Proposed federal housing cuts overshadow landmark Illinois progress

• By Robin Snyderman
• March 29, 2005

At the first gathering of the Governor’s Housing Task Force following the release of Illinois' first-ever comprehensive housing plan, there was little room for celebration.  If housing activity in Washington D.C. continues on course, the damage to Illinois would more than negate the victories and efficiencies anticipated as a result of the State’s stepped-up leadership and coordination on housing.

For the third year in a row, President George W. Bush has proposed radical changes in the budget of the U.S. Department of Housing and Urban Development (HUD). These changes jeopardize the viability of the Housing Choice Voucher (HCV) program and significantly cut funding for HOPE VI and the Community Development Block Grant (CDBG) programs, as well as other programs that provide housing options and support for low- and moderate-income households in Illinois.

The HCV program provides rental assistance to more than 56,000 low-income families in the Chicago metropolitan area. Over 700,000 households in this region are paying more than 35 percent of their income for housing, and  45,000 have made their way onto an HCV waiting list. Most of these lists have been closed for years, however, including those in Chicago and Cook County.  The Illinois legislature is thus poised to pass a Rental Housing Support Bill, funded through a county recordation fee on real estate transactions, creating a new rent subsidy for approximately 5,000 of the neediest households. 

The President’s FY2006 request for the entire HCV program is $15.8 billion -- a $1.1 billion increase over 2005 levels. Yet a report recently released by the Center on Budget and Policy Priorities (CBPP) points out that this increase will be insufficient over time if the Administration’s plans for future budget cuts are enacted. Among these cuts are announced caps on discretionary spending for the next five years. According to the report, Office of Management and Budget (OMB) documents show that the President's planned budget for federal housing assistance programs in 2010 is $29.6 billion. Adjusted for inflation, this is a decrease of $3.7 billion in comparison to FY2006 levels, CBPP experts say.

The cuts also present a great challenge for housing authorities to promote mobility of HCV holders. As an expression of the “choice” for which the HCV program stands, voucher holders can move out of the jurisdictions in which they obtained their certificates in search of better economic opportunities. In this region, where housing options are out of reach to entry level workers in many job-rich areas, this is an essential component of the program’s success.  Illinois has even passed legislation providing a tax incentive to property owners who rent to voucher holders in low-poverty areas with high tax bases.  But the administrative and financial burdens of this portability are huge for many housing authorities. Not only do they have to pay administrative fees and coordinate billing with dozens of other authorities, but they also have to cover the difference in rent payments between the destination jurisdiction and the jurisdiction of origin. Every time a family using a HCV makes a move toward self-sufficiency by relocating to an area of economic opportunity (and higher rents), its housing authority of origin suffers.

The effect of changes in the funding allocation formula set in motion last year by HUD are already negatively affecting regional public housing authorities, which weathered an overall 4 percent reduction in their 2005 budgets. Many of them are starting to consider suggestions from HUD to cut expenses, such as reducing payment standards to landlords, denying voucher holders moves to higher cost areas, cutting utilities allowances, or even terminating vouchers. Last year, the Housing Authority of Elgin issued notices of termination to 32 families. This year Oak Park’s Housing Authority estimates that  70 HCV families will need to be eliminated in order to balance its budget.

Other unexpected changes proposed (and eventually withdrew) by HUD in 2005 (such a plan to block-grant the HCV program, or a revised methodology to calculate Fair Market Rents) have contributed to create an atmosphere of great uncertainty. The repercussions of this are serious: housing authorities are having a hard time running their programs and planning for the near future;  property owners are more and more reluctant to participate in the HCV program; public housing residents and voucher holders fear for the continuity of their much needed subsidies; and last, but not least, municipalities across the region and the state are finding difficulty in figuring out how to coordinate and incorporate these much-needed resources into their own comprehensive housing plans.

Another program seriously affected by the President’s budget proposal is HOPE VI. Once again, President Bush is proposing zeroing out this program, which has played a key role in transforming distressed public housing projects into vibrant mixed-income communities throughout the country. Last year, and after intense negotiations and pressure from housing advocates, the HOPE VI program received $143 million for FY2005 (versus the initial 0$ proposed by President Bush), well below the $574 million budgeted for FY2002 and FY2003, and the $625 million recommended by the National Association of Housing and Redevelopment Officials (NAHRO).

Despite criticisms alleging that many of the HOPE VI funds awarded to housing authorities remain unused and that delivery of redeveloped homes has been slower than planned, HOPE VI remains a basic funding tool for the transformation of rundown public housing. The Chicago Housing Authority (CHA) has received $258 million in HOPE VI revitalization grants and another $80 million for planning and demolitions since the beginning of its $1.6 billion Plan for Transformation. These funds are helping create successful mixed-income communities throughout the city. A recent report by the U.S. General Accounting Office (GAO) pointed out that in Chicago’s Henry Horner area (redeveloped through HOPE VI funds), average property values increased in 215 percent after the revitalization effort.

The Community Development Block Grant program (CDBG) will disappear too in 2006 if the President’s request is accepted by the House and the Senate. The CDBG  program is a partnership between federal, state and local governments, and provides funds to rehabilitate affordable housing, spur economic growth and provide basic infrastructures. According to NAHRO, in the last year alone CDBG has created or retained more than 90,000 jobs, assisted 178,000 households, and provided public services, including employment training, child care, and services for the elderly and disabled, to 13.3 million people. Among many other initiatives, 313 homes in 27 communities were rehabilitated in 2004 in Illinois using CDBG funds to address health and safety issues, and, where appropriate, accessibility issues for people with disabilities. Illinois received almost $200 million for FY2005.

The Chicago region is experiencing a serious affordable housing crisis. In the last decade, the six-county Chicago region grew by 11 percent in population and 16 percent in jobs, but lost more than 28,000 apartments. MPC, along with many other organizations is advocating for full funding for the HCV, HOPE VI, and CDBG programs, three precious federal resources that have made a difference in the quantity and quality of public and affordable housing options in our region since their inception.

MPC’s efforts are in tune with the new Illinois housing policy outlined by Gov. Rod Blagojevich in Illinois’ Comprehensive Housing Plan . The plan identifies several underserved populations that should be targeted specifically, including households earning below 50 percent of area median income (AMI) with an emphasis on those at 30 percent of AMI, who are the main beneficiaries of HCV and HOPE VI programs. Recognizing that the achievements anticipated thanks to his new Housing Plan cannot be realized if the federal government proceeds with the President’s budget, the Governor sent a letter to President Bush requesting that he preserve the CDBG program and guarantee its full funding.

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