Low-Income Housing Funds Are Drying Up All Over America

Despite a new federal program to help struggling Americans secure homes, recession-era cuts are going to be hard to repair.

A low-income housing area in the Reservoir Hill neighborhood of Baltimore. (Photo: Flickr)

Jan 13, 2015· 3 MIN READ
A former journalist for The Associated Press and Miami Herald, she reported from Latin America for Time, Businessweek, and Financial Times.

When Baltimore opened its public housing wait list for the first time in a decade last fall, more than 70,000 people applied for 25,000 spots. It was the same scenario in Pittsburgh—more than 13,000 residents jumped at the opportunity to get on a list capped at 6,000. In the District of Columbia, which closed its wait list in 2013, more than 72,000 people are in line for just 14,000 Section 8 housing vouchers.

Those numbers depict a story that plays out in major cities across the country when it comes to how much demand outpaces supply for public housing, and those wait lists are no guarantee of ever landing a subsidized apartment. It can take years to get through those backlogs.

That's why housing advocates say this month’s long-awaited launch of the National Housing Trust Fund, which is mainly aimed at shoring up the nation’s dwindling stock of low-income rental units, is welcome, but the amount of money it is expected to raise won’t go very far to alleviate the housing crisis.

Fueled by a slice of revenue from federal mortgage programs Freddie Mac and Fannie Mae starting this month, the fund is expected to raise $250 million to $350 million this year to be distributed to states in 2016, primarily for assisting extremely low-income renters.

“Any money is needed, but when spread out nationally, it’s not a lot of money,” said Linda Crouch, senior vice president for policy for the National Low Income Housing Coalition in Washington, D.C. “I know states and developers are already looking at how to get it.”

The fund, run by the Federal Housing Finance Agency, had been on hold for six years because of the foreclosure crisis that saw millions of homeowners lose the roofs over their heads. A companion program, the Capital Magnet Fund, will provide money for economic development projects in low-income areas.

But the new funds are seen as little compensation for steep budget cuts to the federal Department of Housing and Urban Development, the country’s main agency that deals with financial support for low-income housing.

From 2010 to 2015, for instance, HUD’s mainstay HOME Program, which distributes block grants to states and communities for assisting low-income renters and homeowners, saw its budget chopped in half, from $1.8 billion to $900 million.

Funding for other programs has virtually dried up. In Seattle, a 50-unit building for low-income seniors is opening this month under HUD’s Section 202 elderly housing program. Sharon Lee, executive director of Seattle’s Low Income Housing Institute, believes it’s one of the last such projects in the country.

“The [202] program’s been decimated,” she said. “And we have a huge increase in the number of homeless seniors.”

In Los Angeles, one of the nation’s top three cities for expensive housing, HUD grants have plunged from $54 million in 2008 to just $19 million currently. The city’s Affordable Housing Trust Fund has also been dealt a blow by California’s elimination of redevelopment agencies in 2011. Money funneled through the agencies was set aside for projects such as low-income housing. Now it goes directly into the municipal general fund, which pays the city’s operating expenses.

Additionally, while Congress exempted other public assistance programs, such as food and health care, from sequestration cuts in 2013, housing was not included as a protected program.

The result is that, combined with stagnant wages and soaring rents due to the flood of foreclosed-on homeowners turned tenants, housing expenses have risen to near-record levels for many Americans.

More than 50 percent of renters are spending more than 30 percent of their income on rent, while 28 percent are spending more than half their income, according to The Joint Center for Housing Studies of Harvard University.

Housing activists say they’re seeing more families doubling and tripling up in apartments, more people staying in bad situations such as homes with domestic violence, and more children in shelters.

“There’s just no incentive to keep rent low for those who need it,” said Jessica Lewis, an organizer with the Right to Housing Alliance in Baltimore. “Nationally, there’s no sort of trend to building affordable housing. People are ending up homeless.”

HUD Secretary Julian Castro said in a budget statement last month that the funding cuts are forcing the department to be more creative in coming up with programs to fill the gaps. One way the department is trying to do that is through public-private partnerships, such as the Low Income Tax Credit program, that give tax incentives to private developers to build affordable housing.

Another project, Rental Assistance Demonstration, is aimed at upgrading the country’s public housing stock, which needs an estimated $26.5 billion in maintenance. Currently in pilot phase in 13 states, the program guarantees housing authorities and private landlords long-term Section 8 contracts so they can use them as leverage to obtain private loans to rehab units.

Cities are also looking to jump-start their own programs. In Seattle, voters have approved a property tax levy earmarked at funding affordable housing. Los Angeles is batting around several ideas, such as requiring extra developer fees or mandating affordable units in zoning ordinances.

Advocates say what’s really needed is restoring HUD’s funding for direct subsidies to low-income renters—the best and quickest way to keep families from becoming homeless—but they acknowledge that’s unlikely to happen anytime soon.

“The outlook for 2016–17 is bleak,” Crouch said. “It’s all about preserving what we have.”