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.

The artificial distinction between tax expenditures (credits, deductions, and other tax breaks) and spending programs “make[s] it harder to gauge the impact of the federal budget on such crucial activities as housing,” a recent New York Times story explains, noting that the mortgage interest deduction — which mostly helps high-income people — costs far more than spending programs to help low- or moderate-income people afford housing.  The story continues:

“If someone said, ‘Let’s have a voucher program on the spending side, giving high-income families vouchers to subsidize their mortgages,’ ” said Glenn Hubbard, the dean of Columbia Business School and a prominent Republican economist, referring to the home mortgage interest deduction, “I don’t think that would get through Congress.”

That’s why we’ve called for rebalancing federal housing policy by creating a renters’ tax credit to help low-income families afford housing.

Policymakers have focused for decades on policies to increase homeownership, and most federal housing dollars benefit families with relatively little need for assistance.  More than half of federal dollars for housing benefit households with incomes above $100,000 (see chart).

Meanwhile, the nation’s lowest-income renters are far likelier to struggle to pay for housing — and their affordability problems are growing.

A renters’ credit, administered by states and capped at $5 billion a year, could:

• Assist about 1.2 million of the lowest-income renter households;

• Reduce each household’s rent by an average of $400; and

• Lift 250,000 families out of poverty and lift four of five of the poorest families it assists out of deep poverty (defined as having income below half of the federal poverty guidelines).

It’s the right time to consider such a credit, as policymakers consider restructuring tax expenditures as part of tax reform.  Proposed changes to the mortgage interest deduction (such as converting it to a credit) could make homeownership-related tax expenditures more efficient and raise added revenues to reduce the deficit.  And, by directing a modest share of the savings from these or other tax reforms to the renters’ credit, policymakers could make the nation’s housing dollars fairer and more effective.

Rep. Michele Bachmann (R-MN) claimed this week that just 30 percent of the dollars spent on the Supplemental Nutrition Assistance Program (SNAP, formerly called Food Stamps) actually benefit program participants.  The truth, plain and simple:  that figure is way off.  We’ve pointed this out, and fact checkers from the Washington Post and PolitiFact failed Bachmann on their tests of accuracy.

In fact, almost 95 percent of federal spending on SNAP goes toward providing benefits to eligible households to purchase food.  What’s more, states achieved a record-low SNAP error rate in fiscal year 2011, according to the U.S. Department of Agriculture, which oversees the program.  Only 3 percent of all SNAP benefits represented overpayments, meaning they either went to ineligible households or went to eligible households but in excessive amounts, and more than 98 percent of SNAP benefits were issued to eligible households.

And SNAP is in good company among safety net programs.  As we’ve explained and the chart below illustrates, at least nine-tenths of federal spending — and in most cases, more — for programs including Medicaid, housing vouchers, and Supplemental Security Income reaches low-income Americans.

In a new guest post for the Open Society Foundations,  Doug Rice points out that the “sequestration” budget cuts will harm many low-income families — and explains how the Senate can mitigate the damage somewhat by adopting an updated 2013 budget for the Department of Housing and Urban Development.  Here are the key points:

Last Friday, the White House Office of Management and Budget released details of the across-the-board budget cuts known as sequestration, including the fact that funding for the Housing Choice Voucher (HCV) program will be cut by $938 million this year. We estimate that this cut will cause more than 100,000 low-income families to lose rental assistance over the next 12 months – and that the figure could be as high as 140,000.

These cuts will fall on highly vulnerable families. Half of the 2.1 million households that the HCV program serves are seniors or people with disabilities; most of the rest are families with children. On average, these households have incomes of about $12,500 per year, well below the poverty line. Without rental assistance, housing would be unaffordable for these families, placing them at heightened risk of becoming homeless and sharply reducing the resources they can use to buy food, medicine, and other essentials. . . .

What should be done to protect vulnerable people — and the general public — from the increased hardships that sequestration will bring? First and foremost, policymakers should replace sequestration with a balanced package of tax and spending measures that do not increase poverty or inequality.

But that’s not likely to happen soon – and the effects of the cuts on low-income families in communities across the country will be growing. Meanwhile, Congress must enact, by March 27, legislation to fund the federal government for the remainder of the year. While this legislation will likely leave sequestration untouched, it offers the opportunity to reapportion funding among the various areas of the federal budget in ways that would mitigate some of the harmful effects of sequestration.

This week, the House of Representatives approved legislation that does this — but only for the Department of Defense and the Veterans’ Administration. Funding for other federal agencies is continued at the 2012 level (with exceptions for a few programs), with sequestration’s cuts then applied against those amounts.  Senator Barbara Mikulski, chair of the Senate Appropriations Committee, is spearheading a bipartisan effort to add updated budgets for some of the other federal agencies.  It is essential that the Department of Housing and Urban Development be included in this effort.  An updated HUD budget could, for example, sharply reduce the expected shortfall in funding for public housing operations, and also lessen the number of families losing voucher assistance.  Such action would be a step in the right direction in support of low-income families.

Click here for the full post.