Using a Full Portfolio of Tools (Including Vouchers) to Expand Access to High-Opportunity Communities

by Barbara Sard
Center on Budget
and Policy Priorities

The three papers from the rich and provocative A Shared Future symposium that focused on what it would take for housing subsidies to overcome affordability barriers to inclusion in all neighborhoods provide a multi-faceted and nuanced set of approaches that would expand possibilities for lower-income, non-white families to live in higher-opportunity communities. While these are important approaches that should be part of the policy portfolio, efforts to expand opportunities should also recognize that tenant-based vouchers are, and will likely remain, the primary policy tool for enabling poor and near-poor families to live in higher-opportunity communities.

In his paper, Chris Herbert reminds us that, typically, the housing stock in high-opportunity communities is predominantly owner-occupied. So, as part of a comprehensive portfolio, it’s important to consider strategies to make it possible for low-income (and other) families of color to purchase homes in such neighborhoods, including those where rents are starting to rise. However, even a robust set of tools to overcome downpayment and credit barriers may not be sufficient to make for-sale homes in neighborhoods with good schools and other amenities in many regions within reach of low-income families.

Both Steve Norman and Margery Turner highlight the key role acquisition by committed owners of multifamily rental properties can play, both in keeping rents affordable in “emergent” (i.e., gentrifying) neighborhoods and in making more units available to families with housing vouchers in those and already higher-rent communities. Federal housing policy has neglected such acquisition strategies: grants are rarely available to reduce the amount of debt such purchases will require, and tax credits are restricted to new development or substantial rehabilitation. Like the King County Housing Authority, some other mission-driven organizations, such as the National Housing Trust, have patched together state or local assistance with private market debt (and potentially project-based vouchers) to make such acquisitions feasible. Facilitating loans and grants to purchase rental properties tied to long-term affordability restrictions – including obligations not to discriminate against voucher holders – should be a goal of federal housing policy, including housing finance reform.

While it’s important to include for-sale and multifamily acquisition strategies in a comprehensive strategy portfolio, tenant-based vouchers will likely remain the primary tool for enabling more poor and near-poor families to live in higher-opportunity communities. That’s true, given vouchers’ current scale — more than 2.2 million Housing Choice Vouchers are now in use — and their flexibility to rent virtually any type of decent-quality dwelling at a wide range of price points.

Yet vouchers can do much more to expand housing choice. The implementation of HUD’s new Small Area Fair Market Rent (SAFMR) policy is a promising step, but other federal policy changes are needed to create stronger incentives for housing agencies to promote better locational outcomes. It’s also vital to make more funding available, from public as well as philanthropic sources, to meet agencies’ additional administrative costs of promoting voucher mobility. And federal policy should not only permit but encourage agencies to target vouchers combined with mobility assistance to families with young children living in the most severely distressed neighborhoods.

Such efforts to foster inclusion may cost more, though experience with SAFMRs shows this isn’t always the case. But if we really care about outcomes for families over the long term, we can’t wait until there are sufficient resources to make housing affordable to all before we start paying attention to the types of neighborhoods families live in. The desperation and long-term harm of homelessness and housing insecurity create understandable pressure to spread the limited subsidy resources to help as many families as possible. Yet mounting evidence demonstrates the real long-term harm of growing up in a very poor, violent neighborhood and attending low-performing schools. Affordable housing alone doesn’t improve life chances; where families are able to live must also be a first-order concern, not one that we’ll pay attention to if and when we remedy the shortage of subsidies.  

While housing practitioners work to do the best job possible with the available resources, we must also build the political will to expand investments in housing subsidies, so that more families have the chance to overcome affordability barriers and live in communities of their choice. The Center for Budget and Policy Priorities, along with the National Low Income Housing Coalition and others, has just launched the Opportunity Starts at Home campaign, a long-term effort to achieve this goal. 

The Fair Housing Act at 50

by David Luberoff
Deputy Director

Fair housing can and should be a centerpiece of efforts to expand economic opportunity, asserted Dr. Raphael Bostic, President and CEO of the Federal Reserve Bank of Atlanta, who gave the 18th Annual John T. Dunlop Lecture at the Harvard Graduate School of Design on Tuesday, April 10 (watch video).  His talk, on the past, present, and future of the Fair Housing Act, was given one day before the 50th anniversary of President Lyndon B. Johnson signing the measure.

Bostic, who also served as Assistant Secretary for Policy Development and Research at the U.S. Department of Housing and Urban Development (HUD) from 2009 until 2012, explained that decades of research show the strong positive impacts that neighborhoods can have on children's education and future earnings. Given this, he noted, it is in everyone's interest to support efforts to expand opportunities for all families. "Fair housing is a key to economic mobility," he explained. "It is an economic development issue as well as a community and personal development issue."

Bostic went on to discuss the two main strategies for achieving the law's ambitious (and, in many cases, unfilled) goals. One approach has been enforcement of the fair housing act’s prohibition on discriminatory treatment in the housing market– including actions brought by HUD against communities, and sometimes brought against HUD by activists and non-profit groups. The other strategy derives from the act’s mandate that federal grantees also have an obligation to affirmatively further fair housing, taking steps to promote integration and not just combat discrimination. During his HUD tenure, Bostic was instrumental in developing a new approach to structuring how HUD-funded communities should go about identifying and implementing such affirmative steps.

While the former approach can achieve some success, it can ultimately produce only limited results, he observed. However, if carefully designed, the latter strategy has significant potential, asserted Bostic, as plans designed by the communities themselves with input from local stakeholders have a greater chance of being actively embraced. Given the current administration's efforts to slow and roll back some of those efforts, in the short run, enforcement efforts are likely to be the primary way in which supporters of fair housing will achieve their goals, he said. However, in the long run, people and communities will come to adopt more proactive approaches if only because an increasing number of them understand that America's long-standing history of upward economic mobility is at risk and that fair housing can be part of a solution to making sure that the next generation (and the ones that follow) continue to have access to the American Dream.

Furthering Fair Housing: It’s Not Too Late to Follow New Orleans’ Lead

by Cashauna Hill
Greater New Orleans Fair
Housing Action Center

Although the U.S. Department of Housing and Urban Development (HUD) has announced that state and local entities will have more time to detail their plans to affirmatively further fair housing, some localities are moving forward. These include the City of New Orleans, which in October 2016 became the country’s first jurisdiction to submit a legally required Assessment of Fair Housing plan (AFH).

New Orleans’ AFH, which was submitted jointly by the city government and the Housing Authority of New Orleans (HANO), not only represents a shift in the way that jurisdictions report on the state of housing access in their communities but also could serve as a model for other jurisdictions around the country. Most notably, in accordance with guidance provided by HUD in 2015, the New Orleans AFH was prepared with significant community input. 

Specifically, at the outset of the process, the city and HANO partnered with the Greater New Orleans Fair Housing Action Center (GNOFHAC), which I lead, to ensure that the AFH reflected the concerns of community leaders and community-based organizations. To make this happen, GNOHFAC designed and implemented a community engagement strategy that aimed to organize, educate, and engage with community stakeholders—particularly leaders of color and organizations that represented communities of color. In addition to facilitating a robust community engagement process, the city and HANO welcomed GNOFHAC’s assistance in analyzing relevant data that was included in the AFH plan. Finally, GNOFHAC helped provide both context and data on public and private acts of discrimination that affect housing choices in the New Orleans market.

Taken as a whole, these activities created a process that reflected an unprecedented level of community engagement in planning the city’s fair housing efforts. This engagement led to several notable recommendations in the AFH, such as a framework for improving the access that Housing Choice Voucher (HCV) participants have to low-poverty, high-opportunity neighborhoods, particularly areas connected job centers via dependable public transit services. Community leaders also helped develop other important recommendations, such as developing and implementing a “strategic plan to address environmental hazards, including lead in water and housing.” The AFH’s recommendation to address substandard housing in New Orleans by establishing a rental registry also was a direct result of engagement with community members who often accept substandard conditions when seeking affordable rental housing.

As noted above, in January 2018 HUD announced that it intends to delay required submission of AFH plans from jurisdictions that have yet to submit them. For persons in communities without a commitment from city leadership, or where the AFH will not be submitted in the near future as planned, this change could make it harder for people of color and lower-income households to access higher-quality housing, and programs designed to support existing homeowners.

However, despite that change in HUD’s policies, implementation of New Orleans’ AFH’s recommendations is expected to continue without interruption. We commend policymakers and leaders in New Orleans for continuing to support equal access to housing and the positive life outcomes that flow from access to better housing. Further, we hope that even with the delays, other jurisdictions follow New Orleans’ lead and work with affected communities to develop meaningful efforts to achieve the Fair Housing Act’s long-standing goal of “affirmatively furthering fair housing” throughout the United States.

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This post is a response to the Panel 4 papers that were presented at our A Shared Future symposium in 2017. These papers are available on the JCHS website. 

Assessing Fair Housing: HUD's Delay and the Dilemma this Poses for Jurisdictions

by Katherine M. O'Regan,
NYU

How should the numerous jurisdictions poised to start their Assessments of Fair Housing (or those who are already mid-process) proceed in the wake of an announcement that the federal government planned to push back deadlines for using this specific form of assessment as part of their legally-required planning process?

That's the question facing thousands of entities after the US Department of Housing and Urban Development (HUD) announced in January that it was delaying a previously issued final rule requiring that jurisdictions receiving HUD funding conduct an Assessment of Fair Housing (AFH) to meet, in part, their obligation to comply with the federal Fair Housing Act's requirement that they "affirmatively further fair housing" (AFFH).

HUD's notice extended the AFH deadline for one cycle for jurisdictions that had not yet had an AFH accepted and whose AFH deadline date fell before October 31, 2020. These jurisdictions, the announcement emphasized, must still meet their AFFH obligations. During the delay, they must conduct an Analysis of Impediments (AI) to fair housing choice (as they had prior to HUD's final AFFH rule) and take appropriate actions to overcome impediments identified by the analysis. However, unlike an AFH, there is no standardized form or specific content required for an AI, it need not be submitted to HUD, and HUD will not review it. (While the notice specified that the delay would be applicable as of the day it was issued, public comments on the notice can be submitted through March 6, 2018.)

When the delay was announced, many jurisdictions were in the final stages of conducting their AFHs; hundreds more were about to start. This raises two related questions that this blog tries to briefly answer. First, what does this delay mean for these jurisdictions? Second, how should they proceed?

Returning to the Flawed Analysis of Impediments (AI) Process

The notice calls for jurisdictions to return to a process that both the GAO and HUD itself deemed to be highly flawed. A 2010 GAO study reported that only 64 percent of program participants appeared to have AIs that were current, and questioned the usefulness of many of the AIs that did exist. It concluded that "[a]bsent any changes in the AI process, they will likely continue to add limited value going forward in terms of eliminating potential impediments to fair housing that may exist across the country." HUD's own internal analysis in 2009 came to the same conclusion, finding that about half of the AIs it collected for the study were outdated. incomplete, or otherwise of unacceptable quality.

To address some of the concerns raised in the GAO's report, HUD requires that AFHs be conducted with a standardized assessment tool and that jurisdictions provide measurable goals with a timeline for achieving them. As part of its justification for AFH postponement, HUD noted that 35 percent of the first AFHs submitted to HUD were initially not accepted. The AFH process, however, requires that HUD give feedback on AFHs that are not accepted. HUD provided such feedback and worked with jurisdictions to resolve deficiencies in the submissions. Ultimately, almost all of the 49 first submissions were accepted. In contrast, with AIs, there is no review or feedback from HUD. Notably, HUD's 2009 internal report found no evidence that jurisdictions were improving their AIs over time.

The combination of tighter standards, a better assessment tool, and a feedback loop seems to have produced stronger plans, according to MIT's Justin Steil and Nicholas Kelly, who compared the first 29 AFHs (as modified in response to HUD's comments on initial submissions) to the AIs previously conducted by those same jurisdictions. They found that compared to the earlier AIs, the final AFHs included more quantifiable goals as well as more specific policies and programs meant to achieve those goals. Such results, they noted, suggest the rule is working. "[T]he non-acceptances provided participants with the opportunity to respond to HUD feedback and to strengthen their final AFHs so as to meet their fair housing obligations. In short, the non-acceptances should be seen as strengths of the new rule not a failure."

What is HUD's Advice for a Good AI? Conduct an AFH?

For jurisdictions that have already begun their AFH, HUD's notice states that jurisdictions may continue to do so, as "the AFFH rule may provide program participants with a useful framework for complying with their AFFH obligations." HUD encouraged all participants to use the data and mapping tools as well as the AFH Assessment Tool in conducting their AIs, and to collaborate with other submitters in their region. But this vague guidance puts jurisdictions in the precarious position of identifying which elements of the AFH tool and process are necessary to meet its AFFH obligations.

Will Legal Challenges Reinstate the AFH?

The Trump administration has been aggressive in its use of delays to forestall the implementation of rules, temporarily or indefinitely. Many of these delays have been successfully challenged in the courts under the Administrative Procedures Act, which governs most federal rulemaking. For example, in December 2017, the US District Court for the District of Columbia enjoined HUD's two-year delay of its Small Area Fair Market Rent (FMR) rule, which would have required 24 metropolitan areas to use ZIP-code-level FMRs in setting rent payment standards for voucher recipients. HUD has since dropped its plans for delay, and advised more than 200 affected public housing authorities they must implement the new process within three months.

While no lawsuit has yet been filed against HUD's AFH delay, it is likely to come. (In theory, HUD could also modify its announcement in response to public comments, which, as noted above, must be submitted by March 6.) This suggests that jurisdictions should carefully weigh the risk that the delay will be reversed, and their duty to Affirmatively Further Fair Housing, as they determine how to conduct their new AIs. HUD's AFFH framework and assessment tool seem the best place to start. Notably, officials in some jurisdictions, such as New York City, have made public statements that they will move forward with a process that is true to the principles of the AFH.

However, whether jurisdictions will stay true to key advantages of the AFH, including robust public engagement and an open and transparent drafting process, remains to be seen. As Michael Allen notes in his contribution to the Joint Center's panel "What would it take for the HUD AFFH rule to meaningfully increase inclusion?," that may depend on whether a broad set of constituents come together to mobilize a strong ground game. Meanwhile, until the uncertainty created by HUD's decision is resolved, the AFH process and assessment tool may provide the safest and clearest path forward for jurisdictions.

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Papers from the A Shared Future symposium are available on the JCHS website. 

The Case for Allowing Tenants and Owners to Remain in Their Homes Post-Foreclosure

by Rachel Bratt
Senior Research Fellow

Although federal guidelines allow foreclosed homes to be sold with occupants, in a recently published article in Housing Policy Debate, I report that the guidelines are largely irrelevant in practice. In fact, data obtained from HUD through a Freedom of Information Act request shows that in Fiscal Years 2010-2014, there were a total of 23,746 requests for FHA-insured foreclosed properties to be conveyed while occupied. However, only 87 of those requests—much less than one percent—were approved by the U.S. Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA), which is part of HUD.

The data—along with interviews done with key stakeholders in Greater Boston—raise troubling questions about the extent to which HUD/FHA as well as the Federal Housing Finance Agency (FHFA) and housing-related Government Sponsored Enterprises (GSEs)—specifically, Fannie Mae and Freddie Mac—are continuing to view foreclosed homes more as financial assets, whose value they seek to maximize by requiring that they be vacant when they are sold. In doing so, they ignore the fact that the buildings also are dwellings for financially strained households who, if evicted, may need additional housing subsidies as well as the fact that continued occupancy by prior owners and tenants can be part of an effective strategy to preemptively stabilize neighborhoods. 

While there have been some changes in an FHFA policy that could soften the GSEs’ “no occupants at conveyance” practice, it is not yet clear whether this will result in former owners and tenants being allowed to remain in their homes following foreclosure. More generally, several other recent policies pertaining both to the GSEs and to HUD/FHA provide reasons for optimism. However, the extent to which these translate into pro-consumer and pro-neighborhood practices is not yet known.

To enable former homeowners and tenants to continue living in their homes following a foreclosure, greater public resources and commitment are needed. Programs and financial assistance that would enable nonprofits to purchase foreclosed dwellings, then rent them back to the prior owners and tenants, and to successive low-income households, would result in a long-term source of affordable housing. Key to such a policy shift would be more detailed assessments of the ways in which HUD, FHA, FHFA and the GSEs approach their pre- and post-foreclosure mortgage relief and property disposition policies, and the various costs involved in allowing occupied conveyance vs. requiring forced displacement. It seems likely that when vulnerable, low-income households are facing the loss of their homes, other units of government may need to step in to help them find and pay for their new housing.

The long-term costs under this scenario—both financial and otherwise—are virtually certain to far outweigh a short-term, up-front investment in keeping these households in place. Absent these changes, the various agencies will continue to implement a highly problematic set of procedures that promote family instability, potentially increase homelessness, and result in vacant homes, which have adverse neighborhood impacts.

Rachel Bratt is a Senior Research Fellow of the Joint Center for Housing Studies at Harvard, and Professor Emerita, Department of Urban and Environmental Policy and Planning, at Tufts University.

Panel Discussions Focus on Housing Policy in the Next Administration

by Shannon Rieger
Research Assistant

From tax reform to fair housing, the incoming Trump administration and new Congress are likely to adopt policies that could greatly affect housing, particularly affordable subsidized housing, noted speakers at a conference held in Boston last week. Organized by The New England Housing Network, a broad coalition of housing and community development organizations from the six New England states, the December 16th event focused on what the new administration and Congress will “do about the unmet need for affordable housing in our country” and what advocates can do to encourage a robust federal affordable housing agenda in 2017.

Speakers, including national experts, state officials, and leading advocates from throughout New England, touched on a variety of issues, including tax reform, the future of Government Sponsored Enterprises (GSEs), infrastructure initiatives, anti-poverty programs, and fair housing policies. Everyone noted that many current programs and initiatives are threatened and that much of the discussion is speculative because there is tremendous uncertainty surrounding the Trump administration’s plans, as well as the likelihood that Congress may not support the new administration’s policies. Nevertheless, panelists discussed several potential strategies for bringing together an effective coalition to advocate for affordable housing at a particularly challenging time.

(Photo courtesy of Asian Community Development Corporation)

In opening remarks, several panelists warned that the incoming Trump administration’s stated focus on increasing defense spending while cutting corporate taxes from 35 to 15 percent will shrink the non-defense discretionary budget. With new capital investment therefore unlikely to materialize, several panelists noted that it will be tempting – and perhaps necessary – to go into “preserve and protect” mode to maintain existing affordable housing programs.  However, discussants went on to emphasize the importance of pushing back against proposed spending cuts instead of focusing on potential losses. The panelists agreed that agencies and advocates must join forces to fight for the common goal of increasing overall non-defense spending, and pointed out that squabbling over the pieces of a shrinking pie would likely only undermine critical potential alliances.

Identifying and fostering cross-sector alliances and interdependencies emerged as a central theme throughout the forum. The panelists suggested that lifting up housing’s strong ties to health and to economic opportunity, in particular, will be critical in order to keep housing on the agenda. Barbara Fields, Executive Director of Rhode Island Housing, a state entity that works with developers and non-profit groups, illustrated how this might be accomplished by referencing an oft-cited quote from Rakesh Mohan, Deputy Governor of the Federal Reserve Bank of India, who in 2007 said, “Because housing is where jobs go to sleep at night, the quantity, quality, availability and affordability of housing is a key component in national economic competitiveness.”

Similarly, Chris Estes, President and CEO of the National Housing Conference, recalled Megan Sandel’s description of housing as a “vaccine” that can improve health.  Chrystal Kornegay, Undersecretary of the Massachusetts Department of Housing and Community Development, added that we should think of housing as a beginning rather than an end, highlighting housing’s potential to bring together a variety of groups that ordinarily might not collaborate.

Turning to specifics, panelists noted that tax reform could dramatically affect both the Low-Income Housing Tax Credit (LIHTC) and Private Activity Bonds. Panelists referenced a House bill that would eliminate Private Activity Bonds but keep LIHTC, while a Senate bill introduced in May 2016 would expand the LIHTC program by 50 percent. They also discussed House Speaker Paul Ryan’s June 2016 tax plan which, by greatly increasing the standard deduction, would substantially reduce use of the mortgage interest deduction. Although it is far from certain that this proposal will become law, panelists suggested that if reforms do happen, housing advocates should insist that any revenue generated by the changes be re-invested in housing on measures such as a renters’ tax credit and not used for other purposes.

Discussants also noted that Treasury Secretary designate Steven Mnuchin and key members of Congress appear to significantly disagree on GSE reform. Mnuchin has said he is interested in seeing that Fannie Mae and Freddie Mac are taken out of “government ownership,” restructured, and privatized.  However, Congress has not demonstrated support for a “recap and release” of the GSEs. These disagreements may impede any efforts to reform GSEs, noted several panelists.

The conflicting perspectives about both issues within the Republican Party will make it hard to substantially change the tax code or restructure the GSEs, said Benson “Buzz” Roberts, President and CEO of the National Association of Affordable Housing Lenders. He also noted that “inertia is the most powerful third party in the United States”, and may slow down or even block substantial changes in tax policy or GSE reform in the next several years.

Several panelists pointed out that President-Elect Donald Trump’s plan to substantially increase spending on infrastructure explicitly includes roads, bridges, tunnels, airports, railroads, ports and waterways, and pipelines. However, they added, it is unclear whether or not housing will (or could) be part of this spending package.  Including housing in those programs, panelists noted, might be an effective way to fund housing in coming years. In thinking about how to effectively communicate the role of housing as an economic engine, Fields suggested that investments in the skilled labor needed to build housing (along with the other forms of infrastructure explicitly mentioned in the Trump administration’s plan) may help to mitigate existing labor shortages and grow the economy.

Turning to anti-poverty, mobility, and fair housing policies under the incoming Trump administration, the discussants agreed that the AFFH (Affordably Furthering Fair Housing) initiative will certainly be under threat from a Republican-majority Congress and from incoming HUD Secretary Ben Carson, who last year wrote an op-ed denouncing the rule. The future of anti-poverty policies is less certain. Speaker Ryan’s “welfare reform 2.0” plans are the most concrete indication of how the Trump Administration might approach “anti-poverty” policy. Ultimately, panelists concluded that while there is little concrete information about how the Trump administration will proceed in this arena, the strong focus of the Trump campaign on economic opportunity and mobility for all Americans may present some opportunities. For example, by highlighting housing’s role in advancing mobility, housing advocates could align a housing agenda with other Trump administration priorities.

Taken together, the upshot of the discussions was that while many existing programs and initiatives could be under threat, the future of housing policy in a Trump administration is very uncertain.  Opportunities may arise from uncertainty, though, such as the potential to insist that housing be included as a part of infrastructure investment. The panelists added that recognizing such opportunities, and starting today to proactively build strong, cross-sector coalitions able to take advantage of potential openings, will be critical to advancing an affordable housing agenda in coming years. 

Can Homebuyer Counseling Support Sustainable Homeownership?

by Jonathan Spader
Senior Research Associate

HUD recently released a progress report —including a few early findings—from what could be a ground-breaking study of homebuyer education and counseling (HEC). While it will be several more months before the full study sample is ready for analysis, the early findings offer several insights about the value of HEC in helping potential homebuyers prepare for and sustain homeownership. Equally important, they confirm that implementation of the study is on track, successfully completing a field experiment that has the potential to produce detailed evidence about the impacts of homebuyer education and counseling. (Full disclosure: I’m currently an advisor to the study and previously served as its project director.)

The HUD study offers the first large-scale randomized-control trial of homebuyer education and counseling (although existing non-experimental studies  have shown promising estimates of HEC’s impacts). When enrollment closed earlier this year, more than 5,800 study participants were enrolled in 28 cities across the United States, with enrollments primarily occurring between January 2014 and January 2016. These participants were randomly assigned to one of three study groups: 1) in-person HEC offered through local housing counseling agencies; 2) remote HEC offered via internet and telephone, and 3) a no-services control group. For more details about this study design, see the full report. 

Looking forward, the critical tests will examine how HEC influences recipient outcomes, and whether such impacts translate into improved decisions during the home purchase process and, ultimately, into sustained homeownership. To better understand these impacts, the study’s future analyses will examine multiple measures across three domains: financial knowledge and management; home and mortgage search; and, homeownership sustainability.

For now, the early results offer a few data points that focus on the initial steps toward these outcomes, comparing outcomes 12 months after enrollment for a pooled treatment group (which combines the in-person and remote groups) versus the control group. These early analyses find several statistically-significant impacts of HEC:

• Treatment group members performed significantly better than control group members on a four-question measure of mortgage literacy.
• Treatment group members are significantly more likely to indicate that they would proactively contact their lender before missing a payment, a period when the lender has the most options for finding a solution that avoids default or foreclosure.
• Treatment group members are significantly more likely to have credit scores above 620, suggesting that HEC helped participants to correct errors or otherwise improve their credit scores in advance of home purchase.

Not all of the outcomes showed statistically-significant impacts. Treatment group members were not significantly different than control group members with respect to the fourth outcome tested—whether they regularly tracked their spending against a budget. A further caveat to these findings comes from the preliminary nature of the tests, which are based on a subset of the full study sample and examine only a handful of outcomes. Nonetheless, these estimates offer initial evidence that homebuyer education and counseling can play a valuable role in helping people prepare for homeownership. To that end, the early results report includes a couple of statements from study participants that are worth quoting directly:

“Just talking to the [housing counselor], it made me realize… what I could afford and, well, what I was preapproved for… She was adding on other expenses that I had totally forgot to add, you know, ‘cause I thought I had it all together. And I hadn’t. So I ran into a few things talking to her that made me realize that I probably need to just, you know, wait.”

 –Study participant in Chicago, IL

“[HEC] gave us the idea of whether we should go for it right now or not. It is really telling us what the timing [sic] if we are not really prepared and if we don’t have enough credit or other issues …you know, maybe it is not the right time for us. So it is really helping us to make the decision of go or no go.”

–Study participant in Dallas, TX

The full analyses of study participant outcomes at 12 months from study enrollment are is due in 2018, with analyses of longer-term impacts at 42 months from enrollment due in 2020. If the initial results are any guide, these future reports are likely to offer important conclusions about the value of HEC in supporting sustainable homeownership. 

Addressing the Housing Insecurity of Low-Income Renters

Irene Lew
Research Analyst

As our recently released 2016 State of the Nation’s Housing report highlights, rental housing affordability remains a pervasive—and growing—problem for millions of renter households in the US. The number of renter households devoting more than half of their income to housing costs (those considered severely burdened) climbed to a record high of 11.4 million in 2014. Among renter households earning under $15,000 a year, severe cost burdens are widespread, with 72 percent falling into this category. Severe cost burdens can adversely impact the housing security of very low-income households, leaving them little money left over to pay for necessities or to cover unexpected expenses. Indeed, compared to those with similar incomes who live in housing they can afford, very low-income renters paying more than half of their income on housing in 2013 were nearly two times more likely to fall behind on their rent, were at higher risk of having their utilities being shut off due to nonpayment, and were more likely to believe that they would be evicted within the next two months—all elements of housing insecurity (Figure 1).

Notes: Very low-income refers to households with incomes no higher than 50% of area medians. Severely cost burdened refers to households that pay more than 50% of income for housing. Households with zero or negative income are assumed to be severely burdened. Rent payment(s) were missed within the previous three months. Felt under threat of eviction refers to households who reported that they were likely to be evicted within the next two months. 
Source: JCHS tabulations of HUD, 2013 American Housing Survey. 

Furthermore, very low-income renter households with children are also more likely than those without children to be housing insecure and believe that they are at risk for eviction (Figure 2). Eviction is a leading cause of homelessness for families with children living in major cities like Washington, DC, Philadelphia and Baltimore, according to the most recent US Conference of Mayors Hunger and Homelessness Survey. As I point out in a previous blog post, homelessness among people in families with children persists in the highest-cost cities even as homelessness continues to decline steadily among veterans and those with chronic patterns of homelessness.

Notes: Very low-income refers to households with incomes no higher than 50% of area medians. Severely cost burdened refers to households that pay more than 50% of income for housing. Households with zero or negative income are assumed to be severely burdened. Rent payment(s) were missed within the previous three months. Felt under threat of eviction refers to households who reported that they were likely to be evicted within the next two months. Households with children refer to any households headed by an adult aged 18 and over with at least one child (related or unrelated). 
Source: JCHS tabulations of HUD, 2013 American Housing Survey.

Permanent federal housing subsidies that account for changes in tenant incomes, such as housing choice vouchers,  have proven to be the best option for improving housing stability, especially among homeless families exiting shelter. However, spending on federal housing assistance remains scarce, with direct housing subsidies representing just 4 percent of total discretionary funding approved by Congress in FY2015, a share that has barely budged over the past two decades.

Given the scarcity of federal funding, how can we address financial instability among low-income renters and reduce housing insecurity among this group? Enterprise recently proposed a promising master lease model program with built-in tenant savings accounts that could, without federal subsidies, improve the stability of low-income renters. Under this program, rents would remain affordable because a nonprofit or mission-driven organization would obtain long-term access to units in existing buildings through a multi-year master lease arrangement with fixed prices similar to the ones used for commercial leases. Unique to this model is a savings component in which a small amount of money from a tenant’s monthly lease payment would be allocated toward a custodial account in the tenant’s name. Tenants would not only have stable housing costs but would also be able to accumulate a savings cushion to pay for unanticipated expenses such as emergency room visits, and bounce back from income disruptions such as involuntary job loss or a significant reduction in income. In fact, a recent Urban Institute report analyzing data from the Census Bureau’s Survey of Income and Program Participation panel found that low-income families with savings of at least $2,000 to $4,999 are more financially resilient than middle-income families without any savings. Among low-income families with savings of $2,000–$4,999, just 20 percent experienced hardship after an income disruption, compared to about 30 percent among middle-income families without any savings.

However, financial issues are not the only contributor to housing insecurity among low-income households—some households may also struggle with additional challenges such as domestic violence, former incarceration, and mental health and substance abuse issues. As a result, improving housing insecurity may also require expanding access to supportive services that help address these underlying issues.

The MacArthur Foundation’s annual How Housing Matters Survey released last month confirms that a majority of Americans have a grim outlook on housing affordability—81 percent of respondents stated that they believe housing affordability is a problem in America today. Nearly seven in ten adults responded that it is more challenging to secure stable, affordable housing today than it was for previous generations. Furthermore, a recent Gallup poll found that 63 percent of renters with annual household income of less than $30,000 were worried about being able to pay their rent or other housing costs. Existing proposals to increase the number of affordable rentals built or preserved through the Low Income Housing Tax Credit program, and to reform federal rental assistance programs in order to serve more low-income households, can help alleviate the rental affordability crisis. However, it is equally important to offer programs that can help low-income renters better weather income disruptions or unexpected financial emergencies and avoid missed rent payments that can lead to eviction.

Are Renter Worst Case Housing Needs Easing?

by Ellen Marya
Research Associate

Every two years, the Department of Housing and Urban Development (HUD) issues its Worst Case Housing Needs Report to Congress (WCN). This report highlights the challenges faced by low-income renter households in finding affordable, good-quality housing. In addition to data on characteristics of renter households and units, HUD’s report provides a count of renters facing worst case needs—defined as households who earn less than 50 percent of the area median income (AMI) who do not receive housing assistance from the government, who also are severely cost burdened (spending more than 50 percent on income on housing costs), and/or live in severely inadequate units. 

In its most recent WCN report released in May 2015, HUD noted a full 9 percent decline in the number of households with worst case needs, falling from 8.5 million in 2011 to 7.7 million in 2013. It was the first decline in that measure since a slight (1 percent) decrease in 2005-2007 and followed two periods of increases of about 20 percent. The change was surprising given that it coincided with a time of broadly stagnant incomes, rising rents, and a rapid increase in the number of renters. Do HUD’s numbers reflect genuine improvements in conditions for renters or are other factors at work?

A potential explanation for the decrease in worst case needs explored by HUD is a change in the income limits the agency uses to identify households earning less than 50 percent of AMI (very low-income households). Between 2011 and 2013, HUD reduced the maximum income for very low-income households by $516, decreasing the number of households in this group eligible to be counted among those with worst case needs by about 1 percent. When HUD compared the tallies of renters with worst case needs using the new and old cutoffs, however, it found that only 20,000 of the 750,000 total reduction 2011–2013 could be attributed to the new lower income limit.

Much of the decrease in worst case needs is due to a drop in households with severe cost burdens, which account for the vast majority of worse case needs. HUD reported that the total number of renter households with severe cost burdens fell from 10.4 million in 2011 to 9.7 million in 2013, a decline of over 6 percent. Counter to these findings, however, calculations from the Joint Center for Housing Studies (JCHS) using a different data source, the American Community Survey, found a negligible decline (just over 1 percent) in severely cost burdened renters, from 11.3 million in 2011 to 11.2 million in 2013.

Notes: Severe burdens are defined as housing costs of more than 50% of household income. In HUD tabulations, households with zero or negative income are excluded unless they pay Fair Market Rent or more for housing. For households paying no cash rent, utility costs are used to represent housing costs. In JCHS tabulations, households with zero or negative income are assumed to have severe burdens, while renters paying no cash rent are assumed to be without burdens.

Sources: HUD Worst Case Housing Needs: 2015 Report to Congress and JCHS tabulations of US Census Bureau, American Community Surveys.

Several unique methodological differences help contextualize why HUD and JCHS estimates vary (Figure 1). The first key distinction between the measures reported by HUD and JCHS is the source data. HUD estimates of cost burdens rely on the American Housing Survey (AHS), a biennial survey jointly administered by HUD and the Census Bureau assessing characteristics of the housing stock and its occupants. JCHS calculates cost burdens using the American Community Survey (ACS), an annual Census Bureau survey of households designed to supplement the short form decennial census. The surveys vary in size and scope. The AHS reaches 50,000-70,000 housing units in its national longitudinal sample, gathering detailed information on housing quality and cost, assisted status, and location. The ACS reaches 3.0-3.5 million households in the years since its full implementation and collects information on many demographic, economic, and employment characteristics, along with selected housing cost and unit information.

In addition to their variations in design, the AHS and ACS use distinct methods for defining occupied units that result in different counts for the most basic variables of total households (equivalent to total occupied housing units) and households by tenure. While several reports have examined these differences in more depth, essentially the ACS uses a broader definition of occupancy and makes more attempts to contact sampled households. These features of the survey tend to increase the number of occupied units reported and can count households in a seasonal residence (often rented) rather than their usual residence (possibly owned), increasing the number of renter households over the AHS (Figure 2). While not unique to the 2011-2013 period to explain the divergent trends, this difference in methodology consistently results in about 2 million more renter households in the ACS over the AHS, likely contributing in part to a higher ACS count of burdened renters

Sources: HUD Worst Case Housing Needs: 2015 Report to Congress and JCHS tabulations of US Census Bureau, American Community Surveys.

There are also important distinctions in how cost burdens are measured and what adjustments are made to the data. According to its WCN report, HUD excludes households reporting zero or negative income when calculating cost burdens, unless these households report paying the local Fair Market Rent (FMR) or more for housing. In this case, HUD assumes the negative income reported to represent a temporary situation and imputes a higher income for the household. If these households pay more than FMR and live in adequate, uncrowded housing, an income slightly higher than the local area median is assigned, again assuming a temporary period of income loss. HUD also makes adjustments for households that report paying no cash rent. For these households, HUD relies on reported utility costs to represent housing costs and identify housing cost burdens.

In contrast, JCHS assumes all households reporting zero or negative income to be severely cost burdened and all those paying no cash rent to be unburdened (in the case of a household reporting both zero or negative income and no cash rent, the household is assumed to be unburdened). The difference in adjustments may have had an especially large impact in 2011-2013 as JCHS tabulations of the AHS find the number of renter households reporting zero or negative income rose by nearly 13 percent, about four times the rate of growth of renters reporting positive income. ACS numbers do not mirror this rise, as renters reporting zero or negative income increased by 3 percent 2011-2013. Excluding zero or negative income households may better isolate households with perennially low incomes from those potentially higher-wealth households reporting temporary annual business losses. However, excluding these households from ACS analysis finds that severe cost burdens still do not drop nearly as much in 2011-2013 as HUD methods shows. Subtracting all households with zero or negative incomes from the ACS burden count shifts the totals to 10.4 million severely burdened renters in 2011 and 10.3 million in 2013, a decline of just 1.4 percent—much smaller than that reported by HUD for the period. Conversely, if all zero or negative income households in the AHS were considered burdened regardless of rent level, the decline in renters with severe cost burdens 2011–2013 would be about 4.6 percent.

In addition to varying counts of zero and negative income households, a disparity in median renter income patterns between 2011 and 2013 may also explain part of the divergent cost burden trends in that period. HUD cites an increase in median renter income of 7.2 percent in 2011-2013 in real terms as a factor driving down the number of severely burdened renters. While JCHS estimates of ACS data also find an increase in real median renter income in that time—the first increase since 2006-2007—the gain is a distinctly smaller 5.2 percent. HUD notes in its WCN report that some of the observed increase in median income may be due to newly formed higher income renter households, but does not further explore this possibility. Analysis of ACS data indeed shows that an influx of higher income renters occurred over this time. Of the net 1.7 million increase in renter households measured in the ACS 2011-2013, fully 1 million or 60 percent had incomes of $75,000 or more, over twice the median renter income (Figure 3). With this group pulling up the median figure, aggregate income gains may not have impacted lower income households sufficiently to meaningfully decrease the number of severely burdened renters.

Source: JCHS tabulations of US Census Bureau, American Community Surveys.

Indeed, analysis of the most recent 2014 ACS reveals the number of severely burdened renters is once again on the rise, climbing to 11.4 million—the highest number on record. Whether new AHS data expected in the upcoming months and the next WCN report due the following spring confirm this trend or show a further drop in severely burdened renters, the results of both surveys again underscore the acute unaffordability of housing for millions of renter households. Understanding whether affordability pressures are worsening or easing is therefore crucial to making informed decisions concerning rental assistance and other housing policy actions. Given additional data showing persistent rent growth and  tightness in the rental market, the larger sample size of the ACS, the benefit of an added year of ACS data showing rising burdens, and the unusually large recent shifts in renter incomes in the AHS, it seems likely that the enduringly high severe cost burden levels reported by the ACS are more accurate and affordability pressures for renter households continue to build.

Housing Inadequacy Remains a Problem for the Lowest-Income Renters

Irene Lew
Research Analyst

In the early 1970s, in response to growing concerns about the housing conditions of poor families, the US Department of Housing and Urban Development (HUD) developed a measure of housing adequacy for its American Housing Survey (AHS) that continues to be used by the agency today. This adequacy measure was originally designed to evaluate the extent to which the national housing stock met the standard of “a decent home and a suitable living environment” established by the Housing Act of 1949. While the condition of the housing stock has improved over the past several decades, the rental stock is still three times more likely than the owner-occupied stock to be considered inadequate. And problems persist among the most affordable rentals.

While fairly complex, the AHS adequacy measure factors in various housing problems related to plumbing, heating, electrical wiring, and maintenance. Using this AHS measure, the majority of the nation’s rental housing stock is in physically adequate condition. As of 2013, just 3 percent of occupied rental units were categorized as severely inadequate and 6 percent were moderately inadequate. In fact, the adequacy of the rental stock has improved over the past decade, with the share of rentals categorized as physically inadequate declining from about 11 percent in 2003 to 9 percent in 2013. 

Notes: Inadequate units lack complete bathrooms, running water, electricity, or have other deficiencies. 

Source: JCHS tabulations of HUD, American Housing Surveys.

Stricter building codes have certainly helped to encourage higher quality, particularly the construction of units with complete plumbing and heating systems. As a result, severe physical deficiencies have been rare among the rental stock, especially among newer rentals. Just 1 percent of rentals built 2003 and later was classified as severely inadequate, compared to 4 percent of those built prior to 1960.

It is noteworthy, however, that the AHS adequacy measure does not account for certain health-related quality issues such as the presence of mold or structural issues such as holes in the roof or foundation, so housing quality problems may in fact occur at higher rates than the survey reports. And although physical deficiencies have become less common among the nation’s rental housing stock, housing problems disproportionately appear in units occupied by the lowest-income renters. In 2013, 11 percent of units occupied by extremely low-income renters (those with incomes less than or equal to 30 percent of area medians) were physically inadequate, compared to just 7 percent of those with incomes above 80 percent of area medians.

Notes: Extremely low / very low /  low income is defined as up to 30% / 30–50% / 50–80% of area median income. Inadequate units lack complete bathrooms, running water, electricity, or have other deficiencies.

Source: JCHS tabulations of HUD, 2013 American Housing Survey.

The lowest-income households also accounted for the largest share of renters reporting overcrowded conditions and physical housing problems such as toilet breakdowns, exposed electrical wiring, heating equipment breakdowns lasting six hours or more and the presence of rats in the unit. 

Notes: Extremely low / very low /  low income is defined as up to 30% / 30–50% / 50–80% of area median income Overcrowded conditions refer to units where there are more than two people per bedroom. Holes in the floor are those that are about four inches across.  

Source: JCHS tabulations of HUD, 2013 American Housing Survey.

Matthew Desmond’s most recent book, Evicted, vividly captures these statistics, drawing attention to the grim housing conditions of families in low-rent units in inner-city Milwaukee who must live with the constant presence of roaches and other vermin, clogged sinks and bathtubs, holes in their windows, and broken front doors.

Rentals occupied by extremely low-income households in central cities have the highest physical inadequacy rates, especially those located in small multifamily buildings with 2-4 units. Indeed, 16 percent of these units were categorized as inadequate, compared to 12 percent of those in buildings with 50 or more units. As I pointed out in a previous post, small multifamilies are a critical source of low-cost housing because they tend to charge lower rents than those in much larger structures, but much of this stock is rather old and at higher risk of loss from the affordable stock due to deterioration.

As this recent NPR piece suggests, the narrow margins for mom-and-pop landlords operating in low-income neighborhoods do not provide sufficient incentive for landlords to make improvements or repairs in a timely manner. Indeed, according to the American Housing Survey, 13 percent of extremely low-income renters reported in 2013 that the owner of their unit usually did not start major repairs or maintenance quickly enough, compared to less than half that share (6 percent) among higher-income renters with incomes above 80 percent of area medians.

The prevalence of housing deficiencies among units occupied by the lowest-income renters highlights the importance of bolstering building code enforcement efforts at the state and local levels. However, municipalities are often faced with tight budgets that lead to dwindling code enforcement teams. Indeed, according to one estimate in 2013, Cleveland and Detroit, among others, have cut their code enforcement workforce by about half since the middle of the last decade. Cities like Baltimore, Portland, and the San Francisco Bay Area are also facing shortages of building inspectors that make it difficult to deal with building code violations. While increased code enforcement can identify landlords who are failing to maintain their properties, this could also lead to unstable housing situations for current tenants. Renters may withhold rent or call local building inspectors as a tactic to push landlords to make necessary repairs, but this could lead to eviction threats or the initiation of a formal eviction process due to nonpayment of rent.

At the federal level, budgetary constraints have also impacted efforts to address the physical deficiencies among the aging public housing stock, which was largely built before 1970. Federal appropriations for the public housing capital fund fell by 34 percent over the past decade and HUD is faced with an estimated backlog of $26 billion in capital maintenance and repairs (as of 2010). HUD’s housing choice voucher and project-based rental assistance programs, which subsidize rentals for low-income households in the private market, require landlords to pass annual or biennial inspections for housing quality. However, the public housing stock is not subject to regular inspections and has largely been prohibited from using private capital to finance capital needs and repairs. As a result, compared to other types of assisted rentals, physical housing problems are more common among the public housing stock. In 2013, over half (53 percent) of public housing units had more than two heating equipment breakdowns lasting at least six hours and 13 percent of units had water leaks due to equipment failures within the previous 12 months.

Living in unsafe, physically inadequate housing can lead to adverse health and developmental outcomes for low-income families. Indeed, recent research confirms that children exposed to defects such as leaking roofs, broken windows, rodents, and nonfunctioning heaters or stoves were more likely to experience emotional and behavioral problems. Among five housing characteristics studied—quality, stability, affordability, ownership, and receipt of housing assistance—poor physical quality of housing was the most consistent and strongest predictor of emotional and behavioral problems in low-income children and adolescents. Poor housing conditions such as mold, chronic dampness, water leaks, and heating, plumbing, and electrical deficiencies, are also associated with health risks like respiratory illness and asthma. These findings underscore the urgent need for cities to prioritize code enforcement and work collaboratively with nonprofit tenants’ rights groups to deal with landlords who are not responsive to requests for necessary repairs.

HUD Funding in the Presidential Budget Prioritizes Economic Mobility and Rental Assistance

Irene Lew
Research Analyst

Several weeks ago, President Obama released his final budget proposal to Congress. In it, the President requests $48.9 billion in gross discretionary funding for HUD—a $1.6 billion increase over the amount that Congress appropriated in FY 2016. With the exception of the Community Development Block Grant (CDBG) and the public housing capital fund, HUD’s FY 2017 budget maintains or requests increases for key programs over the levels that lawmakers approved in FY 2016 (Figure 1).

Source: US Department of Housing and Urban Development, FY 2017 Congressional Justifications; White House Office of Management and Budget FY 2017 President’s Budget 

Funding for Rental Housing Assistance

More than three-quarters (78 percent) of the funding request would support 4.5 million low-income households through HUD’s three largest rental housing assistance programs: housing choice vouchers, project-based rental assistance, and public housing (through its capital and operating funds) (Figure 2).

Source: US Department of Housing and Urban Development, FY 2017 Congressional Justifications.

After several years of uncertainty in the wake of sequestration in 2013, the request of $20.8 billion for the housing choice voucher program would fully fund all voucher renewals in calendar year 2016. The request includes a 26-percent boost in administrative fees to cover public housing agencies’ (PHAs) costs to administer the voucher program under a new formula based on the recommendations of a HUD-commissioned study released last year that highlighted the underfunding of PHAs.

Meanwhile, the budget would provide a full 12 months of funding for all contracts under the project-based rental assistance program, including public housing units and privately-owned units that were converted to long-term project-based Section 8 contracts under the Rental Assistance Demonstration (RAD) program. For the second straight year, HUD is seeking $50 million to expand the RAD program and remove the 185,000 unit cap on the number of public housing conversions under the first phase of RAD. Since it received Congressional authorization in 2012, RAD has been a key part of HUD’s strategy to access private capital to rehabilitate and preserve the aging public housing inventory, which has experienced a net loss of 139,000 units since 2000. Until RAD’s authorization, HUD’s public housing program was largely prohibited from accessing non-federal funding sources for making critical repairs to the stock. As of December 2015, HUD estimates that PHAs and their partners have raised over $1.7 billion through RAD to convert more than 26,000 public housing units.

With an increased emphasis on public housing RAD conversions, the request for the public housing program in FY 2016 was a marginal increase—less than 1 percent—over the FY 2016 enacted level. The budget proposes a 2 percent reduction for the public housing capital fund, which is troubling given that the public housing stock has an estimated capital needs backlog of about $26 billion, and that adequacy issues among public housing units are much more common than among other types of federally assisted and unassisted units. While RAD will help address adequacy issues in the public housing inventory, there is no guarantee that RAD funding will continue, and the ongoing disinvestment in the public housing capital repairs fund may offset gains made under RAD.

Meanwhile, the President’s budget also requests funding increases for key multifamily rental housing assistance programs administered by the US Department of Agriculture (USDA) that serve roughly 403,000 low-income households annually in rural communities, including $33 million for the Section 515 Rural Rental Housing Loans program, up 18 percent from $28 million enacted in FY 2016, and $1.4 billion for the Section 521 Rural Rental Assistance program, a modest increase (1 percent) from the FY 2016 enacted level.

Commitment to Ending Homelessness

Funding for homelessness prevention remains a priority in the President’s budget, which includes an 18 percent increase in discretionary funding over the FY 2016 enacted level for Homeless Assistance Grants. The increase will fund $25 million in new projects for homeless youth in coordination with the Department of Health and Human Services (HHS), an additional 25,500 new units of permanent supportive housing targeted at the chronically homeless, and 8,000 new rapid rehousing units for homeless families. Overall, in contrast to many other HUD programs whose funding levels have declined sharply over the past decade in real terms, funding for homeless assistance grants is now 43 percent higher in FY 2016 than in FY 2006 (Figure 3).

Note: Percent change is based on dollar values that have been adjusted for inflation using the CPI-U for All Items.
Source: White House Office of Management and Budget; US Department of Housing and Urban Development FY 2017 Congressional Justifications.

Building on the findings in HUD’s recent Family Options report highlighting the effectiveness of vouchers in improving the housing stability of homeless families, the budget is seeking $88 million in discretionary funding for 10,000 new vouchers for this population. In addition to this request, the budget has also proposed $11 billion in mandatory funding for an ambitious new 10-year initiative to end homelessness among families with children. This initiative, which would be exempt from the annual Congressional appropriations process, aims to assist 555,000 families over the coming decade through a significant expansion of housing choice vouchers and rapid rehousing assistance. As I noted in a blog post last year, the reduction in family homelessness has been much smaller than among veterans and chronically homeless individuals. In fact, as of the 2015 Point-in-Time count, which estimates both the sheltered and unsheltered homeless populations on a single night every January, the number of homeless persons in families in shelter is actually 4 percent higher than in 2007.

Emphasis on Economic Mobility and Fostering Inclusive Communities

With increasing evidence that neighborhood quality matters for child development and economic prospects, including a 2015 analysis of HUD’s Moving to Opportunity demonstration program, the President’s budget has requested a $75-million funding increase for Choice Neighborhoods, and has proposed a new three-year $15 million Housing Choice Voucher Mobility Counseling Demonstration program to help HUD-assisted families move and stay in higher-opportunity neighborhoods. In a similar vein, the budget has proposed the Upward Mobility Project, a new place-based initiative that will allow states and localities to blend funding across four existing block grant programs—HHS Social Services Block Grant and Community Services Block Grant, as well as HUD's HOME and CDBG programs—to implement evidence-based policies focused on poverty reduction and neighborhood revitalization. The budget maintains HOME funding at the FY 2016 enacted level of $950 million, which is an encouraging sign for many advocates who had rallied against FY 2016 Congressional proposals calling for severe cutbacks to the program, an important source of gap financing for tax credit projects and other local affordable housing initiatives. The budget also includes a request of $300 million in mandatory funding for a Local Housing Policy Grants program to help localities and regional coalitions fund policies and programs that minimize barriers to housing development and expand housing supply and affordability.

Reflecting the impact of the Supreme Court’s decision regarding low income housing tax credit (LIHTC) allocations in Texas Department of Housing and Community Affairs vs. Inclusive Communities Project and HUD’s Affirmatively Furthering Fair Housing ruling last summer, the President’s FY 2017 budget has also proposed that Qualified Allocation Plans (QAPs) for state housing finance agencies be required to include Affirmatively Furthering Fair Housing (AFFH) as an explicit preference for awarding tax credits. Additionally, part of the $69 million increase requested for the public housing operating fund in FY 2017 would go toward supporting increased PHA administrative expenses associated with implementation of the new AFFH regulations.

Serving the Lowest-Income Households

According to HUD’s 2015 Worst Case Housing Needs report, just 39 affordable units are available for every 100 extremely low-income renter households (those with income no higher than 30 percent of AMI). To incentivize developers seeking tax credits to provide deeper affordability for the lowest-income households—those who often cannot afford to live in LIHTC units without additional rental assistance—the President’s budget has once again proposed an income-averaging rule for LIHTC eligibility in which the average income for a minimum 40 percent of the units in a project does not exceed 60 percent of AMI.

The National Housing Trust Fund would also help address the shortfall in units that are affordable to the lowest-income households. Originally authorized in 2008 under the Housing and Economic Recovery Act, the Housing Trust Fund is a mandatory program funded by GSE contributions that will allocate funding to states and state-designated entities for the development, rehabilitation, and preservation of housing targeted at extremely low-income households. HUD predicts that it will collect $170 million in fee assessments from Fannie Mae and Freddie Mac for the fund in 2016, and an additional $136 million from the GSEs in 2017.

Preserving the Affordable Rental Stock

Despite an expansion of the voucher program, the budget included a $20 million reduction in tenant protection vouchers, which provide critical protection to residents at risk of displacement because they live in HUD-assisted units with expiring or terminating contracts. HUD notes that it will need to provide partial funding to approximately 33,500 vouchers in FY 2017 because the proposed amount of $117 million is insufficient to fund them for a full 12 months. Although HUD plans to request the full amount necessary for these voucher renewals in 2018, there is no guarantee that HUD will receive the funding it needs, putting families living in HUD-assisted units with expiring affordability contracts at risk for rent increases, eviction, or homelessness.

In addition to a requested expansion of the RAD program in order to preserve affordable stock, the President’s budget has also proposed that Section 202 Project Rental Assistance Contracts (PRACs), providing affordable rental housing to adults aged 62 and over, should also be eligible for conversion. While not part of the FY 2017 discretionary funding request, the budget has also recommended adding the preservation of federally assisted affordable housing to the other 10 criteria that state housing finance agencies are required to include in their QAPs for awarding LIHTC allocations.

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What happens from here? As the Center on Budget and Policy Priorities (CBPP) notes in a recent memo, the House and Senate will likely begin working on their own budget resolutions earlier than usual this year because an agreement is already in place on overall Congressional funding limits for fiscal year 2017. However, final decisions on FY 2017 appropriations will likely occur after the November elections.