Overview of Federal Housing Assistance Programs and Policy

Overview of Federal Housing Assistance
Programs and Policy
July 22, 2008
Maggie McCarty, Libby Perl, and Bruce Foote
Analysts in Housing
Domestic Social Policy Division
Meredith Peterson
Information Specialist
Knowledge Research Group

Overview of Federal Housing Assistance
Programs and Policy
Summary
The federal government has been involved in providing housing assistance to
lower-income households since the 1930s. In the beginning, the federal government
was involved in supporting the mortgage market (through establishment of the
Federal Housing Administration (FHA) and the government-sponsored enterprises)
and in promoting construction of low-rent public housing for lower-income families
through local public housing authorities (PHAs). Over time, the role of the federal
government has shifted away from providing construction-based subsidies to
providing rental subsidies; private developers and property owners now play a larger
role; and more federal funding has been provided to states and localities.
Today’s federal housing assistance programs fall into three main categories:
rental housing assistance, assistance to state and local governments, and assistance
for homeowners. Most of these programs are administered by the Department of
Housing and Urban Development (HUD). Current housing assistance programs
include: Section 8 vouchers and project-based rental assistance, public housing,
housing for the elderly (Section 202), housing for the disabled (Section 811), rural
rental assistance (Section 515 and 521), Community Development Block Grants
(CDBG), HOME Investment Partnerships Block Grants, Low-Income Housing Tax
Credits (LIHTC), homeless assistance programs, FHA and Veterans’ Administration
mortgage insurance, and the mortgage interest deduction in the tax code.
Most of the federal housing assistance programs are aimed at making housing
affordable for low-income families. Housing affordability — housing that costs no
more than 30% of family income — is considered the largest housing problem today.
Rental assistance programs, which are the largest source of direct housing assistance
for low-income families, all allow families to pay affordable, income-based rents;
however, different forms of assistance target different types of households, including
the elderly, persons with disabilities, and families with children. Several trends in
federal housing policy have emerged in recent decades. As the focus of federal
housing assistance has shifted away from construction-based subsidies to rental
assistance, block grants, and LIHTC, state and local governments have had greater
access to federal resources to fund local housing and community development
priorities. This shift in federal funding has also led affordable housing developers
to pursue mixed financing: the use of multiple streams of federal funding, state, and
local funding, or private financing. Lagging homeownership rates among low-
income and minority households have prompted the past several Presidents to
promote homeownership-based housing policies.
This report provides an overview of the history and evolution of federal housing
assistance programs and policy, information about the main programs, and a
discussion of recent issues and trends. It is an expanded version of the Federal
Housing Assistance section originally prepared for the 2008 edition of the Committee
on Ways and Means publication, “Background Material and Data on the Programs
within the Jurisdiction of the Committee on Ways and Means” (informally known as
the Green Book). This report will be updated periodically.

Key CRS Housing Policy Experts
Telephone and
Area of ExpertiseNameE-Mail
Assisted rental housing, including SectionMaggie7-2163
8, public and assisted housing, HOMEMcCartymmccarty@crs.loc.gov
Community and economic development,Eugene Boyd7-8689
including Community Development Blockand Oscar R.eboyd@crs.loc.gov
Grants, Brownfields, empowerment zonesGonzales7-0764
ogonzales@c rs.loc.gov
Consumer law and mortgage lending,David H.7-9118
housing law, including fair housing,Carpenterdcarpenter@crs.loc.gov
consumer issues of bankruptcy
Emergency management policy, includingFrancis X.7-9533
post-disaster FEMA temporary housingMcCarthyfmccarthy@crs.loc.gov
issues.
Fannie Mae, Freddie Mac, and SBAN. Eric Weiss7-6209
disaster loanseweiss@crs.loc.gov
Homeownership, including FHA,Bruce E. Foote7-7805
predatory lending, rural housing, RESPA bfoote@crs.loc.gov
Housing finance issues, includingDarryl E. Getter7-2834
mortgage underwriting and FHA lendingdgetter@crs.loc.gov
criteria
Housing for special populations, includingLibby Perl7-7806
the elderly, disabled, homeless, HOPWAeperl@crs.loc.gov
Housing tax policy, including the Low-Mark Patrick
Income Housing Tax Credit, mortgageKeightley7-1049
revenue bonds, and other incentives for
rental housing and owner-occupiedmkeightley@crs.loc.gov
housing
Non-traditional mortgages, includingEdward Vincent
lending oversight by the OCC, OTS,Murphy7-4972
FDIC, and Federal Reserve, and Federaltmurphy@crs.loc.gov

Home Loan Banks

Contents
In troduction ......................................................1
History and Evolution of Federal Housing Assistance Policy................1
The Beginning of Federal Housing Assistance: FHA and Public Housing..1
Government Subsidization of Private Development...................3
Rethinking the Strategy: From Construction Subsidies to Rent Subsidies..6
Increasing Role of State and Local Governments.....................7
Reforming Rental Assistance.....................................8
Today’s Housing Assistance Programs.................................9
Rental Housing Assistance......................................9
Section 8 Vouchers........................................9
Public Housing...........................................10
Project-Based Section 8 Rental Assistance.....................12
Section 202 Supportive Housing for the Elderly Program and the
Section 811 Housing for Persons with Disabilities Program....12
Other Rent-Restricted Units.................................14
Rural Rental Housing (Section 515) and Rental Assistance
(Section 521)........................................14
Funding for States and Localities.................................15
Low Income Housing Tax Credit.............................15
Mortgage Revenue Bonds..................................16
Community Development Block Grants.......................17
HOME Block Grants......................................18
Homeless Assistance Grants................................19
Housing Opportunities for Persons With AIDS..................20
NAHAS DA .............................................20
Homeownership Assistance.....................................21
Federal Housing Administration.............................21
Department of Veterans Affairs Loan Guarantees................22
Federal Home Loan Banks..................................23
Department of Agriculture Rural Housing Loans................23
Section 235.............................................24
Mortgage Interest Deduction................................24
Issues and Trends in Housing Assistance Programs......................25
Incidence of Housing Problems..................................25
Characteristics of Families Receiving Assistance....................26
The Federal Government’s Role in Housing........................29
Shift to Tenant-Based Assistance................................32
Promoting Homeownership.....................................34
Data ...........................................................35

List of Tables
Table 1. Appropriations for Section 8, FY1999-FY2008..................11
Table 2. Appropriations for Public Housing, FY1999-FY2008.............12
Table 3. Appropriations for Section 202 and Section 811, FY1999-FY2008..14
Table 4. Appropriations for the USDA Section 515 and
Section 521 Programs, FY1999 - FY2008..........................15
Table 5. Appropriations for the Community Development Fund
and CDBG, FY1999-FY2008...................................18
Table 6. Appropriations for HOME, FY1999-FY2007....................19
Table 7. Appropriations for the Homeless Assistance Grants and HOPWA,
FY1999-FY2008 .............................................20
Table 8. Appropriations for NAHASDA, FY1999 - FY2008...............21
Table 9. FHA Share of Mortgage Market, FY1998 - FY2007...............22
Table 10. VA Share of Mortgage Market, FY1998 - FY2007..............23
Table 11. Characteristics of Households Served in Selected
Housing Assistance Programs ...................................27
Table 12. Outlays, Selected Housing Programs, FY1980-FY2007..........36
Table 13. Units Eligible for Payment, Selected Housing Programs,
FY1980-FY2007 .............................................38

Overview of Federal Housing Assistance
Programs and Policy
Introduction
The federal government has played a role in subsidizing housing construction
and providing homeownership and rental assistance for lower-income households
since the 1930s. Today, Congress funds a number of programs to help meet the
housing needs of poor and vulnerable populations. The programs are primarily
administered by the Department of Housing and Urban Development (HUD), with
some assistance provided to rural communities through the Department of
Agriculture. The modern housing assistance programs include both relatively flexible
grants to state and local governments to serve homeless people, build affordable
housing, provide assistance to first-time homebuyers, and promote community
development and more structured, direct assistance programs that provide low-cost
apartments and rental vouchers to poor families, administered through local public,
quasi-public, and private intermediaries. The federal government also makes tax
credits available to states to distribute to developers of low-cost housing and provides
insurance to lenders that make mortgages to eligible homebuyers. The federal
government’s largest housing program, however, is arguably the mortgage interest
deduction, which is not targeted to lower-income households, but is available to all
homeowners who pay mortgage interest and itemize their deductions.
This report begins with an overview of the history and evolution of federal
housing assistance policy, followed by a description of today’s major federal housing
assistance programs, and concludes with a discussion of issues and trends in federal
housing assistance policy. This report, which will be updated periodically, does not
track current legislation; interested readers should see CRS Report RL33879,
Housing Issues in the 110^th Congress, for information on current legislation.
History and Evolution of
Federal Housing Assistance Policy
The Beginning of Federal Housing Assistance:
FHA and Public Housing
The federal government’s first major housing policy was formulated in response
to trouble in the mortgage market resulting from the Great Depression. Until the
early 1930s, most mortgages were written for terms of three to five years and
required borrowers to make payments only on an annual basis. At the end of the
three- or five-year terms, the remaining loan balance had to be repaid or the mortgage

had to be renegotiated. Another feature of the mortgage market was that lenders
would only lend 40% to 50% of the value of the property, so borrowers had to have
the cash to complete the transaction or find someone willing to finance the balance
(or part of the balance) in a second mortgage. During the Great Depression, however,
lenders were unable or unwilling to refinance many of the loans that became due.
When borrowers could not pay the loan balances, lenders foreclosed on the loans and
took possession of the properties.
It was against this background that the Housing Act of 1934 (P.L. 73-479) was
enacted. The broad objectives of the act were to (1) encourage lenders to invest in
housing construction, and (2) to stimulate employment in the building industry. The
act created the Federal Housing Administration (FHA). FHA insured lenders against
losses on home modernization and home improvement loans, created the Mutual
Mortgage Insurance Fund to fund the operation of the newly-created mortgage
insurance programs, and established national mortgage associations to buy and sell
mortgages.
The creation of FHA also institutionalized a revolutionary idea: 20-year
mortgages on which a loan would be completely repaid at the end of its term. If
borrowers defaulted, FHA insured that the lender would be fully repaid. Eventually,
lenders began to make long-term mortgages without FHA insurance as long as
borrowers made significant downpayments. Over time, 25- and 30-year mortgages
have become standard mortgage products.
As in the case of the mortgage finance market, the federal government initially
became involved in the provision of rental housing assistance in response to the
Great Depression. In the early 1930s, a housing division was added to President
Franklin D. Roosevelt’s Works Progress Administration (WPA) as a part of the effort
to create jobs and spur economic growth.¹ The Housing Division acquired land and
built multifamily housing projects for occupancy by lower-income families across the
country. However, the Housing Division’s activities proved controversial with local
government officials who thought that they were not consulted in the process.
Against this backdrop, the U.S. Housing Act of 1937 (P.L. 75-412) was enacted.
It replaced the WPA’s Housing Division and its projects by establishing a new,
federal United States Housing Agency (a precursor agency to today’s Department of
Housing and Urban Development) and a new Low-Rent Public Housing program.
The new program required partnerships between the federal government, states, and
localities. States that wished to receive assistance in building low-rent public
housing were required to pass enabling legislation creating new, quasi-governmental,
local public housing authorities (PHAs). These PHAs could then apply to the federal
government for funding to aid in the construction and maintenance of low-rent
housing developments targeted to low-income families. The act declared that it was
the policy of the United States:

¹ For more information on the history of public housing, see Fisher, Robert Moore, 20 Years
of Public Housing, Harper and Brothers, 1959 and Wood, Elizabeth The Beautiful
Beginnings, the Failure to Learn: Fifty Years of Public Housing in America, The National
Center for Housing Management, October 1982.

...to promote the general welfare of the nation by employing its funds and credit,
as provided in this Act, to assist the several states and their political subdivisions
to alleviate present and recurring unemployment and to remedy the unsafe and
unsanitary housing conditions and the acute shortage of decent, safe, and sanitary
dwellings for families of low-income, in rural or urban communities, that are
injurious to the health, safety, and morals of the citizens of the nation.
Housing was a major issue in the presidential and congressional races during

1948. President Harry S. Truman’s pledge to address the postwar housing shortage²

and the problem of urban slums played a key role in his margin of victory. In his
State of the Union Address in 1949 unveiling the “Fair Deal,” President Truman
observed that “Five million families are still living in slums and firetraps. Three
million families share their homes with others.”³
He further stated
The housing shortage continues to be acute. As an immediate step, the Congress
should enact the provisions for low-rent public housing, slum clearance, farm
housing, and housing research which I have repeatedly recommended. The
number of low-rent public housing units provided for in the legislation should be
increased to 1 million units in the next 7 years. Even this number of units will not
begin to meet our need for new housing.
The Housing Act of 1949 (P.L. 81-171) declared the goal of “a decent home
and a suitable living environment for every American family.” The act: (1)
established a federal urban redevelopment and slum clearance program, authorizing
federal loans of $1 billion over a five-year period to help local redevelopment
agencies acquire slum properties and assemble sites for redevelopment; (2)
reactivated the public housing program for low-income families (which had been on
hold during World War II), authorizing subsidies to local housing authorities
sufficient to build 810,000 units over six years; (3) expanded the FHA’s mortgage
insurance program to promote home building and homeownership; (4) created within
the U.S. Department of Agriculture a program of financial assistance and subsidies
to improve housing conditions on farms and in rural areas; and (5) authorized federal
grants for research, primarily to improve the productivity of the housing industry.
Government Subsidization of Private Development
Through the 1950s, the federal government’s role in housing assistance focused
largely on public housing, which served a mostly poor population. Congress
recognized that a gap existed in the market — few options existed for moderate
income families whose incomes were too high to qualify for public housing, but too⁴
low to afford adequate market rate housing. Proposals in Congress had been made

² Peter Dreir, Labor’s Love Lost? Rebuilding Unions’ Involvement in Federal Housing
Policy, Housing Policy Debate, vol. 2, issue 2, p. 327.
³ President Harry S. Truman, State of the Union Address, January 5, 1949.
⁴ See, for example, Committee on Banking and Currency, report to accompany S. 1922, the
(continued...)

to address the shortage of housing for moderate income households during the 1950s;
however, no legislation had been enacted, in part due to the cost to the government
of creating and funding a new program.⁵ In order to avoid creating another large
housing program with high expenditures, while at the same time finding a way to
serve this segment of the population, Congress approved legislation at the end of the
1950s and throughout the 1960s that engaged the private sector in the development
of affordable housing.
The Housing Act of 1959 (P.L. 86-372) was the first significant instance where
government incentives were used to persuade private developers to build housing that
would be affordable to low- and moderate-income households. As part of P.L. 86-
372, Congress created the Section 202 Housing for the Elderly program. Through
the Section 202 program, the federal government extended low-interest loans to
private non-profit organizations for the development of affordable housing for
moderate-income residents age 62 and older. The low interest rates were meant to
ensure that units would be affordable, with non-profit developers able to charge
lower rents and still have adequate revenue to pay back the government loans.
The Housing Act of 1961 (P.L. 87-70) further expanded the role of the private
sector in providing housing to low- and moderate-income households. The act
created the Section 221(d)(3) Below Market Interest Rate (BMIR) housing program,
which both insured mortgages to private developers of multifamily housing and
provided loans at low interest rates. The BMIR program expanded the pool of
eligible borrowers to private for-profit developers and government entities, as well
as non-profit developers. Eligible developers included cooperatives, limited dividend
corporations, and state or local government agencies. Like the Section 202 program,
the low interest rates in the BMIR program were meant to ensure that building
owners could offer affordable rents to tenants.
In 1965, the Housing and Urban Development Act (P.L. 89-117) added rental
assistance to the list of incentives for private multifamily housing developers that
participated in the Section 221(d)(3) BMIR program. P.L. 89-117 created the Rent
Supplement program, which capped the rents charged to tenants at 20% of their
incomes and paid building owners the difference between 20% of a tenant’s income
and fair market rent.
The Housing and Urban Development Act of 1965 also created the Section 23
leased housing program, the first program to provide rent subsidies for use in existing
private rental market units. The same PHAs that administered the public housing
program were authorized to enter into contracts with landlords in the private market.
These contracts authorized payments to landlords who rented units to low-income

⁴ (...continued)
Housing Act of 1961, 87^th Cong., 1^st sess., S.Rept. 281, May 19, 1961 (“The largest unfilled
demand in the housing market is that of moderate-income families.”).
⁵ S.Rept. 281. “Perhaps the most significant reason that previous proposals to establish a
moderate-income housing program have not been favorably received by the Congress is that
the majority of those proposals would have placed sole responsibility for such a program on
the Federal Government.”

tenants. Tenants paid one quarter of their income toward rent in these private units,
and the federal subsidies made up the difference between the tenant payments and
rent for the units.
In 1968, the Housing and Urban Development Act (P.L. 90-448) created the
Section 236 and Section 235 programs. In the Section 236 program, the government
subsidized private developers’ mortgage interest payments so that they would not pay
more than 1% toward interest. Like the low interest rate loans provided through the
Section 221(d)(3) BMIR program, the Section 236 interest subsidies were meant to
ensure that units would be affordable to low- and moderate-income tenants, although
some units also received rent subsidies (referred to as Rental Assistance Payments
(RAP)) to make them affordable to the lowest-income tenants. The Section 235
program instituted similar mortgage interest reduction payments for individual
homeowners rather than multifamily housing developers.
Under the public housing program, tenants generally paid rent in an amount
equal to the costs of operating the assisted housing in which they lived. Over time,
as operating costs rose, there was a concern that the below-market rents being
charged to families were too high to be affordable to the poorest families. The
Brooke Amendment, which was included as part of the Housing and Urban
Development Act of 1969 (P.L. 91-152), limited tenant contributions toward rent in
all rent assisted units (including public housing and all project-based rental assistance
units) to an amount equal to 25% of tenant income (this was later raised to 30%).
The Brooke Amendment is considered responsible for codifying an income-based
rent structure in federal housing programs.
By the end of the 1960s, subsidies to private developers had resulted in the
creation of hundreds of thousands of housing units. Approximately 700,000 units of
housing had been built through the Section 236 and Section 221(d)(3) programs
alone.⁶ The Section 202 program had created more than 45,000 units for elderly
households.⁷ The Section 235 and Section 23 leased-housing programs provided
ownership and rental subsidies for thousands more. Through 1972, the Section 235
program subsidized nearly 400,000 homeowners,⁸ while the Section 23 leased-
housing program provided rent subsidies for more than 38,000 private market rental
units.⁹ Despite the growth in the role of private developers, public housing was still

⁶ U.S. Department of Housing and Urban Development, Multifamily Properties: Opting In,
Opting Out and Remaining Affordable, January 2006, p. 1, available at [http://www.huduser
.org/ Publications/pdf/opting_in.pdf].
⁷ U.S. Department of Housing and Urban Development, Housing for the Elderly and
Handicapped: The Experience of the Section 202 Program from 1959 to 1977, January

1979, p. 17.

⁸ U.S. Congress, Senate Committee on Banking, Housing and Urban Affairs, Subcommittee
on Housing and Urban Affairs, An Analysis of the Section 235 and 236 Programs,^rd^st
committee print, 93 Cong., 1 sess., May 24, 1973, p. 9, available at [http://www.congress.
gov/ crsx/products-nd/73.1142.doc.pdf].
⁹ U.S. Department of Housing and Urban Development FY1974 Budget Summary, Housing
Production and Mortgage Credit, p. 7.

the largest housing subsidy program, with roughly a million units built and
subsidized by the early 1970s.¹⁰
Rethinking the Strategy:
From Construction Subsidies to Rent Subsidies
By the early 1970s, concern was growing about the cost, efficacy, and equity of
the construction-based housing subsidy programs, such as the Section 236 and public
housing programs. Then-President Richard M. Nixon criticized the existing
programs as not equitably serving families in the same circumstances, providing poor
quality housing, being too costly, and placing some families in homes they could not¹¹
afford. Out of these concerns, President Nixon declared a moratorium on all new
activity under the major housing subsidy programs — except for the Section 23
leased-housing program — beginning in January 1973. Assisted housing activity
slowly restarted in response to lawsuits and new legislation.
The Housing Act of 1974 (P.L. 93-383) was the first omnibus housing
legislation since 1968 and the first such legislation following the Nixon moratorium.
The act created a new low-income rental assistance program, referred to as Section
8. Although the 1960s had seen rental assistance programs like Rent Supplement and
Section 23, the scale of the Section 8 program made it the first comprehensive rental
assistance program. The Section 8 program combined features of the Section 236
program, which was popular with advocates of construction-based subsidies, and the
Section 23 leased housing program, which used the existing housing stock and was
popular with the Nixon Administration. Through Section 8, the federal government
provided private property owners monthly assistance payments for new or
substantially rehabilitated rental units. In exchange for monthly rental payments,
property owners would agree to rent to eligible low-income families (defined as
families with incomes at or below 80% of local area median income) who would pay
an income-based rent. It also provided PHAs with the authority to enter into rental
assistance contracts for existing, private market units.
Over time, the use of Section 8 in new construction and substantial
rehabilitation projects was found to be more expensive than its use in existing
housing. The Housing and Urban-Rural Recovery Act of 1983 (P.L. 98-181)
repealed HUD’s authority to enter into new Section 8 contracts tied to new
construction and substantial rehabilitation, but retained HUD’s authority to issue new
contracts for existing properties. The act also created a new demonstration program
to test a modified use of Section 8, referred to as vouchers. Vouchers were similar
to the use of Section 8 rent subsidies in existing housing, but provided more
flexibility to PHAs, particularly by permitting families to pay more than 30% of their
incomes in rent. The demonstration was made permanent in 1985.

¹⁰ HUD, “Annotated Tables for 2001 Budget,” p. 86.
¹¹ President Richard Nixon, Presidential Message to Congress on Housing Policy, September

19, 1973.

Increasing Role of State and Local Governments
By the mid-1980s, federal housing programs had gone through a number of
iterations. Some programs had been scrapped as inefficient, subject to fraud and
abuse, or too expensive. Shifting federal priorities — toward reducing taxes and
increasing military spending in response to the Cold War — reduced funding
available for social programs, including housing assistance. Creation of assisted
housing with federal funds was on the decline, with production between 1982 and
1988 slowing significantly.¹² In addition, existing affordable rental units were being
lost as use restrictions between private owners and HUD expired or owners chose to
prepay their low-interest mortgages and begin charging market-rate rent.¹³
As a result of reduced federal support for housing, state and local governments
and private for- or non-profit organizations began to take the initiative in developing
innovative ways of providing housing in their communities.¹⁴ Policymakers
acknowledged that, in some cases, local communities had better knowledge about
how to provide housing than the federal government, and might be able to provide
housing more efficiently than HUD.¹⁵ From the late 1980s through the 1990s,
Congress acknowledged the value of local control and gave more decision-making
authority over housing policy to state and local governments through the creation of
block grants and tax credits.
In 1986, the Low Income Housing Tax Credit (LIHTC) program was created as
part of the Tax Reform Act of 1986 (P.L. 99-514). The LIHTC was not initially part
of the bill that became the Tax Reform Act (H.R. 3838). However, because portions
of H.R. 3838 eliminated the favorable treatment of real estate investment income,
Members added the LIHTC program to the bill in order to ensure that developers
would have an incentive to continue to construct low- and moderate-income
housing.¹⁶
The LIHTC program, intentionally or not, was one of the first major programs
to give a good deal of control over housing policy to states and localities. Tax credits
are allocated to states based on population. States then have discretion in setting
priorities as to how the credits will be used. While states must prioritize projects that
serve the lowest income tenants for the longest period of time, they may choose to

¹² The National Housing Task Force, A Decent Place to Live, March 1988, available from
S.Hrg. 100-689. See p. 142.
¹³ See A Decent Place to Live, available at S.Hrg. 100-689, p. 142.
¹⁴ Ibid., pp. 154-155. See also Michael A. Stegman and J. David Holden, Non-federal
Housing Programs: How States and Localities Are Responding to Federal Cutbacks in Low-
Income Housing (Washington, DC: The Urban Land Institute, 1987).
¹⁵ Ibid. See also Charles J. Orlebeke, “The Evolution of Low-Income Housing Policy, 1949
to 1999,” Housing Policy Debate, vol. 11, no. 2 (2000), pp. 509-510, available at
[ h t t p : / / www.mi .vt . edu/ dat a / f i l e s/ hpd% 2011( 2) / hpd% 2011( 2) _or l e beke .pdf ] .
¹⁶ Karl E. Case, “Investors, Developers, and Supply-Side Subsidies: How Much is Enough?”
Housing Policy Debate, vol. 2, no. 2 (April 1990), pp. 349-351, available at
[ ht t p: / / www.mi .vt .edu/ dat a / f i l e s/ hpd% 202( 2) / hpd% 202( 2) % 20case.pdf ] .

allocate credits based on criteria such as the tenant populations served — those with
special needs, families with children, or those on public housing waiting lists.
In 1990, Congress created another large, flexible block grant to states and
localities. The National Affordable Housing Act of 1990 (NAHA, P.L. 101-625)
authorized the HOME Investment Partnerships program. HOME was modeled after
an earlier block grant, the Community Development Block Grant (CDBG), which
was created as part of the Housing Act of 1974 to consolidate several special purpose
grants funding many activities other than housing, such as neighborhood
revitalization, open space, and water and sewer grants. NAHA directed that HOME
funds be allocated to states and localities based on a formula and that funds be
targeted to assist families with incomes at or below 60% of area median income.
Recipient jurisdictions were permitted to use funds to assist homeowners, construct
rental housing, or provide rental assistance, and they were required to establish plans
for spending their funds, meet match requirements, and partner with local non-
profits.
The Native American Housing Assistance and Self-Determination Act of 1996
(NAHASDA, P.L. 104-330), reorganized the system of federal housing assistance to
Native Americans by eliminating several separate programs of assistance and
replacing them with a single block grant program. In addition to simplifying the
process of providing housing assistance, the purpose of NAHASDA was to provide
federal assistance for Indian tribes in a manner that recognizes the right of Indian
self-determination and tribal self-governance.
Reforming Rental Assistance
Throughout the 1990s, concern about the state of public housing grew. The
public perceived public housing as mismanaged, of poor quality, and dangerous.¹⁷
At the same time, interest was growing in reforming social programs by devolving
control to the states and increasing their focus on promoting work and self
sufficiency. Concern over the state of public housing — and the influence of the
1996 welfare reform debate and legislation — led to proposals for major public and
assisted housing reforms. Several years of debate in Congress culminated with the
enactment of the Quality Housing and Work Opportunity Reconciliation Act of 1998
(P.L. 105-276).
The purposes of QHWRA, as defined in the act, were to deregulate PHAs;
provide more flexible use of federal assistance to PHAs; facilitate mixed income
communities; decrease concentrations of poverty in public housing; increase
accountability and reward effective management of PHAs; create incentives and
economic opportunities for residents assisted by PHAs to work and become self-
sufficient; consolidate the Section 8 voucher and certificate programs into a single
market-driven program; remedy the problems of troubled PHAs; and replace or
revitalize severely distressed public housing projects.

¹⁷ For more information, see the final report of the National Commission on Severely
Distressed Public Housing, 1992.

Specific reforms in QHWRA included increased income targeting in the
voucher program, removal of federal preference categories for housing assistance,
enactment of a limited community service requirement in public housing, creation
of the Section 8 Housing Choice Voucher program (a hybrid of the Section 8
vouchers and certificate programs), authorization of the HOPE VI program (which
had been in place, but unauthorized since the early 1990s), consolidation and reform
of funding for public housing, and modifications to the assessment systems for
PHAs.
Today’s Housing Assistance Programs
Today’s system for providing housing assistance to low-income families is
comprised of programs that fall into three main categories: rental housing assistance,
federal assistance to state and local governments, and homeownership assistance.
Rental assistance is provided primarily through rent vouchers that families can use
in the private market, below-market rental units owned by PHAs or private landlords
under contract with the federal government, and, to a limited extent, construction of
new below-market rental units. Assistance to state and local governments comes in
a number of forms, including broad flexible block grants that can be used for rental,
homeownership, or community development purposes, special purpose block grants,
and programs based in the tax system. Homeownership assistance includes direct
assistance to defray homebuying costs, as well as mortgage insurance programs to
help provide incentives for the private market to meet the needs of underserved
segments of the population.
The following section provides a description of the major housing assistance
programs that fall into these three categories.
Rental Housing Assistance
Section 8 Vouchers. Section 8 vouchers are a form of tenant-based rental
assistance funded by the federal government, administered locally by quasi-
governmental public housing authorities (PHAs) and provided to private landlords
on behalf of low-income families. (The program is codified at 42 USC §1437f(o)).
Generally, eligible families with vouchers live in the housing of their choice in the
private market and the voucher pays the difference between the family’s contribution
toward rent and the actual rent for the unit. Specifically, a family pays 30% of its
adjusted income toward rent (although they can choose to pay more) and the PHA,
which receives funding from HUD, makes payments to the landlord based on a
maximum subsidy set by the PHA (based on the local fair market rent established by
HUD), less the tenant’s contribution. Families are eligible to receive a voucher if
they are very low-income (earning 50% or less of the local area median income) or
low-income (earning 80% or less of the local area median income) but meet other
special criteria (for example, are elderly or have disabilities). However, PHAs must
provide 75% of all vouchers available in a year to extremely low-income families
(earning 30% or less of the area median income). Vouchers are nationally portable;
once a family receives a voucher, it can take that voucher and move to any part of the
country where a voucher program is being administered.

There are several special forms of Section 8 vouchers. Tenant protection
vouchers are provided to families who would otherwise be displaced from other
HUD programs. Some tenant protection vouchers, called enhanced vouchers, can
have higher values than regular vouchers. PHAs also have the discretion to “project-
base” some of their vouchers. Project-based vouchers are attached to specific
housing units rather than given to families to use in the homes of their choosing.
Another special form of voucher is the homeownership voucher; PHAs have the
discretion to allow eligible first-time homebuyers to use their vouchers to make
monthly mortgage payments. (For more information, see CRS Report RL32284, An
Overview of the Section 8 Housing Programs, by Maggie McCarty.)
The voucher program is not an entitlement program. Families that wish to
receive a voucher must generally apply to their local PHA and are placed on a
waiting list, the length of which varies by community and can range from several
months to many years. Congress has authorized and funded roughly two million
vouchers. The funding for those vouchers is provided annually by Congress in the
appropriations for HUD. The Section 8 voucher program is the largest of HUD’s
rental assistance programs, serving the largest number of households and accounting,
in recent years, for over one-third of the Department’s budget. Congress has
generally renewed all existing vouchers each year; in some years, Congress also
creates new vouchers to serve additional families, referred to as incremental
vouchers. The current distribution of vouchers across PHAs results from a variety
of allocation methods used in the past: formula-based, competitive, and other.
While the distribution of funding to PHAs is generally based on the number of
vouchers that they have and the cost of those vouchers, the exact distribution formula
has often been modified by Congress in the appropriations process. (For more
information, see CRS Report RL33929, Recent Changes to the Section 8 Voucher
Renewal Funding Formula, by Maggie McCarty.)
Other Tenant-Based Rental Assistance. While Section 8 vouchers are
the main form of tenant-based rental assistance, HUD also funds several other types
of tenant-based rental assistance. HUD funds special vouchers for persons with
disabilities (through the Section 811 program, discussed later) and for homeless
persons (through the Shelter Plus Care program, discussed later), and states and
localities can use their HOME Investment Partnerships Block Grant (discussed later)
funds to provide vouchers.
Public Housing. Low-rent public housing developments are owned and
operated by local public housing authorities (PHAs) and subsidized and regulated by
the federal government. (The program is codified at 42 USC §1437.) Generally,
families are eligible to live in public housing if they are low-income (those with
income at or below 80% of area median income), but 40% of public housing units
that become available in a year must be given to extremely low-income families
(those with income at or below 30% of area median income). As in the Section 8
voucher program, families living in public housing pay 30% of their adjusted income
toward rent.
PHAs receive several streams of funding from HUD to help make up the
difference between what tenants pay in rent and what it costs to maintain public
housing. PHAs receive operating funds and capital funds through a formula

allocation process; operating funds are used for management, administration, and the
day-to-day costs of running a housing development and capital funds are used for
modernization needs (such as replacing a roof or heating and cooling system, or
reconfiguring units). PHAs can also apply for competitive HOPE VI revitalization
grants, which are used to demolish and rebuild, or substantially rehabilitate, severely
distressed public housing, replacing it with mixed-income housing. (For more
information, see CRS Report RL32236, HOPE VI Public Housing Revitalization
Program: Background, Funding, and Issues, by Maggie McCarty.)
There are roughly 1.2 million public housing units under contract with the
federal government, making public housing the second largest direct housing
assistance program. The 1998 Public Housing Reform Act (P.L. 105-276) prohibited
public housing authorities from increasing the total number of public housing units
in their inventory; however, the number of public housing units had begun to steadily
decline before then for a number of reasons. PHAs are authorized to demolish or sell
their public housing developments with HUD’s permission, and since the mid-1990s,
they have not been required to replace those units with new units (although they must
provide displaced families with Section 8 vouchers). The 1998 Act also provided
authority to allow, and in some cases require, PHAs to convert their public housing
units to vouchers. Also, the HOPE VI program has contributed to the demolition of
more units than it has replaced.
Table 1. Appropriations for Section 8, FY1999-FY2008
⁽^$ⁱⁿ^m^illioⁿ^s⁾
^Project-Bas^ed
^FY^Tena^nt^-^B^a^s^ed^Sect^io^{n 8}^Vo^uchers^Sect^io^{n 8}^Rent^a^l^To^t^a^{l Sect}^io^{n 8}
^Assist^aⁿ^c^e
¹⁹⁹⁹^-^-^10,327
²⁰⁰⁰^-^-^11,377
²⁰⁰¹^-^-^13,941
²⁰⁰²^-^-^15,640
²⁰⁰³^-^-^17,116
²⁰⁰⁴^-^-^19,257
²⁰⁰⁵^{14,766 5,298}^20,064
²⁰⁰⁶^{15,418 5,037}^20,455
²⁰⁰⁷^{15,920 5,976}^21,896
²⁰⁰⁸^{15,703 6,382}^22,085
^S^o^u^rce:^Fⁱ^gu^{res b}^a^sed^oⁿ^coⁿ^g^ressioⁿ^a^l^a^p^p^r^o^p^r^iatioⁿ^s^d^o^c^u^m^en^{ts an}^d^{HUD Co}ⁿ^g^ressioⁿ^a^{l Bu}^d^g^et
^Justif^ic^a^tions.
^Note:^Fig^u^r^e^s^a^r^e^{not a}^d^jus^t^e^d^f^o^r^r^e^scis^sⁱ^ons^of^unoblig^a^t^e^d^budg^e^t^a^u^thor^ity^{. P}^r^ior^{to FY}^{2005, C}^ong^r^e^s^s
^f^unde^{d the}^Se^c^tion⁸^v^ouc^he^r^a^nd^pr^oje^c^t^-^b^a^s^e^d^r^e^nta^l^a^s^sⁱ^s^t^aⁿ^c^e^pr^og^r^a^m^s^jointly^{. FY}^{2006 f}ⁱ^g^u^r^e^s^f^o^r^te^na^nt-
^ba^s^e^d^re^nta^l^a^s^sⁱ^s^t^aⁿ^c^e^do^{not inc}^l^ude^{$390 m}^{illion in e}^m^e^r^g^e^nc^y^a^ppropria^tions^f^o^{r hurric}^aⁿ^e^re^lie^f^.^Fig^u^re^f^o^r
^FY^{2008 te}^na^nt-ba^s^e^d^re^nta^l^a^s^sⁱ^s^t^aⁿ^c^e^is^a^d^jus^t^e^d^f^o^{r $723 m}^illion^re^s^c^is^sⁱ^on^of^c^u^rre^nt^y^e^a^r^budg^e^t^a^u^thority
^eⁿ^a^c^t^e^dⁱⁿ^FY^{2008. Fig}^u^r^e^s^s^how^{n r}^e^pr^e^s^eⁿ^{t budg}^e^t^a^u^thor^ity^a^v^a^ila^ble^{in the}^FY^{, not budg}^e^t^a^u^thor^ity^pr^ov^ide^d
⁽^w^hic^h^a^c^c^ounts^f^o^r^dif^f^e^r^e^nc^e^s^{in a}^d^v^a^nc^e^a^ppr^opr^ia^tions^f^r^om^y^e^a^r^{to y}^e^a^r⁾^.

Table 2. Appropriations for Public Housing, FY1999-FY2008
⁽^$ⁱⁿ^m^illioⁿ^s⁾
^To^t^a^l
^FY^Operating^F^und^Ca^pit^a^{l F}^und^Drug^Elim^ina^t^ioⁿ^Gr^aⁿ^t^s^a^HOPE^VI^Public
^Hou^sⁱⁿ^g
¹⁹⁹⁹^2,818^3,000³¹⁰⁶²⁵^6,753
²⁰⁰⁰^3,138^2,900³¹⁰⁵⁷⁵^6,923
²⁰⁰¹^3,242^3,000³¹⁰⁵⁷⁵^7,127
²⁰⁰²^3,495^2,843⁰⁵⁷⁴^6,912
²⁰⁰³^3,577^2,712⁰⁵⁷⁰^6,859
²⁰⁰⁴^3,579^2,696⁰¹⁴⁹^6,424
²⁰⁰⁵^2,438^2,579⁰¹⁴³^5,160
²⁰⁰⁶^3,564^2,439⁰⁹⁹^6,102
²⁰⁰⁷^3,864^2,439⁰⁹⁹^6,402
²⁰⁰⁸^4,200^2,439⁰¹⁰⁰^6,739
^S^o^u^rce:^{HUD Cong}^re^ssioⁿ^a^l^B^udg^e^t^Justif^ic^a^{tions, FY2001-}^{FY2009. Ena}^c^t^e^d^f^unding^fⁱ^g^u^re^{s ta}^k^e^{n f}^r^om
^s^ubs^e^que^{nt y}^e^a^r^s^’^jus^tif^ic^a^tions^.
^Note:^Aⁿ^a^c^c^ounting^c^h^aⁿ^g^e^eⁿ^a^c^t^e^d^by^C^ong^r^e^s^s^le^{d to a}^one^-^tim^e^s^a^vⁱ^ng^s^{in the}^public^hous^ing^ope^r^a^ting^f^und
^{in FY}^{2005. For}^m^o^r^eⁱⁿ^f^o^r^m^a^{tion, s}^e^e^dis^c^us^sⁱ^{on on pa}^g^e^{13 of}^C^R^S^R^e^por^{t R}^L^32443,^The^D^e^par^tm^eⁿ^{t of}
^H^ous^{ing and U}^r^{ban D}^evelo^p^m^en^{t (}^{HUD): F}^Y^{2005 Budge}^t^.
^a^.^Drug^e^lim^ina^{tion g}^r^aⁿ^{ts w}^e^re^a^v^a^ila^ble^{to P}^H^A^s^{, initia}^lly^c^o^m^p^e^titiv^e^l^y^,^theⁿ^la^te^{r v}ⁱ^a^f^o^rm^ula^a^lloc^a^{tion, to}
^pa^y^f^o^{r s}^a^f^e^ty^a^{nd s}^e^c^u^rity^a^c^tiv^itie^s^{in public}^hous^ing^.^T^h^e^y^w^e^re^f^unde^{d f}^r^om^FY^1991-FY^2001.
Project-Based Section 8 Rental Assistance. Under the Section 8
project-based rental assistance program, HUD entered into contracts with private
property owners under which owners agreed to rent their housing units to eligible
low-income tenants for an income-based rent, and HUD agreed to pay the difference
between tenants’ contributions and a rent set by HUD. Families are eligible to live
in project-based Section 8 units if they are low-income (having income at or below
80% of the area median income), but 40% of units made available each year must be
reserved for extremely low-income families (those with income at or below 30% of
the area median income).
No new project-based Section 8 contracts have been awarded since the mid-
1980s, although existing contracts can be renewed upon their expiration. Roughly
one million project-based units are still under contract and receive assistance. The
original contracts were for 10-40 year periods and were provided with multi-year
funding from Congress for the length of their contract. Therefore, each year,
Congress only has to provide new funding for those contracts that have expired and
require annual renewal (although, eventually, all of those long-term contracts will
expire so all contracts will require annual funding). (See Table 1 for appropriations
information.) Not all contracts are renewed, so there has been a loss of project-based
Section 8 units over time. When owners do not renew, tenants are provided with
Section 8 tenant protection vouchers. (For more information, see CRS Report
RL32284, An Overview of the Section 8 Housing Programs, by Maggie McCarty.)
Section 202 Supportive Housing for the Elderly Program and the
Section 811 Housing for Persons with Disabilities Program. Through the
Section 202 Supportive Housing for the Elderly program, HUD provides funds to
nonprofit organizations which in turn build rental properties for low-income elderly

households (those with a head of household or spouse age 62 or older). The program
was created as part of the Housing Act of 1959 (P.L. 86-372). (The program is
codified at 12 U.S.C. §1701q.) Section 202 is the only federal housing program that
funds housing exclusively for elderly persons, although from approximately 1964 to
1990, non-elderly disabled households were eligible for residency in Section 202
properties.¹⁸ Although the Section 202 program initially provided low-interest loans
to nonprofit developers, since the early 1990s, the program has provided nonprofit
developers with capital grants, together with project rental assistance contracts (rental
assistance that is similar to project-based Section 8). The capital grants are awarded
through a competitive process. The current version of the Section 202 program
serves very low-income elderly households (those with incomes at or below 50% of
poverty). (For more information about the Section 202 program, see CRS Report
RL33508, Section 202 and Other HUD Rental Programs for Low-Income Elderly
Residents, by Libby Perl.)
The Section 811 Supportive Housing for Persons with Disabilities Program was
created in 1990 as part of the Cranston-Gonzalez Affordable Housing Act (P.L. 101-
625). (The program is codified at 42 U.S.C. §8013.) Until the enactment of Section

811, the Section 202 program provided housing for persons with disabilities.

Through Section 811, HUD provides capital grants to non-profit organizations to
create rental housing that is affordable to very low-income households with an adult
who has a disability.¹⁹ The program also funds project rental assistance contracts to
subsidize the rent paid by tenants. In addition, Section 811 makes available
“mainstream vouchers” which are similar to Section 8 vouchers and allow eligible
recipients to find housing in the private market. Housing built with capital grants
may include group homes, independent living facilities, multifamily rental units,
condominium units, and cooperative housing. Section 811 developers must provide
supportive services to those residing in the units.

¹⁸ “Handicapped” families were added to the definition of “elderly” families in P.L. 88-560,
the Housing Act of 1964. In 1990, the Cranston-Gonzalez National Affordable Housing Act
(P.L. 101-625) separated housing for disabled persons from housing for elderly persons with
the creation of the Section 811 Housing for Persons with Disabilities program.
¹⁹ A disability is defined as (1) having a physical, mental, or emotional impairment that is
expected to be of long-continued or indefinite duration, substantially impedes the ability to
live independently, and could improved by suitable housing, (2) a developmental disability.

42 U.S.C. §8013(k)(2).

Table 3. Appropriations for Section 202 and Section 811,
FY1999-FY2008
⁽^$ⁱⁿ^m^illioⁿ^s⁾
^FY^{Section 202}^a^{Section 811}
¹⁹⁹⁹⁶⁶⁰¹⁹⁴
²⁰⁰⁰⁶¹⁰²⁰¹
²⁰⁰¹⁶⁷⁷²¹⁶
²⁰⁰²⁶⁸³²⁴⁰
²⁰⁰³⁶⁷⁸²⁴⁹
²⁰⁰⁴⁶⁹⁸²⁴⁹
²⁰⁰⁵⁶⁴⁸²³⁸
²⁰⁰⁶⁶³⁵²³¹
²⁰⁰⁷⁶³⁹²³⁶
²⁰⁰⁸⁶²⁹²³⁷
^S^o^u^rce:^{HUD Budg}^e^t^Justif^ic^a^tions^f^r^om^{FY2001 throug}^{h FY2009.}
^a^.^T^h^e^a^m^ounts^a^ppr^opr^ia^te^{d f}^o^r^Se^c^{tion 202 inc}^l^ude^f^unds^f^o^r^ne^w^c^a^p^ita^{l g}^r^aⁿ^ts^,^ne^w^pr^oje^c^t^r^e^nta^l^a^s^sⁱ^s^t^aⁿ^c^e^,
^a^nd^r^e^ne^w^a^ls^of^or^a^m^e^ndm^eⁿ^ts^to^pr^oje^c^t^r^e^nta^l^a^s^sⁱ^s^t^aⁿ^c^e^c^ontr^a^c^t^s^.^T^h^e^s^e^fⁱ^g^u^r^e^s^{do not inc}^l^ude^f^unds
^f^o^r^Se^r^v^ic^e^C^oor^dina^tor^s^or^the^A^s^sⁱ^s^t^e^d^Lⁱ^vⁱ^ng^C^onv^e^r^sⁱ^{on P}^r^og^r^a^m^.
Other Rent-Restricted Units. The Section 236 program was a HUD
initiative to encourage private developers to create housing affordable to low- and
moderate-income households. The program, created as part of the Housing and
Urban Development Act of 1968 (P.L. 90-448) was active in promoting new
development from approximately 1969 to 1973. (The program is codified at 12
U.S.C. §1715z-1.) The Section 236 program provided mortgage insurance to
housing developers for the construction and rehabilitation of rental housing and
continues to provide mortgage subsidies to building owners through a mechanism
called Interest Reduction Payments (IRPs). IRPs are subsidies to owners that ensure
that the owners will only pay 1% interest on their mortgages. Approximately²⁰
240,000 developments continue to receive IRPs today. Given the reduced financing
costs, owners can charge below-market rents for Section 236 units. Many units also
receive rental assistance payments through the Section 8 project-based voucher
program, Rent Supplement program, or the Rental Assistance Payments (RAP)
program, making the units affordable to very low-income and extremely low-income
families.
The Section 221(d)(3) Below Market Interest Rate (BMIR) program was another
HUD program that encouraged private developers to create affordable housing by
offering FHA-insured loans with interest rates of 3%. The program was enacted as
part of the Housing Act of 1961 (P.L. 87-70) and actively insured new loans until
1968, when the Section 236 program replaced it as a vehicle for affordable housing
development. (The Section 221(d)(3) program is codified at 12 U.S.C. §1715l.) Like
Section 236, units created under this program are offered for below-market rents and
units may also receive rental assistance.
Rural Rental Housing (Section 515) and Rental Assistance (Section

521). Title V of the Housing Act of 1949 authorized the U.S. Department of

²⁰ HUD, Congressional Justifications for FY2009, p. K-1.

Agriculture (USDA) to make loans to farmers to enable them to construct, improve,
repair, or replace dwellings and other farm buildings to provide decent, safe, and
sanitary living conditions for themselves, their tenants, lessees, sharecroppers, and
laborers. USDA was authorized to make grants, or combinations of loans and grants
to those farmers who could not qualify to repay the full amount of a loan, but who
needed the funds to make their dwellings sanitary or to remove health hazards to the
occupants or the community. Although the act was initially targeted to farmers, over
time the act has been amended to enable USDA to make housing loans and grants to
rural residents in general.
The USDA housing programs are generally referred to by the section number
under which they are authorized in the Housing Act of 1949, as amended. Under the
Section 515 program, the Rural Housing Service of the USDA is authorized to make
direct loans for the construction of rural rental and cooperative housing. (The
program is codified at 42 U.S.C. §1485.) The loans are made at a 1% interest rate and
are repayable in 50 years. Except for public agencies, all borrowers must
demonstrate that financial assistance from other sources is not enough to enable the
borrower to provide the housing at terms that are affordable to the target population.
Under the Section 521 program, rental assistance payments, which are made directly
to owners of rental properties, make up the difference between the tenants’ rent
payments and the USDA-approved rent for the Section 515 units. (The program is
codified at 42 U.S.C. §1490a.) Owners must agree to operate the property on a
limited profit or nonprofit basis. For more information, see CRS Report RL33421,
USDA Rural Housing Programs: An Overview, by Bruce Foote.
Table 4. Appropriations for the USDA Section 515 and Section
521 Programs, FY1999 - FY2008
⁽^$ⁱⁿ^m^illioⁿ^s⁾
^FY^{Section 515}^S^ecti^oⁿ^{521 R}^eⁿ^t^al^Assist^aⁿ^c^e
¹⁹⁹⁹¹¹⁴⁵⁸³
²⁰⁰⁰¹¹⁴⁶⁴⁰
²⁰⁰¹¹¹⁴⁶⁸⁶
²⁰⁰²¹¹⁸⁷⁰¹
²⁰⁰³¹¹⁵⁷²⁴
²⁰⁰⁴¹¹⁶⁵⁸¹
²⁰⁰⁵⁹⁹⁵⁹²
²⁰⁰⁶⁹⁸⁶⁴⁷
²⁰⁰⁷⁹⁰³²⁹
²⁰⁰⁸⁷⁰⁴⁸²
^S^o^u^rce:^U^.^{S. D}^e^pa^r^t^m^e^{nt of}^A^g^rⁱ^c^u^ltur^e^B^udg^e^t^J^u^s^tif^ic^a^tions^a^{nd A}^ppr^opr^ia^tions^A^c^ts^.
Funding for States and Localities
Low Income Housing Tax Credit. The LIHTC was enacted as part of the
Tax Reform Act of 1986 (P.L. 99-514) and provides incentives for the development
of affordable rental housing through federal tax credits administered through the
Internal Revenue Service. (The program is codified at 26 U.S.C. §42.) The tax
credits are disbursed to state housing finance agencies (HFAs) based on population.
HFAs, in turn, award the credits to housing developers that agree to build or

rehabilitate housing where a certain percentage of units will be affordable to low
income households. Housing developers then sell the credits to investors and use the
proceeds from sale of the credits to help finance the housing developments. The
benefit of the tax credits to the purchasing investors is that they reduce the investor’s
federal income tax liability annually over a ten year period.
Because tax credits reduce the amount of private financing required to build or
rehabilitate housing, the owners of developments financed through tax credits are
able to charge lower rents. In order to qualify for the tax credits, at least 20% of units
in a development must be occupied by households with incomes at or below 50% of
area median income, or at least 40% of units must be occupied by households with
incomes at or below 60% of area median income. Rent charged for the rent restricted
units in a development may not exceed 30% of an imputed income limitation —
calculated based on area median incomes. Units financed with tax credits must
remain affordable for at least 15 years. As of 2005, over 1.5 million units had been
created using LIHTCs.²¹ In 2007, the Joint Committee on Taxation estimated that the
LIHTC would result in a $5.1 billion tax expenditure.²² For more information, see
CRS Report RS22389, An Introduction to the Design of the Low- Income Housing
Tax Credit, by Mark Patrick Keightley.
Mortgage Revenue Bonds. The federal government authorizes state and
local governments to issue private activity bonds, up to a certain limit, which are
exempt from federal taxes. One form of a private activity bond is a mortgage
revenue bond (MRB). State or local governments — or their authorized agencies,
such as housing finance agencies — sell MRBs to investors. Because the interest
earned by bondholders is exempt from federal (and sometimes state) taxation, the
bonds can be marketed at lower interest rates than would be required for similar
taxable instruments. The proceeds of the bond sale, less issuance costs and reserves,
are used to finance home mortgages to eligible (generally first-time) homebuyers. In
effect, the tax exemption on the bonds provides an interest rate subsidy to
homebuyers.
In order to qualify for the benefit, a borrower must not have been a homeowner
in the past three years, the mortgage must be for the principal residence of the
borrower, the purchase price may not exceed 90% (110% in targeted areas) of the
average purchase price in the area, and the income of the borrower may not exceed

110% (140% in targeted areas) of the median income for the area. In 2007, the Joint

²¹ Data taken from U.S. Department of Housing and Urban Development’s LIHTC Database.
²² Joint Committee on Taxation, Estimates of Federal Tax Expenditures for Fiscal Years
2007-2011, committee print, 110^th Cong., September 27, 2007. The Joint Committee on
Taxation (JCT) measures a tax expenditure as the difference between tax liability under
present law and tax liability computed without the tax expenditure provision. The JCT
assumes all other tax expenditures remain in the tax code and that taxpayer behavior is
unchanged. The tax expenditure estimate for the LIHTC includes tax credits taken by
individuals and corporations.

Committee on Taxation estimated that MRBs would result in a $1.4 billion tax
ex penditure.²³
Community Development Block Grants. The Community Development
Block Grant (CDBG) program was enacted as part of the Housing and Community
Development Act of 1974 (P.L. 93-383), and is administered by HUD. (The program
is codified at 42 U.S.C. §§5301-5321.)
The purpose of the CDBG program is to develop viable urban communities by
providing decent housing, a suitable living environment, and expanding economic
opportunities primarily for low- and moderate-income persons. The CDBG program
distributes 70% of total funds through formula grants to entitlement communities —
central cities of metropolitan areas, cities with populations of 50,000 or more, and
urban counties — and the remaining 30% goes to states for use in small, non-
entitlement communities.
Recipient communities may use CDBG funds for a variety of activities, although
at least 70% of funds must be used to benefit low- and moderate-income persons.
Eligible activities include the acquisition and rehabilitation of property for purposes
such as public works, urban beautification, historic preservation; the demolition of
blighted properties; services such as crime prevention, child care, drug abuse
counseling, education, or recreation; neighborhood economic development projects;
and the rehabilitation or development of housing as well as housing counseling
services.

²³ Joint Committee on Taxation, Estimates of Federal Tax Expenditures for Fiscal Years
2007-2011, committee print, 110^th Cong., September 27, 2007. The Joint Committee on
Taxation (JCT) measures a tax expenditure as the difference between tax liability under
present law and tax liability computed without the tax expenditure provision. The JCT
assumes all other tax expenditures remain in the tax code and that taxpayer behavior is
unchanged. The tax expenditure estimate for MRBs includes tax credits taken by
individuals and corporations.

Table 5. Appropriations for the Community Development Fund
and CDBG, FY1999-FY2008
⁽^$ⁱⁿ^m^illioⁿ^s⁾
^FY^CDB^G^Fo^rm^ula^G^r^aⁿ^ts^Set-Asides^Co^m^m^unit^y^Dev^e^lo^pm^ent^F^{und Acco}^unt^To^t^a^l
¹⁹⁹⁹^4,218⁵³²^4,750
²⁰⁰⁰^4,236⁵⁴⁵^4,781
²⁰⁰¹^4,399⁶⁴⁷^5,046
²⁰⁰²^4,341⁶⁵⁹^5,000
²⁰⁰³^4,340⁵⁶⁵^4,905
²⁰⁰⁴^4,331⁶⁰³^4,934
²⁰⁰⁵^4,117⁵⁸⁵^4,702
²⁰⁰⁶^3,711⁴⁶⁷^4,178
²⁰⁰⁷^3,711⁶¹^3,772
²⁰⁰⁸^3,593²⁷³^3,866
^S^o^u^rce:^{HUD Cong}^re^ssiona^{l Budg}^e^t^Justif^ic^a^ti^{ons; f}^o^{r FY2004-}^FY2007,^{HUD’s w}^e^bsite^[^h^ttp://^www.^hud.g^o^v^/
^of^fⁱ^c^e^s^/c^pd/a^bout/budg^e^t/]^{HUD Budg}^e^t^Justif^ic^a^{tions, FY2000-FY}^{2008 (e}^na^c^t^e^d^f^unding^le^v^e^{ls FY1998-}
^FY²⁰⁰⁶⁾^{, P}^.^L^.^110-^{5 (}^e^na^c^t^e^d^f^unding^le^v^e^ls^f^o^r^FY²⁰⁰⁷⁾^,^P^.^L^.^110-¹⁶¹⁽^e^na^c^t^e^d^f^unding^le^v^e^ls^f^o^r^FY²⁰⁰⁸⁾^,
^a^{nd FY}^{2009 P}^r^e^s^ideⁿ^t’^s^budg^e^t^.
^Note:^T^h^e^C^D^B^G^pr^og^r^a^m^is^f^unde^dⁱⁿ^aⁿ^a^c^c^{ount c}^a^lle^{d the}^C^o^m^m^unity^D^e^v^e^lopm^eⁿ^{t Fund. T}^h^a^t^a^c^c^{ount a}^l^s^o
^f^unds^s^e^t-a^s^ide^s^inc^l^uding^f^unding^f^o^{r Ec}^onom^ic^D^e^v^e^lopm^eⁿ^{t Initia}^tiv^e^s^a^nd^N^e^ig^hborhood^Initia^tiv^e^s^.^T^h^is
^ta^ble^e^x^c^l^ude^s^e^m^e^r^g^e^nc^y^f^unding^pr^ov^ide^d^{to C}^D^B^G^{in r}^e^s^pons^e^{to dis}^a^s^t^e^r^s^.
HOME Block Grants. The HOME Investment Partnerships program is a
housing block grant program administered by HUD designed to expand the supply
of decent, safe, sanitary, and affordable housing. (The program is codified at 42 USC
§§12741 et seq.) HOME funds are provided via formula allocation; 60% of funds
are awarded to participating jurisdictions (which have populations above a certain
threshold) and 40% are awarded to states to use in areas not served by participating
jurisdictions. HOME grantees must match 25% of their HOME grants (with some
exceptions) and submit a plan to HUD detailing their community needs and
priorities.
HOME funds can be used for four main purposes: homeowner rehabilitation,
homebuyer assistance, rental construction and rehabilitation, and the provision of
tenant-based rental assistance. In 2003, Congress added a special set-aside of
funding, called the American Dream Downpayment Initiative (ADDI) program,
which can be used only for downpayment and closing cost assistance for eligible first
time homebuyers. All HOME funds must be used to benefit low-income families
(those with incomes at or below 80% of the area median income) and at least 90%
of funds must be used to benefit families with incomes at or below 60% of area
median income.

Table 6. Appropriations for HOME, FY1999-FY2007
⁽^$ⁱⁿ^m^illioⁿ^s⁾
^FY^HOM^E^Form^{ula G}^r^ants^Set-As^ides^HOM^E^{Account T}^o^tal
¹⁹⁹⁹^1,550⁵⁰^1,600
²⁰⁰⁰^1,553⁴⁷^1,600
²⁰⁰¹^1,734⁶²^1,796
²⁰⁰²^1,743⁵³^1,796
²⁰⁰³^1,850¹³⁷^1,987
²⁰⁰⁴^1,855¹⁵⁰^2,006
²⁰⁰⁵^1,785¹¹⁵^1,900
²⁰⁰⁶^1,677⁸¹^1,757
²⁰⁰⁷^1,677⁸¹^1,757
²⁰⁰⁸^1,625⁷⁹^1,704
^S^o^u^rce:^{FY1999-FY2005 da}^ta^prov^ide^d^by^{HUD to CRS}^{; FY2006-FY2007 da}^ta^a^v^a^ila^ble^f^r^om^HUD’s^w^e^bsite
^[^h^t^t^p^:^/^/^www.^hud.g^o^v^/^of^fⁱ^c^e^s^/c^pd/a^bout/budg^e^t/]^{; FY2008 da}^ta^ta^k^e^{n f}^r^om^{HUD FY2009 Cong}^re^ssiona^{l Budg}^e^t
^Justif^ic^a^tions.
^Note:^Iⁿ^a^{ddition to f}^unding^H^O^M^{E bloc}^k^g^r^aⁿ^ts^{, the}^H^O^M^E^a^c^c^ount^is^a^l^s^o^us^e^d^{to f}^{und the}^A^m^e^r^ic^aⁿ^D^r^e^a^m
^D^o^w^npa^y^m^eⁿ^t^Initia^tiv^e^a^nd^othe^r^s^e^t-a^s^ide^s^{, inc}^l^uding^hous^ing^c^ouns^e^ling^a^s^sⁱ^s^t^aⁿ^c^e^a^{nd f}^unding^f^o^{r ins}^u^la^r
^areas.
Homeless Assistance Grants. HUD administers four homeless assistance
grants, three of which were enacted in 1987 as part of the McKinney-Vento
Homeless Assistance Act (P.L. 100-77). (The Homeless Assistance Grants are
codified at Title 42, Chapter 119, Subchapter IV of the United States Code.) The four
homeless assistance grants are (1) the Emergency Shelter Grants (ESG) program,²⁴
(2) the Supportive Housing Program (SHP), (3) the Single Room Occupancy (SRO)
program, and (4) the Shelter Plus Care (S+C) program.²⁵ The four grants are
distributed to local communities through both formula allocations and a competitive
grant process. Depending on the program under which funds are awarded, grantees
may use their awards to provide permanent supportive housing, transitional housing,
and supportive services for homeless individuals.
The ESG program funds are distributed by formula to both local communities
and states, and may be used by grantees to address the emergency requirements of
persons experiencing homelessness. The other three homeless assistance grants —
SHP, SRO, and S+C — focus on the longer term needs of persons experiencing
homelessness — transitional and permanent housing together with supportive
services. Funds for each of the three grants are distributed through a competition in
which local communities (usually cities, counties, or combinations of both)
collaborate and apply for funds through HUD’s “Continuum of Care” process. SHP
funds may be used for transitional housing for homeless individuals and families for
up to 24 months, permanent housing for disabled homeless individuals, and
supportive services. The SRO program provides permanent housing to homeless

²⁴ ESG was enacted one year prior to McKinney-Vento as part of the Continuing
Appropriations Act for FY1987 (P.L. 99-591). However, it was made part of McKinney-
Vento.
²⁵ The S+C program was authorized in 1990 by the Stewart B. McKinney Homeless Act
Amendments (P.L. 101-645).

individuals in efficiency units where bathroom and kitchen facilities are shared. The
S+C program provides permanent supportive housing for disabled homeless
individuals and their families. (For more information about the Homeless Assistance
Grants, see CRS Report RL33764, The HUD Homeless Assistance Grants:
Distribution of Funds, by Libby Perl.)
Table 7. Appropriations for the Homeless Assistance Grants
and HOPWA, FY1999-FY2008
⁽^$ⁱⁿ^m^illioⁿ^s⁾
^F^Y^H^o^m^e^le^{ss Assist}^aⁿ^c^e^Gr^aⁿ^t^s^H^O^P^WA
¹⁹⁹⁹⁹⁷⁵²²⁵
²⁰⁰⁰^1,020²³²
²⁰⁰¹^1,123²⁵⁷
²⁰⁰²^1,123²⁷⁷
²⁰⁰³^1,217²⁹⁰
²⁰⁰⁴^1,260²⁹⁵
²⁰⁰⁵^1,229²⁸²
²⁰⁰⁶^1,327²⁸⁶
²⁰⁰⁷^1,442²⁸⁶
²⁰⁰⁸^1,586³⁰⁰
^S^o^u^rce:^{HUD Budg}^e^t^Justif^ic^a^{tions, FY2001 th}^roug^{h FY2009.}
Housing Opportunities for Persons With AIDS. The Housing
Opportunities for Persons with AIDS (HOPWA) program is the only federal program
that provides funding specifically for housing for persons with acquired
immunodeficiency syndrome (AIDS) and related illnesses. Congress established the
HOPWA program as part of the National Affordable Housing Act (P.L. 101-625) in
1990. (The program is codified at 42 U.S.C. §§12901-12912.) HOPWA program
funding is distributed both by formula allocations and competitive grants. HUD
awards 90% of appropriated funds by formula to states and eligible metropolitan
statistical areas (MSAs) that meet thresholds regarding population, AIDS cases, and
AIDS incidence. Recipient states and MSAs may allocate grants to nonprofit
organizations or administer the funds through government agencies. HOPWA
grantees may use funds for a wide range of housing, social services, program
planning, and development costs. (For more information about HOPWA, see CRS
Report RL34318, Housing Opportunities for Persons with AIDS (HOPWA), by Libby
Perl.)
NAHASDA. The Native American Housing Assistance and Self-Determination
Act of 1996 (NAHASDA, P.L. 104-330), reorganized the system of federal housing
assistance to Native Americans by separating Native American programs from the
public housing program, and by eliminating several separate programs of assistance
and replacing them with a single block grant program. In addition to simplifying the
process of providing housing assistance, the purpose of NAHASDA was to provide
federal assistance for Indian tribes in a manner that recognizes the right of Indian
self-determination and tribal self-governance.
The act provides block grants to Indian tribes or their tribally designated housing
entities (TDHE) for affordable housing activities. The tribe must submit an Indian
housing plan (IHP), with long- and short-term goals and proposed activities, which

is reviewed by HUD for compliance with statutory and regulatory requirements.
Funding is provided under a needs-based formula, which was developed pursuant to
negotiated rule-making. Tribes and TDHEs can leverage funds, within certain limits,
by using future grants as collateral to issue obligations under a guaranteed loan
program.
Table 8. Appropriations for NAHASDA, FY1999 - FY2008
⁽^$ⁱⁿ^m^illioⁿ^s⁾
^FY^NAHASDA
¹⁹⁹⁹⁶²⁰
²⁰⁰⁰⁶²⁰
²⁰⁰¹⁶⁵⁰
²⁰⁰²⁶⁴⁹
²⁰⁰³⁶⁴⁵
²⁰⁰⁴⁶⁵⁰
²⁰⁰⁵⁶²²
²⁰⁰⁶⁶²⁴
²⁰⁰⁷⁶²⁴
²⁰⁰⁸⁶³⁰
^S^o^u^rce:^{HUD Budg}^e^t^Justif^ic^a^{tions, FY2001-}^{FY2009, a}^{nd A}^ppropr^ia^{tions A}^c^ts.
Homeownership Assistance
Federal Housing Administration. The Federal Housing Administration
(FHA) is an agency within HUD that insures mortgages made by private lenders.
Since lenders are insured against loss if borrowers default, they are willing to make
loans to borrowers who might not otherwise be served by the private market,
particularly those with low downpayments or little credit history. FHA-insured
borrowers pay an insurance premium to FHA and are subject to limits on the size of
loan that they can obtain.
The FHA administers a variety of mortgage insurance products, including
insurance for home purchase and home improvement loans, reverse mortgages to
allow the elderly to remain in their homes, as well as loans for the purchase, repair,
or construction of apartments, hospitals, and nursing homes. The programs are
administered through two program accounts — the Mutual Mortgage
Insurance/Cooperative Management Housing Insurance fund account (MMI) and the
General Insurance/Special Risk Insurance fund account (GI/SRI). The MMI fund
provides insurance for home mortgages. The GI/SRI fund provides insurance for
more risky home mortgages, for multifamily rental housing, and for an assortment
of special purpose loans such as hospitals and nursing homes.
Table 10 presents the FHA share of the home mortgage market for FY1998 -
FY2007. The share of home purchases financed with an FHA-insured mortgage each
year was about 14% for FY1999 through FY2001 and then it began to decline to a
low of 4% in FY2006. The FHA share of loans doubled between FY2006 and
FY2007, as FHA obtained a higher share of a smaller mortgage market. For more

information on FHA, see CRS Report RS20530, FHA Loan Insurance Program: An
Overview, by Bruce Foote and Meredith Peterson.
Table 9. FHA Share of Mortgage Market, FY1998 - FY2007
^Num^b^{er of FHA-I}ⁿ^s^u^red^FHA^-^Iⁿ^s^u^red^M^o^rtgages^as
^FY^M^o^rtgages^Ori^gⁱⁿ^ated^a^{% o}^f^{All H}^o^m^e^Sa^les
⁽⁰⁰⁰⁾
¹⁹⁹⁸⁷⁹⁰¹³
¹⁹⁹⁹⁹¹¹¹⁴
²⁰⁰⁰⁸⁵⁸¹⁴
²⁰⁰¹⁸⁷²¹⁴
²⁰⁰²⁸⁰⁸¹²
²⁰⁰³⁶⁵⁷⁹
²⁰⁰⁴⁵⁰⁶⁶
²⁰⁰⁵³⁴⁶⁴
²⁰⁰⁶³⁰²⁴
²⁰⁰⁷²⁸⁹⁸
^S^o^u^rce:^{HUD, [}^h^ttp^://^www.^hud.g^o^v^/^of^fⁱ^c^e^s^/hs^g^/c^om^p/r^p^ts^/f^ha^m^k^ts^h/f^h^a^m^k^t^c^u^r^r^e^nt.pdf^]^.
Department of Veterans Affairs Loan Guarantees. The Servicemen’s
Readjustment Act of 1944 (P.L. 78-346) established the home loan guaranty
program, which is now administered by the Department of Veterans Affairs (VA).
The VA loan guaranty program was an alternative to cash bonuses for the millions
of men and women who served in the Armed Forces during World War II.
Under this program, an eligible veteran may purchase a home through a private
lender and the VA guarantees to pay the lender a portion of the losses if the veteran
defaults on the loan, similar to FHA. While initially established to benefit veterans
who had served during war times, the program has been amended to extend eligibility
to all parties who are on active duty or honorably discharged from the services. The
main objective of the current VA home loan guaranty program is to help veterans
finance the purchase of homes on favorable loan terms.
Table 11 presents the VA-insured share of the home mortgage market for
FY1998 to FY2007. The total number of VA-insured loans originated per year as a
share of all home sales declined from 8% in FY1999 to 2% in FY2005 through
FY2007. For more information on VA home loans, see CRS Report RS20533,
VA-Home Loan Guaranty Program: An Overview, by Bruce Foote and Meredith
Peterson.

Table 10. VA Share of Mortgage Market, FY1998 - FY2007
^Num^b^{er of VA-I}ⁿ^s^u^red^V^A^-^Iⁿ^s^u^red^M^o^rtgages^as^a
^FY^M^o^rtgages^Ori^gⁱⁿ^ated^{% o}^f^{All H}^o^m^e^Sa^les
⁽⁰⁰⁰⁾
¹⁹⁹⁸³⁴⁴⁶
¹⁹⁹⁹⁴⁸⁶⁸
²⁰⁰⁰¹⁹⁹³
²⁰⁰¹²⁵⁰⁴
²⁰⁰²³¹⁷⁵
²⁰⁰³⁴⁸⁹⁷
²⁰⁰⁴³³⁶⁴
²⁰⁰⁵¹⁶⁶²
²⁰⁰⁶¹⁴³²
²⁰⁰⁷¹³³²
^S^o^u^rce:^VA^loaⁿ^da^ta^pr^ov^ide^d^to^C^R^S^by^U^.^{S. D}^e^pa^r^t^m^e^{nt of}^Ve^te^r^a^ns^A^f^f^a^ir^s^.^T^o^ta^{l m}^a^r^k^e^t^da^ta^ta^k^e^{n f}^r^om
^{HUD’s w}^e^b^s^{ite at [}^h^ttp^://^www.^hud.g^o^v^/^of^fⁱ^c^e^s^/hs^g^/c^o^m^p^/^r^p^ts^/f^ha^m^k^ts^h/f^h^a^m^k^t^c^u^r^r^e^nt.pdf^]^.^P^e^r^c^eⁿ^ta^g^e^s
^cal^cu^l^a^t^e^d^b^y^CRS^.
Federal Home Loan Banks. The Federal Home Loan Banks (FHLB; the
Banks) were created in 1932 by the Federal Home Loan Bank Act (P.L. 72-304) to
serve as lenders to savings and loan associations, which at the time made the majority
of home mortgage loans. The Banks were established to ensure the liquidity of these
lenders, and today lend money to commercial banks, credit unions, and insurance
companies in addition to savings and loans. The FHLB System includes twelve
regional wholesale Banks and an Office of Finance. Each Bank is a separate legal
entity, cooperatively owned by its member financial institutions, and has its own
management, employees, and board of directors. Each Bank is assigned a distinct
geographic area.
Although the Federal Home Loan Banks are not subject to federal income tax,
they do pay 20% of their net earnings to fund a portion of the interest on the
Resolution Funding Corporation (REFCorp) debt, which was issued for the
resolution of insolvent savings and loans association during the 1980s. In addition,
the Federal Home Loan Banks contribute the greater of 10% of their net income or
$100 million toward an Affordable Housing Program, the purpose of which is to
extend grants and subsidized housing loans to very low- to moderate-income families
and individuals. The Affordable Housing Program includes a First-time Homebuyer
Program which enables up to $10,000 to be awarded to eligible homebuyers for
downpayment and closing cost assistance. For more information, see CRS Report
RL32815, Federal Home Loan Bank System: Policy Issues, by Edward Vincent
Murphy.
Department of Agriculture Rural Housing Loans. Through the Section
502 Guaranteed Rural Housing Loan program, USDA is authorized to make both
direct loans and to guarantee private loans to very low- to moderate-income rural
residents for the purchase or repair of new or existing single-family homes. (The
program is codified at 42 U.S.C. §1472.) The direct loans have a 33-year term and
interest rates may be as low as 1%. Borrowers with incomes at or below 80% of area
median income qualify for the direct loans. The guaranteed loans have 30-year
terms, and borrowers with incomes at or below 115% of the area median qualify.

Priority for both direct and guaranteed loans is given to first-time homebuyers, and
USDA may require that borrowers complete a homeownership counseling program.
Through the Section 504 program, the USDA makes loans and grants to very
low-income homeowners (those with incomes at or below 50% of area median
income) for home repairs or improvements, or to remove health and safety hazards.
(The program is codified at 42 U.S.C. §1474.) The Section 504 grants may be
available to homeowners who are age 62 or older. To qualify for the grants, the
elderly homeowners must lack the ability to repay the full cost of the repairs.
Depending on the cost of the repairs and the income of the elderly homeowner, the
owner may be eligible either for a grant that will cover the full cost of the repairs, or
for some combination of loan and grant. For more information, see CRS Report
RL33421, USDA Rural Housing Programs: An Overview, by Bruce Foote.
Section 235. The Section 235 program, enacted as part of the Housing and
Urban Development Act of 1968 (P.L. 90-448), helped to subsidize the home
purchases of individual borrowers. Through the program, FHA provided a monthly
subsidy payment to lenders in order to reduce the interest liability of loans made to
eligible borrowers. As originally enacted and administered, homebuyers were
required to pay at least 20% of their income toward debt service on their mortgages,
and FHA paid the lenders the lesser of (1) balance of the monthly payment due after
the borrowers paid 20% of their income or (2) the difference between the required
payments at the FHA interest rate and the payments that would be due on a loan with
a 1% interest rate. As a result, the subsidy to homeowners varied depending upon
their income, the amount of the mortgage, and the market interest rate.
The Section 235 program had a two-tiered eligibility component. At least 80%
of program funds were made available for homebuyers with incomes that did not
exceed 135% of the maximum income for admission to public housing. Applicants
in this group could purchase homes with downpayments as low as $200. The
remaining 20% of program funds were available for a higher income group.
Applicants in this group had to make downpayments of at least 3% of the sales price.
New commitments under the Section 235 program were halted by the 1973 Nixon
moratorium; a revised version of the program was reactivated in 1976. The Section
235 program was terminated as of October 1, 1989 by the Housing and Community
Development Act of 1987 (P.L. 100-242); however, roughly 4,000 families continue²⁶
to be assisted by the program.
Mortgage Interest Deduction. Homeownership promotion has generally
taken two forms: government assistance in the financing of home purchases, and tax
preferences favoring homeowners. One of the tax incentives that promotes
homeownership is the mortgage interest deduction. The mortgage interest deduction
allows homeowners to deduct any interest paid on their mortgage from their taxable
income, thus reducing their tax liability. The deduction benefits those households
that own homes, that have a mortgage on which they pay interest, that have federal
income tax liability, and for whom itemized deductions exceed the standard

²⁶ HUD, Congressional Justifications for FY2009, p. K-1.

deduction (approximately 75% of taxpayers take the standard deduction). It is not
targeted to lower-income households.
Although the mortgage interest deduction was not initially created to promote
homeownership,²⁷ today, the mortgage interest deduction could be considered the
federal government’s largest housing program. According to the Joint Committee
on Taxation (JCT), in FY2007, the mortgage interest deduction resulted in a $73.7
billion tax expenditure.²⁸
Issues and Trends in Housing Assistance Programs
Incidence of Housing Problems
When the federal housing assistance programs began in the 1930s, the nation
was considered to be ill-housed. The Housing Act of 1937 identified an “acute
shortage of decent, safe, and sanitary dwellings.” Thanks in part to stricter building
codes and standards, most housing in the United States today is decent, safe, and
sanitary. Although some units are still considered substandard, today the greatest
perceived housing problem is affordabililty. Housing is considered “affordable” if
it costs no more than 30% of a household’s income. Households that pay half or
more of their income toward their housing costs are considered severely cost
burdened; households that pay between 30% and 50% of their income toward their
housing costs are considered moderately cost burdened. According to data from the
Census Bureau’s American Community Survey, 20 million households were
moderately cost burdened and 17 million households were severely cost burdened in

2005.²⁹

HUD is directed to report to Congress periodically on the incidence of “worst
case” housing needs. Worst case housing needs are defined as unassisted renters
with very low incomes (at or below 50% of area median income) who pay more than
half of their income for housing costs or live in severely substandard housing. In a
report to Congress on worst case housing needs, HUD found that roughly 6 million
households had worst case housing needs in 2005, accounting for 5.5% of all

²⁷ As described in CRS Report RL33025, Fundamental Tax Reform: Options for the
Mortgage Interest Deduction, by Pamela Jackson, when the federal income tax was
instituted in 1913, all interest payments were deductible. Over time, mortgage interest
became distinguishable from other interest, and the deductibility of mortgage interest was
separated and maintained (although changes have been made over time), while the
deductibility of personal interest payments was eliminated.
²⁸ Joint Committee on Taxation, Estimates of Federal Tax Expenditures for Fiscal Years
2007-2011, committee print, 110^th Cong., September 27, 2007. The Joint Committee on
Taxation (JCT) measures a tax expenditure as the difference between tax liability under
present law and tax liability computed without the tax expenditure provision. The JCT
assumes all other tax expenditures remain in the tax code and that taxpayer behavior is
unchanged.
²⁹ Harvard Joint Center for Housing Studies, “State of the Nation’s Housing, 2007,” Table
A-6.

households.³⁰ This was a statistically significant increase from 2003, when 5.2
million households had worst case housing needs (4.9% of all households). Prior to
the increase in 2005, the percentage of households having worst case housing needs
had remained relatively steady — roughly 5% — since HUD began reporting on
worst case housing needs in 1991. The vast majority of households with worst case
housing needs (91%) were severely cost burdened, but lived in standard housing;
only about 4% of households had worst case housing needs solely because they lived
in substandard housing. In other words, their worst case housing needs were a
function of the cost of their housing to a much greater extent than the condition of
their housing.
Characteristics of Families Receiving Assistance
Public housing, Section 8 vouchers, and the project-based rental assistance
programs (including project-based Section 8, Section 202 and Section 811) combined
serve roughly 4 million households and can be considered the primary housing
assistance programs for low-income families. These three forms of assistance are
similar in many ways. They all target assistance to extremely low-income families,
require families to pay 30% of their incomes toward rent, and generally have long
waiting lists for assistance. However, the three vary significantly in terms of their
evolution, the structure of their benefit (a portable voucher versus a housing unit),
and their administration (PHA versus private owner).
The similarities and differences in the programs themselves result in similarities
and differences in the characteristics of the households they serve. Table 11
provides household characteristics data for participants in the Section 8 tenant-based
voucher program, the public housing program, and the project-based rental assistance
programs (including project-based Section 8, housing for the elderly and disabled,
and the rental assistance payment programs).

³⁰ Department of Housing and Urban Development, “Affordable Housing Needs 2005:
Report to Congress,” May 2007.

Table 11. Characteristics of Households Served in
Selected Housing Assistance Programs
^Tena^nt^-^Public^Project-
^Bas^e^d^Hou^sⁱⁿ^g^Bas^e^d
^Hou^s^eh^ol^d^C^h^aracteri^s^tⁱ^c^s
^El^derl^y^H^{ead of}^H^o^u^s^eh^ol^d^16%^32%^48%
^Dⁱ^s^a^bl^{ed H}^{ead of}^H^o^u^s^eh^ol^d^25%^20%^15%
^A^l^l^H^o^u^s^eh^ol^ds^wⁱ^t^h^C^hⁱ^l^d^ren^59%^42%^29%
^N^oⁿ^-^Marri^{ed F}^e^m^a^l^e^H^{ead of}^H^o^u^s^eh^ol^{d Wi}^t^h^C^hⁱ^l^d^ren^54%^38%^26%
^Ra^{ce a}^{nd Et}^hnicit^y⁽^H^ea^{d o}^f^H^o^useho^l^d)
^Whⁱ^t^e^54%^50%^63%
^Bl^ack^43%^47%^32%
^His^p^an^{ic (an}^y^race)^16%^21%^11%
^Hou^s^eh^ol^d^Iⁿ^com^e⁽²⁰⁰⁴⁾
^M^e^dⁱ^aⁿ^A^nnua^l^Iⁿ^c^o^m^e^$⁹^,⁵⁰⁰^$⁸^,⁴⁰⁰^$⁹^,³⁰⁰
^Z^e^{ro In}^com^e^4%^5%^5%
^{Source of I}ⁿ^com^e^{(All Hous}^eholds⁾
^Aⁿ^y^Wag^e^s^37%^31%^22%
^Aⁿ^y^Wel^f^are^24%^17%^9%
^Aⁿ^y^So^{cial Secu}^r^ity^{, P}^eⁿ^s^ioⁿ^,^o^r^Disab^ility^Iⁿ^co^m^e²⁸^%³⁹^%⁶⁵^%
^{Source of I}ⁿ^com^e^(Non-e^{lderly, Non-dis}^a^bled)
^Aⁿ^y^Wag^e^s^55%^54%^49%
^Aⁿ^y^Wel^f^are^29%^25%^17%
^Aⁿ^y^So^{cial Secu}^r^ity^{, P}^eⁿ^s^ioⁿ^,^o^r^Disab^ility^Iⁿ^co^m^e⁶^%⁶^%¹⁰^%
^{Tenure (}ⁱ^{n y}^e^a^r^s)
²⁵^t^h^P^e^r^cen^tile¹^.⁸¹^.9¹^.⁷
^Medi^an^3.4⁵^.3^3.8
⁷⁵^t^h^P^e^r^cen^tile⁶^.⁶¹²^.¹⁸^.6
^Lo^c^a^tⁱ^oⁿ
^S^u^bu^rb^32%^17%^28%
^C^eⁿ^t^ral^Cⁱ^t^y^47%^54%^50%
^N^oⁿ^-^Met^r^{o A}^r^ea^21%^29%^21%
^S^o^u^rce:^Calcu^l^ated^b^y^CRS^,^b^a^sed^oⁿ^d^a^{ta p}^r^o^v^id^ed^b^y^HUD.
^Note:^D^a^ta^r^e^f^l^e^c^t^pa^r^tic^ipa^ting^hous^e^holds^{in D}^ecem^b^e^r^2004.
The Section 8 (tenant-based) voucher program serves more single, female-
headed households with children than do the public housing program or project-
based programs. In 2004, over half of voucher households were households with
children headed by unmarried females, compared to less than 40% of public housing
households and less than 30% of project-based households. The project-based
programs primarily serve elderly and disabled households, who account for nearly
two-thirds of all households served in those programs. This is not surprising given
that owners of project-based housing may designate entire properties for elderly or
disabled households. Public housing is more evenly divided, with about half of all
households being elderly or disabled.
In all three programs, the majority of households served have heads of
household who identify their race as white, although all three serve a substantial
number of households whose heads identify their race as black. Public housing
serves the highest proportion of black households, 47% compared to 43% in the

voucher program and 32% in the project-based programs. Between 10% and 20%
of households served across the three programs have heads of household who identify
their ethnicity as Hispanic, with public housing again having the largest share.
Public housing is also more concentrated in central cities than are vouchers or
project-based units.
The rules governing the three main housing assistance programs require that
they serve low-income households. In 2004, the median household income across
the three programs ranged from $8,400 in the public housing program to $9,500 in
the voucher program. The median income of the households served in the HUD
programs was less than one-fifth of national median income. (In FY2004, national
median income for a family of four was $57,500.³¹) Across all three programs,
roughly 5% of households reported having zero income.
Given the differences in characteristics of households served by each program,
it is not surprising that the source of tenant income varies significantly by program.
Among households receiving project-based rental assistance, nearly two-thirds
reported receiving pension income, Social Security income, or disability-related fixed
income. In the voucher program, which serves fewer elderly and disabled households
than the project-based programs, nearly as many households reported receiving some
income from welfare as receiving income from pension, Social Security, or
disability-related payments. In the public housing program, a little over a third of
households reported receiving income from Social Security, pension, or disability
payments and a little under a third reported income from work.
Unlike the Temporary Assistance for Needy Families (TANF) program, the
housing assistance programs do not contain a requirement that recipients obtain
employment, with the exception of an 8-hour per month community service
requirement for non-working, non-elderly, non-disabled public housing residents.
There have been proposals offered in Congress to institute a work requirement for
recipients of assisted housing, and some public housing authorities have
experimented with instituting such requirements. Looking at non-elderly, non-
disabled households across the three programs, half or more of all households have
at least some income from work.
Concern has been raised that perhaps the income-based rent structure in the
assisted housing programs acts as a disincentive for households to increase their
earnings; for every new dollar a family earns, thirty-cents must go toward rent.³²
There have been some efforts to mitigate this perceived work disincentive, including
the adoption of an earned income disregard in the public housing program and an
earned income disregard for disabled families in the voucher program. Congress also
developed the Family Self Sufficiency (FSS) program in an effort to promote work.
Families in the FSS program enter into contracts with their PHAs in which they agree
to take steps toward becoming self sufficient within five years. The PHA, in turn,
agrees to deposit any increased rent collected as a result of the family’s increased

³¹ See [http://www.huduser.org/Datasets/IL/IL04/BRIEFING-MATERIALs.pdf].
³² lsen, Edgar, et al., Effects of Different Types of Housing Assistance on Earnings and
EmploymentCityscape: A Journal of Policy Development and Research, vol. 8, no. 2, 2005.

earnings into an escrow account that the family will receive at the end of the five
years, or from which they can make interim withdrawals for approved purposes. FSS
is voluntary for PHAs to administer and voluntary for families to join.
Also unlike TANF, the housing assistance programs do not have time limits.
Once a household begins receiving housing assistance, that household can continue
to receive assistance for as long as they wish to participate in the program and
continue to comply with program rules. Families whose incomes increase above the
initial eligibility thresholds can continue to receive assistance until 30% of their
income is equal to their rent. At that point, they no longer qualify for rental
assistance under the voucher program, and in the case of the public housing program,
they can continue to live in their apartments and pay market rate rent. Among the
households receiving assistance in December 2004, the median length of time that
households had lived in assisted housing (tenure) was greatest in the public housing
program, at just over five years, and shortest in the voucher program, at just under
three and a half years.³³
The Federal Government’s Role in Housing
Beginning in the 1980s, the federal government took on a lesser role in the
creation of assisted housing. This occurred in several ways. Congress ceased funding
new construction under the Section 8 project-based program, which from its
enactment in 1974, had subsidized hundreds of thousands of units of assisted
housing. This left very few active programs in which HUD supported the
development of physical housing units. Between 1976 and 1982, the federal housing
programs produced more than one million units of subsidized housing.³⁴ In the
following years, however, annual production was around 25,000 new subsidized
units.³⁵ Around the time that housing production was declining, Congress created
two programs that gave a good deal of control over decisions regarding housing
policy and development to state and local governments — these included the Low
Income Housing Tax Credit (LIHTC) program and the HOME Investment
Partnerships program. These programs, particularly the LIHTC, have been used by
states and localities to create hundreds of thousands of units of affordable housing.
The federal government’s decision to take a lesser role in the development of
housing has had several consequences. First, state and local governments have taken
on an increased role in providing affordable housing and establishing priorities in
their communities.³⁶ Second, due to a reduction in the number of new affordable
housing units that are created each year, the need to preserve existing affordable
housing units has taken on a new importance. A third consequence is the need for

³³ Median length of stays taken from point-in-time data cannot predict how long a household
entering a housing program is likely to stay.
³⁴ The National Housing Task Force, A Decent Place to Live, March 1988. See S.Hrg. 100-

689, p. 142.

³⁵ Ibid.
³⁶ Michael A. Stegman, State and Local Affordable Housing Programs: A Rich Tapestry
(Washington, DC: Urban Land Institute, 1999).

multiple streams of funding other than federal grants in order both to support the
creation of new affordable housing units and to preserve existing units. Those three
consequences are discussed more fully below.
First, with the advent of both the LIHTC program and the HOME program,
states and localities were able to exercise discretion in determining how to prioritize
and develop housing using a larger pool of federal funds. Until that point, even
though states, through their Housing Finance Agencies, helped finance mortgage
loans and affordable rental housing, their role was limited by the amount of funds
available.
In the Low Income Housing Tax Credit program, states develop plans in which
they may set aside a certain percentage of tax credits for populations such as
homeless individuals or persons with disabilities. They may also decide to use tax
credits to preserve existing housing as well as to build new housing. Funds that
states receive from the HOME program may be used for the construction of new
rental housing and rental assistance for low-income households. A potential
drawback of these programs is their inability, on their own, to reach the neediest
households.³⁷ For example, in a LIHTC development, at least 20% of units must be
affordable to households at or below 50% of area median income, or 40% of units
must be affordable to households at or below 60% of area median income. Many of
the older HUD programs constructed housing that was affordable to households at
or below 30% of area median income — those considered extremely low-income.
Often these households cannot afford units in LIHTC properties without rental
subsidies, such as Section 8 vouchers.³⁸
Another way some states and local governments support affordable housing is
outside of the assistance of the federal government, through establishment of their
own housing trust funds. These trust funds use dedicated funding sources such as
document recording fees or real estate transfer taxes to create a pool of funds for
affordable housing. By using a dedicated source of financing, trust funds may not be
as subject to the vicissitudes of state budgets as are other means of funding housing
development. States and local communities also support affordable housing through
inclusionary zoning. Through this method, housing developers are expected to
dedicate a percentage of units they build as affordable housing. In exchange, states
or local communities give developers incentives that allow them to expand or speed
up the pace of development. Some of the incentives include density bonuses or
zoning variances that allow developers to build larger facilities than they would be
able to under existing zoning regulations, as well as expedited approval of building
permits.

³⁷ See, for example, Recapitalization Advisors, Inc., The Low Income Housing Tax Credit
Effectiveness and Efficiency: A Presentation of the Issues, March 4, 2002, p. 11, available
at [http://www.affordablehousinginstitute.org/resources/library/MHC_LIHT.pdf].
³⁸ Ethan Handelman, Jeffrey Oakman, and David A. Smith, The Interaction of LIHTC and
Section 8 Rents, Recapitalization Advisors, Inc., January 30, 2007, p. 4, available at
[ h t t p : / / www.r ecapadvi sor s .com/ pdf / W u% 2061.pdf ] .

A second consequence of the decreased role of the federal government in the
creation of affordable housing units is the increased pressure to maintain the
affordability of existing units. Many HUD subsidized units that were developed in
the 1960s and 1970s through programs such as Section 236 and Section 221(d)(3),
as well as those units that received Section 8 project-based rental assistance, are no
longer available to low-income households. At the time the properties were
developed, building owners entered into contracts with HUD in which they agreed
to maintain affordability for a certain number of years. The duration of these
contracts varied; depending on the federal program, these contracts, or “use
restrictions” may last between 15 years (the Low Income Housing Tax Credit
program) and 50 years (early Section 202 developments). In recent years, these
contracts have begun to expire or, in some cases, property owners have chosen to pay
off their mortgages early and end the use restrictions. Contracts for rental assistance,
including project-based Section 8 rental assistance, have also begun to expire. When
any of these events occur, owners may charge market-rate rents for the units, and the
affordable units are lost. The term used to refer to efforts to maintain the affordability
of these housing units is “affordable housing preservation.” In coming years, more
and more property owners will be in a position to opt out of affordability restrictions
and thousands of units could be lost.³⁹
Congress has attempted to enact laws that would preserve affordable housing
units; however, due to the temporary nature of some of the measures, preservation
remains a concern. Congress first enacted legislation to help preserve affordable
rental housing in 1987. The Emergency Low-Income Housing Preservation Act
(ELIHPA), enacted as part of the Housing and Community Development Act of 1987
(P.L. 100-242), was a temporary measure that prevented owners of Section 236 and
Section 221(d)(3) properties from prepaying their mortgages. In 1990, the Low-
Income Housing Preservation and Resident Homeownership Act (LIHPRHA),
enacted as part of the Cranston-Gonzalez National Affordable Housing Act (P.L.

101-625), offered incentives to owners to keep them from prepaying their mortgages.

However, six years after LIHPRHA was enacted, Congress reinstated the right of
owners to prepay their mortgages. (See P.L. 104-134.) Another effort to preserve
affordable housing was enacted as part of the Multifamily Assisted Housing Reform
and Accountability Act (MAHRA, P.L. 105-65). Through this effort, called Mark-to-
Market, HUD restructures the debt of building owners while at the same time
renegotiating their rental assistance contracts. Unlike ELIHPA and LIHPRHA, the
Mark-to-Market program is still in effect.
A third consequence of decreased federal funding for the construction of
affordable housing is the need for low-income housing developers to bring together
multiple funding streams in order to build a development. When the federal
government first began to subsidize the production of affordable housing, in many
cases the funds appropriated for housing programs were sufficient to construct or
rehabilitate the affordable units without the need for funds from the private financial
markets. Over the years, however, federal programs that provide grants for the

³⁹ For example, according to HUD’s database of Section 236 properties with active loans,
at least 1,200 loans representing 137,000 units will have mortgages that mature over a five-
year period between 2008 and 2013.

construction of multifamily housing for low-income households have become a
smaller portion of the government’s housing portfolio. At the same time, the grants
themselves have become a smaller portion of the total amount needed to support the
development of affordable housing. As a result, it has become necessary for
developers to turn to multiple sources of financing, including Low Income Housing
Tax Credits, tax exempt bonds, and state or local housing trust funds. In addition,
it is often necessary for building owners to seek rent subsidies through programs like
Section 8, HOME, and Shelter Plus Care to make renting to very low- or extremely
low-income households feasible.
The interactions among these various financing streams can be complex, and
putting together a development plan may require the expertise of housing finance
professionals.
Shift to Tenant-Based Assistance
Over time, the number of Section 8 vouchers provided and funded by the federal
government has grown, while the number of federally-subsidized housing units —
through project-based Section 8 rental assistance and public housing — has declined.
From 1998 to 2007, the number of vouchers has increased by more than half a
million;⁴⁰ over the same time period, the number of public housing units declined by
over 140,000 units⁴¹ and the number of project-based Section 8 units declined by
about 120,000 units.⁴²
This change from project-based assistance to tenant-based assistance is due, in
part, to Congress’ decision to increase the voucher program by creating new vouchers
after new construction in the project-based Section 8 program and public housing
program had been halted.⁴³ Between FY1998 and FY2007, Congress authorized and
funded 276,981 new vouchers — referred to as incremental vouchers.⁴⁴ Some of

⁴⁰ From roughly 1.6 million vouchers in FY1998 to 2.1 million vouchers in FY2007. The
1998 estimate of Section 8 vouchers is taken from the Government Accountability Office
Report, GAO-06-405, Rental Housing Assistance: Policy Decisions and Market Factors
Explain Changes in the Costs of the Section 8 Programs, April 28, 2006; the 2007 estimate
was taken from the FY2009 HUD Congressional Budget Justifications. Note that the
methodology for counting Section 8 vouchers has changed over time, therefore, the 2007
count may underestimate the number of vouchers.
⁴¹ From just under 1.3 million units in FY1998 to just under 1.16 million units in FY2007.
Data on public housing units are taken from HUD Congressional Budget Justifications.
⁴² From just under 1.4 million units in CY1998 to just under 1.29 million units in FY2007.
Data on project-based Section 8 units are taken from Econometrica, et al., Multifamily
Properties: Opting In, Opting Out and Remaining Affordable, January 2006 (CY1998 data,
Table 2.2) and HUD Congressional Budget Justifications (FY2007 data). Note that for
project-based figures, a calendar year figure is compared to a fiscal year figure.
⁴³ The authority to enter into new project-based Section 8 contracts was repealed in 1983
and the 1998 public housing reform law prohibited PHAs from increasing the number of
public housing units under contract.
⁴⁴ Estimates of incremental vouchers from FY1998-FY2004 are taken from Government
(continued...)

these vouchers were general purpose vouchers, available to any eligible family, and
some were special purpose vouchers, targeted to special populations, such as families
transitioning from welfare to work.
This shift is also due, in part, to declines in the number of project-based
assistance and public housing units. As previously noted in this report, the project-
based rental assistance contracts between private landlords and HUD began expiring
in the 1980s. When these contracts expire, private property owners can either renew
their contracts with HUD (typically on an annual or five-year basis) or leave the
program. When property owners leave the program, their tenants typically receive
Section 8 vouchers — referred to as tenant protection vouchers. As also noted earlier
in this report, since the mid-1990s, when public housing units are demolished or sold,
PHAs are not required to replace each lost unit with a new public housing unit.
Instead, displaced families who are not relocated to other public housing units are
provided with tenant-protection vouchers. From FY1998 to FY2007, HUD awarded

280,784 tenant protection vouchers.⁴⁵ ⁴⁶

The shift from project-based assistance to tenant-based assistance has several
implications for families. Vouchers offer portability, which, for some residents of
public or other assisted housing, may mean the ability to move out of a troubled
community to a community with new opportunities. However, there is debate over
whether vouchers’ portability leads to economic or social mobility. Early research
on mobility showed promise that families — particularly, low-income black families
— that moved from heavily poverty- and minority-concentrated public housing
neighborhoods to more economically- and racially-integrated neighborhoods using
vouchers could see improved employment and child outcomes.⁴⁷ However, more
recent mobility research has shown mixed results.⁴⁸ There is also some evidence that,
for families accustomed to living in public housing, the transition to the private

⁴⁴ (...continued)
Accountability Office Report, GAO-06-405, Rental Housing Assistance: Policy Decisions
and Market Factors Explain Changes in the Costs of the Section 8 Programs, April 28,
2006. Between FY2004 and FY2007, no new incremental vouchers were funded or
awarded.
⁴⁵ Estimates of tenant protection vouchers from FY1998-FY2004 are taken from
Government Accountability Office Report, GAO-06-405, Rental Housing Assistance: Policy
Decisions and Market Factors Explain Changes in the Costs of the Section 8 Programs,
April 28, 2006. Estimates of tenant protection vouchers from FY2005-FY2007 are taken
from Notices published by HUD in the Federal Register.
⁴⁶ Note that the number of tenant protection vouchers awarded exceeds the decline in the
number of public housing and project-based Section 8 units. This may be partly due to the
awarding of tenant-protection vouchers to other project-based rental assisted units and partly
due to differences in timing between the award of the vouchers and the units leaving the
inventory.
⁴⁷ J.E. Rosenbaum, Changing the Geography of Opportunity by Expanding Residential
Choice: Lessons from the Gautreaux, Housing Policy Debate, vol. 6 no. 1, Fannie Mae
Foundation, 1995.
⁴⁸ Larry Orr, et al., Moving to Opportunity for Fair Housing Demonstration : Interim
Impacts Evaluation, Abt Associates, September 2003.

market rental market with a voucher can be difficult without counseling and other
supports, which may not be consistently provided.⁴⁹
Promoting Homeownership
Historian James Truslow Adams is generally credited with coining the term “the
American Dream” when he wrote a book titled “The Epic of America.” Adams
defined the American Dream as “That dream of a land in which life should be better
and richer and fuller for every man, with opportunity for each according to his ability
or achievement.”⁵⁰ Over time, the meaning of the American Dream has often been
truncated and associated with becoming a homeowner.
For the First Quarter of 2008, the Census Bureau reported a U.S.
homeownership rate of 67.8%.⁵¹ The distribution of homeownership is not even,
however. The rate is highest in the Midwest (72%) and lowest in the West (62.8%).
It is highest for those age 65 years or more (79.9%), and lowest for those under 35
years old (41.3%). It is higher for whites (75%) than it is for blacks (47.1%).
Hispanics, who can be of any race, had a homeownership rate of 48.9%. The
homeownership rate is higher for those with income greater than the median (82.8%)
and lower for those with incomes less than the median (51.2%).
Homeownership has been promoted by favorable treatment in the tax code
(mortgage interest and property tax deductions); by the creation and favorable
treatment of lending institutions that make home loans (federal home loan banks);
by the establishment of federal programs that insure lenders against losses on home
loans (FHA, VA, and USDA); by establishing institutions that create a secondary
market for mortgages and enable funds for mortgages to be available throughout the
U.S. (Fannie Mae, Freddie Mac, and Ginnie Mae); by establishing counseling
programs, within HUD and USDA, that fund agencies that counsel prospective
homebuyers on obtaining and maintaining homeownership; and by funding grant
programs that provide downpayment and closing cost assistance to some
homebuyers.
Since the 1940s nearly every U.S. president has expressed support for the
concept of increased homeownership. For example, there has been the “Blueprint for
the American Dream” by the George H.W. Bush Administration, the “National
Homeownership Strategy” of the Clinton Administration, and the “Homeownership
Initiative” of George W. Bush Administration. Generally, the proposals have
involved little new federal funding, but have sought to rally the private sector to use
existing programs to reach some specified target.

⁴⁹ Popkin, Susan, et al., A Decade of HOPE VI: Research Findings and Policy Challenges,
Urban Institute, May 18, 2004.
⁵⁰ Youngro Lee, “To Dream or Not to Dream: A Cost-Benefit Analysis of the Development,
Relief, and Education for Alien Minors (DREAM) Act,” Cornell Journal of Law and Public
Policy, Fall 2006.
⁵¹ Department of Commerce, U.S. Census Bureau News, Census Bureau Reports on
Residential Vacancies and Homeownership, April 28, 2008, p. 4, available at
[ h t t p : / / www.census.go v/ hhes/ www/ housi n g/ hvs/ qt r 108/ q108pr ess.pdf ] .

The primary focus of recent proposals has been to increase homeownership
among those who have been traditionally left out of the homeownership dream, such
as low-income families and minorities. The success of these proposals will likely
depend on the success of such families in maintaining homeownership once obtained.
Data
The following tables present data on federal spending (outlays) on selected
housing assistance programs as well as data on the number of assisted units, since

1980.

Table 12 presents outlays for selected programs, in both real and nominal
dollars. It is important to note that this table does not include any spending
information related to loan commitments or obligations.
As can be seen in Table 12, outlays for the selected programs have increased,
in both real and nominal dollars, over the nearly three decades presented (a 363%
increase in nominal dollars, a 105% increase in real dollars). The growth in outlays
was greatest from the late-1980s to mid-1990s ( from 1988 to 1995 outlays grew by
over 98% in nominal terms, over 62% in real terms), but has slowed in recent years
(from 2000 to 2007, outlays grew by 29% in nominal terms, 8% in real terms).
Another trend that can be seen in Table 12 is the increase in outlays for the
rental assistance programs in recent years, while outlays in the public housing and
other housing assistance programs are declining. This is consistent with the shift
from project-based assistance to tenant-based assistance (or vouchers) discussed
earlier in this report.

Table 12. Outlays, Selected Housing Programs, FY1980-FY2007
⁽ⁿ^o^mⁱⁿ^{al d}^o^llar^sⁱⁿ^m^illioⁿ^s^{, u}ⁿ^l^{ess o}^t^h^e^r^w^{ise n}^o^ted⁾
^Fis^c^al^Renta^l^a^Public^b^Oth^e^r^Hou^sⁱⁿ^g^Bl^oc^k^d^Hom^e^l^e^s^s^an^d^To^t^a^l^No^mⁱ^na^l^T^o^tal²⁰⁰⁷
^Yea^r^Assist^aⁿ^c^e^Hou^sⁱⁿ^g^Assist^aⁿ^c^e^c^Gr^aⁿ^t^s^HOPW^A^e^Do^lla^rs^Do^lla^rs
¹⁹⁸⁰²¹⁰⁴^2,185⁹²⁴³⁹¹⁰^9,123^20,539
¹⁹⁸¹³¹¹⁵^2,401^1,011⁴⁰⁴⁸^10,575^21,685
¹⁹⁸²⁴⁰⁸⁵^2,574^1,074³⁷⁹⁵^11,528^22,126
¹⁹⁸³⁴⁹⁹⁵^3,206^1,003³⁵⁵⁷^12,761^23,456
¹⁹⁸⁴⁶⁰³⁰^2,821⁹¹⁰³⁸²³^13,585^24,081
¹⁹⁸⁵⁶⁸¹⁸^3,408⁸⁶¹³⁸²⁰^14,907^25,595
¹⁹⁸⁶⁷⁴³⁰^2,882⁷⁸⁵³³²⁹^14,426^24,205
¹⁹⁸⁷⁸¹²⁵^2,161⁷⁵⁸²⁹⁷⁰²^14,016^22,918
¹⁹⁸⁸⁹¹³³^2,526⁷⁵²³⁰⁵⁴³⁷^15,501^24,574
¹⁹⁸⁹⁹⁹¹⁸^3,043⁶⁹⁰^2,951⁷⁰^16,673^25,444
¹⁹⁹⁰¹⁰⁵⁸¹^3,918⁶⁷⁹^2,821⁸²^18,081^26,605
¹⁹⁹¹¹¹⁴⁰⁰^4,544⁶⁸⁷²⁹⁸¹¹²⁰^19,732^27,983
¹⁹⁹²¹²³⁰⁷^5,045⁶¹⁰^3,099¹⁴⁵^21,205^29,335
¹⁹⁹³¹³²⁸⁹^6,296⁶²⁷^3,416¹⁷²^23,799^32,192
¹⁹⁹⁴¹⁴⁵⁷⁶^6,771⁶⁰⁷^4,439¹⁸⁹^26,583^35,201
¹⁹⁹⁵¹⁶⁹⁴⁸^7,414⁶⁰³⁵⁵¹⁹²⁷⁰^30,754^39,886
¹⁹⁹⁶¹⁵⁷⁷⁹^7,605⁶⁰⁰⁵⁷⁶¹⁴⁵³^30,199^38,427
¹⁹⁹⁷¹⁶³⁹³^7,687⁶²⁹^5,731⁷¹⁸^31,158^38,968
¹⁹⁹⁸^f¹⁶¹¹⁴^7,534⁵⁷⁶^6,360⁹¹⁶^31,499^38,922
¹⁹⁹⁹¹⁵⁶⁵²^6,560⁵⁴⁷^6,748^1,032^30,539^37,247
²⁰⁰⁰¹⁶⁶⁹²^7,193⁶⁶⁷^7,077^1,100^32,729^39,128
²⁰⁰¹¹⁷⁴⁹⁴^7,483⁶⁵⁹^7,047^1,208^33,892^39,584
²⁰⁰²^g¹⁹³⁹⁴^8,193⁶⁴⁴^7,349^1,358^36,937^42,330
²⁰⁰³²¹⁹⁴¹^7,837⁶³⁰^7,229^1,376^39,013^43,822
²⁰⁰⁴²³⁴⁹⁸^7,490⁶²⁰^7,113^1,492^40,213^44,024
²⁰⁰⁵²⁴⁴⁹⁵^7,426⁶⁰³⁷²²⁵^1,562^41,312^43,823
²⁰⁰⁶²⁴⁷⁵⁶^7,560⁵⁶⁹^7,086^1,655^41,626^42,742
²⁰⁰⁷²⁵⁶⁷⁴^7,295⁵⁵⁹^7,011^1,664^42,202^42,202
^S^o^u^rce:^Tab^l^e^p^r^ep^a^r^e^d^by^C^R^S^ba^s^e^{d on da}^ta^f^r^om^the^D^e^pa^r^t^m^e^{nt of}^H^ous^ing^a^{nd U}^r^ba^{n D}^e^v^e^lopm^eⁿ^t
^A^nnota^t^e^d^T^a^ble^s^f^o^r^the^{2001 B}^udg^e^t^{, C}^ong^r^e^s^sⁱ^ona^{l B}^udg^e^t^J^u^s^tif^ic^a^tions^,^a^nd^the^O^f^fⁱ^c^e^of^Ma^na^g^e^m^e^{nt a}ⁿ^d
^B^udg^e^t^’^s^P^ublic^B^udg^e^t^D^a^ta^ba^s^e^.
^Note:^Ea^r^lie^r^v^e^r^s^ions^of^this^ta^ble^c^ontaⁱ^ne^{d a}ⁿ^e^r^r^o^r^;^the^tota^{l c}^o^lumⁿ^{s a}^dde^{d so}^m^e^fⁱ^gu^{res m}^o^{re t}^h^an^oⁿ^ce.
^a^.^R^e^nta^l^A^s^sⁱ^s^t^aⁿ^c^e^inc^l^ude^s^Se^c^{tion 8, Se}^c^{tion 202 a}^{nd Se}^c^{tion 811.}
^b.^P^ublic^H^ous^ing^inc^l^ude^s^P^ublic^H^ous^ing^C^a^pita^{l F}^{und, P}^ublic^H^ous^ing^O^p^e^r^a^ting^Fund,^P^ublic^H^ous^ing^D^r^ug
^Elim^ina^{tion P}^r^og^r^a^m^,^a^{nd H}^O^P^{E VI}^.
^c^.^O^t^he^r^H^ous^ing^A^s^sⁱ^s^t^aⁿ^c^e^inc^l^ude^s^Se^c^{tion 235, Se}^c^{tion 236, a}^{nd R}^e^{nt Supple}^m^eⁿ^t.
^{d. B}^l^oc^k^G^r^aⁿ^ts^inc^l^ude^s^C^o^m^m^unity^D^e^v^e^lopm^eⁿ^{t Fund (}^C^D^B^G⁾^,^H^O^M^{E I}ⁿ^v^e^s^t^m^e^{nt P}^a^r^t^ne^r^s^hips^{, N}^a^tiv^e
^A^m^e^r^ic^aⁿ^H^ous^ing^B^l^oc^k^G^r^aⁿ^ts^a^{nd H}^ous^ing^C^ouns^e^ling^A^s^sⁱ^s^t^aⁿ^c^e^.
^e.^Ho^m^e^l^e^{ss i}ⁿ^cl^u^d^e^{s HOP}^W^A^,^Ho^m^e^l^e^{ss A}^ssi^st^an^{ce G}^r^an^t^s^,^E^m^ergen^c^y^S^h^el^t^e^{r G}^r^an^t^s^,^S^h^el^t^e^{r P}^l^u^s^Care
⁽ⁱ^nc^luding^r^e^ne^w^a^ls⁾^,^Se^c^{tion 8 SR}^O^,^Suppor^tiv^e^H^ous^ing^,^I^nnov^a^tiv^e^H^o^m^e^le^s^s^D^e^m^ons^tr^a^t^{ion P}^r^og^r^a^m^,
^Supple^m^eⁿ^ta^{l A}^s^sⁱ^s^t^aⁿ^c^e^f^o^{r Fa}^c^ilitie^s^{to A}^s^sⁱ^s^t^the^H^o^m^e^le^s^s^.
^f^.^P^r^ior^{to FY}^{1998, f}^unding^f^o^r^the^N^a^tiv^e^A^m^e^r^ic^aⁿ^hous^ing^pr^og^r^a^m^s^tha^t^w^e^r^e^c^ons^olida^t^e^d^by^N^A^H^A^SD^A
^w^a^s^inc^l^ude^{d in othe}^r^a^c^c^ounts^.
^g^.^C^ong^r^e^s^s^pe^rⁱ^odic^a^lly^pr^ov^ide^s^e^m^e^r^g^e^nc^y^f^unding^thr^oug^{h the}^C^D^B^G^pr^og^r^a^m^f^o^llowⁱ^ng^dis^a^s^t^e^r^s^,^g^e^ne^r^a^lly
ⁱⁿ^a^m^ounts^le^s^s^thaⁿ^{$1 billion pe}^{r y}^e^a^r^{. H}^o^w^e^v^e^{r, Cong}^re^s^s^prov^ide^d^s^ubs^ta^ntia^lly^m^o^re^f^unding
^f^o^llowⁱ^ng^the^Se^pte^m^be^{r 11, 2001 te}^rroris^t^a^tta^c^k^s^{($3 billion) a}^{nd f}^o^llowⁱ^ng^the^{2005 hurric}^aⁿ^e^s^(ov^e^r
^{$16 bill}ⁱ^oⁿ⁾^.^Th^e^am^ounts^s^how^{n in T}^a^ble^{12 inc}^l^ude^s^p^e^nding^of^e^m^e^r^g^e^nc^y^f^unds^{, e}^x^c^e^p^{t f}^o^r
^FY^2002-^FY^{2007, w}^h^eⁿ^s^p^e^nding^of^e^m^e^r^g^e^nc^y^C^D^B^G^f^unding^w^a^s^e^x^c^l^ude^d.

Table 13 presents the number of units eligible for payment across several
programs. Units eligible for payment is a measure of the number of housing units
under rental assistance contracts with HUD (project-based Section 8, Section 202 and
Section 811 units, and rental assistance payment and rent supplement units) as well
as the number of Section 8 vouchers. Generally, over the course of a year, each unit
will be available for one household, although given turnover, properties are rarely at
100% occupancy and vouchers are rarely 100% utilized. As a result, fewer
households receive assistance in a year than there are units eligible for payment in a
year.
As shown in Table 13, the total number of units eligible for payment under the
selected housing programs has grown by over 50% over the nearly three decades
presented. However, most of that growth happened in the 1980s. Since the early
1990s, the number of units eligible for payment has gone up and down from year to
year, with an overall decline in units from FY2001 to FY2007.
Table 13 also helps to illustrate the trend away from public housing and other
housing assistance to rental assistance ( Section 8 vouchers) discussed earlier in this
report. The number of units assisted under the other housing assistance programs
has been on the decline since the Nixon Moratorium in the 1970s. For many of those
units, once the family leaves the program, they receive a voucher. In the case of
public housing, the number of units continued to increase until the mid-1990s, as
contracted units became available. Since the mid-1990s, through the HOPE VI
program and other authority, PHAs have been demolishing and disposing of many
of their public housing developments. In their place, some replacement public
housing units have been built, but many of the units were replaced with Section 8
vouchers.

Table 13. Units Eligible for Payment, Selected Housing
Programs, FY1980-FY2007
^Fis^c^al^Renta^l^a^{Public H}^o^using^Oth^{er Hou}^sⁱⁿ^g^b,^c^Annua^{l To}^t^a^l
^Yea^r^Assist^aⁿ^c^e^Assist^aⁿ^c^e
¹⁹⁸⁰^1153311^1,192,000^761,759^3,107,070
¹⁹⁸¹^1318927^1,204,000⁷⁷⁴⁵²⁴^3,297,451
¹⁹⁸²^1526683^1,224,000^757,213^3,507,896
¹⁹⁸³^1749904^1,250,000^663,424^3,663,328
¹⁹⁸⁴^1909812^1,331,908^617,956^3,859,676
¹⁹⁸⁵^2010306^1,355,152^577,780^3,943,238
¹⁹⁸⁶^2143339^1,379,679^553,765^4,076,783
¹⁹⁸⁷^d^2239503^1390098^521,651^4,151,252
¹⁹⁸⁸^d^2332462^1,397,907^496,961^4,227,330^d
¹⁹⁸⁹^2419866^1,403,816^491,635^4,315,317
¹⁹⁹⁰^2500462^1,404,870^481,033^4,386,365
¹⁹⁹¹^2547995^1410137^473,945^4,432,077
¹⁹⁹²^2796613^1,409,191^428,986^4,634,790
¹⁹⁹³^2812008^1,407,923^434,498^4,654,429
¹⁹⁹⁴^2925959^1,409,455^413,999^4,749,413
¹⁹⁹⁵^2911692^1,397,205^415,165^4,724,062
¹⁹⁹⁶^2958162^1,388,746^404,498^4,751,406
¹⁹⁹⁷^2943634^1,372,260^385,651^4,701,545
¹⁹⁹⁸^3000935^1,295,437^359,884^4,656,256
¹⁹⁹⁹^f^2985339^1,273,500³³⁷⁸⁵⁶^4,596,695
²⁰⁰⁰^3196225^1,266,980^302,898^4,766,103
²⁰⁰¹^3396289^1219238^262,343^4,877,870
²⁰⁰²^3420669^1,208,730^233,736^4,863,135
²⁰⁰³^3476451^1,206,721^179,952^4,863,124
²⁰⁰⁴^3508091^1,188,649^155,289^4,852,029
²⁰⁰⁵^3483511^1162808^128,771^4,775,090
²⁰⁰⁶^g^3498363^1172204^123,503^4,794,070
²⁰⁰⁷^3532079^1155377^100,595^4,788,051
^S^o^u^rce:^T^a^ble^pr^e^p^a^r^e^d^by^C^R^S^ba^s^e^{d on da}^ta^f^r^om^the^D^e^pa^r^t^m^e^{nt of}^H^ousiⁿ^g^an^d^Ur^b^a^{n D}^e^v^e^lopm^eⁿ^t
^A^nnota^t^e^d^T^a^ble^s^f^o^r^the^{2001 B}^udg^e^t^a^{nd C}^ong^r^e^s^sⁱ^ona^{l B}^udg^e^t^J^u^s^tif^ic^a^tions^.
^Note:^Ea^r^lie^r^v^e^r^s^ions^of^this^ta^ble^c^ontaⁱ^ne^{d a}ⁿ^e^{rror; the}^tota^{ls in som}^e^y^{ears w}^e^{re i}ⁿ^co^rrect^.
^a^.^R^e^nta^l^A^s^sⁱ^s^t^aⁿ^c^e^inc^l^ude^s^Se^c^{tion 8, Se}^c^{tion 202, Se}^c^{tion 811.}
^{b. O}^t^he^r^H^ous^ing^A^s^sⁱ^s^t^aⁿ^c^e^inc^l^ude^s^S^e^c^{tion 235, Se}^c^{tion 236, R}^e^{nt Supple}^m^eⁿ^t.
^{c. T}^o^{tal is ad}^ju^sted^f^o^{r u}ⁿ^{its receiv}ⁱⁿ^g^m^u^ltip^{le su}^b^s^id^ies.
^{d. Vouc}^he^r^c^ounts^f^o^r^FY^1987-^FY^{1989 r}^e^f^l^e^c^t^v^ouc^he^r^s^le^a^s^e^d^{, r}^a^the^r^thaⁿ^r^e^s^e^r^v^e^d⁽^c^ontr^a^c^t^e^d⁾^v^ouc^he^r^s^.
^e^.^P^r^ior^{to FY}^{1998, N}^a^tiv^e^A^m^e^r^ic^aⁿ^public^hous^ing^units^w^e^r^e^inc^l^ude^{d in}^the^c^{ount of}^public^hous^ing^units^.
^B^e^gⁱ^nning^{in 1998, thos}^e^units^a^r^e^{not inc}^l^ude^{d in the}^public^hous^ing^{unit c}^ount.
^f^.^T^h^e^v^ouc^he^r^c^{ount in FY}^{1999 r}^e^f^l^e^c^t^s^oblig^a^t^e^d^v^ouc^he^r^s^{, r}^a^the^r^thaⁿ^r^e^s^e^r^v^e^d⁽^c^ontr^a^c^t^e^d⁾^v^ouc^he^r^s^.
^g^.^Be^gⁱ^nning^{in FY}^2006,^{HUD re}^porte^{d the}^to^ta^{l num}^be^{r of}^“^f^unde^d”^v^ouc^he^rs^{, w}^h^ic^{h is HUD’s e}^s^tim^a^t^e^of^how
^m^a^ny^v^ouc^he^r^s^the^a^m^{ount of}^f^unding^pr^ov^ide^d^by^C^ong^r^e^s^s^w^{ould s}^u^s^t^aⁱ^{n, g}ⁱ^v^e^{n the}^dis^t^rⁱ^{bution of}^tha^t
^f^unding^.