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Federal Programs for Addressing Low-Income Housing Needs

MONTHLY RENT OR MORTGAGE PAY- ments constitute the single biggest expenditure in most family budgets, and many low-income families have difficulty finding housing they can reasonably afford. Although most family-strengthening and community change initiatives recognize the urgency of the housing problems facing low-income families, they often have difficulty figuring out how to con- structively address them. Federal housing programs are numerous and confusing, implementation is balka- nized, funding falls woefully short of needs, and pol- icy debates often focus on narrow technical issues. This primer intends to demystify federal rental assistance programs and provide the most current information available on how many (and who) they serve and how their scale is changing over time.1 It also summarizes key challenges facing housing policy today and in the coming years—challenges that may create opportu- nities for federal, state, and local engagement and innovation.

Understanding the Basics

The federal government began building subsidized housing during the New Deal, and in the decades since, a complex tangle of federal programs has evolved to tackle the housing needs of low-income renters. Today, federal housing programs fall into three basic categories: (1) programs that provide deep, gap- filling rent subsidies, earmarked either for particular buildings or for individual households; (2) tax credits that produce new housing with moderate (below- market) rent levels; and (3) block grants that provide flexible support for local affordable housing initiatives.

Understanding all three program types—and the people and properties they serve—is essential for iden- tifying community-level opportunities to strengthen, expand, or supplement affordable housing options.2

The most generous and reliable support for low- income households comes from federal housing pro- grams that provide deep, gap-filling rent subsidies. These programs all pay the difference between a rent contribution that is considered affordable—currently set at 30 percent of monthly income—and the actual rent for a house or apartment. Families receive this kind of “gap-filling” subsidy if they live in public housing (owned and managed by a local public hous- ing agency) or in privately owned developments that have long-term subsidy contracts with the federal Department of Housing and Urban Development (HUD). In both cases, the subsidy is “project based”— attached to the house or apartment; if the family moves, it loses its subsidy.

Production of these deeply subsidized rental proj- ects occurred in two overlapping phases. During the first phase, extending from the 1930s through the early 1970s, the federal government contracted with local public housing agencies (PHAs) to build and manage properties, providing funds to cover both capital and operating costs.3 In effect, these contracts required the PHAs to maintain the affordability of public housing units in perpetuity. During the second phase, extending from the 1960s to the early 1980s, the federal government executed contracts directly with for-profit and nonprofit housing developers, rather than with PHAs. The terms of contracts gen- erally guaranteed subsidies and imposed affordability restrictions for up to 30-year terms.

Federal Programs for Addressing Low-Income Housing Needs


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