Revised February 24, 2005

PRESIDENT’S BUDGET WOULD RESTORE SOME RENTAL VOUCHERS CUT
 IN 2005 BUT REDUCE THE PROGRAM SUBSTANTIALLY IN FUTURE YEARS:
370,000 Fewer Families Could Receive Voucher Assistance by 2010

PDF of full report
Appendix: HTM | PDF
Press Release: HTM | PDF

State-by-State data on potential voucher losses in 2005 at each housing agency can be viewed here.

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Executive Summary

The President’s budget for fiscal year 2006 proposes a modest increase in funding for the “Section 8” Housing Choice Voucher Program that is sufficient to restore about half of the 80,000 vouchers being cut in 2005 due to inadequate federal funding this year.  This restoration would likely be temporary, however, since the budget also calls for sharp cuts in funding for housing programs in years after 2006, and the reductions could cause the number of families with vouchers to drop by 370,000 by 2010.  The budget also proposes changes to the funding structure of the voucher program that would increase the chances that cuts of this magnitude would actually occur.

The voucher program, the nation’s largest low-income housing assistance program, currently helps about two million households — most of them senior citizens, people with disabilities, and working families — rent modest housing in the private market.

Proposed Voucher Funding Levels for 2006

The President’s budget requests $15.8 billion to fund the voucher program in 2006, which is $1.1 billion above the 2005 level.  This increase reflects three developments:

Temporary Restoration Likely to Be Followed by Sharp Cuts

The restoration of funds that the President proposes for 2006 would likely be short-lived, however, and deep cuts are likely in store for the future.  There are three primary reasons why this is the case.

If the $29.6 billion that the OMB documents indicate would be available under the budget for low-income housing programs in 2010 is distributed among these programs in the same proportions as the Administration’s budget proposes to distribute funding for these housing programs in 2006 (which would maintain the relative priorities the Administration has set among these programs for 2006), the funding level for the voucher program in 2010 would fall about $2.9 billion short of the amount needed to cover the vouchers that are being funded in 2005.  (This takes into account the anticipated exhaustion of prior-year funds.)  This would reduce the number of low-income families receiving assistance by about 370,000 in 2010, compared to the number of vouchers funded in 2005.[2]

As noted above, the funding level for vouchers in 2005 is itself inadequate and will cause a reduction of 80,000 in the number of low-income families receiving voucher assistance this year.  Thus, the overall reduction in the number of low-income families receiving voucher assistance in 2010 would be about 450,000.  This is a dramatic reduction.

 Moreover, these estimates of the reduction in the number of families that could be assisted are conservative, because they assume that no new “tenant protection” vouchers will be needed after 2005.  HUD estimates indicate, however, that well over 100,000 such vouchers could be needed to aid low-income households, many of them elderly or disabled, who are losing other forms of federal housing assistance.  If 100,000 vouchers are needed by 2010 simply to replace other forms of housing assistance that have been terminated, then the overall decline in the number of low-income families being provided rental assistance would be even greater than the numbers cited here.

It is possible that the Administration intends the $29.6 billion that the budget documents show for housing assistance programs in 2010 to be distributed among housing programs in different proportions than the proportions that the budget proposes for 2006.  If that is the case, the cuts in voucher assistance could be smaller and cuts to other low-income housing programs could be larger in 2010.  The reverse could also be true.

 Proposed Changes in Funding Structure Would Raise Odds That Large Future Cuts Would Be Carried Out

The budget also proposes changes in the voucher program’s basic funding structure that would take a major step toward converting the program to a block grant.  The level of funding for the program would no longer be tied to the number of families being assisted in communities across the country, rental costs in those communities, and the incomes of the low-income families being helped.  The level of funding would be divorced from these basic indicators of need.

Without such measures of need to serve as a basis for setting the program’s funding level, the amount of funding provided for the program would likely fail to keep pace with increases in local rental costs.  As a result, the number of families the program assisted would likely drop significantly over time.  (Even today, only one in four low-income families eligible for vouchers receive any form of federal housing assistance.)

The President’s budget does not include a comprehensive proposal to convert the voucher program to a block grant, which would both sever the link between funding and actual costs and give state and local agencies near-total autonomy to determine how many families they serve and what level of assistance they provide to each family.  While the Administration’s budget proposal would sever the connection between funding and costs — the first step toward a block grant — it would not itself grant state and local agencies the broad flexibility envisioned in its previous block grant proposals.

The Administration has indicated, however, that it will submit legislation later this year to make major changes to many voucher program rules, including rules governing the income levels at which families are eligible for vouchers, the amount of rent that vouchers can cover, and the size of the rental payments that families with vouchers can be charged.  If these key rules are eliminated or substantially weakened and the program’s funding structure is changed as the budget proposes, the voucher program will effectively have been converted to a block grant.

If that occurs, the odds that voucher funding will erode significantly in future years will increase further.  This is the case because under the current system, when Congress determines how much funding to provide for the voucher program, it is mindful of how many families will receive (or lose) assistance as a result of the funding level that it sets.  Under a block grant, by contrast, local voucher programs would operate under a patchwork of local rules and likely would set widely varying subsidy levels, so it would be difficult or impossible to determine the effect of a proposed cut in federal voucher funding.  As a result, congressional accountability for such cuts would be weakened, and the hard decisions about how the cuts would be instituted passed down to local housing agencies.


End Notes:

[1] See "Appropriations Shortfall Cuts Funding for 80,000 Housing Vouchers This Year," Center on Budget and Policy Priorities, available online at /archiveSite/2-11-05hous.htm.

[2] The methods used to assess the funding levels in the Administration budget are described in greater detail in the Appendix.