Congress Should Increase HUD’s Budget to Prevent Families from Losing Assistance and Address Growing Needs

PDF of this report (15pp.)

By Douglas Rice and Barbara Sard

Revised June 1, 2007

Key Findings

  • Census data indicate that since 2000, the number of low-income renter families with severe housing cost problems has increased by one-third, to nearly 9 million.
  • The President’s budget, however, would cut HUD funding for 2008 by $2 billion below the 2007 level, adjusted for inflation, and thereby exacerbate the effects of the large cuts made in 2005 and 2006.
  • Congress took critical steps to reverse the weakening of low-income housing programs in the 2007 appropriations law, by providing funding increases for core HUD programs. But additional increases, as well as policy improvements, will be needed in 2008.
  • Just to prevent low-income families from losing assistance and to avert a further deterioration of public housing, Congress will need to increase funding for the three principal low-income housing programs by an estimated $2.8 billion above the President’s request. This includes $600 million for Section 8 vouchers, $300 to $900 million for Section 8 Project-Based Rental Assistance, and $1.6 billion for public housing.
  • Congress also should fund “incremental” Section 8 vouchers to help stem the growing housing affordability problems that low-income families encounter.

Related Areas of Research

Introduction

The President’s budget for fiscal year 2008 proposes to cut $2 billion (5 percent) from the Department of Housing and Urban Development (HUD), compared to the 2007 funding level, adjusted for inflation.[1]  The deepest cuts would be made in housing for the elderly and disabled (a 29 percent cut), Community Development Block Grants (a 22 percent cut), public housing (an 8 percent cut), and Section 8 Project-Based Rental Assistance (a 5 percent cut), although other programs would receive reduced funding as well.

In most cases, these reductions would come on top of cuts made in these programs in fiscal years 2005 and 2006 (see Figure 1).  Under the President’s 2008 budget, total funding for HUD programs would fall to a level that is $4.6 billion — or 11 percent — below the 2004 funding levels, adjusted for inflation.

The President is proposing these cuts despite evidence that growing numbers of low-income families have serious housing affordability problems.  Some 15 million low-income households have rent and utility costs that are unaffordable under federal standards (i.e., costs that exceed 30 percent of their modest incomes).  Moreover, since 2000, the number of low-income renter families with the most severe housing cost burdens — that is, who pay more than half of their income for housing — has increased by one third, to nearly 9 million families.[2]  (Recent improvements in the economy are unlikely to have altered these trends significantly; while average earnings for workers have risen in real terms in 2006 and early 2007, they have not kept pace with increases in rents and utility costs.)[3]

When housing is unaffordable, vulnerable families are forced to endure hardships ranging from poorer nutrition to homelessness.  Harvard University researchers found, for example, that high housing costs are strongly correlated with significant reductions in spending on food, transportation, clothing, and other necessities.[4]  Unaffordable housing costs are also a primary cause of homelessness.  An estimated 750,000 Americans are homeless on any given night, and up to 3 million are estimated to be homeless at some point over the course of a year [5]

In early 2007, Congress took the first steps toward reversing the recent weakening of federal housing assistance and renewing efforts to make housing more affordable.  It provided the first real increase in funding for HUD programs since 2004, adding nearly $900 million (in inflation-adjusted terms) to HUD programs for fiscal year 2007 over the 2006 level, including significant increases in funding for HUD’s main low-income programs.  Congress also adopted an improved funding formula for the Section 8 voucher program that will distribute renewal funding more efficiently and help housing agencies restore recent cuts made in the number of low-income families receiving Section 8 voucher assistance.

Congress can make additional progress when it crafts the HUD appropriations bill for fiscal year 2008.  The House and Senate have agreed on a budget resolution that rejects the overall cut in funding for non-defense discretionary programs that the Administration proposed.  But large budgetary challenges remain.  As this analysis shows, Congress must provide an estimated $2.8 billion more than the President’s budget requested for the three largest HUD programs in 2008 (Section 8 vouchers, Section 8 project-based rental assistance, and public housing) just to prevent families from losing housing assistance and to avert the further deterioration of public housing.  This report briefly outlines the major funding issues for each of those three programs for the coming year.

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End Notes:

[1] These figures are for total gross discretionary budget authority, prior to netting of rescissions and receipts, for all HUD programs and administration.  Gross budget authority is used because it provides a more accurate picture of program-level funding in the HUD budget than do net budget authority estimates.  Calculations are CBPP’s, based on the HUD budget for fiscal year 2008 and Congressional Budget Office (CBO) estimates of budget authority for fiscal year 2007.  It should be noted that the President’s budget was finalized before Congress agreed to final HUD funding levels for fiscal year 2007.

[2] These figures are based on a CBPP analysis of data from the 2000 and 2005 American Community Surveys, the latter of which is the most recent Census data available.

[3] Over the 2-year period ending in April 2007, average rents and utilities have increased 7.9 and 16.0 percent, respectively, while average weekly earnings for workers increased 7.6 percent.  Sources are the Consumer Price Index for residential rents and fuels and utilities, and the Current Employment Statistics survey for the earnings of production or nonsupervisory workers on private nonfarm payrolls.  Both sets of data are published by the Bureau of Labor Statistics.  Figures are nominal and seasonally-adjusted.

[4] For example, the Harvard analysis revealed that families with children that were in the bottom income quartile and paid more than half of their income for housing costs spent 30 percent less on food than households with similar incomes and affordable housing costs.  See Joint Center for Housing Studies at Harvard University, The State of the Nation’s Houinsg, 2006, President and Fellows of Harvard College, 2006.  Note that the analysis is based on data from the Consumer Expenditure Survey, which includes expenditures made with public benefits such as Food Stamps.

[5] See The Annual Homeless Assessment Report to Congress, U.S. Department of Housing and Urban Development, February 2007, and Martha Burt et al., Helping America’s Homeless, Urban Institute, 2001.

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