The Center's work on 'Budget' Issues

Obama Plan to Raise Rents on Rural Poor is the Wrong Way to Save Money

April 11, 2014 at 12:30 pm

About 42,000 extremely poor families — 15 percent of those assisted through the Agriculture Department’s (USDA) rural rental assistance program — could face rent increases of up to $600 a year under a proposal in President Obama’s 2015 budget.

Today, families with rural rental assistance must pay 30 percent of their income for rent and utilities.  The President’s proposal would require property owners to charge families a minimum of $50 a month — even if this exceeds 30 percent of their income.  Many of those who would be affected are especially vulnerable to hardship:  64 percent of households with USDA rental assistance have a head (or the head’s spouse) who is elderly or has a disability, and 135,000 children live in low-income families receiving such assistance.

USDA budget documents say that one goal of the proposal is to “encourage financial responsibility in tenants, increasing their opportunity for success on the path to homeownership.”  But there is no evidence that requiring destitute families to pay $50 a month helps them get back on their feet.  To the contrary, a growing body of research shows that extreme poverty — which the USDA proposal would exacerbate — does long-term damage to children’s neural development and education and employment prospects.

A second goal is to save money.  USDA estimates that the policy will reduce program costs by $5 million in 2015 and $20 million annually in later years.  But policymakers could surely find better ways to save $20 million a year than raising rents on some of the most vulnerable people in rural America.

USDA points out that some households with rental assistance through the Department of Housing and Urban Development (HUD) must pay $50 minimum rents.  But no major HUD program imposes a program-wide $50 minimum rent like USDA has proposed.  HUD’s supportive housing programs for the elderly and people with disabilities do not charge a minimum, while the Section 8 Project-Based Rental Assistance program has a $25 minimum rent and state and local agencies administering Housing Choice Vouchers and Public Housing can set the minimum below $50 or have no minimum at all.

USDA has also claimed that a proposed exemption for families who would face hardship from minimum rents — modeled on similar exemptions in HUD programs — would minimize any adverse consequences.  Tony Hernandez, the Administrator of USDA’s Rural Housing Service, told a House Appropriations subcommittee that households with incomes of $2,000 a year “probably would not have to pay because they would be exempted because of the hardship clause.”

But experience in the HUD programs indicates that very few would likely be exempted.  As we’ve noted, the HUD hardship policies have had little impact, partly because they require tenants — many of whom have physical or mental disabilities or very low education levels — to seek out exemptions.  A 2010 HUD study found that 82 percent of state and local housing agencies that chose to impose minimum rents exempted less than 1 percent of affected households.  (Moreover, the minimum rent proposed by USDA would fall almost exclusively on families with incomes close to or below $2,000, so if most of those families were exempted, the policy’s savings would largely disappear.)

Families facing hardship might have an even harder time obtaining exemptions in the USDA rental assistance program, where small rural property owners with limited administrative capacity would be responsible for implementing the hardship policy.  The best way to protect these families would be to reject the President’s proposal.

Ryan Budget Mischaracterizes Housing Vouchers, Then Sets the Stage to Cut Them

April 4, 2014 at 11:02 am

House Budget Committee Chairman Paul Ryan used a faulty number to argue that “Section 8” Housing Choice Voucher program costs have risen excessively.  His budget documents also float a proposed expansion of the Moving to Work (MTW) demonstration that could lay the groundwork for deep, harmful cuts in the voucher program in years to come.  That program, which helps 2.1 million low-income families rent modest units of their choice in the private market, is just beginning to recover from the loss of 70,000 vouchers due to sequestration budget cuts last year.

Rental vouchers sharply reduce homelessness (see chart) and other hardships, lift more than a million people out of poverty, and help families move to safer, less poor neighborhoods, research shows.  These effects, in turn, are closely linked to educational, developmental, and health benefits that can improve children’s long-term outcomes.

Ryan’s budget claims that voucher spending grew by an “explosive” 80 percent from 2005 to 2013.  That’s simply incorrect.  Voucher expenditures rose by 20 to 30 percent over this period, driven largely by rising market rents and congressional decisions to add vouchers to assist homeless veterans and to replace other rental assistance (such as public housing that was demolished, which was funded through a different budget account).  The average inflation-adjusted cost of a voucher is lower today than it was in 2005.

The Ryan budget calls for changes in housing assistance and says that such changes could include expanding MTW, a deregulation demonstration project that now includes 39 of the nearly 4,000 state and local agencies that administer vouchers or public housing.  MTW allows waivers of most laws and regulations governing the voucher and public housing programs and converts voucher funding — and sometimes public housing operating subsidies — to a block grant.

MTW expansion could weaken protections for vulnerable families and cause fewer needy households to receive assistance.  (These risks would be lower if Congress added new safeguards to MTW, but the Ryan budget documents make no mention of such safeguards.)  The Government Accountability Office and the Department of Housing and Urban Development’s (HUD) Inspector General have raised serious doubts about expansion, based on concerns that HUD has not adequately evaluated and monitored the existing demonstration.

Most significantly, a major expansion of MTW block grants would raise the odds of future voucher and public housing funding reductions.  Congress has cut funding deeply over time for housing block grant programs such as HOME, Community Development Block Grants, and the Public Housing Capital Fund, as well as many block grants in other areas.

Two features make block grant programs especially vulnerable to cuts.  First, unlike the current voucher and public housing operating fund formulas, block grants typically don’t account for factors such as the number of families assisted or the cost of assistance.  As a result, it’s more difficult to make a compelling case that policymakers should maintain current nominal funding levels, let alone ensure that funding at least keeps pace with inflation.  Second, because block grants provide broad flexibility in how state or local officials use the funds, federal policymakers can cut funding and claim no harm will ensue, while leaving the tough decisions about how to actually make the cuts to state and local agencies.

The Ryan budget cuts $791 billion over the next ten years from non-defense discretionary programs, the budget category that includes most low-income housing programs.  The budget does not specify which discretionary programs would lose funding, but if policymakers expand MTW to the point that block grants provide the bulk of voucher and public housing funds, it would increase the likelihood of sizable cuts to the voucher and public housing programs — an outcome that would likely lead to more homelessness and housing instability among the most vulnerable Americans.

Funding Bill Stops the Bleeding, But Low-Income Housing Still Needs Intensive Care

January 17, 2014 at 11:26 am

Last year’s sequestration forced deep cuts in federal rental assistance — at a time when just 1 in 4 eligible households receives such aid and the number of low-income renters paying unaffordable housing costs is at historic highs.  In this context, the bill to fund federal programs for the rest of fiscal year 2014, which Congress has approved, is good news.  But the federal government must do much more to reverse sequestration’s harm and begin to meet the severe housing challenges that low-income families faced before sequestration.

On the plus side:  the bill largely reverses sequestration’s cuts in rental assistance programs.  It also includes important reforms that will streamline the administration of rental assistance programs and save money.

Congress was right to lessen sequestration’s harmful housing cuts and to prioritize low-income housing for additional resources, but the bill still falls short of fully reversing the effects of sequestration.  Roughly 50,000 fewer households were using Housing Choice Vouchers — which help 2.1 million low-income seniors, people with disabilities, and families with children pay for housing in the private market — by the end of 2013, compared to a year earlier, as sequestration forced housing agencies to cut their assistance.  Under this funding bill, most of those agencies should be able to issue vouchers again to families on their waiting lists, but they probably won’t be able to restore all of the vouchers lost in 2013.

More broadly, the bill makes no progress in addressing the enormous challenges that existed prior to sequestration.  Public housing, which provides affordable housing for 1.1 million low-income households, has a $26 billion backlog of repair needs that this funding bill won’t reduce.  Homelessness also remains a persistent and costly problem.  While progress has been made in some areas — such as in reducing homelessness among veterans — these gains may be at risk without additional resources.

The task of addressing these challenges remains for fiscal year 2015, when the spending limits to which Congress agreed in the 2011 Budget Control Act (and modified last fall) will continue to put downward pressure on non-defense discretionary funding (see chart).  The focus now turns to whether the President’s budget and next year’s appropriations bills will make the hard priority choices to protect essential safety net programs despite the budget limits.

Charting a Mismatch in Housing Spending

December 18, 2013 at 11:32 am

Federal housing expenditures are unbalanced in two respects, as our new chartbook shows: they target a disproportionate share of subsidies on higher-income households and they favor homeownership over renting.  Low-income renters are far more likely than homeowners or higher-income renters to pay very high shares of their income for housing and to experience problems such as homelessness, housing instability, and overcrowding.

Federal rental assistance programs help these highly vulnerable families, but they are deeply underfunded and as a result reach fewer than one in four eligible households.  Families with children and non-elderly households without children or a disabled member face particularly severe shortages (see chart).

Moreover, budget cuts due to sequestration have forced reductions in the number of families that rental assistance can serve, and those cuts could grow deeper in the coming years.  Fortunately, the Murray-Ryan budget agreement that the House has passed and the Senate is expected to approve later today would make it possible to discontinue some of the sequester cuts planned in 2014 and 2015.

It’s critical that Congress use those resources to increase funding for housing programs targeted on the neediest families — especially for vouchers, the public housing operating fund, and homelessness assistance.  If policymakers don’t provide additional funding, unmet needs among poor renters will grow substantially and the imbalance in federal housing policy will become even more severe.

Click here for the chartbook.

Hardship in America, 2013: Homelessness Remains High and Affordable Housing Is Increasingly Scarce

November 26, 2013 at 4:09 pm

Six years after the Great Recession began, the number of homeless families with children remains stubbornly high.  And the number of low-income households with unmet needs for housing assistance — especially families with children — has soared.  Funding cuts under sequestration threaten to halt progress against homelessness and worsen the shortage of affordable housing.

Let’s first look at the homelessness data:

  • Over 1.1 million children and youth were homeless during the 2011-2012 school year, according to the Department of Education.  Four-fifths were living in homes that were not their own and that may be crowded and unstable; the rest were living in homeless shelters or on the street, in cars, or in abandoned buildings.
  • The number of families with children in homeless shelters or temporary housing for the homeless jumped by 30 percent in the first two years of the recession (2007-2009) and remained only slightly below the 2009 level as of 2012, according to a Department of Housing and Urban Development (HUD) report.  This figure doesn’t include families who are doubling up with other households, even if they have to move every few weeks. 
  • HUD’s latest count of the number of people living on the streets or in shelters on one night in January showed a modest drop among families with children.  (The drop since 2007, however, was close to 25 percent each among people with disabilities and veterans.)  And one-night counts are less reliable than counts of the number of homeless households over a whole year.

Millions of families that aren’t homeless nonetheless face serious housing affordability problems.  More than 8 million low-income households who receive no federal housing assistance pay more than half of their income for rent and utilities (see chart).  That’s a 43 percent increase since 2007.

More than 2 million low-income households use vouchers to rent modest private-market housing at an affordable cost.  But low-income seniors, people with disabilities, and working families with children eligible for the voucher program often must wait years for assistance due to limited funding.

Sequestration is hitting both the voucher program and anti-homelessness efforts (as well as public housing and other areas).  Scheduled cuts in voucher funding could eliminate vouchers for as many as 185,000 low-income families by the end of 2014.  Cuts in the grants that communities use to help homeless people could force them to cut back efforts to prevent homelessness or re-house homeless families.  The voucher cuts also mean that many fewer families that are homeless or at imminent risk of homelessness will have access to vouchers.

Sequestration’s harmful impact on low-income housing is one of many reasons why budget negotiators should replace part or all of sequestration for the next year or two with alternative deficit-reduction measures.