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Trump’s budget guts affordable housing during an affordable housing shortage

The new budget proposal shifts the responsibility of funding affordable housing from the federal government to local governments and the private sector

Gilmor Homes housing project building near in Baltimore, Maryland. Getty Images

Home prices and rents are regularly hitting new all-time highs. The share of Americans who spend more than 50 percent of their income on housing is rising. Private sector home builders are catering to the high-end market, not low-income families.

The result is an affordable housing shortage that’s quickly becoming a crisis, and yet instead of increasing investment in the federal programs that can give low-income families housing stability, President Trump’s budget proposal unveiled Monday guts them at time when they’re needed most.

“We’re in the worst affordable housing crisis in generations,” said Sue Popkin, a senior fellow at the Urban Institute. “We already have a situation where only one in five households eligible for housing assistance gets it. This is only going to make that worse.”

Trump’s budget request for the Department of Housing and Urban Development (HUD) eliminates two block grant programs in their entirety that state and local governments use to fund affordable housing and infrastructure projects. The Community Development Block Grant (CDBG) program allocates $3 billion annual to such projects, while the HOME Investment Partnerships program gives communities a little less than $1 billion annually.

The administration’s rationale for cutting these programs is that they’ve “failed to demonstrate effectiveness,” while also making a vague reference to wanting to give more authority to state and local governments “that are better equipped to respond to local conditions.” In fact, these programs allocate funds to state and local governments to use as they see fit given local conditions anyway.

In the case of CDBG funding, local governments have wide authority to use it for development or rehabilitation of affordable housing, improving local infrastructure, or passing it to a nonprofit such as Habitat for Humanity. There’s also a separate CDBG fund that provides disaster aid. HOME funding is more targeted toward housing issues, including providing direct rental assistance to low-income residents.

“The cuts that are proposed in the budget would have a devastating impact on Habitat for Humanity’s work in the U.S.,” said Sue Henderson, a vice president for Habitat for Humanity. “Our affiliates use a significant amount of HOME funding and CDBG funding. [We] use that funding for everything we do, from building homes or rehabbing vacant homes or repairing homes. It’s a very significant source of funding.”

The cuts in the budget extend to public housing. The Public Housing Capital Fund, a $2 billion annual fund that’s used to renovate or maintain the condition of pubic housing units, is eliminated entirely. The Public Housing Operating Fund, a $4.4 billion fund that handles day-to-day maintenance of public housing units, is cut to $2.8 billion.

In arguing for the cuts to public housing, the administration’s budget says that state and local governments need to “do more” to fill the funding gap, without indicating where that might come from, other than potentially the “private sector.” Affordable housing advocates believe it’s unreasonable to suggest local governments can replace this funding.

Meanwhile, the budget adds $100 million to the rental assistance demonstration (RAD) program, which helps local housing authorities to convert public housing units into project-based rental assistance units. These are subsidized units that work like Section 8 housing vouchers except the subsidy is tied to the unit, not the tenant.

The RAD program helps units that were previously public housing units to secure private funding, as public-private partnerships have long been the preferred method of federal subsidies for conservatives.

“The problem is the money that he’s proposing for RAD while at the same time proposing entirely eliminating the Public Housing Capital Fund and gutting the Public Housing Operating Fund,” said Diane Yentel, president and CEO of the National Low Income Housing Coalition. “There’s a connection between the two that means if you just try to convert many many more units of public housing to project-based rental assistance without an adequate funding stream to go with it, it’s not going to work.”

These cuts, should they become law, would domino throughout the affordable housing market. The enforcement of the Fair Housing Act of 1968, which bars discrimination on the basis of race, gender, color, or creed in housing, is often tied to CDBG funding. If the a housing authority wants the money, they have to ensure that its housing policies don’t discriminate or they don’t get the money.

For example, the Affirmatively Furthering Fair Housing (AFFH) rule, a delayed Obama-era policy that mandates local housing authorities identify policies that lead to housing segregation, would withhold CDBG funding if a housing authority doesn’t comply. If the CDBG program is eliminated entirely, there’s nothing to enforce the AFFH rule.

Furthermore, HUD Secretary Ben Carson announced he wanted to delay the AFFH rule on the basis that local housing authorities needed more time and technical assistance to implement the rule. The budget provides no such technical assistance, and in fact removes the CDBG program the rule depends on.

The “good” news for affordable housing advocates is that the budget contains much of the same draconian cuts that the president proposed last year, and that budget was so unpopular in Congress that it wasn’t even brought up for a vote.

Some of the line-item cuts in HUD’s budget are also very popular among elected officials across the country. As virtually every congressional district and state and local government benefits from CDBG money, the program is a favorite among members of Congress. Advocates say they’d be shocked if CDBG was eliminated entirely.

But the risk is that by setting the terms of the debate around CDBG on elimination, it can make a severe cut look reasonable by comparison, even when advocates for affordable housing say that Congress needs to invest more money in programs like CDBG, not less.

After Trump’s budget proposed similar cuts to HUD last year, Carson tried to assuage fears by suggesting that the forthcoming infrastructure plan would fill some of the gaps. The infrastructure package was finally announced Monday, but it doesn’t have anything major related to affordable housing that would make up for the billions removed from HUD’s funding.

It’s unclear how much of the budget could actually pass. But, if nothing else, it sends a clear message that the federal government wants to do less, not more, to relieve the affordable housing crisis in America. It wants to shift the cost burden to the tenants who receive subsidies, and it wants to put more responsibility for funding on local governments and the private sector, even in situations where this is already occurring.

“Irrespective of whether it happens, it sends a very dangerous message about the national priorities on affordable housing at this moment of crisis,” said Bryan Thomas, Director of Public and Media relations at Habitat for Humanity. “As a matter of law, it would be devastating, and as a matter of message it’s also devastating.”