federal housing policy and preservation: historical evolution ......some responsibility for...

Housing Policy Debate • Volume 2, Issue 2 157

Federal Housing Policy and Preservation:Historical Evolution, Patterns, andImplications

David ListokinRutgers University

Abstract

This paper considers the evolution and patterns of federal low-income1 housingpolicies and programs over roughly the past half-century. It begins with anoverview of the multifaceted involvement of the federal government in housing —only one aspect of which is its intervention in the low-income sector. This is fol-lowed by an overview of federal low-income housing policy from the New Deal totoday. The underlying assumptions and approaches of these policies are then con-sidered with respect to such considerations as the government’s presence and role,its targeting of assistance, and the selection of subsidy levels and vehicles. Thepaper concludes with a brief review of the implications of the historical record forfuture policy.

Introduction

This paper considers the evolution and patterns of federal low-income housing policies and programs from the New Deal to today.Federal assistance, resulting in the subsidy of about 5 millionhousing units, is charged with multiple goals that are often difficultto satisfy simultaneously. Government intervention is accepted;however, housing delivery is to be primarily through the privatesector. The focus of the public assistance regarding the degree ofdisadvantage of the households to be aided has fluctuated over time.The mechanism of the housing subsidy has been consistently cate-gorical in type; there have been changes, however, in the subsidyvehicle, going from a supply- to a demand-side approach. Finally,the housing programs have often been poorly coordinated with otherforces affecting housing, such as welfare support; similarly, there isa narrow focus on the housing unit itself as opposed to housing as itis affected by the social needs of its occupants and surroundingneighborhood conditions. The paper concludes with a brief reviewof the implications of the historical record for future policy.

158 David Listokin

Multifaceted federal housing involvement

The federal government has been involved in housing in manyways. It has formed national commissions to study housing pro-grams and strategies. One of the first federal housing “actions” wasthe formation of a Congressional commission in 1892 to investigateslum conditions in the nation’s cities.2 In times of emergency, thefederal government has built housing directly. During World War I,the U.S. Housing Corporation constructed, organized, and managedhousing for defense workers; in World War II, the National HousingAgency performed a similar role and (with other programs) deliv-ered almost 1 million units for defense workers and military servicepersonnel.3

On a much more long-term and permanent basis is the federal gov-ernment’s involvement in facilitating residential mortgage financingin general and fostering the goal of homeownership in particular.To this end, it has assisted and regulated a savings and loan indus-try focusing on home lending; provided insurance through suchagencies as the Federal Housing Administration (FHA) so thatmortgages would be granted on the most favorable terms; and, mostsignificantly, extended generous tax benefits for residential mort-gage and property tax payments. These aids for homeownershipconstitute the most significant federal outlay for housing. In fiscalyear (FY) 1988, tax incentives to foster homeownership cost thefederal government almost $50 billion (encompassing deductions formortgage insurance, mortgage revenue bonds, and property taxes).4This outlay was roughly four times greater than what the U.S.Department of Housing and Urban Development (HUD) spent forassisted housing that year.

The federal government is involved in housing in still other ways.Provisions in the Internal Revenue Code (depreciation, recapture,credits, etc.) have at times discouraged, and at other times havespecifically aided, investment in rental housing, rehabilitation, andother housing outlays.5 On a different but nonetheless significantfront is the housing component of the nation’s welfare system. It isestimated that the combination of explicit and implicit shelterallowances provided by the welfare system — Aid to Families withDependent Children (AFDC), Supplemental Security Income, andGeneral Assistance — amount to at least $10 billion yearly.6 Thelatter expenditure is roughly equivalent to HUD’s annual supportfor housing assistance.

This multifaceted federal involvement is in addition to the federalgovernment’s half-century effort of directly assisting lower cost

Federal Housing Policy and Preservation 159

housing production. This effort has been implemented by HUD andthe Farmers Home Administration (FmHA) and their predecessoragencies. The following section reviews the programmatic effortsince the 1930s, focusing on HUD subsidies.

Overview of federal low-income housing policy sincethe New Deal7

Depression-era efforts (1930s)

The United States was a late and reluctant entrant in assumingsome responsibility for providing lower cost housing. Great Britain,for instance, adopted a large-scale, government-aided housingprogram after World War I.8 In this country, there was littlesupport for such a role, especially in light of the vigorous privatehousing production in the 1920s.

With the advent of the Depression, the housing boom went bust.Housing starts plummeted to under 100,000 — a drop of 90 percentfrom the 1920s’ peak. Mortgage foreclosures soared to 1,000 daily,and half of the country’s homeowners were in default.9

These shocks goaded the nation into action. To stabilize the finan-cial industry and to foster residential construction with its atten-dant employment benefit, a constellation of programs and agencieswas created. These agencies included the Federal Home LoanBank, the Federal Housing Administration, the Federal NationalMortgage Association, and the Federal Savings and Loan InsuranceCorporation. An alphabet-soup list of largely market-oriented pro-grams ensued, such as FHA Title I guarantees for home repairs,and FHA Section 203 insurance for home mortgages.

There were also the first efforts to produce lower cost housing. TheRelief and Construction Act of 1932 authorized the ReconstructionFinance Corporation (RFC) to make loans to low-income and slumredevelopment housing corporations.10 The RFC made numerousloans, such as an $8 million commitment to Knickerbocker Villagein New York City and a $15 million loan for rural housing inKansas.

The federal government then elected to intervene directly inhousing production — both to provide shelter and to pump-primethe economy and employment. The 1933 National IndustrialRecovery Act11 authorized the Public Works Administration (PWA)

160 David Listokin

to construct lower cost housing.12 Ultimately about 40,000 suchhousing units were produced. This effort ended, however, when theUnited States Court of Appeals declared the PWA’s use of eminentdomain powers for low-cost housing and slum clearance to beunconstitutional.13

That decision proved only a temporary setback. The 1937 HousingAct14 created the landmark public housing program. Instead ofintervening directly, the federal government would assist localpublic housing agencies that had eminent domain powers. Aidwould be provided in the form of capital grants and loans, with acapital subsidy commitment being made in the form of an AnnualContributions Contract paying principal and interest for as long as60 years (later reduced to 40 years). With financing support, rentscould be lowered to cover only the housing’s operating cost. Publichousing developed into a landmark effort to house the poor. At first,this meant the “working poor” — those whose circumstances did notallow them to afford privately produced housing; over time, publichousing was directed to the most disadvantaged.

Early postwar response (1940s-1950s)

Even during World War II, there was congressional consideration ofthe nation’s need for housing and the need to alleviate slum condi-tions. Thus, a 1945 congressional report, Postwar Housing, pro-posed “the establishment of a new form of assistance to cities inridding themselves of unhealthful housing conditions and of restor-ing blighted areas.”15

From 1945 to 1949, Congress debated the details of new housingand slum clearance legislation. The denouement was the landmark1949 Housing Act.16 It declared the goal of “a decent home and asuitable living environment for every American”17 To achieve thegoal, numerous programs were formulated under the collectiveprogram title of urban renewal. Title I of the 1949 Housing Actauthorized $1 billion in loans and $500 million in grants to aid localslum clearance programs (i.e., land costs would be written downwith federal assistance); Title II increased the FHA mortgage insur-ance authorization; Title III expanded the Public HousingAuthorization to a total of over 800,000 units; and Title V autho-rized the secretary of agriculture to establish programs to improverural housing. Title V led to the establishment of the Section 502program whereby FmHA directly granted mortgages for the pur-chase or repair of new or existing single-family housing for rural


residents. (These were not subsidized with a specific interest write-down until 1968, however, other than the lower rate inherent in amortgage granted by the federal government at its favorable bor-rowing rate.)

In the early 1950s, there was much emphasis on clearing deterio-rated units under urban renewal, with only minor aided-housingproduction. In 1950, for instance, only 32,000 public housing unitswere started nationally.18 Production soon increased. In 1951 and1952, a total of over 125,000 housing units were started. By 1955,there was a cumulative total of approximately 350,000 housingunits subsidized by the federal government under public housing(table 1).

Despite an increase in production, it was apparent that an expan-sion and reformulation of federal housing programs were in order.In 1953, the Advisory Committee on Government Housing Policiesand Programs recommended that the urban redevelopment activi-ties authorized by the 1949 Housing Act be broadened to include therehabilitation of existing structures. A year later, the 1954 HousingAct19 broadened urban renewal from mere demolition and new con-struction to encompass housing rehabilitation and the prevention ofneighborhood decline. It also authorized Section 220 and Section221 FHA insurance for housing in urban renewal neighborhoods.Finally, to foster a secondary market for these new mortgages,Fannie Mae was authorized to provide “special assistance functions(purchases).”

Even with these changes, it was soon apparent that the housingassistance arsenal was limited. Urban renewal continued toemphasize the demolition of older housing. The public housingprogram, which was intended to replace these lost units, was neverfunded at a sufficient level. In addition, public housing was increas-ingly becoming the repository of the poor. This occurred becausepublic housing was being used primarily to shelter families dis-placed by urban renewal and because of other changes (e.g., the1949 Housing Act mandated that there be a “20 percent gap”between the highest public housing rents and the lowest rents inprivate housing). Finally, other housing programs, such as thegrowing list of FHA insurance provisions for those displaced byurban renewal, were welcome (i.e., under the Section 220 program)but offered only shallow assistance.

The end of the 1950s saw a new subsidy program, Section 202 assis-tance for the elderly (later expanded to include the handicapped).Authorized by the Housing Act of 1959,20 the Section 202 program

Tab

le 1

. Cu

mu

lati

ve

Nu

mb

er o

f A

ssis

ted

Ho

usi

ng

Un

its

by

Ma

jor

HU

D a

nd

Fm

HA

Pro

gra

ms

162 David Listokin

(En

d o

f F

isca

l Y

ear

1955

-198

9)(U

nit

s in

Th

ou

san

ds)

Ma

jor

HU

D P

rog

ram

sM

ajo

r F

mH

A P

rog

ram

s(E

stim

ate

d)

Ma

jor

sub

sid

ized

Sec

tion

8H

UD

(n

et)

Fis

cal

yea

rP

ubl

icS

ecti

onS

ecti

onR

ent

incl

udi

ng

Tot

al H

UD

(en

d o

f)

hou

sin

g 23

6a

235

supp

lem

ent

vou

cher

G

iros

sbT

otal

an

d F

mH

AN

etc

502

515

Fm

HA

p

rog

ram

s

1955

344

1960

425

1965

577

1970

830

1975

1,15

119

801,

192

1985

1,35

519

861,

380

1987

1,39

019

881,

398

1989

1,40

1

NA

d

NA

NA 5

400

377

332

337

339

326

324

NA

NA

NA

NA

NA

NA

NA

NA

NA

6631

NA

409

165

NA

219

165

1,15

320

046

2,01

018

234

2,14

315

923

2,24

014

823

2,33

213

724

2,41

8

344

425

577

932

2,12

63,

268

4,14

04,

269

4,34

14,

430

4,50

6

NA

NA

NA

NA

NA

3,10

73,

943

4,07

74,

151

4,22

74,

315e

00

034

40

00

425

00

057

740

545

977

230

4027

02,

396

330

180

510

3,61

739

031

570

54,

648

400

330

730

4,80

739

035

074

04,

891

370

370

740

4,96

737

037

574

55,

060

Sou

rce:

Fm

HA

Off

ice

of

the

Bu

dget

an

d D

elin

quen

cy F

ile

Ser

ies

#616

; th

e H

ousi

ng

Ass

ista

nce

Cou

nci

l; an

d G

race

Mil

gram

, “U

rban

Hou

sin

g A

ssis

tan

ce P

rogr

ams

in t

he

Un

ited

Sta

tes,

” C

RS

Rep

ort,

Mar

ch 2

, 198

9.a

Un

til 1

980,

indi

cate

s t

he

gros

s n

um

bers

of

subs

idiz

ed u

nit

s; a

fter

198

0, t

he

net

nu

mbe

r of

un

its

(se

e be

low

).b

Indi

cate

s th

e n

um

ber

of s

ubs

idie

s to

un

its

(i.e

., a

sin

gle

un

it r

ecei

vin

g du

al s

ubs

idie

s, s

uch

as

Sec

tion

236

an

d S

ecti

on 8

, wou

ld c

oun

t as

tw

o u

nit

s).

c In

dica

tes

th

e n

um

ber

of u

nit

s s

ubs

idiz

ed (

i.e.,

a s

ingl

e u

nit

rec

eivi

ng

dual

su

bsid

ies

wou

ld s

till

cou

nt

as o

ne

un

it).

d In

form

atio

n n

ot a

vail

able

or

appl

icab

le.

e In

dica

tes

corr

ecte

d fi

nal

tot

al.

Not

e: F

mH

A-s

ubs

idiz

ed u

nit

s ar

e es

tim

ated

an

d in

clu

de o

nly

un

its

wit

h a

n in

tere

st s

ubs

idy.

In

add

itio

n, H

UD

- an

d F

mH

A-a

ssis

ted

un

its

as s

how

n h

ere

are

not

iden

tica

l;th

ey a

re s

um

med

to

indi

cate

a g

ross

leve

l of

nat

ion

al h

ousi

ng

assi

stan

ce. F

inal

ly,

the

HU

D s

ubs

idiz

ed f

igu

res

do n

ot in

clu

de a

ppro

xim

atel

y 15

0,00

0 u

nit

s u

nde

r th

eS

ecti

on 2

21(d

)(3)

an

d S

ecti

on 2

02 p

rogr

ams

for

wh

ich

th

ere

is a

BM

IR m

ortg

age

but

no

oth

er s

ubs

idy

such

as

Sec

tion

8, n

or d

o th

ey in

clu

de a

ny

CD

BG

-ass

iste

d u

nit

s.


was designed to assist households with incomes above publichousing levels but below that permitting rental of standard-quality,market-produced housing. To accomplish this, the Section 202program provided for direct loans from the federal government at abelow-market interest rate (BMIR) to nonprofit housing sponsors.The program represented an expansion in the federal government’sshelter intervention beyond public housing. The private sector, asopposed to local housing authorities, would build and develop unitswith BMIR loans in order to assist households above public-housingincome limits. This approach became the mechanism of choice inthe explosion of housing programs in the 1960s.

Housing program expansion in the 1960s

The decade of the New Frontier and Great Society witnessed an out-pouring of housing assistance. The 1961 Housing Act,21 underSection 221(d)(3), provided for BMIR-3-percent loans to limited divi-dend as well as nonprofit sponsors of rental housing for householdswith below-median incomes but incomes above that of public-housing levels. (While Section 202 involved a direct federal loan, inSection 221(d)(3) Fannie Mae would purchase loans made byprivate lenders.) A year later, an important rural housing program,Section 515, was authorized by the Senior Citizens Housing Act of1962.22 Section 515 provided a directly administered loan fromFmHA for rental housing for moderate-income elderly families inrural areas. (The limitation to the elderly was removed in 1966.)

The vigorous housing tenor of the 1960s was exemplified by thescope of the Housing Act of 1968.23 A new subsidy, Section 236,offered a BMIR loan with an interest rate as low as 1 percent forprivately developed rental housing; a sister program, Section 235,provided similar assistance for homeownership. (To foster morelower income homeownership, a Section 104 Special Risk Fundmodified conventional underwriting standards in older, decliningurban neighborhoods.) A Section 521 program was added to makethe l-percent BMIR subsidy available in the FmHA Section 502(homeowner) and Section 515 (rental) programs. In short, a multi-tude of low-cost loans were offered to households that were abovepublic-housing income levels but that might nonetheless experiencedifficulty in affording market-produced housing.

Assisted production soared. In 1960, a cumulative total of approxi-mately 425,000 units was provided by the major federal housing-subsidy programs; by 1970, subsidized housing productionapproached 1 million units, mostly under HUD programs (table 1).

164 David Listokin

Even while assisted housing delivery rose dramatically, there was arealization that existing subsidies were deficient. As public housingincreasingly became the home of the troubled poor, the basic mecha-nism of federal interest assistance proved insufficient to ensureadequate maintenance. This situation was financially exacerbatedby the Brooke Amendment of 1969, which capped rents in publichousing to one-fourth of the tenant’s typically low income.24 On adifferent front, the BMIR loans of Sections 202, 221 d(3), 235, 236,and others also often proved inadequate to cope with rising fuel andother maintenance expenses.

There were efforts to address these deficiencies. The 1965 HousingAct provided for a deeper subsidy (Section 101 Rent Supplement)that encompassed operating expenses;25 under these programs, thesupplement would pay the difference between the fair market rentand one-fourth of the tenant’s income. Section 23 of this act alsoallowed for greater flexibility in the public housing program by per-mitting public housing authorities (PHAs) to lease privately ownedunits.

These changes heralded the housing approaches of the 1970s and1980s. They came too late, however, to save the day for the housingprograms of the 1960s. The inadequacies of these subsidies in anera of rapid inflation, coupled with loose administration by HUDthat encouraged chicanery, led to a mounting number of troubledprojects by the late 1960s and early 1970s. For instance, numerouscongressional hearings on the Section 235 program documentedmany cases of poorly located and physically deficient homes beingsold to inadequately prepared purchasers who soon defaulted.

Reappraisal and new directions in the 1970s and 1980s

The late 1960s and early 1970s saw mounting troubles in thefederal government’s housing involvement. The demolition ofPruitt-Igoe in 1972 pointed to the distressing state of the nation’spublic housing program. Delinquencies and foreclosures mountedin the Section 221(d)(3), 235, 236, and other subsidized projects.FHA mortgage activity, such as under the Section 104 Special RiskFund, was often abused by realtors and mortgage bankers; the term“ ‘FHAing a neighborhood’ was coined to describe the purposefuldestruction of a neighborhood by a malevolent force.”26 All this wasoccurring while outlays for federally subsidized housing exceeded $1billion in FY 1972 and increased at a rate approaching a half-billiondollars a year.27


In January 1973, the Nixon Administration imposed a moratoriumon subsidized production pending a reevaluation. Sweeping changewas soon introduced by the 1974 Housing Act.28 Title I of the actreplaced urban renewal and many categorical housing and commu-nity development programs with Community Development BlockGrants (CDBG). Communities would either be entitled to, or wouldcompete for, CDBG monies. Once secured, the CDBG monies couldbe used for a variety of housing and community improvementpurposes by the recipients.

The 1974 act also established a major new housing subsidy underSection 8. Section 8 went beyond the interest-cost write-down ofpublic housing (as originally structured) and Sections 202, 236, 515,and others, to encompass a more extensive operating cost subsidy.In this respect, Section 8 mirrored the deeper assistance of theearlier Rent Supplement program; Section 8 also reflected and ben-efitted from the activities and findings of the Experimental HousingAllowance Program (EHAP) initiated in 1971.29 Under Section 8,the federal government would pay the difference between an estab-lished fair market rent and 25 percent (later amended to 30percent) of the tenant’s income. Eligible households were thosewith “lower income,” defined as households with incomes under 80percent of the area’s median adjusted for family size. Section 8could be applied on new, rehabilitated, and existing privately ownedhousing.

In parallel with Section 8, Section 521 of the 1974 Housing Actadded a similar operating subsidy for FmHA-financed rentalhousing programs (i.e., Section 515). Under Section 521, lowerincome tenants in these FmHA projects would pay no more than 25percent of their income in rent.

The federal government also acted to foster the financing of Section8 and similar assisted-housing projects. For instance, in 1974, theTandem program was authorized by the Brooke-Cranston Act.Under the Tandem arrangement, the Government NationalMortgage Association would purchase below-market-rate mortgagesfrom private lenders at par — above what these loans were worthon the market — and would then resell these mortgages at theirtrue discounted value to Fannie Mae. The net effect of buying atpar and selling at a discount was a financing subsidy by the federalgovernment over and above the operating cost assistance providedin such programs as Section 8.

166 David Listokin

The new operating and financial assistance subsidies were exten-sively used, resulting in a rapid rise in the number of aided housingunits. In 1970, the tally stood at around 1 million (0.9 million HUD;0.1 million FmHA); by 1980, there were 3.6 million assisted units(table 1). As in years past, most of the subsidized production, about3.1 million, was under HUD auspices. The two major components ofHUD assistance were the Department’s earliest and most currentprograms — Public Housing and Section 8. As of 1980, there wereabout 1.2 million housing units under each of these programs. Inaddition to the HUD production, there were about 0.5 millionFmHA-assisted units, mostly under the Section 502 homeownershipprogram, though there was a dramatic upsurge in Section 515 pro-duction in conjunction with the Section 521 operating subsidy.

With the advent of the Reagan Administration in 1980, assisted-housing activity was sharply curtailed. There were also numerousprogrammatic changes, especially with respect to Section 8. In1981, Section 8 was targeted to the most disadvantaged.Henceforth, almost all Section 8 assistance could be used only byhouseholds of “very low” income — those earning under 50 percentof the areawide median, as opposed to those earning between 50and 80 percent of the median.

Given the nature of the Section 8 subsidy, targeting the most disad-vantaged made it quite expensive. Questions were also rising as towhether the federal government’s major housing subsidy, Section 8,should take the form of a commitment to developers building or sub-stantially rehabilitating housing, as opposed to offering assistancedirectly to tenants who would select their own units. In this regard,the 1982 President’s Commission on Housing declared that“Today. . . .the largest problem is not the quality of housing inwhich most people live but its affordability. . . .The purpose offederal housing programs should be to help people, not to buildprojects.”30 For these reasons, the Housing Act of 1983 repealedSection 8’s use for new construction and substantial rehabilitationas opposed to existing housing.31 Section 8 would then take theform of a certificate or voucher provided to an income-eligibletenant who would secure an eligible unit in the marketplace. (Thevoucher is similar to a certificate except that it offers greaterflexibility in the amount of rent that may be charged and in thepercentage of the tenant’s income that can be spent on housing.)

The remainder of the 1980s saw other efforts at housing assistance,but these did not change the basic imprint of federal housing


programs. The Rental Rehabilitation Grant (RRG) and HousingDevelopment Action Grants (HoDAG), both authorized in 1983,never developed into major production programs. (As of the 1990budget year, RRG is funded at approximately $100 million whileHoDAG is basically terminated.) The Housing Act of 1987 autho-rized Nehemiah Opportunity Grants to assist low-income homeown-ership; again, only minor funding was authorized. Sale of publichousing units to tenants was encouraged; this effort is still in thedemonstration stage. HUD also began to support emergency shelterand supportive housing demonstration projects as part of thepackage of assistance authorized by the 1987 Stewart B. McKinneyHomeless Assistance Act. This effort is a beginning response to agrowing national problem.

The brief record of recent housing programs would be incompletewithout mention of the tax credits authorized by the Tax ReformAct of 1986. These credits represent the latest manifestation ofshifting tax policy for low-income housing. Before the late 1960sand early 1970s, Internal Revenue Service (IRS) provisions did notdifferentiate between market and low-income rental housing; giventhe difficulties inherent in operating the latter, a neutral tax policyin effect discouraged investment in lower rental projects. In time,however, more favorable treatment for low-income housing wasaccorded in depreciation, recapture, and other IRS provisions. Forinstance, the 1981 Economic Recovery Act, which in general wasvery favorable to investment in real estate, provided for more accel-erated depreciation and a shorter depreciable life for low-incomehousing. The 1986 Tax Reform Act eliminated most provisionsencouraging real estate investment. It did, however, provide forspecial tax credits for investment in existing, rehabilitated, and newlow-income housing. These tax credits are encouraging some suchinvestments; however, they are not a substitute for the more deeplysubsidized production programs such as Section 8.

In short, at the dawn of the 1990s, federal housing programs arelargely a legacy of legislation from yesteryear. As of FY 1989, theassisted-housing production is approximately 5.1 million units, with4.3 million under HUD auspices and 0.8 million under FmHA.Section 8 dominates HUD’s share with 2.4 million units. This is fol-lowed by public housing with 1.4 million units, Section 236 (0.3million), Section 235 (0.1 million) and Rent Supplement (0.025million). FmHA’s inventory of an estimated 0.8 million assistedunits is comprised of the Sections 502 and 515 programs in approxi-mately equal numbers (table 1).

168 David Listokin

General approaches and assumptions

While it is difficult to generalize about a half-century of federalhousing programs, it is possible to identify a number of centralthemes and significant assumptions. This section discusses the fol-lowing elements: goals, role, focus, mechanisms, and coordination.

Goals

From the outset, the federal government’s housing programs havebeen imbued with multiple goals. There is a shelter component —to eliminate substandard units and to provide decent and affordablehousing. There is an economic objective — to stimulate employ-ment and production in the construction and building tradeindustries. The economic goal is an important one; it was the eco-nomic distress of the 1930s that pushed the federal government toovercome its historical reluctance to become involved in housing.Housing programs also have a social agenda, such as to overcomediscriminatory living patterns and to provide job-training opportu-nities for the disadvantaged. In addition, there are other objectives,from improving health conditions to bolstering the tax base ofcentral cities.

Not surprisingly, the presence of multiple goals has resulted insometimes contradictory program emphases and results. For manyyears, new construction was favored; while such a focus worked asan economic pump primer, it was not necessarily the best shelterstrategy (it is expensive and often resulted in dislocation).Similarly, the Davis-Bacon provision requiring that federallyassisted housing projects pay prevailing wages helps the construc-tion trades; however, it adds to housing-subsidy costs. There areother tensions in realizing multiple program goals. Over time,federal housing policy shifted from almost exclusive reliance on newconstruction to rehabilitation, the latter often accompanied by a job-training component. Such an employment overlay was good socialpolicy but often made the housing more expensive.

While other federal actions have multiple goals, the housingassistance effort may have more than most. There is also lessacceptance of a federal role in housing compared with such otherfederal functions as defense. This quiescent role is discussed next.


Role

Role, in this sense, encompasses the scope of the federal govern-ment’s intervention in the lower income housing sector vis-à-vis theprivate market. In the United States, the primary response is bythe private sector. This philosophy is embodied in the Declarationof National Housing Policy in the landmark 1949 Housing Act.After declaring the goal of a decent home and a suitable environ-ment for every American, the legislation states that “privateenterprise shall be encouraged to serve as large a part of the totalneed as it can.”32

The private-sector emphasis is manifest in a number of ways.Filtering is an implicit assumption of American housing policy.Consumption of private housing and the federal government’sencouragement of private housing investment (e.g., through offeringtax incentives for homeownership) will culminate in a filteringdown of private units affordable to lower income households. Theemphasis on the private sector is also evident in the relatively lowcoverage of federally assisted units, which house only a small shareof the lower income population — approximately 10 to 15 percent ofall households earning under 80 percent of the area median. Theconverse is that 85 to 90 percent of this population is in private,unassisted units. The Kaiser Commission in the late 1960s spoke ofthe possibility of the federal government becoming the “nation’shouser of last resort,”33 but this posture was the exception in thehalf-century record of federal housing policy.34

The emphasis on the private sector is also evident in the fact thateven when units are assisted by the federal government, the govern-ment eschews public ownership. Except for public housing, thefederally subsidized housing inventory is privately owned. (Evenpublic housing used private production and turned to the privatestock in the Turnkey and Section 23 programs, respectively.) Thepanoply of programs described earlier under Section 8, 202,221(d)(3), 236, and 515 represents private housing that for a periodof time, typically varying from 5 to 20 years, is contracted for lowerincome occupants. This is one basis for the current concern over thepreservation of such subsidized housing; with the expiration of thecontracts, the private owners of these buildings will be free to openthem to market occupancy.

170 David Listokin

Focus — which households should be assisted?

The question of precisely who should be assisted by federal housingintervention has dogged policy-makers for a half-century. At first,the answer in public housing was the working poor who had troubleaffording private housing. Families were eligible for assistance iftheir incomes did not “afford them to pay enough to cause privateenterprise in their locality or metropolitan area to build an ade-quate supply of decent, safe, and sanitary dwellings.”35 Over time,however, because of numerous policies — requiring a “20 percentgap” between public and private housing rentals, using the programto assist those displaced by urban renewal, evicting upwardlymobile households (i.e., those whose incomes rose over time toexceed the maximum earnings allowed), discouraging screening inadmissions policies (households would be admitted on a first-come,first-served basis), and skimping on basic unit amenities such ascloset doors — public housing became the repository of the poor.

With this change, there was a gap in support for those above public-housing incomes but nonetheless experiencing difficulty in securingmarket housing. To fill this gap, the Sections 202, 221(d)(3), 236,and sister programs were established in the 1960s and 1970s. Suchbroad-based assistance was acceptable as long as the federal gov-ernment was willing to maintain a significant housing expenditurefor a broad spectrum of need groups. When this commitment wanedin the 1980s, housing subsidies were then targeted to the lowestincome households — those at 50 percent of the area median andbelow. This policy, in turn, has evoked calls for broader assistanceto allow at least some support for those closer to the median,whether through housing block grants or other mechanisms. Thehistorical tension of determining which households should be aidedis again being felt.

The federal government has further differentiated in terms ofspecial-needs groups. On this count, it has historically favored theelderly. Section 202, one of the earlier programs established,assisted the aged; it still remains in use, while its contemporarysubsidies of Sections 221(d)(3), 236, and others, have long beendropped. Similarly, the FmHA Section 515 program, when firstadopted, was targeted to the elderly. The first operating subsidiesin public housing (in 1961) were directed to elderly tenants. And ingeneral, federal housing subsidies, such as Section 8 and publichousing, while not limited to elderly occupants, have been used dis-proportionately to assist this group.


Other groups have also received favored status. The handicapped,for instance, are also assisted by Section 202. More recently, specialprograms have been formulated for the homeless.

Focus — which housing should be assisted?

New versus existing units. There has been a distinct change in thetype of housing subsidized by the federal government — from build-ing new units to assisting households in existing units. This changein part reflects a shift from supply-side to demand-side subsidy, achange that will be discussed shortly, but there is more at workhere.

When subsidized production began with public housing, the empha-sis was on removing the squalor of tenements and slum areas bydemolishing the deteriorated older stock and replacing it with newconstruction. New construction was also deemed to have a powerfulpump-primer effect on the construction industry, an economicbenefit underlying much of the early support for federal housingintervention.

By the 1960s, the almost exclusive focus of federal subsidies on newconstruction was replaced with some turn to rehabilitation, mostlyof a substantial nature. Rehabilitation was viewed as being expedi-tious, cost-effective, and socially more desirable, as it would providea vehicle for job training and would be less disruptive to a neighbor-hood. While these advantages often proved elusive, substantialrehabilitation was included in the major housing programs ofSections 221(d)(3), 236, and in the early years of Section 8, albeitthe focus of all of these subsidies was on new construction.

Over the past decade, there has been a dramatic reversal from newconstruction and substantial renovation to subsidy of existinghousing. In FY 1979, about two-thirds of HUD’s new budgetauthority was directed towards new construction and substantialrehabilitation (table 2). This dropped to roughly half by FY 1981and has been at the 20 to 25 percent range since. The converse isan increase in the share of HUD’s new budget authority for existinghousing, rising from one-third to the three-quarters to four-fifthslevel.

172 David Listokin

Table 2. Percentage of HUD New Unit Reservations

FY

New Constructionand SubstantialRehabilitation

ExistingHousing Total

1979 62 38 1001980 63 37 1001981 46 54 1001982 56 44 1001983 25 75 1001984 23 77 1001985 19 81 1001986 19 81 1001987 26 74 1001988 23 77 1001989 19 81 100

Note: Figures derived from data sheets maintained by the National Association of Housingand Redevelopment Officials.

This change occurred for numerous reasons. It cost half as much tosubsidize existing housing compared with new construction or sub-stantial rehabilitation.36 Coupled with this saving was the percep-tion that after 40 years of demolishing deteriorated units and oftaking other actions to improve the quality of housing supply, thenation’s housing problem was more one of affordability than of pro-duction. Subsidy of the existing stock, therefore, would be favoredover the production orientation of new construction and substantialrehabilitation. This change underlies the shift from supply side todemand side, one of the changes in the subsidy mechanismsdiscussed next.

Rental versus ownership units. The 50 years of federally assisted,low-income housing programs have emphasized the provision ofrental as opposed to ownership units. This focus likely reflects thebelief that rental units are less costly to provide and thatlow-income families lack homeowner skills.

Over time, however, there have been periodic attempts to encouragelower income homeownership. In 1966, the Demonstration Citiesand Metropolitan Development Act established a 221(h) program forthis purpose. Two years later, the Section 235 subsidy attempted todo the same in a much more expansive program. The high rate ofSection 235 foreclosures, however, soured policy-makers on lowerincome homeownership. This was an unfortunate misreading of thehistorical record: Section 235 failed as much because of inadequate


oversight and fraud as because of the inherent problems of makingfirst-time homeownership a success for the disadvantaged.

With the passage of time, there has been renewed espousal for lowerincome homeownership. It is the objective of such recent efforts asthe Nehemiah Plan and the sale of public housing units to currenttenants.

Mechanism — how should housing be subsidized?

Subsidy type. The half-century of federal housing assistance hasconsisted overwhelmingly of categorical, rather than block grants;monies under the different programs could be applied only for spe-cific purposes and uses — a BMIR loan for building housing for theelderly or handicapped, an FmHA mortgage for providing ruralhousing, and so on. The only exception was CDBG assistance in theform of a block grant. Yet, while CDBG can be and is used forhousing, it is more of a general prop for a wide range of communitydevelopment activities than a specific housing subsidy. Almost allof the housing programs from HUD and FmHA have been and con-tinue to be decidedly categorical in nature.

Subsidy scope. Fifty years of federal housing programs have seenan evolving shift from assisting only financing to more encompass-ing operating-cost subsidies (table 3). After the short-lived effort ofthe Work Projects Administration to provide housing directly, thefederal government began to offer a range of financing assistance tohousing sponsors. At first, this took the form of assuming thefinancing expenditure of PHAs through an annual contribution con-tract. Next, the federal government offered direct, lower cost loansin such programs as Sections 202 and 502. When direct federalloans “showed” expensive in the budget, there was an alternatestrategy of using privately granted mortgages that were subsidizedand purchased on the secondary market; this format characterizedsuch programs as Sections 235 and 236. (Section 502 has remaineda direct loan program.)

Despite these various forms of mortgage assistance, the rising costof operating housing in the 1960s and 1970s, coupled with growingimpoverishment of those aided (especially in public housing), led tofinancial distress. The response was to provide for more encom-passing operating subsidies by modifying the public housingprogram and by adopting such programs as Rent Supplement. The

Tab

le 3

. Su

bsi

dy

Str

ate

gie

s o

f M

ajo

r H

UD

an

d F

mH

A H

ou

sin

g A

ssis

tan

ce P

rog

ram

s174 David Listokin

Pu

bli

c H

ou

sin

gS

ecti

on

8

New

E

xist

ing

Sec

tio

n 2

02S

ecti

on

235

Con

stru

ctio

nH

ousi

ng

Su

bsi

dy

F

mH

A

(fo

r el

der

ly &

S

ecti

on

221

Fm

HA

Ren

t(H

om

eow

ner

-S

ec. 2

36an

dC

erti

fica

tes/

stra

teg

yP

WA

Con

ven

tion

al S

ecti

on 2

3

502/

521

ha

nd

ica

pp

ed)

SU

PP

ship

)(R

enta

l)R

ehab

ilit

atio

nV

ouch

erm

ech

an

ism

s (1

934-

1937

)(1

937)

(196

5)(1

949)

(195

9)(1

961)

(d)(

3)B

MIR

51

5/52

1(1

962)

(196

5)(1

968)

(196

8)(1

974)

(197

4)

Su

pply

sid

eD

irec

t pu

blic

prov

isio

nX

Fin

anci

ng

assi

stan

ce

Dir

ect

loan

Inte

rest

redu

ctio

n

Sec

onda

rym

arke

tta

keou

t

Ope

rati

ng

cost

su

bsid

y

Dem

and

side

Lea

sin

g by

gove

rnm

ent

subl

easi

ng

to t

enan

t

X

X

XX

X

X

XX

X

X

X X

X XX X

Ten

ant

ren

tpa

ymen

tX

X

Sou

rce:

Ada

pted

fro

m G

race

Mil

gram

, “U

rban

Hou

sin

g A

ssis

tan

ce P

rogr

ams

in t

he

Un

ited

Sta

tes,

” C

RS

Rep

ort,

Mar

ch 2

, 198

9.


shift to an operating cost approach was exemplified by the adoptionof the Section 8 program, which became the major subsidy of themodern era.

Subsidy uehicle. Housing subsidies are often classified as eithersupply or demand side. In the former, assistance is directed to theproducers of housing, such as public entities (i.e., PHAs), privatedevelopers, and nonprofit groups. In the latter, assistance is givendirectly to the consumer to secure physically sound and affordableshelter.

When Congress first considered the concept of public housing in the1930s, there were debates about which subsidy strategy would bepreferable — supply or demand. The answer in the public housingprogram, as it was formulated in the 1930s, was a supply-sideapproach: PHAs directly built the needed units. This supply-sideformat remained in place for most of the next 50 years (table 3).Thus, the BMIR loans of Sections 202, 221(d)(3), and 236 wereoffered to sponsors who would construct the needed units. Whilethere were examples of demand-side support in such 1960s pro-grams as Rent Supplement, Section 23, and in the EHAP experi-ment, these were the exceptions. When Section 8 was first imple-mented in the 1970s, it encompassed supply-side assistance to thehousing developer constructing or substantially rehabilitatingrental housing.

In the 1980s, however, with Section 8 now being applied in the formof certificates and vouchers offered to tenants in existing housing,the program changed to a demand-side subsidy. Some federal assis-tance was still of a supply-side nature, such as Section 515/521rental production in rural areas, but such programs paled in scalecompared to Section 8. Federal housing assistance is thus currentlydominated by a demand-side orientation.

Coordination

Thus far, this discussion has focused on the federal housing subsi-dies themselves. A recurring characteristic of American housingpolicy is a lack of coordination between federal housing programsand other influences, provisions, and programs that have a signifi-cant impact on housing. This characteristic is evident in a numberof ways. The housing programs have concentrated on delivering thephysical unit itself; relatively little attention was paid to supportivesocial services that the family living in the subsidized unit may

176 David Listokin

need, or to the overall neighborhood’s impact on the subsidized unit.The Model Cities program attempted to address the package ofinfluences affecting the lower income household — the quality of thehome, the job-training skills of the occupant, the ambiance of theneighborhood, and so on. Model Cities was unique in this compre-hensive approach; by contrast, for a half-century, federal housingprograms have focused more narrowly on delivery of the physicalhousing unit.

There is also little coordination between the federal housing pro-grams and the housing component of the nation’s welfare system.As summarized in a recent study by Newman and Schnare:

In reality, then, there are two streams of government financing oflow-income housing — a housing stream and a welfare stream.Government involvement is shared by two federal agencies, HUD andthe U.S. Department of Health and Human Services, and a multiplic-ity of state and local jurisdictions. But their approaches are uncoordi-nated and potentially overlapping. Furthermore, there are stark dis-parities in the amount of shelter assistance that the systems provide:similar people are not treated similarly. This two-pronged approach. . .raises serious questions regarding the efficiency, equity, andoverall effectiveness of the existing system.37

In sum, considering a half-century of federal housing programsshows both constants and changes with respect to the programs’goals, roles, mechanisms, and coordination. Public assistance ischarged with multiple goals that are often difficult to satisfy simul-taneously. Government intervention is accepted; however, housingdelivery is to be primarily through the private sector. The focus ofpublic assistance — as far as the degree of disadvantage of house-holds to be aided — has fluctuated over time and remains a painfulpolicy choice. The focus of the program in terms of the housing to beassisted has dramatically shifted from new construction to theexisting stock. There remains, however, a historical emphasis onrental as opposed to ownership tenure. The mechanism of thehousing subsidy has been consistently categorical in type. Therehave been changes, however, in the scope of the subsidy to encom-pass operating and financing costs and in the subsidy vehicle, goingfrom a supply- to a demand-side approach. Finally, the housing pro-grams have often been poorly coordinated with other forces affectinghousing, such as welfare support; similarly, there is a narrow focuson the housing unit itself as opposed to housing as it is affected bythe social needs of its occupants and surrounding neighborhoodconditions.


Assessment and implications for future federalintervention

After half a century of federal housing intervention, what has beenaccomplished? Recent congressional hearings on the operation ofsome HUD programs, such as moderate rehabilitation, leave theimpression that much is in disarray. No doubt there have beenserious management gaffes, as has been the case historically withsuch predecessor subsidies as the Section 608 program in the earlypostwar period and Sections 235 and 236 in the late 1960s and early1970s. Yet these recurring problems, serious as they have been,should not be allowed to distort the achievements over time.

The 50 years of federally assisted housing activity represent acumulative federal investment of over $110 billion (1986 dollars).38This investment has produced a stock of about 5 million units.About 1.3 million units are under the public housing program.Public housing has its Pruit-Igoes; however, there have been signifi-cant recent efforts to foster modernization and to improve manage-ment. Most units in this program will remain a public shelterrecourse in perpetuity.

The federal government has augmented the private market byassisting households for which private producers typically haveproblems providing, such as the poor. The two major federal pro-grams of public housing and Section 8 typically house those at thelower end of the economic spectrum. According to a 1986 survey,public housing tenants had incomes just over 50 percent of thepoverty level. Section 8 residents, on average, had earnings justslightly higher, at about 60 percent of the poverty level.39

The federal government has augmented the private market in otherways. It has provided shelter for populations with special needs,such as the disabled and the homeless, who are notoriously poorlyserved in the marketplace. It has built housing to achieve socialobjectives that the marketplace may ignore, such as racial integra-tion; albeit for much of their history, federal housing programs havefollowed (and in early decades fostered) discriminatory patterns.

The private sector also affords low-income housing opportunities.The overwhelming share of low-income families live in unsubsidizedhousing. This is the case for 85 to 90 percent of all low-incomehouseholds (earning under 80 percent of median); for some 80percent of all low-income, renter households (earning under 80percent of median); and even for 70 to 75 percent of very low-incomerenters (earning under 50 percent of median).40 The private sector

178 David Listokin

can provide low-income housing to the extent that filtering isworking, whereby market-priced construction ultimately adds to thelower cost supply by inducing a chain of moves across the housingsystems.41 Filtering, in turn, is abetted by many governmentactions fostering investment in housing, such as tax policy, nurtur-ing of the savings and loan industry, secondary mortgage marketpurchases, and others.

The private sector has also offered low-income housing opportuni-ties through its participation with the public and other sectors. Asnoted, most of the federal government’s assisted-housing productionencompasses private development and ownership. The privatesector has also been involved in low-income housing in partnershipwith a constellation of others — foundations, neighborhood groups,credit agencies, and state and local governments. Over time, theseentities have built new housing, rehabilitated units, and in otherways fostered lower-income housing supply.42

There are, however, gaps and strains in both the public and privatelow-income delivery systems. The annual increment of federallysubsidized production in the last few years is down significantlyfrom levels of a decade ago. (See table 4 for details on the HUD sub-sidized volume.) The ability to use flexibly whatever monies aremade available each year is limited by sometimes narrow federalprogrammatic strictures. The inventory of subsidized units — thelegacy of the 50 years of programs described earlier — is threatenedby prepayment of mortgages, expiration of Section 8 contracts, lossof deteriorated public housing units, and other leakage.43

There are other limitations. The private sector delivery system hasgaps. For instance, HUD estimates that approximately four millionhouseholds in the private sector have a “high-priority need.” Thesehouseholds are defined as families in unaided rental units payingmore than 50 percent of their income for shelter or living in severelyinadequate units (lacking plumbing, heating, or electricity or expe-riencing multiple lesser defects).44 There is also stress on the futureability of the private sector to deliver affordable shelter. A recentstudy by the Neighborhood Reinvestment Corporation concludedthat there will be a growing gap ahead between the demand for low-income units and its supply in the private sector. This gap willresult from changes in demographics (an increase in the share ofthe population that is poor), changes in housing (a loss of low-rentunits due to such forces as abandonment and conversion), andchanges in tax provisions (the 1986 Tax Reform Act lessened the taxbenefits of investments in rental housing).45


Table 4. Cumulative Subsidized Housing Units: Major HUD Programs

Section 236

TotalRental Housing

Assistance

YearPublic Section 235 Rent

Housing Homeownership Supplement Grossa Netb Section 8 Grossa Netb

1941-56 343,9071957 365,8961958 374,1721959 401,4671960 425,4811961 465,4811962 482,7141963 511,0471964 539,8411965 577,3471966 608,5541967 639,6311968 687,3361969 767,7231970 830,4541971 892,6511972 989,4191973 1,047,0001974 1,109,0001975 1,151,0001976 1,167,000

TQ 1,172,0001977 1,174,0001978 1,173,0001979 1,178,0001980 1,192,0001981 1,204,0001982 1,224,0001983 1,250,0001984 1,331,9081985 1,355,1521986 1,379,6791987 1,390,0981988 1,397,9071989 1,400,500

124,400 165,400 191,261 377,285 2,518,800

5,45465,654

204,832344,363411,670418,905408,915339,325380,784292,814261,866235,187219,482240,539241,927229,772209,730200,471182,260159,379147,886136,900

9302,731

12,29930,80457,78692,070

118,184147,847165,326177,645174,339179,908171,598178,891164,992157,779153,35576,91955,60645,61134,37623,48723,47623,500

5,43732,32298,699

191,261293,831400,360439,872447,126543,360544,515541,460538,285537,206536,531533,469530,735527,978529,121528,174528,174527,000

130,471273,266453,135690,914898,441

377,285 1,153,311376,206 1,318,927361,931 1,526,683356,733 1,749,904352,620 1,909,812331,698 2,010,306337,121 2,143,339338,785 2,239,503325,599 2,332,462324,000 2,418,300

343,907 3,107,078365,896374,172401,467425,481465,481482,714511,047539,841577,347608,554640,561690,067785,476932,349

1,187,5911,524,5511,768,1151,969,5832,125,6012,254,3132,254,3132,643,2172,841,8933,031,9793,268,070 3,107,0703,458,451 3,297,4513,682,496 3,507,8963,840,064 3,663,3284,037,791 3,859,6764,139,518 3,943,2384,268,783 4,076,7834,340,641 4,151,2524,429,905 4,227,3304,506,200 4,315,000

Source: HUD, Office of the Budget.

Note: Subtotals may not add to indicated totals.aIndicates the number of subsidies to units (i.e., a single unit receiving dual subsidies, such as Section 236and Section 8, would count as two units).

bIncludes the number of units subsidized (i.e., a single unit receiving dual subsidies would still count asone unit).

180 David Listokin

All these elements comprise the preservation crisis. It is suggestedthat one step to addressing at least some aspects of this problem isto reconsider some of the federal housing policy approachesdescribed earlier.

Goals and role

A half-century after the public housing program was initiated, it istime for the federal government to be more comfortable with thegoal of improving lower income housing opportunities. It is recog-nized that the political and budgetary climate is not ripe for thefederal government to become the “houser of last resort,” as wassuggested by the Kaiser Commission. The primary responsibilityfor delivering lower cost housing in this country will remain withthe private market acting alone and in conjunction with neighbor-hood groups, foundations, state and local government, and others;the federal government will continue to play just a supporting role.It is essential, however, that the federal government not be rele-gated to a cameo appearance. Very bluntly, additional resourcesmust be committed to assist those who are at the lowest end of theincome spectrum and who are experiencing housing distress, suchas the very low-income renters identified by HUD as having “high-priority need.” Increased federally subsidized housing investmentmay require reallocation from such sacred cows as the extensive taxbenefits accorded to homeownership.

The federal government should consider other roles besides that ofproviding housing subsidies. It can play a leadership role by issuingan annual housing “state of the nation,” conducting technicalanalyses (i.e., researching optimal rehabilitation materials andretrofitting techniques), supporting demonstration studies, and pub-licizing innovative local initiatives and legislation (i.e., receivershipstatutes that allow nonprofit groups to take control of deterioratedproperties before they are abandoned). The federal government canalso act as a facilitator. Recent experience shows that neighborhoodand nonprofit groups can contribute much to housing, but they needincubation support in the form of “seed money” and the like.Additionally, the federal government can use its leverage as a regu-lator of financial institutions to foster enhanced credit availabilityfor lower cost housing. Such a strategy is embodied in the afford-able housing programs mandated by the Financial InstitutionsReform, Recovery, and Enforcement Act of 1989. Finally, federalenforcement of fair housing laws is essential. Since an enduring


aspect of the housing problem is discrimination, HUD must make aserious commitment to implement the Fair Housing Amendments of1988 that deal with enforcement.

In addition to a greater federal housing resource, leadership, andregulatory commitment, changes in how the housing subsidies areprovided are in order.

Subsidy mechanisms

The housing experience of the past decade by nonprofits, founda-tions, and developers working across the country is that there is nosingle formula for producing low-income housing. Multipleapproaches are used. Land costs are written down, first and secondmortgages are insured, credit enhancement is given, technicalassistance is provided, and so on.

This diversity is not reflected in the current federal housing subsi-dies that are categorical — limited to one specific application. It issuggested that some general-purpose block assistance be madeavailable for housing-delivery purposes for lower income families.As with all block grants, federal oversight will be needed to ensurethat local usage indeed serves the stipulated program objective,especially in terms of beneficiaries. Notwithstanding the need formonitoring, a block grant offers significant advantages because itsuse can be custom tailored to different local conditions. Thus,CDBG has been flexibly applied over the last decade to manydiverse housing and community development applications.

Attention must also be given to the supply- versus demand-sideformat of the housing subsidies. Current programs are dominatedby a demand-side approach. This again ignores the diversity oflocal housing conditions. In metropolitan areas with adequatevacancies in the lower income housing market, demand-side subsi-dies are generally appropriate. In contrast, in locations with aminuscule vacancy rate, especially of appropriate units (largeenough for families, suitably located near jobs, available to minorityfamilies, etc.), supply-side subsidies for housing production shouldbe made available.

182 David Listokin

Program focus

Current federal housing programs are targeted to the most needy.Since this group is the most difficult to serve, it makes sense for thegovernment to focus its assistance here. Yet, some flexibility isrequired. A portion of federal support, perhaps in the proposedblock grant discussed earlier, should be used for the somewhat lessadvantaged (i.e., those whose income is 50 to 80 percent of themedian, as opposed to only those under 50 percent of the median).

Greater flexibility is also needed concerning housing to be assisted— existing units or new construction/substantial rehabilitation.There is no turning back the clock to the time when the latter domi-nated. Yet, the current near-exclusive focus on existing housingagain ignores differences in local housing markets. New construc-tion may be a more appropriate housing delivery vehicle in areas ofvery low vacancy or where available units are not well located (i.e.,far from jobs or located only in areas of high minority concentration)or are in other ways unsuitable (i.e., too few bedrooms for largerfamilies or physically inadequate).

Coordination

The federal housing programs will always be fighting a failing rear-guard action if they are not better coordinated with other majorforces, such as welfare payments, that affect shelter and the poor.For instance, the shelter payments of the AFDC program are at halfthe fair market levels46 as determined by HUD; such an arrange-ment institutionalizes housing problems. It is also important forthe housing programs to range beyond the housing unit to support-ive neighborhood and social services. An example is the Baltimorepublic housing authority, which provides health clinics, high schoolequivalency training, job preparation and placement, and a widearray of other social services.47 On a broader scale, numeroushousing and social efforts were integrated in HUD’s nationwidedemonstration, Project Self-Sufficiency.

Bringing together housing programs, welfare support, communitydevelopment activities, and social services is an essential strategy.It is chastening that the historical record is characterized by any-thing but long-time coordination on these different fronts.


Author

David Listokin is a professor at the Rutgers University Center for Urban PolicyResearch.

Endnotes

1. Unless indicated otherwise in the text, “low-income” and similar terms in thispaper are used in a general as opposed to a specific programmatic definition(i.e., households earning under 80 percent of the areawide median).

2. Public Res. 52-22. For a historical chronology, see U.S. Congress, House ofRepresentatives, Committee on Banking, Currency and Housing,Subcommittee on Housing and Community Development, Evolution of the Roleof the Federal Government in Housing and Community Development: AChronology of Legislative and Selected Executive Actions, 1892-1974(Washington, DC: U.S. Government Printing Office, 1975).

3. See Barry G. Jacobs et al., Guide to Federal Housing Programs (Washington,DC: Bureau of National Affairs, 1982).

4. Barbara L. Miles, “Housing Policy: Homeownership Affordability,” CRS IssueBrief (March 9, 1989): 1.

5. National Association of Home Builders (NAHB), Low- and Moderate-IncomeHousing: Progress, Problems, and Prospects (Washington, DC: NAHB, 1986):55.

6. Sandra Newman and Ann Schnare, “Integrating Housing and WelfareAssistance” (MIT Housing Policy Project #12, Cambridge, MA, March 1988).

7. This section is based on the following sources: Jacobs, A Guide to FederalHousing Programs; Grace Milgram, “Urban Housing Assistance Programs inthe United States, CRS Report (March 2, 1989); George Sternlieb and DavidListokin, “A Review of National Housing Policy,” in Housing America’s Poor,Peter Salins, ed. (Chapel Hill, NC: University of North Carolina Press, 1987),14; Henry J. Aaron, Shelter and Subsidies (Washington, DC: The BrookingsInstitution, 1972); R. Allen Hays, The Federal Government and UrbanHousing (Albany, NY: SUNY Press, 1985); David C. Schwartz et al., A NewHousing Policy for America (Philadelphia, PA: Temple University Press, 1988);National Association of Housing and Redevelopment Officials (NAHRO),Housing and Community Development: A 50-Year Perspective (Washington,DC: NAHRO, 1986); and Milton Semer et al., “A Review of Federal SubsidizedHousing Programs,” in U.S. Department of Housing and Urban Development,Housing in the Seventies–Working Papers vol. 1 (Washington, DC: U.S.Government Printing Office, 1974), 82.

8. National Commission on Urban Problems, Building the American City (NewYork: Praeger, 1971), 108.

9. Ibid.

10. Public Law 72-302. See also Jacobs, 4.

184 David Listokin

11. Public Law 73-67.

12. Jacobs, 7.

13. U.S. v. Certain Land in the City of Louisville, Jefferson County, Kentucky, 297U.S. 726 (1935). See Housing in the Seventies (Washington, DC: U.S.Government Printing Office, 1973), 1-9.


15. See HUD, Housing in the Seventies, 1-12, for a discussion of the background tothe legislation.


17. Declaration of National Housing Policy, 2 of the Housing Act of 1949.

18. National Commission on Urban Problems, 152.


20. Public Law 372.

21. Public Law 70.

22. Section 4(b) of Public Law 87-723 (September 28, 1962).




26. NAHB, 62.

27. Albert A. Walsh, “Housing Assistance for Lower-Income Families: Evolution,”in Housing and Community Development — A 50-Year Perspective(Washington, DC: National Association of Housing and RedevelopmentOfficials (NAHRO), 1986), 42.


29. See Raymond J. Struyk et al., Future U.S. Housing Policy (Washington, DC:Urban Institute Press), 25.

30. The President’s Commission on Housing, Final Report (Washington, DC:Government Printing Office, 1982), xxii.



33. See Report of the President’s Committee on Urban Housing (Washington, DC:U.S. Government Printing Office, 1969). Also see Langley C. Keyes andDenise Di Pasquale, “Housing Policy For the 1990s,” MIT Housing PolicyProject, Cambridge, MA, August 1988.


34. See Report of the President’s Committee on Housing (Washington, DC: U.S.Government Printing Office, 1983) for the changed perception concerning theproper governmental role since the Kaiser Commission.

35. Semer et al., 102.

36. See Milgram, “Urban Housing Assistance Programs”; idem, “Housing Policy:Low- and Moderate-Income Assistance,” CRS Issue Brief (September 15, 1988);idem, “Housing Programs: Issues in Low- and Moderate-Income HousingAssistance,” CRS Issue Brief (October 14, 1987).

37. Newman and Schnare, 3.

38. Salins, Housing America’s Poor, 1.

39. See Council on Large Public Housing Authorities (CLPHA), Public HousingToday (Washington, DC: CLPHA, 1986), 11.

40. Figures derived from tabulations from the 1987 American Housing Survey pre-pared by the HUD Housing and Demographic Analysis Division, Office ofPolicy Development and Research. See also Morton J. Schussheim, “HousingProblems and Policies,” CRS Issue Brief (February 16, 1990): 9.

41. NAHB, 18.

42. Michael A. Stegman and David Holden, Non-Federal Housing Programs(Washington, DC: ULI–the Urban Land Institute, 1987).

43. National Corporation for Housing Partnerships (NCHP), Preventing theDisappearance of Low-Income Housing — The Report of the National Low-Income Housing Preservation Commission (Washington, DC: NCHP), 1988.

44. Telephone conversation with HUD Office of Housing and DemographicAnalysis, March 1990.

45. Philip L. Clay, At Risk of Loss: The Endangered Future of Low-Income RentalHousing Resources (Washington, DC: Neighborhood Development Corporation,1978).

46. Newman and Schnare, i.

47. Margery Turner and Veronica Reed, Housing America — Learning from thePast, Planning for the Future (Washington, DC: Urban Institute, 1990), 24.

federal housing policy and preservation: historical evolution ......some responsibility for...

Documents