Cuts in Federal Housing Assistance Are Undermining Community Plans to End Homelessness

PDF of Full Report (22pp.)

By Douglas Rice and Barbara Sard

February 1, 2007

Key Findings

  • Cuts in federal low-income housing programs are undermining community plans to fight homelessness, which affects approximately 3 million Americans (including 1 million children and 150,000 to 200,000 chronically homeless adults with disabilities) each year. 
  • More than 200 communities have begun to develop such plans and many are already implementing them - largely at the urging of the Administration, which has set a goal of ending chronic homelessness and reducing other types of homelessness and promised new federal resources to help meet these goals. 
  • Yet the Administration and Congress have cut funding for HUD programs by $3.3 billion (after adjusting for inflation) over the past two years. These cuts have weakened key programs on which local homelessness plans rely, including HOME, CDBG, and Housing Choice Vouchers. 
  • These cuts also have more than offset a modest increase in funding for the McKinney-Vento homeless assistance programs, which have grown by $70 million since 2002.

Related Areas of Research

Executive Summary

Five years ago, the Bush Administration announced a commitment to end chronic homelessness and reduce other types of homelessness within ten years.[2]  If successful, this important initiative would alleviate the severe hardships endured by many of the approximately 3 million Americans who experience homelessness every year, including 150,000 to 200,000 chronically homeless adults with mental illness or other debilitating conditions.

Pledging a commitment to a robust federal-state-municipal partnership and new resources to meet their needs, the Administration has strongly encouraged states and localities to develop local plans to achieve these goals.  Communities have responded energetically.  More than 200 states and localities have taken on the challenge of developing plans to end homelessness.  About half of these plans have been completed, and many communities have begun to implement their plans.

Most state and local plans meet or complement the Administration’s goals.  The great majority target chronic homelessness, although most plans also aim to reduce homelessness among other segments of the population, such as families with children.  To achieve these goals, state and local plans typically emphasize strategies generally endorsed by the U.S. Department of Housing and Urban Development (HUD), including.

  • Preventing homelessness by targeting housing assistance and other types of aid to individuals and families who are at risk of homelessness, such as those who are facing eviction or are exiting institutions such as the child welfare system or corrections facilities.
  • Increasing the availability of permanent affordable housing by expanding rental assistance, developing new affordable housing (especially “supportive housing,” which combines affordable housing with the supportive services that many homeless people need), improving housing placement services for homeless individuals and families, and preserving the existing stock of affordable housing (such as public and other federally assisted housing).
  • Improving access to supportive services by expanding case management and increasing the availability of treatment for mental illness and drug or alcohol addiction.

To implement these strategies effectively, communities will require resources, and many are planning to make substantial investments of local resources to achieve their goals.  Yet most state and local plans underscore that, if they are to succeed, the federal government must be a reliable and strong partner in this regard.

In particular, most community plans were developed under the assumption that existing federal housing programs would continue to assist at least the same number of low-income households.  In addition, many communities, after a thorough evaluation of local affordable housing and homeless assistance resources, have concluded that federal low-income housing assistance must be expanded if they are to be able to make real progress in achieving the goals set out by their plans.

For example, the Chattanooga, Tennessee plan aims to create 1,400 new units of affordable housing over ten years, nearly all of which will require rental assistance.  While some new rental assistance will be funded by local sources, the lion’s share is expected to come from federal programs — from the Housing Choice Voucher Program, in particular, as well as the programs authorized under the McKinney-Vento Homeless Assistance Act of 1987 (“McKinney-Vento”).  In addition, a share of the 1,400 new units will consist of new permanent supportive housing for chronically homeless individuals who will need intensive support services if they are to remain stably housed.  The development of these units will require capital investments, and, like most developers of permanent supportive housing, the City of Chattanooga will have to rely on a variety of sources for this capital, including funding from the federal HOME Investment Partnerships and Community Development Block Grant (CDBG) programs.

The Chattanooga plan is not unique in its reliance on a wide range of federal low-income housing assistance programs, and this should come as no surprise.  HUD and independent sources such as the Government Accountability Office (GAO) have long acknowledged that community efforts to address homelessness depend on federal assistance beyond that provided by the McKinney-Vento homeless assistance programs.  Indeed, this was Congress’ expectation when the McKinney-Vento programs were launched in 1987 with the dual purpose of alleviating emergency needs and developing and testing new approaches to assisting homeless people more effectively.

Yet in spite of their importance to plans to end homelessness, mainstream low-income housing assistance programs have fared poorly in the federal budget in recent years.  Since the reemergence of federal budget deficits in 2003, the Administration and Congress have reduced funding for a number of domestic programs, including most low-income housing assistance programs.  By 2006, funding for HUD programs had declined by $3.3 billion (or 8 percent) in comparison to 2004, once adjustments for inflation are made.  For 2007, the Administration has proposed further cutbacks of $1.3 billion, and, while Congress has not yet made its final appropriations decisions, most programs will likely be funded at roughly the same nominal level as in 2006 — and therefore below 2006 levels once inflation is taken into account.

These cutbacks have affected nearly every low-income housing assistance program important to state and local plans to end homelessness.  CDBG, HOME, and public housing have been hit the hardest, with their funding declining by 20 percent, 16 percent, and 11 percent, respectively, from 2004 to 2006.  Yet the Housing Choice Voucher Program and most other HUD programs have suffered losses as well.  The result has been a noticeable reduction in housing assistance resources available to local communities, including the loss of more than 150,000 housing vouchers since 2004.

These losses are already undermining communities’ ability to meet their goals.  For example, as part of its plan to end long-term homelessness by 2010, the State of Minnesota and its partners in local government and the private sector will invest considerable resources to develop and operate 4,000 new units of permanent supportive housing.  Since the Minnesota plan was adopted in 2004, however, the state has lost more than 700 federal housing vouchers.  Although housing agencies support the plan and have contributed some project-based vouchers, continued funding shortfalls and misguided policy changes have forced housing agencies to cut back on their programs, exacerbating the scarcity of rental assistance available across the state.  The state has been able to meet the production goals under the plan primarily by making a significant commitment to temporary rental assistance from state sources. Yet unless permanent federal rental assistance is made available, it will be increasingly difficult to maintain progress on implementing the plan.  As temporary rental assistance expires, the units provided under the plan will no longer be affordable to this extremely low income population and they may again confront homelessness.

One bright spot in the HUD budget has been the McKinney Homeless Assistance Grant Program, whose funding grew by nearly $70 million (or 5.3 percent) in real terms between fiscal years 2002 and 2006.[3]  While this growth has been welcome, it has fallen far short of meeting the needs of most state and local plans to end homelessness.  McKinney has funded about 37,000 new units of permanent supportive housing over the previous four years, for instance, which is below the rate needed to house the existing population of 150,000 to 200,000 chronically homeless individuals by 2012.

The City of Chattanooga provides an illustration of the limits of the McKinney programs.  Over the past three years, Chattanooga has been very successful in the competition for McKinney homeless assistance funding, securing rental assistance for 135 new units of permanent supportive housing.  Yet this total gain is far short of the 140 new units per year, on average, required by the Chattanooga plan to end chronic homelessness.  Because of the recent cutbacks in federal low-income housing assistance, moreover, Chattanooga is unlikely to have made up for this shortfall from other sources.  The Chattanooga Housing Authority, for example, has lost more than 650 federally-funded housing vouchers since early 2004.

Even if McKinney funding were to grow at twice the recent rate of growth, the resulting resources would not even offset the impact of the cuts that have already been made as well as the deep cuts in funding for mainstream federal low-income housing assistance programs that the Administration is likely to propose over coming years.[4]  The effect of cuts in Housing Choice Vouchers is only the most visible example.  Cuts in funding for HOME, CDBG, public housing, and other mainstream housing assistance programs mean less capital to develop new supportive housing, less rental assistance to re-house homeless people, and fewer units of public and other affordable housing available to prevent households with very low incomes from becoming homeless.  Unless these cutbacks are reversed — and these programs are strengthened in coming years — community plans to end homelessness are not likely to succeed in meeting their worthy goals.

Click here to read the full-text PDF of this report, (22pp.)

End Notes:

[1] This report was made possible through the generous support of the Fannie Mae Foundation.  The Fannie Mae Foundation is committed to the full and fair exposition of issues related to affordable housing and community development.  The opinions expressed in this publication are those of the authors and do not necessarily represent the views of the Fannie Mae Foundation or its officers or directors.

[2] This commitment was made in the Administration’s fiscal year 2003 budget request, which was released in early 2002.

[3] The McKinney Homeless Assistance Grant Program includes a set of programs authorized under the McKinney-Vento Homeless Assistance Act.  These programs include: the Emergency Shelter Grant Program, the Supportive Housing Program, the Shelter Plus Care Program, the Section 8 Moderate Rehabilitation for Single-Room Occupancy Program, and the Safe Havens program.

[4] The Administration’s 2007 budget proposed substantial cuts in domestic discretionary programs over the five-year period, 2007 to 2011, including deep cuts in housing assistance.  See Jim Horney, Arloc Sherman, and Sharon Parrott, “Program Cuts in the President’s Budget:: Cuts Grow Deeper Over Time and Will Hit States Hard,” February 23, 2006.

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