Housing Cuts for the Poor, Tax Cuts for the Rich

March 29, 2006
By Gene C. Gerard

President Bush's 2007 budget that was released last month includes significant cuts in housing assistance. The new budget for the Housing Choice Voucher Program underfunds 70 percent of the state and municipal housing agencies that oversee the program, according to a study by the Center on Budget and Policy Priorities. Although the Republican Congress has debated the cuts affecting the Department of Housing and Urban Development (HUD), it appears unlikely that Mr. Bush's cuts will be opposed. Ironically, Congress is also considering yet another tax cut for the wealthy.

The voucher program is the country's largest low-income housing program. It provides poor households with vouchers they can use to rent housing in the private sector. Since 2004 voucher assistance for over 100,000 families have been cut because HUD doesn't allocate the vouchers based on current needs. Mr. Bush's 2007 budget relies on the same funding formula that has caused the shortages in the past few years.

Under the administration's formula, every housing agency's funding level is based on the dollar amount it was eligible to receive the previous year. The level is adjusted by an inflation factor determined by HUD based on data that is two-years old. But this formula doesn't consider the actual number of vouchers the agency distributed the previous year or changes in local voucher costs. As a result, many agencies are left with inadequate funds to continue all of the vouchers currently being used.

In reality, HUD's voucher assistance program has never been fully funded. Since the formula was first adopted in 2005, the Bush administration has failed to request enough funding to give agencies the total amounts they are eligible for under the formula. Consequently, HUD was forced to impose funding cuts on housing agencies in 2005 and 2006 that were well below the formula amount. The new budget continues this pattern, requiring even larger cuts next year, which will force agencies that are already strapped to reduce vouchers even more.

Mr. Bush's budget for 2007 also cuts tenant protection vouchers by $30 million. These vouchers replace other types of federal housing assistance that are eliminated, such as public-housing units in New Orleans that have been demolished. As a result of all the cuts, state and municipal agencies won't be able to fund more than 40 percent of their authorized vouchers next year. In the nation's capital, for example, the local housing authority is helping 610 fewer families this year than last, and it will have to eliminate assistance to 145 more families next year.

Although the federal government began to address homelessness under President Johnson in the 1960s, the problem remains real and pervasive. According to the National Law Center on Homelessness and Poverty, the annual homeless population is approximately 3.5 million people, or 1.3 percent of the U.S. population. And 40 percent of the homeless population is comprised of families with children. In fact, 39 percent of the homeless are children, almost half of who are under the age of five. In 2004, the demand for housing by the homeless increased by 14 percent.

Ironically, at the same time that the Republican Congress is debating these housing cuts for the poor, it's considering a tax cut for the wealthy. Presently, only individuals who earn less than $100,000 a year can convert their tax-deductible I.R.A. into the newer Roth I.R.A. The Roth is much better than the traditional I.R.A., because no taxes are paid when money is withdrawn. In effect, these tax-free withdrawals are a government handout.

The current tax code doesn't allow those earning over $100,000 to convert their original I.R.A. into the Roth version. And that's as it should be. The wealthy already enjoy numerous tax cuts and subsidies. But the Republican Congress is considering amending the law to allow those earning more than $100,000 to enjoy the tax-free benefits of the Roth I.R.A. Yet Congress is not willing to oppose President Bush's housing assistance cuts.

Given the number of those left homeless in the wake of Hurricanes Katrina and Wilma, the housing voucher cuts are particularly offensive. Mr. Bush should fully fund HUD, such that it can meet at least the current voucher needs. Failing that, Congress should take it upon itself to do so. It's the least it can do, especially if more tax cuts are going to be given to the wealthy.