Cracked Foundation for American Households

photo by shaireproductions.com

President Trump’s budget claims to lay A New Foundation for American Greatness. Whatever else it does, when it comes to housing it leads down a path to ruin for many an American family.

Here is just some of what he proposes: cutting housing choice vouchers by almost $1 billion; cutting support for public housing by nearly $2 billion; and getting rid of the entire $3 billion budget for Community Development Block Grants (CDBG). These are all abstract numbers, so it is worth breaking them down to a more human scale.

Vouchers.  Housing choice vouchers help low-income families afford a home. Republicans and Democrats have long supported these vouchers because they help tenants afford apartments that are rented by private landlords, not by public housing agencies. Vouchers are effectively an income subsidy for the poor that must be used for housing alone. The landlord is paid the subsidy and the tenant pays the difference between the subsidy and the rent. These vouchers are administered by local public housing agencies.

Nearly half of vouchers go to families with children, nearly a quarter go to the elderly and another fifth go to disabled adults. The nonpartisan Center on Budget and Policy Priorities has found that voucher dramatically reduce homelessness. It also found that voucher holders were likely to be in the workforce unless they were elderly or disabled. While vouchers are a very effective subsidy, the federal budget has only provided enough funds for about a quarter of eligible households. Trump’s proposed cuts would cut funding for more than 100,000 families. That’s 100,000 families that may end up homeless as a result.

Public Housing. Public housing has been starved of resources for nearly forty years. While some believe that public housing has been a failure overall, it remains a vital source of housing for the very poor. Trump’s proposed cuts to public housing operating and capital expenses means that these tenants will see their already poorly maintained homes descend deeper into decrepitude. Unaddressed leaks lead to mold; deferred maintenance on boilers leads to no heat in the winter – every building needs some capital repairs to maintain a baseline of habitability.

We must ask ourselves how bad will we allow this housing stock to get before we are overcome by a sense of collective shame. If a private landlord provided housing that was as poorly maintained as much of the public housing stock, it would be on a worst landlords list in local newspapers. The fact that the landlord is the government does not redeem the sin.

CDBG. The Community Development Block Grant funds affordable housing and anti-poverty programs along with community development activities engaged in by local governments. CDBG has broad support from Republicans and Democrats because it provides funds that allow local governments to respond more nimbly to local conditions. Local governments use these funds for basic infrastructure like water and sewer lines, affordable housing and the soft costs involved in planning for their future.

While these expenditures are somewhat abstract, recent press stories have highlighted that CDBG also funds Meals on Wheels for the elderly. While this is not a big portion of the CDBG budget, it does make concrete how those $3 billion are being allocated each year by local communities seeking to help their neediest residents.

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Trump’s budget proposal is honest in that it admits to making “substantial changes to the policies and spending priorities of the previous administration . . .” Members of Congress from both parties will now have to weigh in on those substantial changes. Are they prepared to make Trump’s cuts to these housing and community development programs that provide direct aid to their neighbors and local governments? Are they prepared for the increase in homeless that will follow? In the increase in deficits for state and local governments? If not, they should reject President Trump’s spending priorities and focus on budget priorities that support human dignity and compassion as well as a commitment to local responses to address local problems.

NYC’s Housing Affordability Challenge

NYC’s Comptroller Stringer has issued The Growing Gap: New York City’s Housing Affordability Challenge. The report tells

a sobering story—of stagnant incomes, rising rents, and a deepening affordability crunch, especially for the working poor and others at the lower end of the income spectrum. This financial squeeze comes despite significant housing investments during the 12 years of the Bloomberg mayoralty. From 2000 to 2012, this report found:

• Median apartment rents in New York City rose by 75 percent, compared to 44 percent in the rest of the U.S. Over the same period, real incomes of New Yorkers declined as the nation struggled to emerge from two recessions.

• Housing affordability—as defined by rent-to-income ratios—decreased for renters in every income group during this period, with the harshest consequences for poor and working class New Yorkers earning less than $40,000 a year.

• There was a dramatic shift in the distribution of affordable apartments, with a loss of approximately 400,000 apartments renting for $1,000 or less. This shift helped to drive the inflation-adjusted median rent from $839 in 2000 to $1,100 in 2012, a 31.1% increase. In some neighborhoods – among them Williamsburg, Greenpoint, Ft. Greene and Bushwick in Brooklyn, average real rents increased 50 percent or more over the 12-year period.

• The elderly and working poor are making up a growing portion of low-income households with 40 percent of the increase tied to households in which the head is 60 years or older.

• In 2000, renters earning between $20,000 and $40,000 in inflation-adjusted dollars were dedicating an average of 33 percent of their income to rental costs. Twelve years later that average jumped to 41 percent. Their housing circumstances became more precarious even though their labor force participation rates soared.

It is clear that affordable housing remains one of New York City’s most pressing needs. Mayor de Blasio has laid out a goal of creating or preserving 200,000 units of affordable housing over a 10-year period, an ambitious increase over the 165,000 units pledged under Mayor Bloomberg’s 12-year New Housing Marketplace Plan.

Now, with the winding down of one major housing initiative and the launching of another, it is appropriate to take stock of the City’s housing circumstances, to evaluate the changes that have taken place in the city’s housing ecology, and to outline strategies for future housing investment that are informed by the city’s evolving housing landscape. (1)

While the report diagnoses many of the problems in the housing market, it does much less in terms of proposing solutions to them. It also fundamentally misunderstands the role that new housing plays in the housing market (see page 24). The report only focuses on the high rents for the new units without taking into account the fact that those new units reduce the pressure on rents for older units of housing, a process that housing economists refer to as “filtering.” There is no question that the CIty needs to increase the supply of housing if it wants to reduce the cost of housing overall. The de Blasio Administration understands this. We will have to wait and see how the Mayor’s housing plan, to be released in May, will tackle the under-supply problem head on.