Off the Charts Blog | Center on Budget and Policy Priorities

To help ensure safe, decent living conditions for the roughly 1 million households in public housing — mostly elderly people, people with disabilities, and working-poor families with children — the local agencies that run these developments need sufficient funds for repairs and renovations.  Unfortunately, the federal government has a long history of underfunding public housing and House Republicans have proposed further cuts for the current fiscal year (see graph).  The President’s 2012 budget proposes to test a new funding approach that may offer the most realistic way to preserve these developments over the long run.

Most public housing units are in decent condition, but due to the age of the properties and long-term underfunding, developments have accumulated an estimated $20 billion backlog of unmet renovation needs.  Leaving those needs unmet would raise future federal costs by deferring improvements that would prevent more costly damage down the road, such as structural deterioration caused by a leaky roof.

Eventually, many developments could deteriorate to the point where they would have to be demolished or sold.  That’s already happened in many places:  more than 165,000 units were lost and not replaced by new public housing between 1995 and 2008, and tens of thousands of additional units have been removed from the stock since then.

Given the grim overall budget environment, it’s extremely unlikely that Congress will increase capital funding enough to address the $20 billion renovation backlog.  So other measures will be needed to preserve and modernize public housing.

The President’s proposal offers the most promising approach.  It would fund a limited number of public housing developments through the “Section 8” rental assistance program rather than the public housing program.  The local housing agency could continue to own and manage the development, but the change in the funding stream would have two important benefits:

• More adequate and reliable funding. The affected developments would receive modestly higher funding that better reflected the amount needed to sustain a development.  Funding would likely be more reliable, as well:  while public housing funding has often experienced sharp cuts and shortfalls, Congress has generally funded the Section 8 program adequately.
• Greater access to private financing to help meet renovation needs. Funding some public housing units through Section 8 would allow agencies to borrow private funds more easily, in part because the greater reliability of the funding would give lenders added confidence that the loans would be paid back, allowing agencies to obtain better loan terms.

Section 8 program rules also would give local housing agencies greater flexibility than current public housing rules to mortgage a development, which would further increase the amount of funds they can borrow from private lenders to support renovation.  In approving the proposal, though, Congress should include strong protections to make sure that developments mortgaged under the program stay affordable and under public or non-profit control for the long run.

As a demonstration, the proposal offers a low-cost way to test and refine this approach to funding public housing that can be expanded later if it proves successful.  It deserves Congress’s support.