Policy Changes Could Shrink the Affordable Housing Gap, But Trump Budget Likely to Worsen It

March 15, 2017

Picking up where I left off on the acute shortage of housing for the lowest-income renters. As I said, we’ve got policy remedies, but also threats. Those seem more imminent since the Washington Post reported a leaked preview of Trump’s proposed budget.

A Range of Policy Remedies

More Financing for Affordable Housing. The National Low Income Housing, as you might expect, focuses on the housing, rather than the income side of the equation. Within this broad spectrum, it’s zeroed in, though not exclusively on building the National Housing Trust Fund.

First, it calls for legislative changes that would significantly increase revenues that Fannie Mae and Freddie Mac could transfer to the Fund, which at long last got some money last year — a down payment, of sorts, on its promise.

Second, NLICH would have the mortgage interest deduction cut in half, to $500,000 and the additional tax revenues shifted into the Fund.

These two measures — if swiftly enacted and gradually phased in — would generate an estimated $21.3 billion over the first 10 years, NLIHC says, using in part a study by the Tax Policy Center. Millions more then to states and the District of Columbia.

They can use their Trust Fund shares to help finance a range of activities that preserve, create, upgrade and otherwise make available more affordable housing.

All but 10% must go to rental housing and at least 75% of that for the benefit of extremely low income households, i.e., those with incomes no more than 30% of the median for the area they live in.

More Opportunity to Increase Housing Assistance. Even with a beefed-up Trust Fund, we’d still need more funding for Housing Choice vouchers — both project-based, i.e., those that subsidize rents for specific units, and tenant-based, i.e., those that enable recipients to rent at market-based rates, while still paying only 30% of their income.

Funding for these vouchers got whacked by the 2013 across-the-board cuts. The annual caps on appropriations now leave a lot of discretion to the top-level decision-makers in Congress — and even to majorities in the subcommittees.

The caps have nevertheless surely played a role in severely limiting the reach of not only Housing Choice vouchers, but available public housing units and those funded by several programs that are smaller and more specifically targeted, e.g., for the elderly, for people with disabilities.

The Campaign for Housing and Community Development — a substantial, broad-based coalition — has just called on Congress to lift the originally-mandated caps, which will otherwise again become effective for the next fiscal year’s budget.

Very importantly, it calls for parity, unlike the lopsided defense increase/non-defense decrease we’re likely to see in Trump’s proposed budget, of which more below.

New Renters Credit. The Center on Budget and Policy Priorities has floated a proposal that would get around the caps — a renters credit. Not, you note, technically federal spending, because spending through the tax code doesn’t count.

The credit would work somewhat like the Low Income Housing Tax Credit in that states would get a certain number of the credits and then parcel them out to expand housing affordable for low-income people.

The new credit could go to both developers and owners and would subsidize rents like the Housing Choice vouchers, limiting what tenants pay to 30% of their income.

The difference here is that the developers and/or owners would get the difference as a tax reduction, rather than a direct payment from a public housing authority. And the big difference from the LIHT is that it would make units available for only the lowest-income households.

Like the NILHC mortgage tax interest reduction, the renters credit would shift the balance in current federal policies from housing assistance for high-income homeowners to the lowest-income renters and prospective renters.

The mortgage interest deduction, the related property tax deduction and some other tax preferences recently saved the highest-income households a total of more than $130 billion, according to the Center’s estimates.

All rental assistance was somewhere around $55 billion — less than the mortgage interest deduction alone.

Threats on the Horizon

We don’t know yet exactly what Trump will propose for next fiscal year’s budget, but he’s said it will increase defense spending by $54 billion. Not, however, so as to increase the deficit. He seems intent on doing that in other ways.

His forthcoming budget will offset the significant breach in the defense spending cap by reducing spending for non-defense programs that depend on annual appropriations. How he’ll apportion the cuts remains to be seen.

But the Washington Post reports that “preliminary budget documents,” probably the marks that the Office of Management of Budget passes down to federal agencies, call for more than $6 billion in cuts to Housing and Urban Development programs — roughly 14% of the insufficient amount they get now.

The work-in-progress budget would level-fund rental assistance programs, the Post says. This would not preserve the number of vouchers in current use because they cost more annually to plug gaps between what renters pay and landlords’ permissible rental charges, which HUD bases on the costs of  modest units on the open market.

Both the Center and NLIHC say that about 200,000 vouchers would effectively vanish, leaving more low-income renters with the huge cost burdens many already bear — or homeless.

Public housing would take big hits. The capital fund would lose about $1.3 billion or more than 31%* — this when public housing has major repair/rehabilitation needs that now total nearly $40 billion, NLIHC says.

The cut, on top of years of under-funding would mean the loss of even more public housing units — more than half of which provide affordable units, presumably with accommodations hard to find on the open market, for seniors and younger people with disabilities.

The budget document also cuts funding for operating public housing by $600 million. This funding stream subsidizes not only administrative activities like overseeing buildings and renting vacating units, but routine maintenance. Neglect that and you’ve got a capital need, as all of us housed people know

The prospective budget would also blow away a flexible block grant that densely-populated communities can use to provide affordable housing and cuts two others, including one helps fund improvements in rundown subsidized housing and surrounding neighborhoods.

A fourth — the Native American Housing Block Grant—would be cut by more than 20%, leaving housing on some reservations severely over-crowded and without such basics as hot and cold running water and/or toilets.

In not-so-short, billions more for defense, billions less for poor and near-poor people who urgently need affordable housing — like, for example, what the First Lady’s living in, rent-free.

* The Center, which links to the Post report, says the capital fund cut is about $2 billion.

More Than 40,000 Low-Income Families Could Lose Housing Vouchers

October 27, 2011

Nearly 650,000 people were homeless last January, according to the U.S. Department of Housing and Urban Development’s Annual Homelessness Assessment report.

As I’ve noted before, this is undoubtedly an undercount. Still, it indicates a rising trend — one that will probably continue at least until the labor market generates many millions of new decent-paying jobs.

Now whatever the real homelessness number is seems likely to rise more than it would have otherwise, thanks to budget cuts pending in Congress.

Several pots of money are at issue, including Tenant-Based Rental Assistance and the Public Housing Capital Fund. I’ll deal with the first here and the other in a followup posting.

What the federal budget refers to as Tenant-Based Rental Assistance funds several kinds of housing vouchers, plus some employment services for participating families.

By far and away the largest portion goes to fund Housing Choice vouchers — the kind that recipients use to rent housing in the private market. Vouchers generally cover whatever portion of the rent is more than 30% of their income.

Anyone who’s ever rented an apartment on a year-to-year basis knows that rents go up. Vouchers thus always cost somewhat more than they did the year before — even if recipients don’t experience income losses, as many probably have.

For the past two fiscal years, the President proposed increases just large enough to cover the estimated costs of renewing existing vouchers — even though waiting lists for housing assistance were long many years before the foreclosure and jobs crises boosted need.

Again this year, he proposed what HUD estimated it would cost to renew the 2.1 million or so vouchers now in use.

He also asked for a no-cost contingency policy that would essentially allow HUD to shift some funds so that housing authorities with scant reserves could renew all the vouchers they’ve issued if the estimated renewal cost proved too low.

The House Appropriations Subcommittee for Transportation/HUD cut the proposed renewal funds by about $100 million and rejected the contingency proposal.

In the Senate, which is further along, the full Appropriations Committee approved what the President proposed for voucher renewals.

But, as the Center on Budget and Policy Priorities explains, its appropriation includes $750 million for the contingency fund rather than treating it separately.

So the Senate Committee’s bill, like the House Subcommittee’s bill, doesn’t provide nearly enough new funding to renew all existing vouchers.

CBPP estimates that more than 40,000 low-income households would lose their vouchers under the House Subcommittee’s bill. More than 25,000 would lose them under the Senate Committee’s bill.

No way these households would be able to cover the full costs of the units they’re renting.

Their annual incomes average only $12,600 — well below the federal poverty line for a family of two. Without vouchers, says CBPP, their housing costs would double or triple.

See what I mean about prospects for an increase in homelessness?

More bad news on the HUD budget in this table from the National Low Income Housing Coalition — and, as promised, in another posting.