Transporte

Assistance    0 0 (20) -20

Contract Administration 212 204 201 199 100 100 1,015 Public Housing Capital

Fund 3,166 3,185 2,913 2,771 2,695 2,617 17,346 Public Housing

Operating Fund 3,426 3,441 3,581 3,655 3,579 3,497 21,179 HOPE VI 628 610 588 582 149 0 2,558 Native American Housing

Block Grants 677 690 665 659 650 633 3,974 Native Hawaiian Housing

Block Grant    10 9 10 29

Elderly Housing (Section

202) 775 827 802 795 774 757 4,730 Disabled Housing (Section 811) 219 230 247 254 249 244 1,444 HOME Investment Partnership Program 1,747 1,911 1,891 2,030 2,005 2,040 11,624 CDBG (A.H. Production) 3,668 3,758 3,586 3,508 3,445 3,164 21,129 TOTAL (Tables 3-1 and 3-2) 42,830 48,178 50,172 52,997 55,967 52,933 303,077 * Requested/Estimated FY2005

Source: Author’s tabulation U.S. HUD Data 2000-05 and Data from NLIHC (HUD 2001; HUD 2002; HUD 2003; NLIHC 2003; HUD 2004)

Spending (in real dollars) for demand-side programs during this period increased an average of 7% annually (approximately $2.3 billion/year) and totaled $280 billion (72% of HUD’s budget) while spending for supply-side programs decreased an average of 2% annually (approximately $2.5 million/year) and totaled less than $122 billion (28% of budget) (see Table 3-2 and Figure 3-2).

Three demand-subsidy programs in particular received exceptionally strong funding increases: American Dream Downpayment Assistance, Self-Help

Homeownership Opportunity, and Housing Counseling Assistance. These programs saw average annual budgetary spending increases of 63%, 32% and 27% respectively. All but six demand-side programs experienced positive average annual funding

increases, while only two of the eleven supply-side programsSection 202-Elderly Housing and Section 811-Disabled Housingreceived average annual increases, and even then averaged increases of only 2% and 3% annually.

Table 3-3: Summary of HUD Budget Allocations for Selected Demand- and Supply-Side Housing Programs: 2000-2005 (millions of 2004 U.S. dollars) Fiscal Year Unit

Supply-Side Program Spending Demand-Side Program Spending

Total HUD Budget (Selected Programs) 2000 $ 14,519 28,311 42,830 % 34% 66% 100% 2001 $ 14,856 33,323 48,178 % 31% 69% 100% 2002 $ 14,473 35,699 50,172 % 29% 71% 100% 2003 $ 14,464 38,533 52,997 % 27% 73% 100% 2004 $ 13,655 42,312 55,967 % 24% 76% 100% 2005* $ 13,042 39,892 52,933 % 25% 75% 100% * Requested/Estimated FY2005

Source: Author’s tabulation U.S. HUD Data 2000-05 and Data from NLIHC (HUD 2001; HUD 2002; HUD 2003; NLIHC 2003; HUD 2004)

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 2000 2001 2002 2003 2004 2005* Millions of 2004 U.S. Dollars

Figure 3-2: HUD Budget Allocationsfor Selected Demand- and Supply-Side Housing Programs: 2000-05 (millions of 2004 U.S.

dollars) (Source: HUD)

TOTAL Demand- Side Based Programs TOTAL Supply- Side Based Programs * Estimated/Requested

The President’s FY2004 HUD budget illustrates the federal government’s continuum of support for demand-side housing subsidies, and especially for those that subsidize low-income homeownership. In February 2003, the President requested significant cuts in public housing assistance to offset funding increases for

homeownership programs. Congress did not grant all requests, but the net result was a smaller overall housing assistance budget from FY2003 (Crowley 2003) with notable increases to homeownership and demand-side programs and reductions to many existing supply-side programs, including vouchers. The figures below report those enacted for FY2004 (NLIHC 2003) (HUD 2003). For example, funding for the American Dream Downpayment Assistance program, which provides downpayment assistance to low-income homebuyers, increased by 160% from $75 million in FY2003 to $200 million in FY2004. The budget also included a 14% increase in funding for Housing Counseling Assistance, a centerpiece of the efforts to expand low-income homeownership (Hirad and Zorn 2003), from $35 million in FY2003 to $40 million in FY2004. Approximately two-thirds of these funds were allocated solely for homeownership counseling. The Self Help Homeownership Opportunity Program (SHOP) that funneled grants through faith- based and community organizations to low-income households willing to put “sweat equity” into building a home saw an 8% increase from $25 to $27 million.14 The President had requested to triple funding for this program to $75 million.

The FY2004 budget also contained line items for several new homeownership programs, all demand-side subsidies:

14

Sweat equity refers to a contribution to the construction or rehabilitation of a property by the homebuyer in the form of labor or services rather than cash (NAR 2005).

New Single-Family FHA Financing to assist low-income homeowners who establish a record of timely mortgage payments.

Single-Family Affordable Housing Tax Credit that provides tax credits of up to 50% of construction and/or rehabilitation (for existing homes) costs for single-family low-income homeowners (with incomes of 80% or less of area median income).

New FHA Mortgage Product that offers FHA loan insurance to families that, due to poor credit, would be subject to sub-prime market lending. The insurance applies to maintenance existing and/or purchase of a new home.

Housing Choice Voucher Program. The budget included a proposal to authorize PHAs to use Section 8 funds as down payment assistance for individuals already receiving assistance through the Housing Choice Voucher program. This program, Housing Assistance for Needy Families (HANF), would allow individuals to use up to one year’s worth of rental assistance voucher funds as a down payment to purchase a home.

These budget proposals could be seen as part of a heroic effort to extend

homeownership to low-income and minority households if they did not come in absence of any new supply-side subsidy programs and at the expense of those that were already in existence, or if the affordable housing supply was increasing as a result of existing demand-side subsidies. The President's Budget Summary FY2005 continued this trend: increasing support for homeownership-oriented programs (HUD 2004) at the expense of those that supported multi-family rental programs. Most alarming was the President’s proposal for a reduction in Section 8 vouchers, the first reduction in that program’s 30- year history. The proposal included converting the Section 8 housing voucher program into a block grant program to the states and provided an inadequate funding level for the voucher program in fiscal year 2004 (NLIHC 2004) (NLIHC 2003). The House VA- HUD appropriations subcommittee rejected much of the Section 8 funding cuts, but did so by robbing Peter to pay Paul—by cutting the HOME program, public housing,

Section 8 (NLIHC 2004). These proposals underscored the President’s pro-market and pro-homeownership agenda but they must also be viewed in the context of larger priority shifts in the federal budget, which was facing increasing funding pressures due in part to the Republican tax cuts for the wealthiest Americans.

In Chapter 4, I discuss the financial risks associated with homeownership for low- income households, from mobility to return on investment, and question the benefits of increasing low-income homeownership given these risks. I assess the extent to which homeownershipthe then present objective of federal housing policycan be

considered an appropriate strategy for low-income households by examining the financial benefits and costs if offers.

CHAPTER 4:

THE RISKS ASSOCIATED WITH LOW-INCOME