Deep Cuts to Housing Programs on the Way

Housing programs will join the list of other Federal programs subject to reductions when the president submits his FY 2012 budget Valentine’s Day. While President Barack Obama is proposing “painful” cuts to key programs in the next fiscal year in an effort to reduce the deficit, his proposal pales in comparison to the cuts proposed by House Republicans for the balance of the current fiscal year. Their proposal calls for close to $6 billion in cuts to housing programs as part of $100 billion in cuts to Federal programs.

Anticipating negative reaction to the Obama budget proposal, the president’s staff has contacted supporters of various programs to provide them with a heads up to pending cuts. In a New York Times editorial Jack Lew, Director of the Office of Management and Budget (OMB), stated the president is proposing a budget which reflects the need to reduce the deficit and the fact that hard choices will need to be made. Included in the Obama proposal will be a cut to the community development block grant (CDBG) program by seven and one half percent or $300 million. To administrators of the program, this is a significant to communities which count on these funds to provide local services but it is less than total elimination of the program as proposed by the Republican Study Committee.

According to Housing Affairs Letters, which provides daily coverage of housing and community development news, public housing will take hits to its key programs including $1.1 billion in cuts to the public housing operating fund; funding for tenant-based vouchers for the remaining seven months of FY 2011; and, a $300 million cut to the public housing capital fund. The administration seems to want to use some of the housing programs to help pay for a passenger rail plan.

While the administration will argue their proposed cuts across the board are part of the shared pain all must endure, their budget proposal is sure to set off anguish cries from the various interest groups with a claim to federal funds. It will not cause the same consternation as the cuts proposed by Republicans. In fact, Democrats and the Administration should be thankful that Republicans were offering such drastic cuts. To the general public, Obama’s FY 2012 proposal will seem modest in comparison.

The defense industry, homeland security and programs benefiting veterans have been deemed untouchable. While Social Security, Medicare and Medicaid are considered sacred cows, there will be attempts to curb spending for those programs at another point in time in the process. For now, non-entitlement domestic programs will bear the brunt of the proposed cuts this year. It is safe to assume the president’s proposed budget is the best case scenario for funding for FY2012 given the disparity between the president and Republicans on how to achieve deficit reduction.

The president’s 2012 budget proposal will come three weeks before the continuing resolution for FY2011 expires March 4. As reported in last week’s post, it is not unreasonable to expect a temporary shutdown of the government. Republicans on the House side are seeking significant cuts to Federal programs Democrats and the administration will simply not agree to. Senate Republicans are supportive of their House counterparts and can apply enough pressure to slow the appropriations process in their chamber increasing the likelihood of a temporary shutdown.

Republicans Seek Cuts Now

As the president released his FY2012 budget, Republicans were calling for deep cuts to housing programs for the remainder of FY2011 including the virtual elimination of the CDBG program, $1.5 billion in cuts to housing vouchers, $616 million in cuts to the capital fund, $340 million to HOPE VI (essentially gutting the program), and $203 million to the public housing operating fund. The Republican proposal includes $350million in cuts to the Transforming Rental Assistance initiative which is designed to replace HOPE VI.

President’s Budget Likely Dead on Arrival

Expect the president’s FY 2012 budget to be dead on arrival to Republicans when it is released on Valentine’s Day. Republicans will simply dismiss it as they pursue the more dramatic cuts for the remainder of this fiscal year. History may repeat itself. In the mid-nineties Republicans swept into office believing they had a mandate from the American people to cut spending and forced a government shutdown. The level of cuts proposed by Republicans is so deep it is difficult to see them reaching a compromise with the president before the current continuing resolution expires in early March.

Democrats should feel ecstatic about the Republican proposal. A recent poll has shown that Americans are concerned about increased federal spending but are less supportive of reducing these funds when specific programs are identified. Democrats would prefer to extend the current CR for the balance of the fiscal year. Now they can paint Republicans as being out of touch with the American people which may strengthen their hand in the ensuing negotiations. However, the Republican proposed cuts are so deep the likelihood of a government shutdown has increased.

MacArthur Foundation Announces Housing Research Grants

The John D. and Catherine T. MacArthur Foundation announced February 7 the awarding of nine grants totaling $5.6 million for research to explore the role housing plays in the long-term health and well-being of children, families, and communities.

The nine projects, selected through a competitive process from a pool of 150, were awarded as part of the Foundation's $25 million initiative on How Housing Matters to Families and Communities. The initiative is based on the premise that stable, affordable housing is an essential platform that promotes positive outcomes in education, employment, and physical health by helping to ensure a greater return from other social and public investments. The goal is to help policy makers better direct increasingly scarce public resources to enhance housing outcomes and to achieve broader goals of healthier, better educated, and more successful families and communities.

The nine grant recipients are a mix of studies on the relationship between housing and a series of social and economic concerns including education, health, and economic opportunity:

* Mayor's Fund to Advance New York City -- $1 million to study the role subsidized housing plays in the education and financial and physical health of children and families;

* Boston College -- $900,000 to study the impact of low-income families' housing decisions on children's well-being;

* New York University -- $800,000 to study the impact of housing instability due to foreclosure on school performance;

* The University of Maryland -- $700,000 to model the impact of housing subsidies on children's future participation in the labor force;

* RAND Corporation -- $600,000 to study whether social networks are a key pathway through which low-income residents realize the social and economic benefits of living in mixed-income housing or neighborhoods;

* University of Wisconsin-Madison -- $600,000 to study the effects of federal and state income support policies on homeownership stability and child maltreatment;

* Brown University -- $500,000 to support a study on the relationship between compulsory savings and homeownership in Mexico and on the effects of homeownership on formal labor market participation;

* Harvard University -- $300,000 to study the long-term social, psychological, and economic implications of eviction; and

* University of Chicago -- $200,000 for a study on the impact of childhood housing instability on long-term health and education outcomes.

Interesting Read

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