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Gap-filling subsidies are also available in the form of federal housing vouchers, which allow families to rent regular homes and apartments on the private market. Again, a family contributes 30 percent of its monthly income and the federal government pays the rest, up to a locally determined maximum. Vouchers are unique among federal housing assis- tance programs in that they are “tenant based” rather than project based, allowing the recipient rather than the developer to decide where the low-income household will live. Voucher recipients can even receive their assistance in one jurisdiction and take it to another as they search for housing that best meets their needs.4

Low Income Housing Tax Credits (LIHTC) provide an up-front subsidy to developers of rental housing (or their equity investors) in return for a commitment to charge below-market rent levels. Rents for these units must be set at levels that are deemed affordable for households with moderately low income levels for the local area, and the units are set aside for residents at or below this income ceiling. All eligible residents pay the same rent; the LIHTC program does not require (nor does it provide suffi- cient subsidies to allow) every unit to be affordable for the family that lives in it.

Every year, the federal government also provides flexible support for local housing initiatives in the form of block grants. Specifically, the HOME program allocates federal dollars by formula to state and local governments, which can use the money to buy, build, or rehabilitate rental housing targeted to low- or moderate-income households. The Community Development Block Grant program provides formula funding to the same jurisdictions, and these dollars can be used to pay for infrastructure and community facilities (like parks, recreation centers, and street improvements) that support affordable housing devel- opment. Housing legislation just passed by Congress includes a new Affordable Housing Trust Fund, which (beginning in 2010) will be distributed by formula to state governments primarily to support the devel- opment of rental housing that is affordable for very low income households.5

Scale and Who Is Served

Federal housing assistance programs—though large, complex, and costly—fall woefully short of meet-





ing the needs of low-income Americans. The total number of renters facing serious housing hardship has been steadily rising, and less than a third of eli- gible households with housing needs actually receive assistance. In addition, the number of households receiving deep, gap-filling subsidies (from public housing, privately owned subsidized housing, or vouchers) has remained essentially unchanged since the beginning of this decade, while the number of homes and apartments with shallower LIHTC sub- sidies has grown. Information on the characteristics of households served by federal housing assistance programs varies considerably across program types, with much more complete and reliable data avail- able for the deep subsidy programs than for the newer (expanding) programs.

Housing Assistance Gap

From 1999 through 2005,6 U.S. housing markets experienced an unprecedented boom. Changes in policies and market mechanisms, including a vast increase in subprime lending, substantially expanded the number of homeowners, while the number of renters remained flat. Renters have traditionally expe- rienced more serious and widespread housing prob- lems than owners and, accordingly, have been the intended beneficiaries of the housing assistance pro- grams described in this primer.

For much of the 20th century, inadequate supply and deteriorated structures were America’s dominant housing problems. But, for at least the past 40 years, the primary problem for renters has been affordability. By 2005, only 5 percent of renters lived in over- crowded housing and 11 percent lived in housing that was structurally inadequate, but 22 percent were paying from 30 to 50 percent of their income for rent, and another 23 percent were paying more than half their income for rent (table 1). Altogether, 14.2 mil- lion unassisted renter households (42 percent of all renters) had one or more of these housing problems in 2005. Between 1999 and 2005, the number with problems grew 7.7 percent while the number with no problems declined 9.7 percent.

The fundamental problem is that rents have risen faster than incomes for a growing segment of the workforce in almost every part of the country. This trend is primarily the result of widening income inequality, with incomes rising much more slowly for

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