Off the Charts Blog | Center on Budget and Policy Priorities

For low-income families that need affordable rental housing, the news from Washington in recent years has been bleak.  Yet, while President Obama’s new budget has shortcomings, it achieves the important goal of holding the ground on housing assistance in a very difficult budget environment.

For starters, the President and Congress agreed to deep cuts in federal housing assistance and community development programs in 2011 and 2012, and sequestration will slash more than another $2 billion from these programs this year.  Because of sequestration, the Housing Choice Voucher program alone will assist as many as 140,000 fewer low-income families by early 2014, we estimate, exacerbating homelessness even as funding for homelessness prevention and re-housing homeless families also shrinks.  This represents the largest shortfall in the program’s nearly 40-year history (see chart).

The cuts come at a time when the number of low-income families that need housing assistance has been rising substantially, there are long waiting lists for rental assistance in almost every community, and homelessness remains a persistent problem.

While sequestration is broadly unpopular, cancelling it will require the President and Congress to agree on deficit-reduction measures with which to replace it — an option that carries risks for safety net programs such as Medicaid and food stamps.

Meanwhile, President Obama has released his 2014 budget.  The budget achieves the important goal of holding the ground on housing assistance and other safety net programs in this strained budget environment.  It does this in three ways:

1. It would replace sequestration with a more balanced package of revenue increases and spending cuts that largely protects safety net programs. An approach that relies solely on cuts would devastate housing assistance over time.
2. It would prioritize low-income programs, including housing, for scarce discretionary resources. The President would increase funding for Housing and Urban Development (HUD) programs by $4.3 billion, or 10 percent, above the pre-sequestration funding levels of 2012, and his proposal also prioritizes rental assistance renewals and homeless assistance — areas that have the most significant and immediate impact on low-income families.
3. It would adopt program reforms that reduce HUD program costs without harming low-income families. The President’s budget proposes important reforms to streamline rental assistance programs, while largely protecting low-income households.  Such reforms are essential to stretching HUD dollars further over the next decade.  The budget also funds initiatives that could help to preserve and improve a substantial share of the public housing stock.

While the President’s budget is a vast improvement over the status quo of the sequester (and the House budget resolution), it falls short in some areas.  Notably, it appears to lock in the deep cuts already made in programs such as HOME (a block grant that supports rental housing and homeownership), and its deficit-reduction package would cut another $100 billion from non-defense discretionary programs, including housing, over the next decade.

And, it offers little to meet the enormous challenge of helping the millions of unassisted families with “worst-case” housing needs.  To meet this challenge, we must look for opportunities that lie outside the traditional box of discretionary housing programs, such as reforming the tax code — including the host of special tax breaks called “tax expenditures” — as well as restructuring Fannie Mae and Freddie Mac and, more broadly, federal housing finance.

For instance, as policymakers consider reforming tax expenditures, it makes sense to pursue a renters’ credit.  If capped at $5 billion, such a credit could reduce rents by an average of $400 per month for 1.2 million of the lowest-income renter households, lifting four of five of the poorest families it assists out of deep poverty.

The sequestration budget cuts will likely force state and local housing agencies to cut the number of low-income families using Housing Choice Vouchers to afford housing by roughly 140,000 by early 2014, as we explain in a new paper.  This represents a sharp break from Congress’ bipartisan commitment — which it has met for most of the voucher program’s nearly 40-year history — to renew assistance for at least the same number of families from year to year.  Meanwhile, thousands of other low-income families using vouchers could face sharp rent increases.

These cuts, which housing agencies have already begun to implement, will fall heavily on vulnerable people:

• In Los Angeles, hundreds of families at the top of the waiting list will not receive vouchers, the city housing authority may soon raise rents for 45,000 low-income families by $100 – $200 per month, and, by October, the county housing authority may terminate as many as 1,800 vouchers;
• The city of Marlborough, Massachusetts, expects to increase rent by an average of 45 percent for Section 8 voucher recipients; and
• In Muskogee, Oklahoma, the housing authority lacks the funds to issue more vouchers — which means that 45 fewer families will be assisted this year — and it may be forced to cut the vouchers of some families that are now using them.

The cuts come at a time when the number of low-income families that need housing assistance has been rising substantially, there are long waiting lists for vouchers in almost every community, and homelessness remains a persistent problem.

Overall, sequestration will cut more than $2 billion in 2013 from the housing assistance and community-development programs of the Department of Housing and Urban Development.  While cuts in housing vouchers and homeless assistance will probably affect low-income families the most in the near term, sequestration will also contribute to further losses of public housing, impede the development of affordable housing for low-income seniors and people with disabilities, cause more low-income children to be exposed to lead-based paint in older rental housing, and cut counseling services for families at risk of foreclosure.

Click here to read the full paper.

Testifying yesterday at a Senate Appropriations Committee hearing on the automatic budget cuts (“sequestration”) scheduled to begin March 1, Housing and Urban Development (HUD) Secretary Shaun Donovan stated that the “cuts would be deeply destructive, would damage the economy, and would harm numerous families, individuals, and communities across the nation that rely on HUD programs.”

Our own analysis confirms that the cuts would have serious consequences on critical housing supports in every state.

• Nationwide, more than 100,000 families could lose the Housing Choice Voucher assistance they need to rent decent housing at an affordable cost, placing many at risk of homelessness.  About half of these households are elderly or have disabilities, and most of the rest include children, according to program data.

• Local communities would lose nearly $100 million in homeless assistance grants.  As a result, HUD estimates that 100,000 fewer people who have lost their homes will receive temporary or permanent housing assistance through its homeless assistance grants program, lengthening the time they will remain homeless.

• Public housing, which provides affordable housing for 1.1 million households, most of which include seniors and people with disabilities with extremely low incomes, would lose $300 million.  This would force agencies to delay maintenance and repairs, causing living conditions in public housing to deteriorate and accelerating the loss of developments.   A lack of resources needed to maintain public housing already leads to a loss of about 10,000 units every year.

These cuts would come at time when the need for rental assistance is far outpacing available resources (see chart).

As the Center has explained, policymakers could stabilize the public debt as a share of the economy over the coming decade by enacting $1.5 trillion more in deficit reduction.  But the deficit-reduction strategy must include a balance of revenue increases and spending cuts.  Any approach that relies solely on cuts — including proposals by some to simply redistribute the sequestration cuts by giving Congress or the Obama Administration the flexibility to decide where the cuts will fall — would devastate housing assistance over time.

The across-the-board federal spending cuts scheduled for March 1 would eliminate funds for more than 100,000 housing vouchers for low-income families from the 2013 budget and cut funds for public housing and homeless assistance by $300 million and $100 million, respectively.

The cuts, known as “sequestration,” would sharply reduce the number of families that receive help in affording modest rental housing, significantly increase hardship, and place more families at risk of becoming or remaining homeless.

Moreover, these cuts would come on top of those that are coming under the very tight spending caps established by the Budget Control Act (BCA), which will cut discretionary funding by $1.5 trillion over the next decade.

As we’ve explained, the BCA spending caps will likely put intense pressure on the Department of Housing and Urban Development (HUD) budget.  Under the caps, HUD’s budget would shrink by $2.5 billion by 2021 if the BCA cuts are distributed proportionally.  That’s equivalent to eliminating rental assistance for 300,000 low-income families.

We’ve issued two new sets of resources to help explain what’s at stake for rental assistance programs.

The first, an updated and expanded series of “Policy Basics” on federal rental assistance programs, explains who receives assistance and how the programs work.  We explain, for instance, that more than half of the 5 million assisted households include elderly members or people with disabilities, and most of the rest include children.  The series includes separate offerings on each of the three major programs, the Housing Choice Voucher, public housing, and Section 8 Project-Based Rental Assistance programs.

The second resource, a set of tables with state-by-state data, shows updated estimates of sequestration cuts in major housing and community development assistance programs.

The number of low-income families struggling to afford rental housing has grown dramatically in recent years, as my colleague Will Fischer recently pointed out.  Based on the latest Census Bureau data, our newly updated state-by-state fact sheets on federal rental assistance show that the problem is serious in every state — a fact that federal budget negotiators should keep in mind as they consider cuts that likely would worsen the problem.

In every state, the need for federal rental assistance far exceeds the available funding.  In Arizona and Nevada, for example, roughly five low-income renters have what the Department of Housing and Urban Development terms “severe” housing affordability problems — meaning they pay more than half of their monthly cash income for housing — for every renter who receives assistance.

High housing costs force low-income families to choose between paying their rent and heating bills and covering other basic costs, such as food, transportation to work, medical care, and school supplies for children.

High housing costs also contribute to homelessness, overcrowding, and frequent moves that result in disruptive school changes, all of which can hinder children’s development.  Children in families that are homeless or move frequently are more likely than other low-income children to perform poorly in school or drop out, many studies show.

Unfortunately, federal policymakers last year enacted $900 billion in cuts in funding for “non-defense discretionary” programs, including rental assistance, over the next decade by establishing tight spending caps under the Budget Control Act (BCA).  Funding for this part of the budget is projected to fall over the next decade to its lowest level on record as a share of the economy, with data going back to 1962.

As our recent report explains, the BCA spending caps will make it extraordinarily difficult to continue providing rental assistance to the current number of families — and virtually impossible to serve more families in response to the rise in need.

Further cuts in non-defense programs on top of the BCA cuts would likely force local housing agencies to serve fewer low-income families, with a corresponding rise in homelessness and other hardships.  Congress should reject such outcomes in taking steps to put the nation on a sustainable fiscal path.