Last week the United States Senate Budget Committee Chaired by Mike Enzi of Wyoming released a report titled, Housing Programs: The Need for One Roof. The report asks whether federal housing programs are efficient, that is do they accomplish what they set out to do? It didn’t surprise me that the report’s simple answer to that question is “No.” The report’s most damning line is the finding that, “We spend billions each year, yet over half a million people in this country were homeless in a single night in 2019.” The problem according to the report is too much duplication, but it also validates the idea that solving housing problems in the United States isn’t about the need for more money but the need for more housing.
Senator Enzi led off a preview of the report by talking about his long service in government at the local, state, and federal level. All along the way, he noted, housing was important. He pointed out that one of his first efforts was to find ways to boost housing production in Gillette, Wyoming when he was Mayor. Enzi’s concern was that throughout that period, the country has still been facing housing issues even with many programs and lots of money.
Here is what Senate staff found when they looked at federal programs.
- The federal government in fiscal year 2019 spent over $50 billion on low-income housing assistance programs, guaranteed $2 trillion in home loans, and provided billions more through the tax code.
- A Government Accountability Office analysis identified 20 different entities administering 160 housing assistance programs and activities.
- Today’s housing assistance system is the result of more than 80 years of efforts to address shifting goals and priorities.
- Those changing priorities, combined with other changes, have led to numerous areas of duplication and overlap.
- An estimated 568,000 people in America were homeless on a single night in 2019
One example of duplication is “HUD’s three main rental assistance programs—Public Housing, Housing Choice Vouchers, and Section 8 project-based rental assistance—each have similar eligibility rules and serve largely similar populations.”
Let me give a real life example based on my experience as a non-profit housing developer. If given the task of building 100 units of housing, one of my first priorities after finding available land would be assembling capital for the project. The best developers would assemble state and local dollars and then they would use that to make their case for Low Income Housing Tax Credits (LIHTC). Along the way, they’d pitch the local housing authority for project-based vouchers to pad their pro forma to show steady rent subsidies for 12 to 15 years.
Now, if I hit a nerve, I’m sure to hear protests from non-profit advocates. So here is a paragraph from the City of Seattle’s Housing Levy 2019 Report of Accomplishments
“In addition to Levy O&M Program funds, projects that receive Levy capital funding may apply for vouchers from Seattle Housing Authority (SHA). SHA has committed 300 Section 8 vouchers to the 2016 Housing Levy, which will be “project-based” to provide ongoing building operating subsidies.”
So my hypothetical project could have,
Keep in mind that often state and local funds have some federal money in the form of grants. And we haven’t even gotten to the tax credits under the LIHTC program yet. I have to have those dollars to make my project work.
My one project may have residents receiving federal funds from vouchers that generate rent income, other federal dollars through state and local government, and then tax credits through the LIHTC to pay for construction. This doesn’t cover other assistance residents might be getting from the federal government in the form of food assistance or direct assistance.
Finally, after five years if things go well, and my 100-unit project has a ribbon cutting with all the politicians from all the governments that have put money into construction and operation, it will have a waiting list of five years for people needing to get an apartment. Total cost? In Washington state, my project could cost as much as $500,000 per unit or $50 million. To put that in context, most private developers would build the same project for half that amount in less time with smaller units.
It’s obvious why Enzi’s committee points out that, “Programs are scattered across agencies, creating confusion and headaches for those seeking assistance.” And yes, “The system can and should be improved.”
The first place to start would be withholding all this money until local government leaders, like Enzi in the 1970s, started to act like building new housing is a benefit not an impact. Then government needs to take an interest in why non-profit housing is so cost intensive and take steps to reduce those costs so resources can be used more efficiently.
These two problems — excessive regulation and high costs — are related; reducing regulation would reduce costs across the sector, meaning market prices would fall and so would demand for subsidies. Cheaper housing would mean being able to take existing resources and provide more comprehensive support for people with the greatest needs.
Source: Forbes – Business