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2018 Low Income Housing Outlook - Part 2

The Trump Budget And Public Housing
Funding for Public Housing comes from two primary sources. The Public Housing Operating Fund provides payments for rent subsidies, while the Public Housing Capital Fund pays for repairs and maintenance at 1.2 million public properties. The Trump administration's proposed budget would cut the Operating Fund by about $600 million and the Capital Fund by $1.3 billion.[1]') The cut to the Operating Fund would have a direct impact on the 1.2 million families whose rent-subsidized units depend on this fund. The reduction, if passed, would presumably result in higher rents, fewer subsidized units on the market, or both. The cut to the Capital Fund could have a dire impact on the lives of residents, with far less funding available for needed repairs and maintenance.

What About Housing Choice Vouchers?
The Voucher program is not spared from the large-scale cuts that the proposed budget would apply. The administration's proposed budget cuts are approximately $1 billion from the program, which would eliminate about 250,000 vouchers at a time when PHAs are already overwhelmed with applicants.[2]') These policies may change when Congress eventually addresses the details of the budget, but clearly, the administration intends to impose severe cuts on this vital program.

FHA Loans: Still Available, But More Expensive
The Federal Housing Administration comes through the budget process relatively unscathed. It's not all good news, though. One of Trump's first acts as President was to rescind an Obama-era executive order reducing FHA loan interest rates. That makes loans more costly, and in practice will cost an average homebuyer using an FHA loan around $450 annually.[3] That makes it one step harder for low-income buyers to afford that home of their dreams.

Other Programs Face Complete Elimination
Several smaller programs that provide significant shelter-related services will be reduced or eliminated under the proposed budget.

Community Development Block Grants (CDBG) are used to fund a variety of community development projects, including Meals on Wheels programs, streetscape projects, affordable homes, and infrastructure upgrades. Under the proposed FY 2018 Budget, the CDBG will be eliminated, with funding falling from $3 billion in 2017 to zero in 2018.

Nearly 1,300 states, cities, towns, and counties in America benefit from CDBG funds, which are allocated based on need. The CDBG Program's rules require that a certain proportion of the funds are allocated to benefit low-income households.

In 2017, the HOME Investment Partnership Program (HOME) provided $950 million in grants to help states and local communities rehabilitate or develop affordable homes for low-income households. HOME is a crucial source of funding for the development of affordable homes and has helped build almost 500,000 affordable homes since its inception in 1990. Under the FY 2018 proposed budget, the HOME Program will see its funding completely removed.

Like the CDBG and HOME, the Choice Neighborhoods Initiative (CNI) will lose all its funding under the proposed FY 2018 Budget. In 2017, the CNI had a budget of $138 million, which was used by PHAs to fund the rehabilitation of distressed public or HUD-assisted units and improve neighborhoods. If the FY 2018 Budget is approved, the CNI Program will cease to exist, which will see necessary funding for affordable homes disappear.

The National Housing Trust Fund is used by states to build, rehabilitate, and operate rental accommodation for extremely low-income people. In 2017, the National Housing Trust Fund allocated $219 million to states for this purpose. Under the proposed FY 2018 Budget, the National Housing Trust Fund would be eliminated.

Section 811 provides funding to develop and subsidize affordable homes for persons with disabilities across the United States. Under the proposed FY 2018 Budget, the Section 811 program would see its funding cut from $146.2 million in 2017 to $121.3 million in 2018, a reduction of 17.03%.

The Bottom Line
The picture painted by the cuts outlined above may seem grim, but that's what happens when the government cuts $6 billion from its primary housing support agency. There's no way to sugar-coat the consequences; if all the proposed cuts become law, the consequences for low-income Americans will be severe. Homelessness is likely to increase; fewer people will be able to receive assistance, and more people will have to cut spending on other essentials to stay in their homes. On the brighter side, these cuts are not yet final. Congress has only begun the budget debate, and some analysts already predict that no budget will be passed for this year, which would leave the government to extend last year's programs.

Despite this silver lining, the drastic cuts proposed by the White House should be a warning and a wake-up call. There is a real risk that these cuts or something very similar will be imposed in the future. Citizens who need housing assistance or may need it in the future, or those who care about support for low-income housing, should be monitoring the situation carefully and letting their representatives in Congress know exactly how they feel.