President Donald Trump released a preliminary 2018 budget proposal last month, and as expected, federal funding cuts were recommended across many departments, including education, housing, health services and transportation.
For the U.S. Department of Housing and Urban Development, the administration proposes a cut of more than $6 billion – a 13.2 percent decrease in the department’s operating budget. Encouraging additional state and local funding, the proposal recommends cutting federal funds to the Community Development Block Grant program, the HOME Investment Partnerships Program, the Choice Neighborhoods program and the Self-Help Homeownership Opportunity Program, which provide support for community revival and the establishment of new and improvement of existing affordable housing through grants and nonprofit partnerships. Combined, cutting these programs would reduce the HUD budget by about $4.1 billion.
As with other groups that benefit from particular government departments and face proposed budget cuts, housing authorities and affordable housing advocates have expressed concern that low-income households may not be able to find adequate housing should stipends, subsidies and other assistance be reduced or cut entirely.
Last month HUD Secretary Ben Carson spoke about affordable housing before attendees of the annual conference for the National Association of Hispanic Real Estate Professionals in the District of Columbia. While he did not specifically discuss the proposed budget, Carson echoed his stance on public assistance and the balance between providing aid and allowing for too much dependence on the government.
“The government is simply not capable of doing everything for everyone,” Carson said at the March 28 event.
Affordable Housing and the Budget
Of course, the administration’s budget proposal is simply that – a proposal – and it’s up to Congress to determine where funding will be most effective. Many in the housing industry don’t expect the hit to affordable housing to be as large as currently proposed, though there is concern that many programs will struggle to attract private investment with any significant decrease in public funding.
Amy McClain, an attorney and partner at Ballard Spahr law firm in Baltimore who leads the firm’s government-assisted housing practice, stresses that while she doesn’t expect budget cuts to be as severe as those proposed, “There’s a definite threat to the sources of funding we have available to do the work.”
HUD’s Rental Assistance Demonstration program is one particular platform McClain points to as valuable to the affordable housing industry, which could have detrimental effects if it were cut or reduced significantly. RAD gives housing authorities the ability to convert public housing to Section 8 housing using a combination of public and private debt. The program is aimed at reducing what HUD estimates to be a $26 billion backlog of deferred maintenance in public housing throughout the U.S., though McClain notes the total is likely more than $30 billion.
Converted property is legally required to remain as Section 8 housing under stewardship of the RAD program, but it is able to attract private investment.
“In my mind, it’s a very attractive model, particularly for Republicans because it has that private sector aspect to it – but it’s dependent on those rents,” McClain says. “If the public housing operating subsidy and the public housing capital fund get diminished [in the budget], then the rents are no longer viable to convert to the Section 8 platform.”
Speaking in a session following Carson’s remarks at the NAHREP conference last week, David Stevens, president and CEO of the Mortgage Bankers Association, agreed that he does not expect HUD’s budget cuts to be as extreme as $6 billion, which would likely mean cuts in every corner of the department.
Stevens also noted he previously sat down with Carson to discuss the future of HUD, affordable housing and homeownership, noting Carson’s dedication to “create ways to find sustainable housing wealth,” though likely with less public funding.
HUD Under the Trump Administration
Proposed budgets aside, HUD is already in a new age under Carson, who is in the midst of what he refers to as a nationwide listening tour, visiting different cities throughout the U.S. and speaking with those who are a part of, and those who benefit from, affordable housing programs. The tour kicked off in Detroit on March 15, followed by visits to Miami and the Dallas-Fort Worth area.
“I need to know what really works and what really doesn’t work,” Carson said to attendees of the NAHREP conference.
In discussing the possibilities for new approaches to subsidized rental housing, Carson proposed a “housing savings account,” which would place funds from a housing subsidy in an account reserved for maintenance on the home or apartment. The money not needed to make repairs remains in the account, with the potential to be paid out to the resident upon leaving public housing, creating incentive to care for the home and reduce necessary repairs. If the recipient leaves public housing within a specified period (for example, five to 10 years), the money in the savings account could be used toward a down payment on a home, Carson said.
Still, ideas for introducing new HUD programs, or revising or eliminating current ones, remain theoretical while the budget has yet to be determined.
Stevens and Armando Falcon, CEO of Falcon Capital Advisors in the District of Columbia and former director of the Office of Federal Housing Enterprise Oversight, discussed together before NAHREP conference attendees the best course of action for Carson in his new role as HUD secretary. They agreed the appointment of a Federal Housing Administration commissioner with technical knowledge of the housing industry would be key to promote and facilitate affordable homeownership in addition to housing assistance.
Where Consumers Come Into Play
With HUD’s budget yet to be determined, McClain stresses that it’s not just in the hands of lawmakers to decide which programs will be cut and which will receive additional funding – constituents can play a key role by calling their representatives and advocating for programs they support.
“It’s going to come down to what the advocacy groups do and the level of education for members of Congress to make sure everyone is aware of the benefit of programs and the impact that the cuts would have,” she says.
Even with a smaller budget, successful housing programs are possible, though it takes pressure from the general public to push for additional private investment in housing programs and the development of affordable housing – both rental and owner-occupied.
“Change isn’t always through the administration,” Falcon said at the NAHREP conference, encouraging advocacy to preserve homeownership opportunities, from the private sector as well as from public funding.
She has appeared in media interviews across the U.S. including National Public Radio, WTOP (Washington, D.C.) and KOH (Reno, Nevada) and various print publications, as well as having served on panels discussing real estate development, city planning policy and homebuilding.
Previously, she served as a researcher of commercial real estate transactions and information, and is currently a member of the National Association of Real Estate Editors. Thorsby studied Political Science at the University of Michigan, where she also served as a news reporter and editor for the student newspaper The Michigan Daily. Follow her on Twitter or write to her at email@example.com.