With Federal Funds Insufficient, States and Localities Funding Their Own Rental Assistance Programs

Although the President and Congress have funded modest increases in rental assistance for special populations in recent years — such as vouchers for veterans experiencing homelessness and adults with disabilities — federal funding for rental assistance continues to fall far short of need. That’s prompted states and cities to create and expand their own rental assistance programs targeted to special populations and designed to achieve key policy goals, such as helping people with disabilities live in the community instead of institutions.

Three out of four households that are eligible for federal rental assistance don’t get any because of limited funding, including over 1.2 million households headed by people with disabilities. That makes it tough for states and localities to improve outcomes and reduce costs for people experiencing homelessness, transitioning from expensive institutional settings, or exiting jail or prison.

But state and local rental assistance programs can be effective and sustainable, as our analysis of 19 state and local rental assistance programs (across eight states and two cities) showed. Funding for almost all of those programs — both big and small — has grown significantly, with several more than doubling. Many of them have kept up with rising rent costs and expanded to serve more people, while continuing to receive strong support from lawmakers — who have often designed the local programs to transition participants to federal assistance once it becomes available, enabling them to serve more people.

States and cities have found creative ways to fund and grow their rental assistance programs. The programs we studied fell into three funding categories:

• Entirely general funds: General revenue funds, which the city or state legislative body must appropriate, were by far the most common funding source. Over half of the 19 programs were funded exclusively through general funds, and funding for nearly all of those programs grew substantially over time, despite occasional dips.
• Entirely dedicated funds, such as a fee or a tax: Only one of the 19 programs was funded solely by a dedicated funding source, and its funding fell significantly over time. While dedicated funds have the benefit of being systematically collected through a fee or tax — such as fees paid when real estate is bought and sold — they can fluctuate with market changes or stagnate and fail to keep up with inflation.
• A combination of general and dedicated funds: Several programs have used both general funds and dedicated funds. Typically, either dedicated funding or general revenue initially funded these programs, and lawmakers later added the other funding source to help the program grow or keep up with inflation.

Many lawmakers and advocates continue to pursue new rental assistance programs in addition to the over 60 state and local rental assistance programs that already exist. For instance, Chicago is launching a new Flexible Housing Subsidy Pool, combining funding from city, federal, philanthropic, and private hospital investments. The pool will fund rental assistance and services to help people who’ve experienced homelessness and have significant mental or physical health needs find and keep stable housing.

Well-targeted investments by states and cities are powerful tools to address communities’ most urgent affordable housing needs, but they’re modest compared to the scale of federal programs and won’t close the gap in rental assistance. Policymakers must also further boost federal rental assistance to meet the need.