Section 8 housing in the South Bronx. The shutdown may force landlords to put necessary home repairs on hold.
The government shutdown has hit the one-month mark, and subsidized housing programs are reeling.
Between December and January, the contracts of 1,150 Section 8 units expired, putting in jeopardy the housing of tens of thousands of people enrolled in the project-based rental assistance subsidy program (over half of whom are elderly or disabled). Another 500 contracts are set to expire if the shutdown continues into February.
As administered through the Department of Housing and Urban Development (HUD), the project-based rental assistance program allows for HUD to “directly contract with private landlords to provide affordable homes to low-income tenants at certain properties,” according to the National Housing Law Project, an advocacy group. More specifically, the program allows landlords to charge market rates, with tenants paying 30 percent of their income and HUD picking up the rest.
So far, it seems that many property owners have been able to make do by dipping into reserve funds, but within a few weeks these savings may start to dry up. This could force landlords to put necessary repairs on hold. Or, in the case of the not insignificant minority of units owned by non-profit developers—that is, community development corporations and housing organizations that aim to provide for those who are unable to obtain housing through the private market—it could mean cutting off additional services like afterschool and workforce programs. At worst, the funding cuts could lead landlords to demand that tenants pay the full rent themselves, or else face eviction.
“Owners in many cities will be faced with financial disruption, foreclosure, or bankruptcy if they’re not able to pay their mortgage or meet the other costs of the property,” says Sunia Zaterman, executive director of the Council of Large Public Housing Authorities, a policy-oriented housing non-profit. “This really is going to ripple through the whole housing market system.”
Affordable housing providers and advocates say the instability has been aggravated by shoddy communication from HUD. In the days leading up to the shutdown, Ellen Lurie Hoffman, federal policy director of the National Housing Trust, was told by a HUD representative that the department would be able to renew contracts with Section 8 landlords through the end of January in the event of a shutdown. When she called back on January 7th—more than two weeks into the shutdown—she was informed that the department had failed to renew contracts for either December or January. HUD has yet to establish an alternative source of funding, instead suggesting in a letter to landlords, published by the Washington Post, that they dip into their reserve accounts “to cover funding shortfalls.” What happens if these reserve accounts run out has yet to be addressed. “No one has ever been evicted because of a shutdown, and the landlords have always been made whole,” a HUD spokesperson told the Post.
The strain being felt by owners of project-based rental-assisted properties is a foreshadowing of the housing mayhem that a continued shutdown would bring. During the shutdown thus far, voucher-based subsidies, the most widely used Section 8 program—which tenants can take to any landlord—have remained fully funded. But if the shutdown continues through the end of February, funding for the program will run out, meaning that the March rent of 2.2 million Section 8 households would be left unpaid. “We don’t know what life is like after March 1st,” Zaterman says. Other shutdowns have delayed funding for a few days, but the length of this shutdown and the threat it poses to subsidized housing programs is unprecedented.
This is the worst-case scenario, and housing advocates are putting pressure on HUD to find alternative funding sources. But even if it does, or if the shutdown ends before that date, the effects of this instability are likely to linger.
Nearly every subsidized housing program in the United States relies on landlords willing to participate, and the difficulty of recruiting and retaining landlords has been a defining factor of these programs since their inception. Landlords regularly turn away voucher holders: A recent survey by the HUD-sponsored Urban Institute found the percentage to be as high as three-quarters of landlords in Fort Worth, Texas, and Los Angeles, California. It requires extensive effort on the part of many local government and housing authorities to recruit landlords through outreach and incentives, like reimbursements for unpaid rent or tax abatements.
“Housing authorities are working hard to recruit landlords to participate in these programs, particularly in areas with better schools and employment opportunities,” Zaterman says. But with the shutdown, she’s worried it’ll be even more difficult to get landlords on board. “[Funding] is something an owner would have to calculate as a risk now that was previously not seen as a risk.” A recent study found that one of the most widely cited reasons for landlords participating in the housing choice voucher program was reliable rent payments from the federal government.
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Affordable housing advocates are concerned about the long-term effects of this erosion of trust in housing markets across the country, and for project-based assistance as well. Like with vouchers, the stability of these subsidies is always tenuous: According to the National Low Income Housing Coalition, a Washington-based advocacy group, about 360,000 project‐based Section 8 units have been lost to conversion to market rate housing since 1995. Protecting what’s left requires the government holding up its end of the bargain.
“There’s lots of other ways to earn a living than to be in this public-private partnership,” Lurie Hoffman says. “If it’s this hard to work with the federal government, we’re worried that people will choose to opt out of long-term contracts.” She’s also concerned that the shutdown could erode investor and lender confidence in the program, increasing financing costs for landlords.
Secretary of Housing and Urban Development Ben Carson himself has been clear about the responsibility of the government to uphold its role in private-public partnerships (at the expense of any more substantial federal accountability for the housing crisis). A few months into his term, while on a visit to subsidized housing developments in Miami, he said: “There’s very limited money in the government, but it’s the government that can stimulate these kinds of programs and facilitate that. That’s the answer.”
In August, after the Urban Institute report was published showing high rates of voucher refusal among landlords, Carson launched a “Landlord Task Force” intended to increase participation in the voucher program. But the shutdown sends a starkly opposing message: According to Sarah Mickelson, senior policy director at the National Low Income Housing Coalition, “Any effort that [HUD] has done on that is far outweighed by the damage they’ve done by the shutdown.”
