The Long and Short of House Democrats' Housing Budget

$80 billion for public housing, $90 billion for vouchers, Faircloth soft-repealed

Sep 13, 2021

House Democrats have unveiled their housing budget for the reconciliation bill that’s making its way through Congress.

Today at noon, Chairwoman Maxine Waters will convene the House Financial Services Committee for a markup of the Democrats’ proposed budget for spending on housing, which you can watch here. The budget proposal itself was release last night. Just below are the biggest highlights, and further below is a little bit more in-depth look at some of the programs.

In total, there is $327 billion in new spending on housing, most of it in large chunks for some of the most underfunded programs in the US, namely Section 9 public housing and Section 8 vouchers, which could be getting $80 billion and $90 billion, respectively.

The Big Signals

Beyond the topline numbers themselves, there are several signals being sent by this budget, as written, that have important implications for how Congress is looking at addressing the housing affordability crisis. The four biggest things that jump out:

The 1998 Faircloth Amendment is, for the purposes of the spending within this budget, temporarily “repealed”. The 1998 law, which set a cap on the total number of homes that any public housing authority (PHA) could own and operate, effectively halted new construction of public housing. This is a sea change in terms of Congress’ stance on public housing. While it likely won’t be directly impactful (most PHAs are now well below their Faircloth-imposed caps) it sends a strong signal that Congress wants to move in a direction of building. Reps. AOC, Omar, Waters and Velazquez have all been advocating for a repeal of Faircloth for years.
Former Senator Lauch Faircloth, not a fan of public housing.
New buildings have, of course, gone up since 1998, but for the most part, these have been so-called “replacement units”, that is, replacing recently demolished or decommissioned public homes. The way the text is written, any homes constructed using these $80 billion will not count toward to ceiling established by Faircloth.
Soft repeal of Faircloth in the budget text.
HUD Secretary Marcia Fudge has relatively strong discretionary control over $66 billion of the $80 billion in public housing capital grants—only $10 billion will be allocated according to the standard formula, which tends to underserve big cities with lots of public housing, like New York, Chicago and Philadelphia.

This could shake out in an interesting way for public housing authorities, particularly NYCHA who itself has a $40 billion backlog in capital needs—buildings that need to be upgraded or entirely rebuilt. Under the standard formula rules, NYCHA would probably get $8-12 billion at most, but a sympathetic Secretary Fudge could get them much closer to closing their funding gap—and would be a huge win for almost half a million New Yorkers who live in NYCHA properties.
The Section 8 Housing Choice Voucher program is getting $72 billion in new rental assistance dollars—not over ten years, but over five years—meaning that the program will see an additional $14 billion per year on average (the budget states that these funds will be appropriated “incrementally”—meaning they will be scaled up over the 2022-26 period). Currently, the program gets $22 billion per year, so going up to $36 billion is a more than 50% increase in funding.

That said, the Section 8 program only has funding today to provide rental assistance to about 20% of eligible families in the US—the estimated cost of fully-funding the program could be anywhere from $60 to $100 billion, according to estimates. Though I have run these numbers myself and came up with $110 billion—more on that in a later post.
Congress and HUD are making a push on zoning reform, allocating $4.5 billion in new award grants to local governments who make various land use, zoning, and permitting changes. The funding establishes a new “Unlocking Possibilities Program” (terrible name) that is essentially a toothless bribe (i.e., all carrot, no stick) to entice cities to do things like legalize duplexes or triplexes on single-family lots and speed up various permitting review processes.

What’s Getting Funded?

There’s more than $320 billion in new funding, but only about $240 billion is going to the four biggest programs: public housing, housing vouchers, the housing trust fund, and the HOME program, leaving over $80 billion for smaller, targeted programs.

Voucher Programs

There are two kinds of vouchers under the Section 8 banner: housing choice vouchers, which go to tenants use to shop around for housing, and project-based vouchers, which stay attached to buildings and subsidize the rent of low-income families who move in. Here’s the breakdown under the proposed budget:

$48 billion (over five years): Housing Choice Vouchers (HCVs) for extremely low-income households (below 30% of the area median income).
$24 billion (over five years): HCVs for households experiencing or at risk of homelessness, or fleeing various dangerous situations, like domestic violence or human trafficking
$14 billion: Project Based Vouchers (PBVs) for new or rehabilitated housing for very low-income households (below 50% of the area median income).

Astute readers will notice that this does not add up to $90 billion. That’s because the budget also authorizes around $4 billion for capacity building, like technical assistance and administrative expansion at HUD. That’s a good thing—investing in state capacity yields big returns. What good is rental assistance money if the state can’t get it out properly?

How Many People Will They Reach?

The big question is, how many people will this actually help? Currently we spend $22 billion on housing choice vouchers that help about 2.3 million households, for an average of about $9,500 per household (in the Urban Institute’s estimates linked above, they peg this number at about $7,500 per household, but admit they aren’t factoring in administrative cost or rising rents. So let’s call it $8,500 and say that, on average, an additional $14.4 billion per year (remember, this HCV spending is over five years) will get you about 1.7 million new households enrolled in the program—a 44% increase.

But we’ve also got to consider that about $5 of that $14.4 billion is for people experiencing homelessness who likely won’t be able to contribute much, if anything, to their housing costs. Some quick napkin math says this brings the actual number to closer to 1.1 million extremely low-income households, and roughly 300,000 homeless households—or around 1.4 million total.

For what it’s worth, the National Alliance to End Homelessness estimates that there are about 580,000 homeless people in the US today, so under the best case scenario, this could cut homelessness in half over five years. Of course, Democrats will need to then make the expansion permanent in 2026 (will they have the majority?) if they don’t want a requisite resurgence in homelessness.

Public Housing

There are a few forms of public housing that are getting funding in this budget:

$80 billion: Section 9 capital grants (mix of discretionary, formula, and competitive).
$2.5 billion: Section 202 elderly housing.
$1 billion: Section 811 disability housing.
$5.4 billion: energy and utility upgrades for PBV and Sections 202 and 811.

The biggest surprise, as mentioned at the top, is that the biggest chunk of Section 9 money is not going out according to the standard formula that typically under-funds the needs of big cities, but is rather going to be allocated by HUD Secretary Fudge.

If NYCHA gets anywhere close to the $40 billion they need for their backlog of projects, it would spell great news for NYCHA residents, many of whom have been living in deteriorating conditions for years. NYCHA is already mobilizing in anticipation of the budget so that when the money comes they can act quickly on modernization projects, like energy efficiencies, facade upgrades, and utility replacements. The $5.4 billion in energy upgrades is for similar type of work at non-Section 9 housing, like public housing for the elderly, disabled, and PBV-funded housing.

Above is a before and after of a recent upgrade of a NYCHA property—this one was a Rental Assistance Demonstration, or RAD project, though with new Section 9 money, NYCHA could do this type of work itself, even as it mulls creating a new public trust to hold its assets.

Zoning

The bill also allocates $4.5 billion to HUD for the creation of a new zoning incentives program. The terms around the grants are pretty specific, but give the Secretary some flexibility to be either stricter or looser, per her desires. Specifically, it states that the planning grants will be for local governments who need funding to actually start their planning processes (hiring planners, “engagement with community stakeholders”), but then will also award competitive grants to cities who actually implement:

Effectively this amounts to a bribe to cities who will do things like permit duplexes or triplexes on single-family lots, make permitting processes easier, update their building codes to allow modern materials, and so on. There does not appear to be a limit to how much an eligible city could receive, so Fudge really could wield this cleverly to entice the cities she really wants to see follow through with it.

New and Rehabbed Affordable Housing

There’s a bunch of money for the Housing Trust Fund and the HOME Investment Partnerships program, both of which fund to the construction of new affordable housing, often by contributing to the costs of projects also using other programs, like the LIHTC and tax-exempt bond.

$37 billion: Housing Trust Fund, which provides grants to states with the highest need to fund housing production for (mostly) very low-income households.
$35 billion: HOME Investment Partnerships, which provides grants to states to fund housing production for low-income households.
$10 billion: New “Housing Investment Fund” for Community Development Financial Institutions (CDFIs).
$10 billion: Lead-based paint cleanup and inspections.

Basically the HTF is like HOME, but more targeted to the places and people who need it most. It gets its funding by law from Fannie Mae and Freddie Mac contributions, so an allocation here by Congress is unique and rare, although the program has only been around since 2008. NLIHC has been calling for an appropriation to the HTF for years.

The CDFI money will go to these small little capital allocators across the country who operate things like revolving loan funds to help finance rehabilitation projects and do amorphous community development work. The lead paint money will go to states and then to non-profits to do lead paint inspections and cleanup of properties with lead paint. $2 billion of this will be for owners of Section 8 PBV properties.

Homeownership

There’s a bunch of money for homeownership, like down payment assistance ($10 billion) and a new Ginnie Mae program ($500 million).

Community Development Grants

There’s a couple new programs for community organizations, like Community Development Corporations (CDCs) and community land trusts (CLTs):

$5.7 billion: community-led projects for neighborhood stabilization.
$500 million: community land trusts.

The larger pot for community-led projects is for non-profits, CDCs, and CDFIs, and the grants can be awarded for either planning activities, like “neighborhood engagement”, displacement prevention, and “market analysis” or for implementation work, like new housing construction or rehabilitation, or creation and operation of land banks. In addition, the CLT money could be used for normal CLT activities like acquisition and rehab of homes.

Can it Pass?

Unfortunately, I fear that if programs start to get trimmed by the man from West Virginia, some of the housing money could be a candidate. The social spending programs are the big priorities, and some of the things in this document are going to look like bells and whistles compared to paid leave and the CTC. But there’s always a chance it stays roughly in this shape and it makes it though.

All in all, the real game changer here is the $80 billion for public housing, the Faircloth soft-repeal, the HCV expansion, and the zoning reform carrots. The Housing Trust Fund money will also help make a lot of projects pencil out that otherwise wouldn’t have, and could lead to a lot more affordable projects in neighborhoods all over during the next five years or so.

It kind of goes without saying on this blog that nothing in here is really helping us turn over a new leaf—we’re not restructuring how we own and build housing, and we’re not reforming tenant laws on a national scale. But word has it that there is a social housing-like bill floating around in the House that could see the light of day later this year, and will hopefully set the stage for future legislation.

Social Housing Chronicle