Federally Administered Means-Tested Programs - Federal Housing Assistance

The primary purpose of federal housing assistance is to improve housing quality and to reduce housing costs for low-income Americans. However, affordability rather than housing quality has become the predominant problem facing low-income renters and homeowners. The number of substandard housing units continues to decline. Affordability problems occur nationwide, affecting poor households in every region and in urban, suburban, and rural areas of the country alike. They are spread among all racial and ethnic groups and affect both working and non-working poor renters. For example, in 1999 two-thirds of poor working families with children spent more than 30 percent of their income on shelter, the percentage the government considers affordable.

Financial Commitments for Housing Assistance

Housing assistance for low-income households comes through a number of programs and can be very confusing. Authorizations for housing assistance, especially for building low-cost public housing, may be committed for a dozen or two dozen years in the future. As a result, a financial authorization made in 1977 may well have affected spending by the U.S. Department of Housing and Urban Development (HUD) as late as 2001. Spending patterns changed dramatically in the 1980s and 1990s. HUD has increasingly turned to using housing vouchers to help low-income families pay the rent in existing housing and has turned away from building low-income housing, which requires larger financial commitments over a longer time. Figure 8.5 shows the types of housing assistance provided by the federal government in 1999.

Vouchers give recipients more flexibility as to where they may live and are particularly helpful to those making the transition from welfare to work. Families can use vouchers to move closer to areas with more job opportunities or better transportation to work.

Housing assistance is not an entitlement to which a person has a legal right if he or she meets certain requirements. The number of people receiving help depends on the amount of money authorized by Congress. Therefore, not all households or families that qualify receive assistance. Approximately one-third (32.8 percent) of the low-income families that qualify actually receive assistance. In 1999 some 4.3 million families received federal housing assistance even though about 13.1 million households qualified for it. (See Figure 8.6.)

In the 1980s and 1990s the number of new commitments to assist low-income families dropped dramatically. Between 1977 and 1981 the federal government committed to increasing rental assistance by an average of about 260,000 new households per year. From 1982 through 1999 the new assistance commitments fell to an average of 55,000 per year. The limited level of housing assistance means most poor renters desiring housing assistance are placed on waiting lists and sometimes wait several years before receiving aid. In some areas, waiting lists are so long that they have been closed, and new families are not allowed to apply.

Availability of Low-Cost Housing

Barbara Sard and Margy Waller reported in Housing Strategies to Strengthen Welfare Policy and Support Working Families (Washington, DC: Brookings Institution, 2002) that the supply of low-cost housing has declined from eighty-five units per one hundred poor families in 1987 to seventy-five units in 1999. The number of housing units that are both affordable and available for rent is even less: thirty-nine units for each one hundred renters.

The U.S. Conference of Mayors conducts an annual survey of hunger and homelessness in major U.S. cities. Its 2002 survey of twenty-five cities found an 88 percent increase in requests for housing assistance from low-income families and individuals. Only 31 percent of those eligible were currently receiving housing assistance. The wait for public housing in the cities surveyed averaged nineteen FIGURE 8.6
Housing assistance for very-low-income renter households, 2001 months, and the wait for housing vouchers was twenty-three months. Twelve of the twenty-five cities in the survey had stopped taking applications for at least one housing program due to "the excessive length of waiting list."

Observers attribute the decline in low-cost housing to a number of factors, including the conversion of rental units to condominiums, rapidly increasing costs of maintaining apartments, and urban-renewal programs that have destroyed low-cost housing. The decline in federal spending for public housing, both in funding the construction of new facilities and in refurbishing older, substandard units, has also contributed to the drop in low-cost housing.

Expenditures on Housing

Most federal housing aid goes to "very-low-income renters" through rental-assistance programs that either provide low-cost public housing or pay rent subsidies so that the low-income families may live in existing private apartments. Under the latter program, the low-income tenant pays 30 percent of his or her household income for rent, and the government pays the rest. The federal government also assists some lower moderate-income households in becoming homeowners by making long-term commitments to reduce their interest rates significantly.

In 1995 about 82 percent of all poor-renter households and 78 percent of working-poor renters with children spent at least 30 percent of their income on rent and utilities, the level set by HUD as "affordable housing." By 1999 the percentage of working poor paying more than 30 percent of their income for housing had increased to 88 percent. Around 4.9 million of these households spent more than 50 percent of their income on housing. HUD

TABLE 8.16
Outlays for housing assistance administered by the U.S. Department of Housing and Urban Development, by broad program categories, 1977–2002

	Direct housing assistance (in current dollars)					Total outlays
Fiscal year	Section 8 and other assisted housing1	Public housing2	Subtotal assisted housing	Homeless programs3(in current dollars)	Other housing block grants4(in current dollars)	Current dollars	2002 dollars5
1977	$1,331	$1,564	$2,895	0	0	$2,895	$7,209
1978	1,824	1,779	3,603	0	0	3,603	8,392
1979	2,374	1,815	4,189	0	0	4,189	9,030
1980	3,146	2,218	5,364	0	0	5,364	10,614
1981	4,254	2,478	6,732	0	0	6,732	12,147
1982	5,293	2,553	7,846	0	0	7,846	13,228
1983	6,102	3,318	9,420	0	0	9,420	15,216
1984	7,068	3,932	11,000	0	0	11,000	17,132
1985	7,771	17,261	25,032	0	$15	25,047	37,764
1986	8,320	3,859	12,179	0	142	12,321	18,141
1987	8,993	3,517	12,510	$2	165	12,677	18,168
1988	9,985	3,699	13,684	37	180	13,901	19,287
1989	10,689	3,774	14,463	72	275	14,810	19,789
1990	11,357	4,331	15,688	85	276	16,049	20,668
1991	12,107	4,786	16,893	125	168	17,186	21,303
1992	13,052	5,182	18,234	150	35	18,419	22,245
1993	14,032	6,447	20,479	180	276	20,935	24,699
1994	15,289	6,857	22,146	225	862	23,233	26,827
1995	16,448	7,505	23,953	359	1,259	25,571	28,900
1996	17,496	7,668	25,164	616	1,273	27,053	29,976
1997	17,131	7,809	24,940	718	1,263	26,921	29,258
1998	16,975	8,028	25,003	916	1,316	27,235	29,188
1999	17,171	7,805	24,976	1,032	1,367	27,375	28,952
2000	17,359	7,860	25,219	1,110	1,510	27,829	28,878
2001	18,153	8,188	26,341	1,208	1,448	28,997	29,369
2002	20,037	8,926	28,963	1,358	1,545	31,866	31,866
1Includes the following programs: section 8 Low-Income Housing Assistance, section 202/811 Housing for the Elderly and the Disabled, section 236 Rental Housing Assistance, Rent Supplement, section 235 Homeownership Assistance.
2Includes the following programs: Public Housing Capital, Public Housing operating Subsidies, Public Housing Drug Elimination Grants, Revitalization of Severely Distressed Public Housing, Low-Rent Public Housing Loan Fund, Indian Housing Block Grants.
3Includes the following programs: Housing Opportunities for Persons with AIDS (HOPWA), Homeless Assistance Grants, Supplemental Assistance for Facilities to Assist the Homeless, Emergency Shelter Grants, Supportive Housing, Shelter Plus Care Program, Section 8 Moderate Rehabilitation for Single Room Occupancy Dwellings, Innovative Homeless Initiatives Demonstration Program.
4Includes the following programs: HOME Investment Partnerships Program, Nehemiah Housing Opportunity Grant Program, Rental Housing Development Grants (HoDAG), Rental Rehabilitation Block Grant Program
5In order to reflect trends more accurately, figures have been adjusted to account for advance spending in certain years. In 1995, $1.2 billion of spending occurred that should have occurred in 1996. In 1998, $680 million of spending occurred that should have occurred in 1999. The Congressional Budget office protects also expects that $680 million of spending will occur in 2000 that should occur in 2001.
Note—The bulge in outlays for public housing in 1985 is caused by a change in the method of financing public housing, which generated close to $14 billion in one-time expenditures. That amount paid off—all at once—the capital cost of public housing construction and modernization activities un dertaken between 1974 and 1985, which otherwise would have been paid off over periods of up to 40 years. Because of that expenditure, however, outlays for public housing since that time have been lower than they would have been otherwise. Dollar calculated using GDP deflator.
SOURCE: "Table 15–Housing 3. Outlays for Housing Assistance Administered by HUD, by Broad Program Categories, 1977–2002" in The Green Book, U. S. House of Representatives, Committee on Ways and Means, 2003 [Online] http://waysandmeans.house.gov/media/pdf/greenbook2003/FEDERALHOUSINGASSISTANCE.pdf [accessed February 4, 2004]

considers these families as "worst-case" and gives them priority for housing assistance.

Federal Funding for Housing

Budget authorizations for these programs dropped dramatically between the late 1970s and the late 1980s, but have risen since then. While the authorizations declined, the actual yearly outlays, many fueled by earlier commitments, increased from $7.2 billion (in 2002 dollars) in 1977 to an estimated $31.9 billion in 2002, an increase of 443 percent. (See Table 8.16.) Average annual federal outlays per unit for all programs have generally risen, but rents in subsidized housing have probably risen faster than the income of assisted households, causing the subsidies to rise faster than inflation. In addition, housing aid is being targeted toward a poorer segment of the population, requiring larger subsidies per assisted household.

Increase in the Number of People Served

In 2000, 4.7 million renter households received subsidies, representing 13.6 percent of all renter households. Half of these households had incomes below the federal poverty line. More than one-third (35.6 percent) of those receiving subsidies were African-American, 46.2 percent were non-Hispanic whites, and 13.8 percent were of Hispanic origin.