Some new affordable-housing projects have stalled following news that the Trump administration plans to cut $27 billion in federal programs that provide rental assistance to low-income individuals, according to a report from The Wall Street Journal. The 44% reduction in the Department of Housing and Urban Development’s budget is part of the administration’s effort to reduce government spending.
“We want to be lean and mean, not bloated and bureaucratic,” HUD Secretary Scott Turner said at a June Senate hearing.
More than five million people rely on Section 8 vouchers to pay at least part of their rent. The vouchers are heavily used in high-cost housing markets in New York and California. Both landlords and developers say budget cuts would shrink a crucial piece of revenue for affordable apartments and make it difficult to maintain and pay debt on their properties, according to the report.
For example, one real estate developer in NYC was planning to start construction on a senior affordable-housing facility in Queens this fall. But with Section 8 housing subsidies indefinitely postponed due to lack of funding, the project is now on hold.
This is just one of several similar stories across the country as developers who rely on federal voucher programs to finance developments are navigating uncertainty around the prospect of further cuts next year. Developers are opting to pump the brakes rather than over-commit, said the article.
Affordable-housing advocates say the budget cuts could destabilize the housing system. About $50 million in multifamily loans purchased by Fannie Mae and Freddie Mac between 2018 and 2023 would be at risk of default, according to an analysis by nonprofit, New York Housing Conference.
However, the housing sector welcomed some positives from the administration’s new tax law, including a provision that makes it easier for developers to access the federal government’s Low-Income Housing Tax Credit (LIHTC). This expansion could spur more than 1 million new affordable units over the next decade. In addition, the law made permanent Opportunity Zones and the New Markets Tax Credit, both of which aim to promote new development in low-income areas, said the report.
But without voucher programs, it remains to be seen if newly built housing will be able to obtain the necessary operating revenue.
The proposed budget cut “completely contradicts” the victory on LIHTC, said Amy Albery, chief executive of affordable-housing developer Wallick, in The Wall Street Journal article. Nearly all of her firm’s 10,000 affordable-housing units use some type of HUD housing assistance to finance their loans.
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