U.S. Department of Housing and Urban Development Secretary Shaun Donovan admits that his department’s proposed Fiscal Year 2013 budget includes “some very difficult choices we would not have made in a better fiscal environment.”
“Tough choices,” he continues, “include reforms to HUD rental assistance programs that save over $500 million in 2013 without reducing the number of families served.”
One of those reforms, as I earlier wrote, would require the very poorest of these families to pay a $75 per month minimum rent — unless they could get one of the rarely-granted hardship exemptions.
Another would change part of the complex formula used to calculate the income that’s used to set the 30% the rest pay.
A bit of background first.
The amount households must contribute to their rent is based on their adjusted income, not the total amount they receive in wages, cash benefits and the like.
Part of the formula excludes — or partly excludes — certain types of income. The other part consists of deductions.
Two related deductions address certain out-of-pocket costs that households with elderly and/or disabled members incur for medical care, attendant care and “auxiliary apparatus,” e.g., a wheelchair, a hearing aid.
The latter two are deductible only if they’re necessary for some member of the household — not necessarily the person with the disability — to work.
At this point, the expenses are deductible if they exceed 3% of the household’s income, after exclusions and the standard deduction the families receive if the elderly or disabled member is the head of the household or married to him/her.
The proposed HUD budget would raise the threshold to 10% of income.
This, of course, would increase the amount that many families with elderly and disabled members must contribute to their rent.
The more they pay, the less the public housing authority pays. The less the PHA pays, the less it costs HUD to renew rental assistance contracts. Also, the budget indicates, the less it will have to pay to subsidize public housing operating costs.
Voila! Estimated savings of $200 million* in the upcoming fiscal year — all shifted to vulnerable low-income families.
The 10% deduction threshold isn’t a new idea. As with the minimum rent proposal, HUD borrowed it from a housing assistance reform bill that’s been evolving in Congress for at least five years.
The bill seeks, among other things, to simplify the rules of setting tenant rent payments. As part of that, it raises the deduction threshold for the same types of costs the HUD budget would.
But the successive versions of the bill also raise the standard deduction for the households headed by seniors or people with disabilities. And they index it to inflation.
This would at least partly offset the impact on rent from the hike in the threshold for out-of-pocket deductions.
The proposed HUD budget would leave the standard deduction just where it is — $400 per month. No relief for households that will get stuck with higher rent because their medical co-pays, attendant fees and the like didn’t consume a full tenth of their income.
So HUD’s tough choice will mean tough choices for around 650,000 very low-income families — rent versus prescription renewals, for example.
I’m hard put to believe they’re necessary — fiscal environment notwithstanding.
If the President could find more than $525 billion for the Pentagon, surely some $350 million could have been found to sustain the low-income housing assistance programs without the punitive policy changes the HUD budget would make.
* HUD’s budget justification to Congress accounts only for savings in the Housing Choice voucher program, but clearly indicates that the higher deduction threshold would also apply to public housing and Section 8 project-based housing residents. The estimate I’m citing here comes from a Congressional Budget Office analysis of one version of the reform bill I refer to below.