President Donald Trump calls his proposed budget for fiscal year 2018, “A New Foundation For American Greatness.” Alternately dubbed the “taxpayer-first budget,” the document proposes $3.6 trillion in cuts over 10 years – largely at the expense of education, health care, housing and services that give low-income individuals and families a chance to maintain financial security – while decreasing taxes for the wealthy.
As Congress reviews the components of the Trump budget, we at Colorado Center on Law and Policy believe that a true foundation for “American greatness” begins with policies that invest in struggling Americans. To that point, we are publishing a series of analyses entitled, “A Better Budget,” which will examine the importance of programs targeted for reduction or elimination under the Trump budget. We will then outline how policymakers can strengthen – not undermine – the nation’s safety net while building an inclusive, fair and just economy that reflects our American ideals and puts more Americans on a path toward self-sufficiency.
Part Two of the series examines proposed cuts in programs that make it easier for low- to middle-income Americans to obtain and keep safe and affordable housing.
Proposed cuts: Housing
All told, President Trump’s proposed budget includes a $6.2 billion cut to the U.S. Department of Housing and Urban Development (HUD), a department that’s already woefully underfunded considering the critical importance of housing to people’s health and wellbeing and the growing problem of displacement and homelessness across the county.
Established as part of President Lyndon Johnson’s “Great Society” initiative, HUD distributes funds that allow states and local governments to develop and preserve affordable housing and invest in community development projects. After precipitous cuts from the Reagan era, HUD’s funding has remained virtually flat since the mid 80’s – with occasional ups and downs from year to year.
Under the Trump budget, HUD’s funds would be decreased by 13.2 percent. HUD Secretary Ben Carson said the cuts would be implemented through rental-assistance reforms and by eliminating certain HUD programs, while “streamlining” HUD’s internal operations. “This Budget reflects this administration’s commitment to fiscal responsibility while continuing HUD’s core support of our most vulnerable households,” Carson said.
Nationwide, Trump’s proposed cuts could cause more than 250,000 low-income people to lose their housing vouchers — jeopardizing their family stability and increasing the financial burdens they face to cover the costs of rent and utilities such as water and heat.
In Colorado, where there’s already a dearth of affordable housing and a growing homelessness crisis, the effect of such cuts may be even more pronounced since the state does not have a permanent funding source for affordable housing. Colorado would lose as much as $95 million annually across several housing and community development programs if Trump’s proposed HUD budget cuts became a reality.
The proposed cuts in the Trump budget are alarming because housing plays such a critical role in people’s lives. Housing is a source of safety and stability. It shapes where people are able to go to school and work. It is also important for a family’s health and well-being. Because of an influx of new, affluent residents, low-income Coloradans are being displaced from their communities – notably, communities of color in the Denver area. Indeed, the number of renters in the Denver area is on the rise as fewer and fewer residents can afford the dream of home ownership.
Here are a few ways the president’s budget undermines affordable housing efforts, nationwide and in Colorado:
* The budget eliminates the Community Development Block Grant (CDBG), funded at $3.06 billion and used for various community-development projects. Under the Trump budget, the program would be phased out entirely. Colorado communities from Montrose to Costilla County would lose $33.7 million a year, eliminating funds for projects such as sidewalks, sewer systems, community programs like Meals on Wheels, senior centers and many others. From 1977 through 2014, the program has funded an estimated $1.5 billion in community projects in the state.
* The budget cuts about $1.3 billion of the $1.9 billion Public Housing Capital fund – reducing money available for repairs at 1.2 million public housing rental units nationwide. Public housing properties in Colorado qualified for $10 million in capital repairs. These cuts would slow down or halt repairs for 7,923 families in Colorado and cost the state nearly $7 million in 2018 – not to mention the untold costs to residents dignity and self-worth.
* The budget cuts $500 million of the $4.4 billion Public Housing Operating Fund, used to subsidize the rent of 1.2 million families living in public housing. In 2016, public housing properties located in Colorado qualified for $32 million in operating subsidies. Trump’s budget would reduce services to 8,137 Colorado families living in public housing and take some units out of service due to inadequate funding. Colorado would lose about $3.7 million a year if this cut goes into effect.
* The budget slices more than $2.3 billion from the $20 billion Housing Choice Voucher program, which helps low-income families pay their rent when they rent from regular private property owners. The average monthly support provided by a voucher was $840 in 2016. The cuts could mean almost 4,000 of the 33,000 families in Colorado receiving rental assistance would lose that support. All told, Colorado would lose about $39.4 million a year.
* The budget eliminates the national Housing Trust Fund, the first new resource in decades to help build and preserve affordable housing options for low-income Americans – including those experiencing homelessness. Signed into law in 2008 by President George W. Bush, the fund began receiving money from an assessment on transactions conducted by Freddie Mac and Fannie Mae in 2015, and became “fully operational” in 2016. The first tranche of funding, $174 million, was distributed among various housing agencies around the country. Beneficiaries include low-income seniors, families of people with disabilities and other vulnerable populations. The funds amount to roughly $3 million per state on average and was expected to grow. While insufficient for solving housing needs locally and nationwide, a recent report from The Urban Institute (“Denver and the State of Low- and Middle Income Housing”) cited the new fund as a ray of hope for Denver’s housing market. Eliminating the program would dash any such hopes while not providing any additional funds for other budgetary priorities.
Overall, these cuts would have a devastating effect in a state where housing costs are out of reach for many residents. Low-income Coloradans in particular would be at greater risk of financial strain — and even homelessness — if these cuts see the light of day.
While Trump’s budget is built on the principle that states should take a bigger role in providing human-service programs, Colorado could not absorb cuts of this magnitude, which effectively means that critical needs will go unmet.
What policymakers should do
Lower-income households – particularly people of color who have been disadvantaged over generations – had much of their wealth wiped out during the Great Recession due to foreclosure on their homes. Hispanics experienced the highest rate of foreclosures on loans originated between 2004 and 2008 – 11.9 percent, compared with 9.8 percent for Blacks and 5.1 percent for Whites. Federal funds are essential to give these families the financial footing they lost during the recession. We agree with the National Association of Housing and Redevelopment Officials’ (NAHRO) assertion that the ability of housing and community-development agencies to meet the needs of their communities is dependent on a responsible level of federal investment.
Data shows that families experiencing housing instability have a harder time maintaining healthy relationships and managing personal stress. This could lead to or exacerbate problems at work or health issues. Recent research finds that Latino and Black adolescents had better educational outcomes when they resided in economically secure neighborhoods. The pattern holds true in Denver, where many low-income families are being displaced from the city and pushed into the concentrated disadvantaged neighborhoods in the suburbs.
If lawmakers considered policies that helped more people obtain safe and affordable housing, communities, economies and kids around the country and future generations would have a better chance to thrive. Funding levels for all the programs should be increased, not decreased.
Along with increasing funds for vouchers and housing acquisition, here are some recommendations to promote affordable housing and economic mobility among low-income people, notably people of color:
* Restructure the mortgage interest deduction so the benefit is directed to low- and middle-income taxpayers who are more likely to be deciding whether to own or to rent. The Urban Institute says the restructuring could be accomplished by changing the deduction to a refundable credit, limiting the maximum amount and providing a credit only for a household’s primary residence, not second homes. Other tax strategies might include implementing a first-time homebuyer’s tax credit or helping people save for a down payment through a “first-time homebuyers’ savings plan” that provides federal matching funds and allows tax-free withdrawals for first-time home purchases.
* Implement a “renter’s tax credit,” on a federal and/or statewide level as recommended by the Center on Budget Policy Priorities. Such tax credits would be available to tenants, landlords or the owner’s lender (in exchange for reducing the owner’s mortgage loan payments). The tax credit would be based on a percentage of the rent reduction that the owner provides to the tenants. The tax credit could be structured to go directly to renters. If passed, such a tax credit would decrease the need for housing subsidies and promote affordability.
* Expand federal Low-Income Housing Tax Credit (LIHTC) programs. Established in 1986, the LIHTC promotes the private production of affordable rental housing by providing an income tax credit in exchange for private-sector equity investment. States are allocated tax credits, which are awarded to private developers for affordable-housing projects. The program cost the federal government an estimated $7.8 billion in 2015. Colorado has a state LIHTC as well, which augments the federal tax credits. Senators Cantwell and Hatch have introduced a bill to expand the federal LIHTC. That’s the direction Congress should be going.
As policymakers, developers and philanthropists work on a statewide and local level to address the complicated and vexing problem of affordable housing, more federal funding tied to innovative solutions is essential.
Maintaining the “status quo” in this area clearly isn’t acceptable, but Trump’s proposed budget cuts in housing for low-income Americans will only worsen matters. Having healthy and vibrant communities is correlated with having safe and affordable places where people can live and work.
Ask your U.S. representatives to oppose cuts to HUD and instead to invest in affordable housing that will give all Coloradans a chance to contribute to Colorado’s continued and sustainable economic success.
– By Bob Mook