Fiscal Austerity and Rental Housing Policy in the United States and United Kingdom, 2010–2016

Abstract

After the 2008 global financial crisis, both the United States and the United Kingdom introduced austerity policies targeted at particular elements of their national budgets. The purpose of this article is to compare the nature of this retrenchment; the similarities and differences in how it was implemented; and its initial impacts on one of the expenditure areas particularly affected: affordable rental housing programs and housing support for low-income households. Using a wide range of data sources, we find evidence of political and fiscal policy analogies in the timing and forms of the initial policy choices and how these were modified in the face of economic and political pressures. There are considerable similarities both in the instruments used to reduce housing expenditures and in the early impacts on support mechanisms and recipients. However, we find different histories and trajectories of support between the two countries that suggest that the longer term differences in outcomes may be more important.

Keywords:

• Affordable rental housing policy
• austerity politics
• comparative analysis of U.S. and UK
• measuring outcomes

Acknowledgments

Earlier drafts of this article were presented at the European Network for Housing Research at University College Dublin on 27 November 2015, at the National Academy of Public Administration Conference on Social Equity in San Francisco on 2 June 2016, and at the International Sociological Association meetings in Vienna, Austria on 12 July 2016.The authors would like to thank a number of colleagues who have helped in this research and in reviewing earlier drafts including George Galster, Alex Schwartz, Jim Riccio, Steve Redburn (former branch director for housing programs at OMB), Douglas Rice (U.S. Center for Budget and Policy Priorities), Dan McCue (Joint Center for Housing Studies at Harvard), Mark Keightley (U.S. Congressional Research Service), Barry Steffen (U.S. HUD), senior staff at the GAO, Lisa Diaz and staff at the New York City Public Housing Agency, Hilary Silver on the Board of the Providence Housing Authority, Dan Williams, Patrick Simon and colleagues at INED in Paris, John Hills, Ruth Lupton, and colleagues at the Centre for Housing and Planning Research at Cambridge University. None are in any way liable for our errors, omissions, and misjudgments.

Notes

1. There is limited evidence that international institutional pressures directly solidified austerity pressures (Krugman, 2015; Schafer & Streeck, 2013). We do not address the role of public opinion as we cannot, with current evidence, resolve questions about whether “the preferences of the average American appear to have only a miniscule, near-zero, statistically non-significant impact upon” policy choices (Gilens & Page, 2014, p. 21).

2. In the case of U.S. housing programs, it is important to recall there are distinctions between reductions in the numbers of units of assistance and reductions in the rate of growth of numbers—that is, incremental assistance—further complicated of course by the duration of budget authority which can entail many years of assistance provided in a single year’s appropriation whether new or renewal. It is also necessary to point out that although we focus upon the U.S. federal deficit and debts, there are also state- and city-level debts that are not included in this analysis (see Congressional Budget Office, 2015b).

3. Counting Housing Benefit as part of income, on average tenants in social housing pay more than 30% of their income in rent, and private tenants over 40% (English Housing Survey, 2013/14; DCLG, 2015).

4. There is an allied lack of transparency of detailed budget negotiations with few means to assess the motivations and tradeoffs for the budget decisions enacted. Cutting deficits and debts may, for example, mask partisan opposition to the national government, as in the United States, to aiding the poor, or to particular housing support programs (Mann & Ornstein, 2012; Williamson, Skocpol, & Coggin, 2011).

5. Note that the GDP for the United Kingdom, at roughly $2.8–2.9 trillion, is 15% to 17% the size of U.S. GDP at $17–18 trillion. The U.K. population is also roughly 20% the size of the U.S. population.

6. The Committee for a Responsible Federal Budget in the United States has campaigned for years to address the rising costs of entitlement program spending.

7. This position is almost certainly going to change as a result of modifications in Conservative policy post the Brexit referendum—both because austerity has been downgraded and because there is greater recognition of the need to help those who feel excluded.

8. “The joint committee shall provide recommendations and legislative language that will significantly improve the short-term and long-term fiscal imbalances of the Federal government,” Title IV, section 101, part b3aI of the BCA of 2011 (cited in Krugman, 2013).

9. This analysis does not attempt an in-depth examination of the ways in which the federal government calculates its baseline and alternative budget projections, nor does it directly address the issue of how much debt a society can or should manage. See Galston (2013a, 2013b) and Congressional Budget Office (CBO) (2013a, 2013b). The White House provides its own website portal on sequestration at: http://www.whitehouse.gov/issues/sequester

10. The BCA was amended three times to raise the fiscal caps: the American Taxpayer Relief Act of 2012 raised the caps for 2013; the Bipartisan Budget Act of 2013 raised the caps for 2014 and 2015; and the Bipartisan Budget Act of 2015 raised the caps for 2016 and 2017.

11. Following the resignation of Prime Minister David Cameron in 2016, the new Chancellor of the Exchequer, Hammond, was quoted in the Financial Times (Giles & Parker, 2016; p. 3): "Of course we have to reduce the deficit further...but looking at how and when and at what pace we do that, and how we measure progress in doing that is something we now need to consider."

12. The BCA initially also exempted funding for food stamps (SNAP), veterans’ programs, Pell grants for education, welfare or temporary assistance to needy families, and Medicaid. These programs offer assistance to the large, increasing numbers of households harmed by the Great Recession, with increased caseloads and larger expenditures (Edin & Schaefer, 2015; Moffitt, 2013, p. 145). The most significant anti-cyclical programs exempted were Unemployment Insurance, the Earned Income tax Credit (EITC), and food stamps. Evidence suggests that this latter set of programs typically help those marginally better off and do not offer comparable aid to the very poorest, most notably those out of the work force (Moffitt, 2013, p. 161). The list of programs that have been exempted from the BCA cuts: “Exempt Programs and Activities” Cornell University Law School (n.d.): https://www.law.cornell.edu/uscode/text/2/905

13. The Committee for a Responsible Federal Budget in the United States has campaigned for years to address the rising costs of entitlement program spending. http://crfb.org/

14. Also, initial BCA cuts from HUD’s major rental housing programs, public housing, resulted in $199 million in reductions in funding for both capital building repairs and for normal operating costs (HR&A Advisors, Inc., 2013; Volsky, 2013). Two of HUD’s other major programs, the Community Development Block Grant (CDBG) and HOME programs, were cut in half. Some forms of rental assistance and homeless aid, mostly for veterans, experienced modest increases.

15. Thus these programs experienced roughly $1 billion in funding reductions in just the first year of sequestration (GAO, 2014a, p. 73).

16. Reserves held by PHA were also drawn down, declining in a sample of PHA from $80,064 in 2010 to $55,556 by 2013 (Abt Associates, 2015, p. 5).

17. These reductions are not solely attributable to the BCA as there has been a longer term trend, since 2000, of cutting discretionary funding to this program (Shapiro, DaSilva, Reich, & Kogan, 2016).

18. Estimates are from the Congressional Joint Committee on Taxation (JCT, 2015 ): Note that the JCT estimates report the cost of all the credits used in a particular year. Since Low Income Housing Tax Credits (LIHTC) are claimed over 10 years, the 2015 number will reflect not just new 2015 credits claimed in that year, but also credits that were first allocated between 2006 and 2014, but claimed in 2015. https://www.jct.gov/publications.html?func=startdown&id=4857

19. See the minimum monthly rent of $150 for the Lexington, Kentucky, authority at: http://www.lexha.org/housing-choice-voucher/rent-reform-study

20. The U.S. Congress instructed the General Accountability Office (GAO, 2014a, 2015) to conduct small-scale assessments of the early impacts of sequestration, with the focus mainly upon how federal agencies themselves were impacted. Agencies transferred funds they controlled between accounts, including using unspent or unobligated funds (GAO, 2014b). No further research has been planned by the GAO on the effects of the BCA. HUD is funding alternative, less-costly methods for managing their assistance programs (GAO, 2014a, p. 76), using innovations to learn how innovative rent setting, new minimum income requirements, changed eligibility rules, or the encouragement of more businesslike methods may enlist the support of PHA in managing with the reduced levels of support (Cadic & Nogie, 2010; Jain, 2015; Schwartz, 2016).

21. One potential measure of housing need in the United States that should reflect the impact of budget austerity is the level of severe housing-cost burden since such estimates of need partly reflect the fact that housing subsidies are not an entitlement. They also reflect the fact that measures of housing need are enumerated differently by two major data collection systems, the American Housing Survey and the American Community Survey. The Joint Center for Housing Studies at Harvard, for example, uses the latter data source, which shows higher levels of need. Whereas sampling and measurement issues may account for some of the increases, there is no means to know how much of the increase in need is due to reductions in federal housing support or to increases in market rents tied to limited supply. The trajectory of increased need, however, seems far more plausible than any flattening or reduction (Leopold, 2012).

22. Interestingly, in Wales and Scotland these figures actually declined, perhaps reflecting more generous policies but also less pressure on rents.

23. Even so, recent Joseph Rowntree Foundation research on poverty suggests there have been no real increases to date in the costs of child poverty since 2008 (Joseph Rowntree Foundation, 2016).