Substantial Funding Boost Needed to Renew Housing Vouchers in 2017
Freeze Would Leave Vouchers for More Than 100,000 Families Unfunded
December 1, 2016
If policymakers fail to provide a substantial funding boost to renew housing vouchers in 2017, most housing agencies will be forced to cut the number of low-income households they assist at a time when large and growing numbers are struggling to afford rent. Vouchers for more than 100,000 families would be unfunded, a loss of assistance that would be greater than that caused by the 2013 sequestration cuts.Under the Senate bill, for example, housing vouchers for at least 25,000 low-income households would be left unfunded in 2017, and the shortfall would be even deeper under the House bill. Under a “continuing resolution” that freezes voucher funding for the entire year at the 2016 level, vouchers for more than 100,000 families would be unfunded, a loss of assistance that would be greater than that caused by the across-the-board 2013 sequestration cuts.
Rents are rising strongly — over 3 percent per year — while the 2017 cost-of-living adjustments for seniors and people with disabilities with fixed incomes, who make up about half of the households using vouchers, will be just 0.3 percent. Because of these factors, as well as policymakers’ actions to restore vouchers lost under sequestration, the cost of renewing all housing vouchers in 2017 has risen to $18.86 billion, we estimate, well above the amounts that the House and Senate appropriations committees have approved in their respective 2017 Transportation-Housing and Urban Development (HUD) bills.
Congress appears poised to delay final decisions about fiscal year 2017 funding for housing vouchers until early next year. When Congress returns to wrap up the 2017 budget, providing sufficient funding to renew all housing vouchers that families are using this year should be a high priority. Funding is essential to sustain communities’ efforts to address the growing rental affordability crisis.
Number of Families Using Vouchers Has Recovered to Pre-Sequestration Level
The 2011 Budget Control Act (BCA) required arbitrary, across-the-board sequestration cuts in most discretionary programs in March 2013, including a $938 million reduction for Housing Choice Vouchers. This forced state and local housing agencies to cut the number of families using vouchers by more than 80,000, which undercut communities’ efforts to address homelessness and the growing problem of housing instability due to rising rents.
Over the past two years, however, state and local agencies have restored nearly 60,000 Housing Choice Vouchers into use with funds that federal policymakers made available for fiscal years 2014-2016. These gains, combined with the 20,000 new vouchers that policymakers funded and housing agencies awarded to homeless veterans through the expanded Housing and Urban Development–Veterans’ Affairs Supportive Housing (VASH) program, have reversed most of the effects of the 2013 sequestration cuts (see Figure 1).
The restoration of housing vouchers has been welcome news in communities across the country where large numbers of low-income families are struggling to afford rent, and homelessness remains a persistent problem. A record-setting surge in the number of renter households has driven strong growth in rents over the past decade, while household incomes have failed to keep pace. The growing gap between rents and incomes has squeezed poorer families the hardest. From 2001 to 2013, the number of unassisted renter households with very low incomes (incomes no greater than 50 percent of the area median income) that either pay more than half their income for rent or live in severely substandard housing — known as households with “worst-case needs” — increased a stunning 54 percent, from 5 million households in 2001 to 7.7 million households in 2013, including 1.5 million senior households and 2.8 million families with children.
High housing costs are also a primary cause of homelessness and housing instability, which affects large numbers of individuals and families. For example, some 1.36 million school-aged children — an all-time high — lacked a home of their own in the 2013-2014 school year, Education Department data show. Research studies link homelessness with increased likelihood of cognitive and mental health problems, physical health problems such as asthma, physical assaults, accidental injuries, and poor school performance.
A new HUD study adds to the evidence that housing vouchers are the most effective tool for families to escape the hardships of homelessness and raise their children in safe, stable homes. The study found that homeless families with children assigned to receive vouchers experienced much less homelessness and housing instability over the subsequent 36 months than other homeless families. Parents were also a third less likely to experience domestic violence, and households were 20 percent less likely to have a difficult time affording food for their children. The study also found that housing vouchers reduced children’s risk of either being placed in foster care or having to live temporarily with other family members (see Figure 2).
When combined with appropriate supportive services, housing vouchers also play a key role in addressing repeated or long-term homelessness among people with mental illness and other disabilities. The restoration of housing vouchers has aided many communities’ efforts to address such homelessness. In Los Angeles, for example, civic leaders from the public and private sectors joined together in 2009 to formulate a plan to reduce and eventually eliminate veterans’ and chronic homelessness. Local housing agencies committed hundreds of federally funded housing vouchers to the effort, but were forced to suspend those commitments in the wake of sequestration. As housing vouchers were restored, agencies have been able to meet their commitments, and the city and county are making strides in addressing the problem.
Nationally, Congress’ expansion of the VASH voucher program has also driven an impressive reduction in veterans’ homelessness (see Figure 3).
$18.9 Billion to Renew Vouchers in 2017 Due to Higher Rent, More Eligibility
Policymakers’ actions to restore housing vouchers, as well as the growing gap between tenant incomes and rental costs, will increase the amount of funding state and local housing agencies need just to maintain the existing number of vouchers to a level well above the amounts included in the 2017 House and Senate Transportation-HUD funding bills. Policymakers must provide sufficient funding to meet this need, or they will risk a repeat of the voucher cuts that followed sequestration.
We estimate that $18.86 billion will be required to fully renew vouchers in 2017, which is $1.18 billion over the 2016 level and $500 million above the 2017 Senate bill level (which is slightly higher than the House bill amount). Three factors are primarily responsible for the increased cost of renewing housing vouchers:
- More families are using vouchers. Housing agencies restored some 60,000 housing vouchers over the past two years, as explained above, including some 27,000 over the past year. In addition, the number of formerly homeless veterans using housing vouchers under the HUD-VASH program has increased by about 12,000 over the past year, and HUD has issued an estimated 16,000 new tenant protection vouchers. Overall, more than 55,000 additional housing vouchers will require renewal funding in 2017 than in 2016, an increase of 2.7 percent.
- Rental costs continue to rise at a strong pace. Over the past three years, rental costs have risen an average of 3.1 percent per year, according to the Consumer Price Index, and there are no signs that this trend will moderate in 2017. Families use housing vouchers to rent available units in the private market, which is one reason that the program is cost-effective. But program costs must keep pace with market rent trends (as well as tenant incomes, as explained below), in order for vouchers to succeed in making housing affordable to families.
- Tenant income growth will not keep pace with rental costs. Typically, families pay 30 percent of their income towards rent, while voucher subsidies fill the gap between the family’s payment and the rent, within limits that the housing agency sets based on HUD-determined standards for modest rents. About half of voucher households are seniors or people with disabilities, most of whom live on fixed incomes such as Social Security or Supplemental Security Income (SSI). For 2017, the cost-of-living adjustment for Social Security and SSI will be just 0.3 percent, well below the rate at which rental costs are rising. When household incomes fail to keep pace with rental costs, voucher subsidies must grow to fill the gap. For instance, if seniors’ incomes grow 0.3 percent, while rental costs grow 3.1 percent, then the voucher subsidy must rise 4.5 percent, if seniors are to continue to pay an affordable rent (that is, a rent that does not exceed 30 percent of income).
With rental costs rising by 3.1 percent, and fixed incomes remaining virtually flat, per-voucher subsidies will rise by 3.9 percent in 2017, we estimate. When combined with the 2.7 percent increase in the number of households using vouchers (see first bullet above), the total cost of renewing vouchers will therefore grow by 6.6 percent ($1.18 billion) in 2017. While a sizeable increase relative to 2016, voucher renewal funding eligibility of $18.86 billion in 2017 would still be less than renewal funding in 2010, after adjusting for rent and utilities inflation.
Policymakers may be able to fully fund voucher renewals by providing somewhat less than $18.86 billion. The House and Senate Transportation-HUD bills authorize HUD to reduce renewal funding eligibility for agencies that have excess reserves of unspent funding from prior years. After accounting for increased voucher costs this year, we estimate that approximately $280 million in excess reserves may be available at the beginning of 2017. If this is correct — and the actual amount of excess reserves could be significantly lower or somewhat higher — it would imply that $18.6 billion would be sufficient to renew all vouchers, about $220 million above the Senate bill level.
Inadequate Renewal Funding Risks Deep Cuts in Housing Vouchers
Congress appears poised to delay final decisions about fiscal year 2017 funding until early next year. When Congress returns to wrap up the 2017 budget, providing sufficient funding to renew all housing vouchers that families are using this year should be a high priority. If policymakers fail to do so, most housing agencies will be forced to cut the number of households they assist next year.
Under the Senate bill level of $18.36 billion, housing vouchers that at least 25,000 seniors, families with children, and others are using this year would be left unfunded in 2017 (and the cuts would be deeper under the lower funding level in the House bill). Much deeper cuts would be required under a proposal advanced by some members of Congress to freeze funding for most programs through fiscal year 2017 at 2016 levels (under a so-called “continuing resolution”). Under a funding freeze, housing vouchers currently used by more than 100,000 families would be left unfunded in 2017. Such cuts would be even deeper than those following sequestration in 2013.
 For more on sequestration, see David Reich, “Sequestration and Its Impact on Non-Defense Appropriations,” Center on Budget and Policy Priorities, February 19, 2015, http://www.cbpp.org/research/federal-budget/sequestration-and-its-impact-on-non-defense-appropriations. For more on housing vouchers, see “Policy Basics: The Housing Choice Voucher Program,” Center on Budget and Policy Priorities, September 29, 2015, http://www.cbpp.org/research/housing/policy-basics-the-housing-choice-voucher-program.
 This is a net figure: agencies cut the number of families using vouchers by more than 90,000, but these reductions were offset in part by the issuance of some 10,000 new vouchers for homeless veterans, funding for which was protected from sequestration. “Chart Book: Cuts in Federal Assistance Have Exacerbated Families’ Struggles to Afford Housing,” Center on Budget and Policy Priorities, April 12, 2016, http://www.cbpp.org/research/housing/chart-book-cuts-in-federal-assistance-have-exacerbated-families-struggles-to-afford.
 Agencies restored 58,000 vouchers from June 2014 to September 2016. This figure excludes new tenant protection and VASH vouchers leased during the period. A series of agreements to provide relief from the BCA’s sequestration-level spending caps enabled policymakers to increase funding for vouchers during these years.
 Joint Center for Housing Studies of Harvard University, America’s Rental Housing: Expanding Options for Diverse and Growing Demand, President and Fellows of Harvard College, 2015; and Alicia Mazzara, “Gap Between Rents and Renter Incomes Grew in 2015,” Center on Budget and Policy Priorities, November 1, 2016, http://www.cbpp.org/blog/gap-between-rents-and-renter-incomes-grew-in-2015.
 Barry L. Steffen et al., “Worst Case Housing Needs: 2015 Report to Congress,” Office of Policy Development and Research, U.S. Department of Housing and Urban Development, April 2015, https://www.huduser.gov/portal/publications/affhsg/wc_HsgNeeds15.html.
 National Center for Homeless Education, “Federal Data Summary, School Years 2011-12 to 2013-14,” UNC Greensboro, November 2015, http://nche.ed.gov/downloads/data-comp-1112-1314.pdf. These are the most recent data available.
 Will Fischer, “Research Shows Housing Vouchers Reduce Hardship and Provide Platform for Long-Term Gains Among Children,” Center on Budget and Policy Priorities, October 7, 2015, http://www.cbpp.org/research/housing/research-shows-housing-vouchers-reduce-hardship-and-provide-platform-for-long-term.
 Under the study, families living in homeless shelters were randomly assigned to receive one of three interventions — housing vouchers, rapid rehousing assistance, or transitional housing — or were assigned to a control group. See Daniel Gubits et al., “Family Options Study: 3-Year Impacts of Housing and Services Interventions for Homeless Families,” Department of Housing and Urban Development, October 2016, https://www.huduser.gov/portal/family_options_study.html. See also Ehren Dohler, “Major Study: Housing Vouchers Provide Haven for Homeless Families,” Center on Budget and Policy Priorities, November 4, 2016, http://www.cbpp.org/blog/major-study-housing-vouchers-provide-haven-for-homeless-families. The outcomes regarding family separations were identified 20 months after the beginning of the study, and detailed in the interim study report published in July 2015.
 Ehren Dohler et al., “Supportive Housing Helps Vulnerable People Live and Thrive in the Community,” Center on Budget and Policy Priorities, May 31, 2016, http://www.cbpp.org/research/housing/supportive-housing-helps-vulnerable-people-live-and-thrive-in-the-community.
 See the Home for Good Action Plan, http://homeforgoodla.org/actionplan.html, and “Federal sequester hits home for many of L.A.’s poor,” Los Angeles Daily News, March 21, 2016, http://www.dailynews.com/government-and-politics/20130321/federal-sequester-hits-home-for-many-of-las-poor.
 Ehren Dohler, “Veterans’ Homelessness Cut in Half Since 2010,” Center on Budget and Policy Priorities, November 8, 2016, http://www.cbpp.org/blog/veterans-homelessness-cut-in-half-since-2010.
 By tapping funding reserves, policymakers may be able to fully fund voucher renewals by providing somewhat less than $18.86 billion, as explained below.
 Source is CBPP analysis of HUD Voucher Management System data, except for the tenant protection voucher figure, which is a rough estimate based on annual allocations over the past several years. (HUD has not yet issued a notice of the tenant protection awards for fiscal year 2016.) Tenant protection vouchers are issued to replace assistance for households that were living in federally assisted public and private housing that has been demolished or otherwise removed from service.
 This figure represents a composite of the CPIs for residential rents, and fuels and utilities.
 Social Security Administration news release, https://www.ssa.gov/news/cola/. Roughly, the voucher subsidy equals the rent minus the tenant payment (which equals 30 percent of tenant income). For example, if the rent is $900 per month and the tenant’s income is $1,000 per month, then the tenant pays $300 (that is, 30 percent of income), and the voucher subsidy is $600 (= $900 - $300). If the rent increases 3.1 percent to $928, while the tenant’s income increases 0.3 percent to $1,003, then the voucher subsidy grows to $627 (= $928 - $301), an increase of 4.5 percent over the prior year subsidy of $600.
 For non-elderly, non-disabled households using vouchers, incomes rose 3.3 percent per year from 2012 to 2015, about the same as for American households in the bottom income quintile overall. CBPP’s estimate assumes that this trend will continue in 2017. Sources are CBPP analysis of HUD program data, and historical income tables available on the U.S. Census website, http://www.census.gov/data/tables/time-series/demo/income-poverty/historical-income-households.html.
 A composite of the CPI for residential rents and fuels/utilities for the first nine months of 2016 is 16.7 percent above the 2010 level, and will likely rise by roughly 3 additional percentage points in 2017, to nearly 20 percent above 2010. In comparison, voucher renewal funding eligibility of $18.86 billion in 2017 is 15.6 percent above the 2010 level.
 These figures assume that $280 million in excess reserves is available for a renewal funding offset in 2017. If no excess reserves are available, some 60,000 vouchers used by families would be left unfunded next year under the Senate bill, and 140,000 vouchers would be unfunded under a full-year continuing resolution.
 Agencies could attempt to mitigate cuts in the number of families assisted by failing to adjust voucher subsidies next year to keep pace with rising rents, thereby forcing many vulnerable voucher tenants to scrape together much higher rent payments. Following the 2013 sequestration cuts, however, housing agencies absorbed the lion’s share of the cuts by reducing the number of families using vouchers, even as some also took actions to impose sharp rent increases on voucher tenants. This experience suggests that efforts to increase tenants’ rent burdens would not significantly mitigate the loss of housing vouchers if policymakers fail to provide adequate renewal funding.