By Michael Kane, Executive Director
National Alliance of HUD Tenants
January 2006
The National Coalition for the Homeless estimates that 3.5 million US families experience homelessness each year. Although it is well-established that the private sector cannot produce housing affordable to low income families that need it without massive government assistance, the US government has not sponsored a new low-cost rental housing production program since 1983.
The explosion of massive, visible homelessness dates from that time, as the low income population which needs government housing assistance has grown more rapidly than the available supply. The problem has been made worse by the lack of private market rent controls in the US, which puts much of the rental housing stock beyond the reach of low income families, who must double and triple up to avoid homelessness. (Only New York, California, New Jersey and Massachusetts allowed rent controls ten years ago; these regulatory systems have all been weakened or repealed by the reactionary “property rights” movement in the US in the past decade.)
In its housing policies, the Bush Administration has emphasized assistance to first time homeowners through downpayment assistance and access to low cost credit. While this version of “the American Dream” undoubtedly works for some working and middle class families, most poor and working people in the US are unable to purchase homes due to poor credit, unstable or low incomes, and high costs in many markets.
Although most states and large cities maintain some sort of rental housing production programs, their resources are woefully inadequate and fall far short of housing needs. Only the federal government, through its housing agency (HUD-the Department of Housing and Urban Development) has the potential resources to meet the challenge. But since the Reagan Administration’s dramatic cutbacks of HUD programs in the early 1980’s, the nation’s supply of affordable subsidized rental housing has stagnated and declined.
Three types of rental housing assistance. Today, the US government supports three types of subsidized rental housing assistance through HUD, aiding about five million families. This is approximately one fourth the number who qualify for housing subsidy assistance, based on families who pay excessive rent burdens (defined in the USA as more than 30% of household income spent on rent) and/or live in overcrowded or substandard housing.
Rental Vouchers. Of the five million assisted, approximately two million receive rental “vouchers,” which they can utilize in the market with landlords willing to accept them. Known as “Section 8” vouchers after a section of the US housing law which created it in 1974, this program pays landlords a guaranteed amount for rent, while tenants pay 30% of their household income. Tenants must have household incomes less than 50% of the area median income to qualify for Section 8 assistance.
Public Housing. A second type of rental housing assistance program is known as “public housing,” similar in concept to Council Housing in the UK. Created in 1937, HUD’s Public Housing program today subsidize the operating costs for about 1.3 million apartments built and owned by Local Housing Authorities in each major city. Unlike Council Housing in the UK, public housing tenants in the US are typically very low income people: most earn less than 30% of the median income in their areas. About 40-50% of public housing tenants are elderly or handicapped households paying minimal rents for their government-owned apartments.
Privately-owned, HUD-subsidized. The third major HUD-subsidized housing sector consists of privately-owned, HUD-subsidized multifamily housing complexes which receive either operating and/or capital subsidies and guarantees as incentives for private owners to build and maintain affordable housing for lower income people. Approximately 1.7 million families live in these buildings. About half are elderly or handicapped, most earn less than 50% of the median income, but some earn up to 95% of the median income. These buildings were constructed between 1966 and 1983, and are usually newer and in better condition than the older “public housing” stock.
Social housing stock under attack. For the past decade, HUD and Congressional housing policies have eroded the supply of federally-subsidized affordable rental housing. In the Public Housing sector, US housing policy has promoted the HOPE VI demolition and reconstruction program since 1992, aimed at tearing down ill-conceived high-rise family housing developments which racially segregated low income minorities in the post-World War II era. More than 120,000 units of Public Housing have been demolished under HOPE VI since its inception. In their place, fewer than 40,000 new units of “mixed income” housing have been built, and few of these have been affordable to the low income tenants whose homes were destroyed. HOPE VI also promotes privatized management and redevelopment by private sector investors, whose for-profit goals are fundamentally at odds with social housing and will only lead to institutionalized conflicts in the future.
Many public housing tenant organizations have harshly criticized HOPE VI. Some have called for abolition of the program, others have demanded that local Housing Authorities guarantee one-to-one replacement of units torn down under the program. The Bush Administration has proposed its elimination, but has made no proposals whatsoever for building new rental housing to replace units lost.
In the privately-owned HUD-assisted apartment sector, owners (mostly large, national corporations) have begun to take advantage of the time-limited subsidy contracts which began to expire in the late 1980’s, twenty years after the buildings were initially constructed. Since 1996, when Congress repealed a program which had slowed down the rate of owners opting out of federal subsidies, the US lost more than 300,000 units affordable to low income families through conversion to unregulated high market rents in “hot” real estate markets, primarily the East and West Coasts and “gentrifying” neighborhoods in between, according to the National Housing Trust.
The National Alliance of HUD Tenants (www.saveourhomes.org) has been organizing tenants in this sector since 1992, but has been unable to find Congressional support for regulating owners ability to opt out and not renew expiring subsidy contracts. The Bush Administration has made matters worse by converting subsidy contracts tied to the buildings into tenant-based “vouchers” at every opportunity, further eroding the subsidized housing stock. In response, NAHT won a Congressional amendment in December 2005 to require sale by HUD of buildings under its control with subsidies tied to the buildings to help preserve affordable housing.
Ownership concentration and privatization
Since the early 1980’s, ownership of privately-owned HUD apartment complexes has become increasing concentrated into the hands of large corporate owners, operating nationally or regionally. In 1981, Congress adopted tax code changes proposed by the Reagan Administration which made occupied HUD housing eligible for reinvestment and “resyndication” (sale of new tax shelters). As a result, in the early 1980’s many individual or small corporate owners were bought out by a small number of national companies or wealthy investors, such as the National Housing Partnership, Meridian Group, Bruce Rozette or Alan Bird. Although exact data is unavailable, NAHT estimates that fewer than 20 investment groups owned more than half the HUD housing in America by 1986, when the tax laws were changed again.
In the early 1990’s, HUD housing became a target for Real Estate Investment Trusts (REITS), a form of stock-driven investment in USA real estate markets taking advantage of both favorable tax laws and stock markets to assemble investment capital. The emergence of REITS sparked another round of purchases and ownership concentration in the HUD housing sector. For example, the Apartment Investment Managemcnt Company (AIMCO), a Denver-based REIT with ties to the right wing of the Republican party, formed in 1994, today owns or manages approximately 400,000 apartments in 49 states, of which 115,000 are HUD subsidized housing-fully 7% of the HUD housing in the country.
Because REITS are driven to maximize returns in the short run (AIMCO pays stock bonuses to top managers to encourage this, as Enron did in the USA energy industry), tenants are concerned that the company will be driven to “opt out” of HUD subsidy contracts in “tight” market areas and convert to high rent housing. In response, NAHT has coordinated national campaigns and at one point opened up a direct dialogue with AIMCO, which the company dropped last year. Recently, AIMCO carried out mass forced evictions in a building in Venice, California, suggesting a new turn to its corporate strategy.
So far, there are few examples of non-USA global corporations investing in HUD housing. However, in recent HUD foreclosure auctions in New York City, global investment groups from Hong Kong and other regions have bid on HUD properties. Given the imperatives of the global market, it is only a matter of time before ownership of HUD housing goes global.
To date, there is also little evidence that HUD housing owners like AIMCO plan to expand outside the US. However, some US private investment funds are actively converting “social” housing into condominiums or high market rental uses in Germany (Fortress and Morgan Stanley), Italy (Carlyle Group), and other countries. Efforts to legalize REITs in England and Germany should be viewed as part of this trend.
Bush proposes radical housing cuts. While the subsidized housing stock has gradually eroded over the past decade, for most of the 1990’s Congress at least added new Section 8 Vouchers to HUD’s third subsidized rental housing sector. By 2003, more than two million families received some form of Voucher assistance, up from about 1.6 million at the start of the decade.
However, since 2003, the Bush Administration has attempted to cut this program by seeking, for the first time, inadequate funding to renew all Section 8 contracts when they expired. In response, NAHT and its allies (including the Center for Budget and Policy Priorities, the National Low Income Housing Coalition, and the National Coalition for the Homeless) have organized major campaigns to persuade Congress to restore the funds. (Since 2003, NAHT has organized press conferences in several cities each year in October, as part of International Housing Rights Day called by the Habitat International Coalition and the International Union of Tenants). In response, Congress added $900 million to Bush’s budget request for fiscal year 2004, and $1.6 billion in 2005, blocking Administration proposals to cut 250,000 families in 2005 and 600,000 by 2010-fully 30% of the families receiving Vouchers.
Despite this Congressional support, the Administration managed to cut 160,000 families from the Voucher roles by administrative means in 2004-2005. Although the Administration’s budget for 2006 restored some of these cuts and fully funded Section 8 for fiscal year 2006, conservatives on Capitol Hill have changed the funding formula to local Authorities to a “dollar based” rather than “people based” calculation. This change will make it easier for Congress and HUD to cut program funds in the future, shifting painful budget decisions-and the blame-to local government agencies..
In a related move, the Bush Administration has proposed to devolve administration of the Section 8 Voucher program to Local Housing Authorities, giving them greater administrative discretion but at a reduced funding level. Housing Authorities would be encouraged to “experiment” with higher rents for tenants (above 30% of income, perhaps up to 40%), “time limits” forcing people off rental assistance after a certain period, and replacing very low income tenants with higher income ones to reach more households with limited funds.
Although this proposal has not yet picked up much support in Congress, some national “trade associations” representing Housing Authorities are supporting elements of the Administration’s bill. NAHT expects a renewed push by the Administration to pass this legislation to offset mounting US budget deficits.
“Starving the beast.” Behind the Bush Administration’s radical proposals to cut Section 8 is a strategy dubbed “starving the beast” by some of the Administration’s favorite intellectuals, such as Grover Norquist of Americans for Tax Reform and Howard Husock of the right-wing think tank the Manhattan Institute. In this vision, the Administration has created huge budget deficits by pushing through massive tax cuts for the very wealthy coupled with huge budget increases for war and “homeland security.” This creates long-term, structural pressures to close the growing deficit by slashing non-military domestic programs, such as housing, health care, education, and social security. As the quality of these services and the agencies that run them declines, public support weakens, making deeper cuts and even agency abolition politically feasible in the future.
Overall, the housing sector (tenants, owners, agencies, and their trade associations) is perceived as politically “weak” by the Bush Administration and its Republican allies in Congress, particularly since many beneficiaries are perceived as powerless minorities, and the housing finance and building sector has historically been allied with the Democratic Party in the US. The Bush Administration has pursued an aggressive strategy to “starve the beast” by defunding, privatizing, deregulating, voucherizing and devolving administration of America’s social housing system-the same witch’s brew of “neoliberal” social policies found, in different forms, around the globe.
So the battle lines in the US have been drawn for many years to come, as tenants organize and link up with allies to first save peoples homes before they are lost, and to build alliances for a new rental housing production program in the future. In the meantime, as the need for housing outpaces the government’s ability to provide it, more and more Americans will find themselves paying excessive rents in overcrowded apartments–or living on the streets.
