Final Appropriations Package Will Need Additional Funding to Avoid Rental Assistance Cuts

The Senate is expected to consider a spending bill soon that provides for substantially more rental assistance funding than in the corresponding House bill, but it would still fall short of fully funding all existing Housing Choice Vouchers. As Congress finalizes appropriations bills, it needs to provide at least the amount proposed in the Administration’s budget to avoid roughly 40,000 fewer families receiving help to afford stable homes.

The Housing Choice Voucher program is the country’s largest rental assistance program, helping households with low incomes afford a home of their choice in the private market. But roughly 40,000 fewer families would receive this critical assistance under the House bill’s unnecessarily low spending levels, we estimate. Even at the Senate’s higher funding level, as many as 6,000 fewer families would receive needed assistance.

People left without rental assistance are far more likely to experience homelessness, overcrowding, evictions, and other housing instability. Even existing funding levels are limited, such that more than 3 in 4 eligible households in need of federal rental assistance do not receive it, and there are long waiting lists for assistance in nearly all parts of the country.

The spending caps under this year’s debt ceiling agreement set tight limits for non-defense discretionary funding, the budget category that includes most federal housing assistance programs. Such spending caps create challenges for fully funding existing housing vouchers: because program costs are tied to rental costs, which rise with housing inflation and have increased greatly in the past few years, the program requires additional funding each year.

The Senate, which followed the negotiated spending caps, prioritized renewing rental assistance in its transportation and housing appropriations bill, increasing funding above 2023 levels; but the amount is still $74.5 million below what the Administration requested for vouchers. Voucher renewal resources in the bill passed by the House Appropriations Committee, which used spending limits well below negotiated levels, were still above 2023 levels, but fully $465 million below the budget request. As a result, 40,000 households who would receive housing assistance under the President’s request would instead lose out.

These funding shortfalls are concerning because cost and leasing data so far this year suggest that at least the full $27.84 billion the President requested for renewing existing housing vouchers is needed in 2024 to maintain the current level of assistance under the program, which helps 5 million people afford housing. Higher costs are expected largely because the program is continuing to absorb the extremely rapid increases in market rents in recent years. Rents increased by 28 percent from June 2020 to June 2023, according to Zillow rental data. During the same period, the average cost of a voucher increased by only 17 percent.

Voucher costs tend to lag the rental market in part because they are limited by subsidy caps — known as fair market rents, or FMRs — that the Department of Housing and Urban Development (HUD) sets at the beginning of each fiscal year using a formula that includes retroactive rent data. HUD has announced that FMRs will rise by an average of 12 percent in 2024. That’s more than rents are currently rising, but it’s needed to enable voucher subsidies to catch up to typical market rents and help ensure families with vouchers can successfully rent homes.

Another reason for the higher costs is that housing agencies have succeeded in using a larger share of the vouchers they administer, helping more people in need. Many voucher holders struggled to find homes they could rent in the tight, post-pandemic housing market, but HUD and local housing agencies have taken effective steps to make vouchers easier to use. These efforts (along with some easing of market conditions) helped housing agencies assist nearly 22,000 additional families in August of this year (the most recent data available) compared to the end of 2022.

While CBPP estimates that if Congress provides at least $27.84 billion, housing agencies can continue helping the same number of households, this is based on our analysis of HUD data and projections of costs going forward, which could shift.

Given the cost pressures, if Congress provides less than the Administration has requested, the number of households receiving assistance will fall. That would undo important progress housing agencies have made to help more people afford housing and would lead to more people facing housing insecurity, including eviction and homelessness.

Because vouchers are such a critical tool for providing safe, stable housing for people with low incomes, Congress should prioritize ensuring that a final appropriations bill provides enough resources to prevent cuts in assistance. With recent and projected cost increases, it will require substantially more funding than what’s in the House bill, and modestly more than in the Senate. Looking forward, policymakers should expand rental assistance and provide other supports toward the goal of ensuring that all people with low incomes can have an accessible, affordable home.