Chapter 3

Policy Implications

The findings of this report suggest that economic growth alone will not ameliorate the record-level housing needs among families with limited incomes. Not even families working full-time at the minimum wage can afford decent quality housing in the private rental market. The report also makes it clear that housing needs are found not just in big cities but increasingly in the suburbs as well.

The fundamental reform of the Nation's welfare system, enacted in 1996, is likely to have far-reaching effects on low-income families. These reforms occurred after the data in this report were collected, and it is too early to measure welfare reform impacts on housing needs. Clearly, though, many welfare recipients will find work. Some recipients will experience declining incomes, as they lose income support from either program sanctions or time limits. In both cases, housing assistance will continue to be needed to prevent and alleviate the distress and instability people experience when they pay so much for rent that they cannot afford other necessities.

Worst case needs for housing assistance constitute a persistent structural problem of American society, requiring a significant public policy response. The report suggests a clear and compelling need for the Congress to provide greater support for Federal housing assistance -- by expanding both tenant-based rental assistance and programs that create and rehabilitate more affordable housing units. And Congress should act carefully in reforming the income -- targeting rules for public and assisted housing programs to balance the goals of achieving a greater income mix in public and assisted housing developments and of providing assistance to families with the most severe housing needs.

A short-run policy response should include:

• 103,000 New Housing Vouchers. The Administration has asked Congress to fund 103,000 new housing assistance vouchers, including 50,000 welfare-to-work vouchers to help welfare recipients find and keep jobs. Tenant-based assistance is a cost-effective way to reduce severe rent burdens and provide access to rental housing throughout the private market. For example, these vouchers can help extremely-low-income families live in housing supplied by HOME and the Low Income Housing Tax Credit at affordable rents.

• Ending the Delay on Reissuing Vouchers. Congress should end immediately its cost-saving requirement placed on local housing authorities to hold for three months rental subsidies returned by families leaving the program. This practice reduces by 40,000 the number of subsidies in circulation and thus the number of families receiving housing assistance.

• Expanding Production of Affordable Housing Through HOME and the Low Income Housing Tax Credit. The Administration is also seeking to expand tools to build and rehabilitate affordable housing. HUD's FY 1999 budget includes increased funding for the HOME program, along with a new HOME Bank, a loan guarantee feature that would allow communities to leverage up to five times their Federal grants for larger scale housing investments. In addition, the Administration is proposing a substantial expansion of the Low Income Housing Tax Credit that would create 180,000 new affordable rental units over the next five years.

• Careful Income Targeting of Federal Housing Assistance. Congress is considering legislation which will determine the income levels of households who will be admitted to public housing and to receive Section 8 rental assistance. The Clinton administration and HUD strongly support the transformation of public and assisted housing developments into healthier, mixed-income communities. But policymakers must be careful not to exclude poor families altogether from these housing developments, nor to reduce unnecessarily the numbers of families with worst case needs who can be served by Federal housing programs. This report shows that this goal can be achieved while still continuing to serve families who are working but who have low incomes and serious housing needs.

  Three-fourths of tenant-based assistance should be reserved for families with incomes below 30 percent of the area median, which is the current practice. Forty percent of units that become vacant in public housing and in Section 8 projects should be reserved for extremely-low-income households. Each project should be required to serve a minimum number of extremely-low-income families to avoid gentrification of the most desirable and best located housing.