BEYOND THE NUMBERS
Update, January 10, 2019: We’ve updated our estimates of the number of households potentially affected by the expiration of rental assistance contracts.
Hundreds of thousands, if not millions, of low-income seniors, people with disabilities, and families with children that receive federal rental assistance face severe hardship if the government shutdown extends into February and March.
The Department of Housing and Urban Development (HUD) says it can’t renew up to 1,150 rental assistance contracts with private landlords that expired in December or will expire in January due to a funding shortfall from the government shutdown. Those landlords receive federal subsidies so they can provide apartments at affordable rents to roughly 40,000 low-income households. While a delay of several weeks in renewing the contracts (and restarting the subsidies) likely won’t prompt building owners to evict vulnerable residents, the risks for residents — and for the affected programs’ long-term future — will grow if the shutdown extends into February and March, dramatically boosting the number of residents who could experience severe hardship.
The largest of the currently affected programs is Section 8 Project-Based Rental Assistance, although a few smaller programs, such as Section 202 Supportive Housing for the Elderly, may also be affected. In these programs, HUD contracts with private landlords to provide affordable housing to roughly 1.4 million low-income households. HUD’s monthly payments fill the gap between the tenants’ rent payments (typically 30 percent of household income) and the contract rent.
More than two-thirds of households in these programs are seniors or people with disabilities; most of the rest are families with children. On average, these households have incomes under $13,000, well below the federal poverty line. Housing aid significantly reduces poverty, food insecurity, homelessness, and other hardships, studies show.
When rental assistance contracts expire and aren’t renewed, owners suffer a large, immediate drop in their rental revenue, which they use to pay their mortgages, insurance, and property taxes; repair and otherwise maintain their buildings in good condition; and pay staff. Most owners have sufficient reserves to cover such large losses for several months, but some don’t — and few if any owners can absorb such losses for an extended period without risking default and loss of the property.
The shutdown’s consequences will rapidly worsen if it extends into February and March. If it extends into February, some of the owners of the 1,150 properties whose contracts lapsed in December and January won’t receive subsidy payments for a second (and, in some cases, possibly third) straight month, greatly increasing their financial squeeze. The number of households affected will also grow sharply. Another 550 HUD rental assistance contracts will expire in February, affecting an estimated 16,000 more households. HUD says it won’t be able to renew those contracts as long as the shutdown continues.
If the shutdown lasts into March, all subsidy payments for the largest federal rental assistance program — Housing Choice Vouchers — will end, putting at risk an additional 2.2 million low-income households that use vouchers to rent modest housing in the private market. The loss of voucher subsidies could lead some landlords to double or triple households’ rent payments and even to try to evict vulnerable families, seniors, and others.
Moreover, most HUD rental assistance programs are partnerships between the federal government and private landlords. We can’t reasonably expect landlords to participate if the federal government isn’t a reliable partner and exposes them to large financial risks, as it’s doing now. Perhaps the shutdown’s greatest long-term cost will be discouraging owners from participating in the future, to the detriment of low-income families and communities more broadly.
Policymakers can’t allow that to happen. They should end the shutdown immediately.