A new Center on Budget and Policy Priorities report finds that the recent House Appropriations vote to reduce funding for public housing in 2012 by $1.4 billion, or 20 percent below the 2011 level, would place a significant burden on the quality of public housing and would likely raise future federal costs of maintaining these properties.
There are two main federal funding streams that support public housing developments: the public housing operating fund, which covers the gap between an agency’s day-to-day operating costs and the rent that low-income residents can afford (generally residents are expected to pay 30 percent of income for rent), and the public housing capital fund, which covers substantial repairs and needed renovations. The recent House Appropriations bill would reduce the public housing operating fund by $760 million and the public housing capital fund by $510 million, or 25 percent and 16 percent, respectively. The bill also eliminates funding for HOPE VI and Choice Neighborhoods, two programs that provide grants to rehabilitate severely distressed public housing developments and neighborhoods. In addition, the proposed funding amount covers less than half of the $3.4 billion in new repair and renovation needs that accumulate in public housing each year, according to a recent HUD assessment.
What’s most troubling about these proposed reductions is the likelihood that these cuts would have a significant negative impact on the quality of already struggling public housing developments around the country. For instance, reductions in funding will make it even harder for already struggling housing agencies to maintain aging properties in order to avoid severe safety hazards for residents. This neglect ultimately increases the likelihood that properties will become uninhabitable which will likely displace vulnerable citizens, will squander decades of federal and local investment, and will increase neighborhood blight, thereby affecting property values in surrounding neighborhoods. Decreased capital will also mean job loss for those that have benefited from recent housing development. According to reports submitted by local agencies, $4.0 billion in supplemental public housing capital funds provided through the Recovery Act have supported approximately 24,000 jobs through June 2011.
Finally, the report also details added federal costs that will be incurred in the future if the House Appropriations bill is approved. Deferring needed repairs will only become more costly to fix later, placing the burden of that cost squarely within the purview of the federal government. Furthermore, deep cuts would make it more costly for agencies to issue bonds or take out loans backed by their future public housing capital fund grants. Currently, agencies are permitted borrow in this manner so they are able to undertake major capital projects that cost more than the agency receives in single year. But if Congress continues to cut capital funds, lenders will view such bonds and loans as riskier investments and charge higher interest rates, further increasing the cost of addressing public housing capital needs.
To read the full report, click here.
