President Donald Trump dropped his $4.8 trillion budget for 2021. And despite the affordable housing crisis sweeping the nation in a time of economic prosperity, the proposed budget doesn’t look good for housing.
The winners in the proposal—titled “A Budget for America’s Future”—didn’t contain any big surprises. NASA would get a 12% budget bump, military spending would inch up and, of course, more money would be allocated for the wall along the U.S.-Mexico border.
But foreign aid, Medicare, and the Environmental Protection Agency would see deep cuts along with the Department of Housing and Urban Development if the budget is approved. The housing agency would lose 15.2% of its funding, or about $8.6 billion.
“The President’s budget proposal provides HUD with the resources to serve America’s most vulnerable populations in an efficient and compassionate manner,” said HUD Secretary Ben Carson in a statement. “We must remember, compassion is not always how many people we can get on a government program, but rather how many people we can help graduate out of a program and into financial independence. The road to self-sufficiency is one that is sure to improve the lives of all Americans.”
But many folks are worried about the impact of taking a chunk out of HUD’s budget at a time when home and rental prices have hit new highs in many parts of the country.
“Given that people are struggling with finding affordable housing due to fast-rising home prices and rents, cuts to programs that are designed to help with this very problem could have a negative impact,” says Senior Economist George Ratiu of realtor.com®. But he notes that this budget is just a proposal.
“Congress will wrangle over the details of the budget. Some of the proposed cuts will not make the final cut,” he adds.
The budget isn’t likely to get through the Democrat-controlled House of Representatives and receive bipartisan support in the Senate. It will likely change shape substantially during that process.
In the past fiscal year, the White House tried to cut HUD’s budget by 16.4%, down to $44.1 billion in gross discretionary funding. It was unsuccessful.
“At a time when America’s housing crisis has reached historic heights with the lowest-income people suffering the most severe impacts, proposals to further cut these vital resources are unconscionable and unacceptable,” Diane Yentel, president and CEO of the National Low Income Housing Coalition, said in a statement.
Where President Trump wants HUD funding to go
Not everything in the budget is doom and gloom. Trump’s proposal would dedicate $180 million for building about 1,200 new units for senior and disabled Americans.
And $2.8 billion would go toward homeless assistance grants, including funding to start an initiative to help more folks find shelters.
And it promises to continue the work of Carson, a former surgeon, to remove dangerous lead paint from urban housing. It would also safeguard against carbon monoxide poisoning. The administration has proposed putting $425 million toward mitigating health and safety hazards—$90 million more than in the previous year.
Home buyers wouldn’t be left out in the cold either. The budget sets aside $20 million to modernize the Federal Housing Administration’s information technology systems and strengthen reverse mortgages among other improvements.
The HUD programs on the chopping block
The president has proposed eliminating the HOME Investment Partnerships Program. It provides grants to help states, cities, and communities for building, buying, or rehabbing affordable housing for rent or sale. It can also be used for rental assistance for low-income Americans.
Trump expects that state and local governments as well as the private sector will play a greater role going forward.
“What this will do will push down the affordable housing issues to the state and local levels,” says real estate economist Ken Johnson of Florida Atlantic University in Boca Raton, FL.
This won’t affect Middle America as much, where housing prices are still somewhat reasonable (even though they’re going up).
“The lack of affordability is so dramatic in coastal cities and rapidly growing Southern cities that there’s no real market solution,” he adds. “They need help from the federal government on this.”
For the fourth year in a row, Trump is trying to get rid of the Community Development Block Grant (CDBG) program.The program gives money to struggling neighborhoods to create and preserve affordable housing, establish new infrastructure, and carry out economic development projects.
Doing away with the two programs would chop $4.8 billion from the budget. In addition, the Choice Neighborhoods program would disappear, saving the government $175 million. It gives grants to areas with distressed public and federally assisted housing.
“To support State and local efforts, the White House Council on Eliminating Regulatory Barriers to Affordable Housing is working to identify and support successful practices for removing burdensome rules and regulations that raise the cost of housing development,” the budget reads.
These HUD programs could lose funding
The budget promises to preserve the $41.3 billion for rental assistance for the 4.6 million families that currently receive help from HUD. But it would cut a little over $3.5 billion from the funding it normally provides for rental assistance. Renters would be asked to contribute 35% of their adjusted income, up from 30%, to cover their housing costs.
Trump expects “renters to shoulder more of the costs,” says Ratiu. “But rental growth is outpacing income growth, so this makes it harder for low-income renters to afford their housing.”
The missing money would be made up for by requiring able-bodied individuals receiving assistance to find work and shoulder more of their housing costs. About $190 million would go toward self-sufficiency programs for those getting support from HUD.
“The Budget reflects the President’s commitment to reforming programs to encourage work and self-sufficiency, and provides targeted but fiscally responsible investments that assist vulnerable low-income households,” it reads.
Trump also is attempting to reform federal disaster recovery assistance, which is spread out among programs in 17 government departments and agencies. The budget called out HUD’s CDBG Disaster Recovery program as “slow, unpredictable, and wasteful.”
The budget also proposes cutting $225 million from the Native American Housing Block Grant, which goes toward affordable housing.
“Time will tell if the budget works,” says real estate economist Johnson. “There’s nothing that I see in here that’s going to change the problem of the lack of affordable housing.”