The Center's work on 'Budget' Issues


Helping Renters Afford Their Homes

July 16, 2014 at 4:31 pm

Today’s New York Times “Room for Debate” forum asks “Should Housing Policy Support Renters More?”  It’s an important discussion since, as we explain in this chart book, federal housing policy is imbalanced in two ways.  It favors homeowners over renters, and it targets a disproportionate share of subsidies on higher-income households (see chart).

This is the case even though, as Henry Cisneros, former Secretary of the Department of Housing and Urban Development, points out, “the primary focus of federal housing policy should be to help those most in need.”  Need among renters is rising.  As MacArthur Foundation president Julia Stasch notes, “increasing rents, stagnant wages and inadequate federal support have made rental housing less affordable for more people.”  Low-income renters — including veterans, seniors, people with disabilities, and working families — are far likelier than homeowners and higher income households to need assistance to keep a roof over their heads and make ends meet.

Three ongoing policy debates offer opportunities to move in this direction:

  • Most immediately, Congress should provide more resources in 2015 funding bills to restore Housing Choice Vouchers and other low-income rental assistance that was cut as a result of sequestration in 2013.  Those cuts prevented thousands of low-income Americans from receiving the assistance they need to escape homelessness and housing instability, both of which have been linked to developmental, health, and education problems in children.
  • If tax reform moves forward, Congress should replace the mortgage interest deduction with a less-expensive, better-targeted credit that would trim subsidies for higher-income families while expanding them for middle- and low-income homeowners.  It should also use some of the savings from this reform to fund a new renters’ tax credit that would address part of the unmet need for housing assistance among the lowest-income renters.
  • If Congress reforms the housing finance system, it should use new financing fees for robust funding — like that provided in the reform bill that the Senate Banking Committee approved in May 2014 — to develop and rehabilitate affordable rental housing through the National Housing Trust Fund.

Better Federal Policy Needed to Address Rental Affordability Crisis

July 2, 2014 at 4:24 pm

Housing has become increasingly unaffordable for many Americans, especially those with the lowest incomes, as a recent report from Harvard’s Joint Center for Housing Studies documents and I pointed out earlier this week.  And federal policy is helping fewer families meet this challenge.  The number of households experiencing “worst-case needs” ­— those with very low incomes that pay more than half their income toward housing or live in severely inadequate housing — has risen dramatically, but the share of households eligible for assistance that receive it has fallen to just 23 percent (see chart).

These trends have significant negative consequences for low-income families, as Harvard’s report details.  To afford housing, they may be forced to live in neighborhoods with high crime rates or in inadequate housing.  Families that pay more than half their income for housing also spend far less on other basic needs, including 39 percent less on food, 65 percent less on health care, and 66 percent less on transportation, than families with affordable housing.

Federal rental assistance is a lifeline that can help prevent those kinds of negative results for low-income families.  About 5 million low-income households receive assistance to afford decent, stable, modest housing while paying about 30 percent of their income toward rent.  Rental assistance programs reduce poverty, homelessness, and housing instability, and help families afford decent quality housing in safer neighborhoods.

Nevertheless, Congress has cut these programs in recent years.  Between 2010 and 2014, Congress cut funding for Housing Choice Vouchers by $528 million, public housing by almost $1.6 billion, and housing for the elderly and people with disabilities by almost $600 million, adjusted for inflation.  These cuts have kept tens of thousands of eligible families from receiving rental assistance.  As we’ve explained, for example, last year’s sequestration cuts dropped the number of families using Housing Choice Vouchers by more than 70,000.

Unfortunately, Congress may provide little relief in the 2015 budget.  While Congress provided sufficient funding in 2014 to restore half of the vouchers lost to sequestration, the 2015 spending bills that the House recently approved and the Senate may consider this summer fail to renew those restored vouchers.  Congress can and should do more to help low-income families live in safe and affordable homes.

New Report Documents Growing “Crisis of Affordability” for Renters

June 30, 2014 at 3:59 pm

More than 80 percent of households earning under $15,000 a year — roughly equivalent to full-time work at the minimum wage — paid more than 30 percent of their income for housing in 2012, a new report by Harvard’s Joint Center for Housing Studies finds.  The federal government and many private-sector landlords and lenders consider housing unaffordable if it exceeds 30 percent of household income.

The shortage of affordable housing, which is hitting the lowest-income families the hardest, seems to be growing worse.  The number of households earning under $15,000 paying more than half of their income for housing jumped by over 2 million from 2002 to 2012 (see chart).  In fact, in that latter year, 69 percent of households earning under $15,000 paid more than half of their income for housing.

The report documents a growing “crisis of affordability” for renters, driven by a widening gap between rental costs and renter incomes.  The gap began growing well before 2007 but worsened during the Great Recession.  The median renter income plummeted 13 percent between 2001 and 2012, while median rents rose 4 percent.

Federal policymakers have made things worse by cutting rental assistance.  For example, the number of families using Housing Choice Vouchers, the most common form of federal rental assistance, fell by more than 70,000 in 2013 due to across-the-board sequestration cuts.  Congress provided funds to restore up to half of these vouchers in 2014, but the 2015 spending bills that the House and Senate appropriations committees have approved for the Department of Housing and Urban Development don’t renew all of those vouchers and risk locking in the full sequestration cuts.

Some 5 million low-income households receive federal rental assistance, mostly working families with children, seniors, and people with disabilities.  Studies show that vouchers and other types of rental assistance are extremely effective at reducing poverty, homelessness and housing instability.  With a stable home — the foundation necessary for families to thrive —becoming unaffordable for more Americans, policymakers should be strengthening these programs, not cutting them.

Funding Bills Don’t Provide Enough Housing Help for the Most Vulnerable

June 20, 2014 at 2:20 pm

Congress may soon finalize 2015 funding for the Department of Housing and Urban Development (HUD).  Unfortunately, struggling working families, people with disabilities, and others unable to afford today’s high rents will see little housing relief in Congress’ funding, as I explain in a new post on TalkPoverty.org:

The House has passed its 2015 Transportation-HUD appropriations bill and the Senate may vote on its bill soon.  While the need for affordable housing continues to rise — the number of poor renter households who pay more than half their monthly income for housing costs has risen 28 percent since 2007 — and homelessness remains unacceptably high, the House bill cuts HUD funding compared to 2014, reducing the number of people receiving rental assistance.  The Senate allocated over $1 billion more to HUD than the House and its bill makes important investments in a few areas, but it fails to serve any additional very poor or homeless households.

These inadequate bills come as the Housing Choice Voucher program, the biggest federal rental assistance program, continues to suffer from losses due to sequestration in 2013, which imposed the steepest funding cut in the program’s 40-year history.  Over 70,000 fewer low-income families had vouchers at the end of 2013 than a year earlier.  Congress provided enough funding in 2014 to restore fewer than half of these lost vouchers, but the 2015 Senate and House bills won’t even renew all of the vouchers restored in 2014, locking in large voucher losses for years to come.

Although the funding bill before the Senate makes important improvements over the House bill, neither chamber has prioritized HUD’s housing programs, as my post explains.

These programs serve 10 million people in about 5 million households, most of whom are elderly, disabled or working parents with incomes below the poverty line and would be homeless or lack stable housing without federal rental assistance.  Yet only 1 in 4 people eligible for rental assistance receives it due to limited funding, and the unmet need is enormous. . . .

Even maintaining the status quo, as the Senate bill largely does, won’t help homeless children, who fall farther behind in school the longer they lack a home; it won’t help homeless adults with disabilities obtain supportive housing; and it won’t help more low-income seniors age with dignity in their communities. These bills are not good enough for our most vulnerable neighbors, and they shouldn’t be good enough for Congress.

Click here to read the full post.

House Restriction on Housing Vouchers Would Harm Low-Income Residents of Oil and Gas Boomtowns

June 19, 2014 at 8:23 am

The House adopted an amendment offered by Rep. Aaron Schock (R-IL) to limit subsidies in the Housing Choice Voucher program.  The amendment, attached to the House 2015 funding bill for the Departments of Transportation and Housing and Urban Development (HUD), would weaken state and local housing agencies’ ability to adapt to rental markets in individual communities.  Some of its worst effects would be felt in places with rapidly growing oil and gas industries, where families, elderly people, and people with disabilities could face displacement or other serious hardship.  The Senate, which is considering its version of the bill this week, should reject any effort to add such a restriction.

In the voucher program, families pay 30 percent of their income toward rent for a modest unit of their choice, and the voucher covers the rest up to a cap called a payment standard.  HUD generally sets the “fair market rent” (FMR) based on market rents for an entire county or metropolitan area, even though these areas may contain many rental submarkets, and it must rely on data that’s often several years old.  As a result, FMRs are typically above or below market rents in parts of the areas they cover and are slow to adjust to rapid shifts in the housing market.

Recognizing this, Congress long allowed agencies to set payment standards from 90 to 110 percent of the FMR.  Agencies can also apply to set area-wide payment standards above 110 percent, but they must submit rigorous data showing that a higher standard is needed to cover local rents and that, without it, families couldn’t use their vouchers or would have to use them in high-poverty areas.  (Research shows that living in high-poverty neighborhoods can adversely affect children’s health, education, and long-term economic prospects.)

The Schock amendment would revoke HUD’s authority to approve state and local agencies’ requests to set area-wide payment standards above 120 percent of the FMR during 2015 and would suspend existing standards above that level.  In recent years, HUD has approved new payment standards under this authority in 13 counties, 12 of which are in parts of North Dakota and Pennsylvania with booming energy industries.

When oil and gas activity surges, workers fill rental units and drive up rents.  In the core of North Dakota’s oil and gas region, rents rose quickly to as much as double their pre-boom level.  If housing agencies in these areas could not adjust payment standards adequately, low-income people with vouchers would struggle to use them.  And households already relying on vouchers could be forced out of their homes when their leases expire.  Seniors and people with disabilities on fixed incomes would be particularly vulnerable.

In proposing his amendment, Rep. Schock expressed concern about high payment standards in Chicago.  But those standards are permitted under HUD’s “Moving to Work” demonstration and would likely be unaffected by Schock’s amendment.  His amendment would, however, do considerable harm in other parts of the country.

The voucher program cannot function effectively without flexibility to set adequate, market-based payment standards.  Congress and HUD have wisely set some limits on this flexibility, requiring strong evidence to support large payment standard increases.  Congress should leave those carefully designed rules in place rather than replacing them with the Schock amendment’s arbitrary cap.