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Fiscal Cliff Proposals May Massively Increase Homelessness
Read this policy analysis from the Center on Budget and Policy Priorities to see how hundreds of thousands of the working poor, seniors, and disabled people may go homeless to deal with the deficit.

By Douglas Rice

Editor's Note: The major media are shouting loudly about how the United States is going to fall off a "fiscal cliff" at the end of the year. This media is unfairly repeating over and over the talking points of the so-called austerity hawks like the Pete Peterson Institute and Tea Party conservatives. The media thrives on reporting the views of hysterical voices willing to claim the end of the world is coming. They do not do very much reporting on the kind of facts you will find in the article below because it describes what cuts in housing programs may mean for people who don't have important lobbies in D.C., the working poor, disabled folks, those who need help providing a roof over their heads. These are the folks Mitt Romney calls the unworthy 47%, the people he doesn't have to worry about. And these are the folks even some Democrats may feel it is easy to ignore in order to satisfy conservative demands to lower the deficit rather than adequately raise revenues.

Conservative leaders in the House and Senate have been willing to literally take the entire economy hostage in order to avoid raising taxes on the upper classes, as the political cartoon of George Hall vividly portrays. That's a big reason the economy has had trouble recovering from the financial crisis, itself having a great deal to do with housing. The poor folks utilizing federal housing assistance didn't cause that crash, but with twisted logic the conservatives want them to pay for it. I don't think the vast majority of ordinary Republicans actually want to throw so many people onto the streets. They don't really know what their leaders are doing. This article can help with the facts.

By the way, the Center on Budget Policy and Priorities is an outstanding resource for real data on major policy issues. I encourage readers to read their reports and support their efforts.

Any major legislation to reduce federal budget deficits that does not include substantial new revenues would almost certainly require deep cuts in programs that serve low-income families, including housing and community development programs. Such cuts would come on top of the ten-year spending cuts that President Obama and Congress enacted last year — and they could be far deeper than the across-the-board cuts (“sequester”) that are scheduled to take effect in early January unless policymakers overturn them.

In last year’s Budget Control Act (BCA), the President and Congress set binding “caps” on total funding (or “budget authority”) for discretionary programs in each fiscal year from 2012 to 2021.[1] The caps, coming on top of the spending cuts that policymakers enacted in annual appropriations bills beginning in fiscal year 2011, will cut discretionary funding by a total of $1.5 trillion over ten years, thereby shrinking non-defense discretionary spending to its lowest level on record as a share of Gross Domestic Product (GDP) in data that go back to 1962.[2] The caps have already forced substantial reductions in housing and community development assistance (see Figure 2 below), and they will likely put intense pressure on the budget of the federal Department of Housing and Urban Development (HUD) over the next decade. If the HUD budget fell in proportion to the BCA caps, that would mean a $2.5 billion annual funding cut by 2021, which is equivalent to eliminating housing voucher assistance for more than 300,000 low-income families, or to reducing funding for the three large block grants — CDBG, HOME, and the Native American Housing Block Grant — by 55 percent.

Policymakers agree, however, that they must do much more than implement these funding caps to address projected long-term deficits and debt. Consequently, they included in the BCA a mechanism — known as “sequestration” — to compel themselves to agree on further steps to reduce deficits. Sequestration requires more than $1 trillion in additional spending reductions for defense and non-defense discretionary programs over the decade, beginning with across-the-board cuts in January 2013. In part because the scheduled cuts are harsh, indiscriminate, and unpopular, the President and Congress will try, in the coming weeks, to hammer out a framework under which to replace these cuts with a more balanced and comprehensive package of spending cuts and tax increases.

To understand what’s at stake for housing assistance and community development programs, consider that policymakers broadly agree that, as part of their deficit reduction efforts, they should largely or entirely avoid cuts in Social Security benefits for current retirees and limit or avoid them for current Medicare beneficiaries. Also, many lawmakers oppose cutting defense funding below the BCA caps. If, however, policymakers limit their deficit reduction efforts in this way, then they must achieve the lion’s share of their savings from three remaining major areas of the budget: non-defense discretionary spending — which comprises just one-sixth of spending and has already taken sizeable cuts under the BCA caps — low-income entitlement programs such as Medicaid and SNAP (food stamps) and revenues.

If, then, forthcoming deficit reduction does not include significant new revenues, it almost certainly will force very deep cuts in low-income programs (whether entitlements or low-income programs that are funded through non-defense discretionary spending) — and there is no reason to expect housing assistance and community development programs to avoid such cuts. Indeed, these cuts could be much deeper than those required under sequestration.

The House-passed budget of Budget Committee Chairman Paul Ryan illustrates the consequences of a deficit reduction approach that forgoes new revenues. Under the Ryan budget, non-defense discretionary funding would fall by 24 percent in 2014 and 28 percent by 2021, compared to the 2012 level as adjusted for inflation. These cuts are more than twice as deep as the cuts required by sequestration, and more than four times as deep as those under the BCA caps (see Figure 1).

The cuts required by the Ryan budget would prove devastating to low-income families and communities. If all non-defense discretionary programs were cut by the same percentage, as many as 1.2 million households containing low-income seniors, people with disabilities, and families with children would lose federal rental assistance by 2021, and communities would lose more than $1.3 billion in funds for affordable housing and economic development. (See Tables 1 and 2 of the appendix for state-by-state estimates of the cuts in housing and community development programs under the BCA spending caps, sequestration, and the Ryan budget.)[3]

Congress Has Already Made Deep Cuts in Housing and Community Development Aid

To address projected budget deficits, the President and Congress in recent years have relied almost entirely on cuts to discretionary programs.[4] First, they enacted funding legislation for fiscal year 2011 that cut discretionary funding below the 2010 level. Soon thereafter, they enacted the BCA that, as noted above, set ten-year binding “caps” on total budget authority for discretionary programs. Figure 2 shows the impact to date on housing assistance and community development programs. From 2010 to 2012, funding for housing assistance fell by $2.5 billion, or 5.9 percent just in “nominal terms” — i.e., not counting the additional losses due to the effects of inflation — while funds for community development programs fell by $1.5 billion, or 24 percent.[5] Policymakers cut funds for public housing and housing and community development block grant programs most sharply.

To its credit, Congress mitigated the immediate effect of these cuts on low-income families in two ways. First, lawmakers targeted a larger share of resources to areas where they are needed to prevent the end of rental assistance to the low-income households that now receive it, such as by renewing Housing Choice vouchers and Section 8 project-based rental assistance (see Figure 2). Second, lawmakers cut the price tag of HUD’s fiscal 2012 budget by $1.8 billion through one-time savings measures in housing assistance programs — including the rescission of more than $400 million in unused funds and requirements that housing agencies spend down $1.4 billion in funding reserves in lieu of receiving new funding to cover the cost of operating public housing and renewing housing vouchers for low-income families.

While these measures helped to protect low-income families from immediate harm from budget cuts, policymakers for the most part cannot repeat them in future years. As a result, policymakers would need to allocate significant new funding just to sustain current program service levels. If policymakers do not do so, HUD and housing agencies will have no choice but to substantially reduce the number of low-income families that they assist.

The BCA Caps Will Continue to Put Great Pressure on Housing and Community Development Programs in Future Years

Under the BCA caps, nominal funding for non-defense discretionary programs will rise modestly from fiscal years 2013 through 2021, but by less than CBO’s projected rate of inflation. Thus, funding will continue to shrink in real (inflation-adjusted) terms. (See Figure 1.) A real cut in non-defense discretionary spending will likely put serious pressure on HUD’s budget over the coming decade, forcing the President and Congress to make tough decisions from a menu of poor options.[6] By fiscal year 2021, the caps for non-defense discretionary programs fall 6.6 percent below the enacted 2012 funding level, adjusted for inflation. If HUD’s budget fell proportionally, that would mean a $2.5 billion annual funding cut by 2021, which is equivalent to eliminating housing voucher assistance for more than 300,000 low-income families, or to reducing funding for the three large block grants –CDBG, HOME, and the Native American Housing Block Grant – by 55 percent.

Moreover, these figures probably understate the potential impact on low-income families and communities. First, they assume that the cost of renewing HUD rental assistance for the more than 4.6 million households that now receive it will grow at the expected general rate of inflation. These programs rely largely on private market rental housing, however, where rents and utility costs have grown somewhat more than the general inflation rate over the past two decades. If these trends continue, the number of households losing rental assistance under the funding cuts described above would be greater than these estimates suggest. If one assumes that rental assistance renewal costs will continue to grow at a rate consistent with recent history, for example, the HUD budget shortfall would grow to $4.5 billion by 2021, which is equivalent to eliminating housing voucher assistance for well over 500,000 low-income families.

Second, no funds would be available to address the roughly $26 billion backlog in capital repairs required to maintain public housing in good condition. Current funding levels are insufficient to address these needs; indeed, the backlog of capital repair needs will likely grow under current funding levels. If these repairs are not made, public housing residents — most of whom are elderly or disabled — will have to live in deteriorating conditions, and hundreds of thousands of affordable apartments likely will eventually be lost to disrepair. Unless policymakers can devise a strategy to address these needs that relies less on appropriated funds, therefore, a large loss of public housing assistance will likely compound the problems outlined above.

Finally, as noted above, one-time savings measures absorbed $1.8 billion in funding cuts in HUD’s 2012 budget, and policymakers for the most part cannot repeat these savings. If the President and Congress do not provide new funding in future years to offset these one-time funding cuts, then the impact of the BCA caps on low-income families will be much more severe, sharply increasing, for example, the number of families losing rental assistance.[7]

Four Keys to Sustaining Housing and Community Development Aid Under the BCA Spending Caps

HUD’s budget thus faces serious challenges under the BCA caps, although the outcome is not written in stone. The pressure on HUD could ease somewhat if rental assistance renewal costs grow at a somewhat lower rate than our analysis assumes. For instance, no cuts in rental assistance or other programs would be required under our analysis if rental assistance costs grow at a rate that’s somewhat below the projected overall rate of inflation. In addition, policymakers can, and should, take important steps to avoid deep cuts in assistance for low-income families and communities:
  • Prioritize low-income programs in making discretionary funding decisions, including by passing a HUD funding bill for fiscal year 2013 that’s modeled on the Senate appropriations bill that covers HUD.

    The Senate HUD funding bill, which the Senate Appropriations Committee approved in April, has weaknesses, but it also has many strengths and it improves on the President’s budget request. Senate appropriators wrote the bill within a framework that adheres to the BCA caps, prioritizes scarce resources to avert cuts in the number of families receiving rental assistance, provides modest funding increases for other priorities such as assistance for homeless individuals and families, and avoids one-time budget savings or gimmicks that would exacerbate the budget challenge in future years.[8]

  • Pass comprehensive rental assistance reform legislation, such as the Affordable Housing and Self-Sufficiency Act (AHSSIA).

    This legislation, the most recent version of which was circulated in April by the House Financial Services Committee’s Republican leadership, would streamline the major rental assistance programs, cut the costs of operating these programs, and encourage housing agencies to serve more families within available funds.[9] The Congressional Budget Office (CBO) estimates that, when fully implemented, AHSSIA would reduce funding needs for HUD rental assistance programs by some $700 million per year, not counting additional savings associated with reduced administrative burdens for housing authorities and private owners. In light of the likely gap between HUD funding under the BCA caps and rental assistance renewal costs outlined above, savings of this magnitude would help mitigate the impact of funding cuts on low-income families.

  • Embrace public housing reforms that enable agencies to access more private capital to meet capital repair needs.

    The Obama Administration has proposed to let housing agencies convert public housing properties to “project-based” rental assistance contracts, and Congress approved a limited demonstration of the concept in the 2012 appropriations law. Project-based rental assistance contracts would make it easier for housing agencies to raise private capital to rehabilitate developments and preserve affordable rental housing for the long term. The Administration and Congress should make this option available to more housing agencies by adopting AHSSIA’s expanded demonstration.

  • Prevent further cuts in funding for non-defense discretionary programs by adopting a balanced approach to addressing the nation’s remaining fiscal challenges.

    See the discussion below.
Sequestration Would Cause Hundreds of Thousands of Low-Income Families to Lose Rental Aid, But Alternatives that Lack Substantial New Revenues Would Force Even Deeper Cuts

Along with setting ten-year caps on discretionary spending, the BCA created a Joint Select Committee on Deficit Reduction (the “supercommittee”) to develop legislation to reduce deficits by another $1.2 trillion over ten years, and it created a backup mechanism of annual spending cuts, known as “sequestration,” that would take effect if the supercommittee failed to meet its charge. Because the supercommittee failed, sequestration is scheduled to occur starting in January 2013 and to run through 2021.

Sequestration requires cuts in non-defense discretionary funding in each fiscal year from 2013 to 2021 below the BCA spending caps.[10] Figure 1 shows the effects of these cuts, compared to the cuts under the BCA caps. The first round of sequestration cuts, in January 2013, will apply to every non-exempt program, including nearly every discretionary housing and community development program. (In fiscal years 2014 to 2021, the funding cuts will not occur on an across-the-board basis; that is, the Administration and Congress will have the power to distribute the funding cuts however they wish by making the cuts when they write the annual appropriations bills for these years.)

The Office of Management and Budget recently released estimates showing that funding for non-defense discretionary programs would fall by 8.2 percent under sequestration in January 2013. Table 1 in the appendix shows the estimated effects of a 2013 sequester on housing and community development programs in each state, which would be harsh. For instance, states would lose Housing Choice vouchers for up to 180,000 low-income families, and funding for the three major block grants would fall by $375 million — on top of the $1.9 billion in cuts that policymakers have enacted since 2010. These cuts would grow larger in subsequent years, unless policymakers acted to prevent sequestration from continuing.

Sequestration’s harsh and indiscriminate effects have received much attention, and policymakers face great pressure to prevent it from occurring. If policymakers do so, however, they likely will couple this action with an agreement to cut projected deficits by much more than sequestration would achieve.

Without Revenues, Any Plan to Replace Sequestration Will Force as Deep --- Or Deeper ---Cuts Than Sequestration Itself

Policymakers need to achieve about $2 trillion in additional deficit reduction, on top of that achieved through the BCA caps (for a total of nearly $4 trillion including the BCA savings) in order to “stabilize” the federal debt over the next decade so it does not continue to grow as a share of the economy and, thus, risk serious financial and economic problems.[11] Moreover, as noted above, many policymakers argue that Social Security, Medicare, and defense should contribute little (or nothing) to the effort. If policymakers largely avoid those spending categories, they will need to include very substantial new revenues in their deficit reduction package to prevent very deep cuts to low-income programs, including housing and community development assistance. The House-passed Ryan budget illustrates the point. It includes no new revenues and would impose a massive $5.3 trillion in spending cuts that over ten years. These cuts include severe cuts in non-defense discretionary programs, as well as in Medicaid and food stamps.[12] Under the Ryan budget, funding for non-defense discretionary programs would fall by 24 percent in 2014 and 28 percent by 2021, compared to the 2012 level as adjusted for inflation. These cuts are more than twice as deep as the cuts that sequestration would require and more than four times as deep as those the BCA caps require (see Figure 2).

Such cuts would almost certainly prove devastating to low-income families in every state, as Table 2 in the Appendix indicates. We estimate, for example, that if all non-defense discretionary programs were reduced by the same percentage, up to 1.2 million low-income families would lose rental assistance by 2021 under the Ryan plan, and communities would lose $1.3 billion for affordable housing and community development and $539 million for homeless assistance. These very deep cuts would come at a time when the number of poor households (particularly families with children) struggling to afford housing and avoid homelessness has been rising markedly. For instance, the latest American Housing Survey reveals that the number of poor renter households paying housing costs of more than 50 percent of their income — a housing cost burden that’s associated with increased risks of homelessness — has risen by 14 percent over the past two years.[13]


Bipartisan deficit reduction commissions — including the Bowles-Simpson commission — have supported the principle that deficit reduction should be crafted so the most vulnerable Americans aren’t made to bear greater hardships than they already do. An important part of sustaining the safety net for individuals and families is preventing further cuts to housing assistance and community development programs.

The risk of sequestration has received much attention in recent months. But the greater risk to housing assistance, community development, and other low-income programs lies in the decisions that the President and Congress will make about how to replace sequestration with a long-term deficit reduction package. Policymakers can avoid even deeper cuts in housing assistance and community development programs than the Budget Control Act makes likely — and preserve more of this critical part of the safety net — only through a balanced approach that includes significant new revenues.

For the Appendix with Methods and Sources as well as Estimates of State Impacts see the original article at CBPP

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Date Added: 11/26/2012 Date Revised: 11/26/2012 5:18:55 PM

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