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Unless Policymakers Act, Funding for Federal Rental Assistance Will Hit 40-Year Low

Federal budget caps under the 2011 Budget Control Act (BCA), which have already caused deep cuts in housing assistance funding, could force even deeper cuts in coming years.  If the caps are left unchanged and if housing assistance programs’ share of total non-defense discretionary funding doesn’t rise, funding for housing assistance will soon fall to its lowest level in 40 years, relative to gross domestic product (see chart).

Under the BCA caps, total non-defense discretionary program funding will rise at an average nominal rate of slightly more than 1 percent per year over the next five years.  Meanwhile, the cost of renewing current federal rental assistance — which makes up roughly four-fifths of the Department of Housing and Urban Development’s (HUD) budget and is driven largely by changes in private market rents — will likely grow significantly faster as rent increases continue to outpace tenant income gains.   And there are sound reasons to believe that growth in renter households will remain strong in coming years, likely pushing rental costs up further. 

Policymakers will face a stark choice: cut the rental assistance available to low-income families, or sustain assistance for these families while deepening cuts in other non-defense discretionary programs, potentially including other housing and community development programs that HUD administers.  Any efforts beyond sustaining the status quo — such as expanding rental assistance programs to achieve federal goals of eliminating homelessness, for example — would require even deeper cuts in other areas.

To avoid these choices, policymakers must raise the BCA caps and expand rental assistance for low-income families.  Along with increasing funding for housing vouchers and other current programs, policymakers should explore innovative approaches to assisting families via tax credits and other avenues outside the discretionary budget.

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