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Abstract
Problem: Most housing programs in the United States do not focus on the most pressing housing needs. In 2003 more than 13 million households spent at least half their incomes on rent or the costs of homeownership, an increase of more than 35% since 1993. The vast majority of these households were poor. Yet housing policy has shifted away from deep-subsidy programs targeted to the poorest households toward providing shallow subsidies to higher-income households.
Purpose: This article considers whether, given that the federal government is unlikely to increase funding for low-income housing, state and local governments are likely to increase housing assistance to the lowest-income households in the future, how such assistance could be structured, and how states and localities might be persuaded or compelled to provide this assistance.
Methods: We examine the income distribution of households supported by major programs administered by state and local governments and the extent to which these programs target the poor and provide them with sufficient levels of subsidy. We reviewed program data reported to funding agencies and trade associations, census data on housing problems compiled by the U.S. Department of Housing and Urban Development, and data from surveys of policies and practices conducted by academic researchers and policy organizations.
Results and conclusions: We find that the shift to state and local administration of federal funds has not significantly shifted priorities. We provide evidence that states are not using their discretion go beyond federal requirements, and are not serving income groups below those they are required to serve. Locally funded programs are less likely to target the poor than state or federal programs.
Takeaway for practice: Rather than hoping for substantial local housing assistance targeted to the poor, we recommend making more effective use of existing federal resources.
Research support: None.
Notes
a. 30% of AMFI is roughly equivalent to poverty.
Source: HUD Office of Policy Development and Research (2005, Table A-1a).
a. Rows may not add to 100% due to rounding.
b. LIHTC data do not include households with federal rental vouchers or other additional subsidies.
c. Data on mortgage revenue bonds does not separate households with incomes below 30% AMFI from those with incomes 31 to 50% of AMFI.
d. Multifamily bond data covers only 34 states.
e. Households in HOME-funded housing may spend more than 30% of their income on rent.
f. HOME data on rental housing is for occupied units (not including tenant-based rent assistance) and is from HUD Office of CitationCommunity Planning and Development (2006a).
Source: National Council of CitationState Housing Agencies (2004).
a. Funds can be spent for homeless only.
Source: Center for CitationCommunity Change (2006).
1. Deep subsidies provide enough funding per household to aid very-low-income renters and make it possible to prevent these households from paying more than 30% of household income for rent and utility bills. In contrast, shallow subsidies refer to programs that provide smaller amounts of subsidy per unit, and do not ensure that recipients pay no more than 30% of their income on rent. Shallow-subsidy programs usually target low- or moderate-income households; the subsidy is seldom sufficient to prevent very-low-income households from bearing an excessive cost burden.
2. A proposal for a federal housing trust fund recently passed in the House. It would be financed by revenue from Fannie Mae and Freddie Mac, as well as the Federal Housing Administration and would fund production of 1.5 million total units over a 10 year period. Three-quarters of these units (or 1.125 million) would be targeted to extremely low income households. However, the legislation has not yet passed through the Senate and the details could change during that process.
3. The maximum is lower (50% of area median) when only 20 to 40% of a development's units are to be occupied by low-income households.
4. For an overview of the tax credit program, see Schwartz (2006, pp. 83–99).
5. This figure does not include California units, since their database does not track AMFI target percentages (CitationNational Council of State Housing Agencies, 2005, p. 79).
6. Fair market rents are calculated annually for 2,600 housing markets. They were initially defined as the median rent charged for recently leased apartments, adjusted for apartment size. They were adjusted downward, to the 45th percentile rent, in 1984, and again to the 40th percentile rent, in 1995. In 2001, the government raised fair market rent back to the 50th percentile rent in the 39 most expensive housing markets. (CitationSchwartz, 2006, p. 150).
7. This includes tax-exempt new-money bond issuances only, since refundings do not produce new units.
8. Mean expenditures were $2.5 million but were skewed by the high spending of a few cities.
9. The city of San Antonio has trademarked this acronym: safe, mixed income, accessible, reasonably priced, transit-oriented.
10. Efforts to legislate stronger penalties for noncompliance in 2001 were unsuccessful.
11. The three programs with ongoing rental assistance are Massachusetts' state-funded public housing program, which housed more than 50,000 families in FY 2000; Massachusetts' Rental Voucher Program, which provided about 3,100 tenant-based vouchers in FY 2000; and Connecticut's Rental Assistance Program, which served 2,100 households in FY 2000 (CitationTwombly et al., 2001, p. 12).
12. Public housing authorities may allocate up to 20% of their housing choice vouchers to specific housing developments. However, no more than 25% of the units in a property may receive project-based vouchers.
13. A soft second mortgage uses reduced interest rates and flexible repayment terms to minimize borrower debt and lender risk. Such mortgages are typically provided by government programs to enable low-income households to buy homes.
14. The Texas CitationDepartment of Housing and Community Affairs report (2006) found need for 13,970 more apartments affordable to very low-income families in the Houston metropolitan area, and a surplus of 2,685 apartments for families in the somewhat higher income group traditionally served by the tax credit program.
15. The National Housing Trust Fund legislation, recently passed by the house and now under consideration in the Senate, has the potential to do much more: if fully funded, it would result in the production of 112,500 units per year for extremely low income families (CitationNational Low Income Housing Coalition, 2007).