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Real Estate,
Government

Jun. 7, 2019

HUD policy would exacerbate a worsening crisis

Last month, the Department of Housing and Urban Development published a proposed rule which would terminate housing assistance to households which include a member or members who cannot verify eligible immigration status.

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Alfred M. Clark III

Partner, Locke Lord, LLP

Email: aclark@lockelord.com

Alfred is a member of the board of directors of Locke Lord. His principal practice area involves the representation of institutional lenders and private investors in commercial mortgage transactions, including the exercise of creditor's rights in troubled projects. He has spent his career doing pro bono work in the area of preservation of affordable housing.

Last month, the Department of Housing and Urban Development published a proposed rule which would terminate housing assistance to households which include a member or members who cannot verify eligible immigration status. HUD seeks to justify the rule as necessary to conform with Section 214 of the Housing and Community Development Act of 1980, which prohibits HUD from making certain financial assistance available to persons other than U.S. citizens or specified categories of noncitizens. If adopted, the proposed amendments would entirely terminate the housing assistance for households which include any person unable to verify eligible immigration status.

Current HUD policy accounts for the Section 214 prohibition by requiring families which include persons ineligible for assistance to bear a greater percentage of their housing costs as their assistance is proportionately reduced. Cutting off such families entirely from housing assistance will have a devastating impact on those families. HUD's own analysis has concluded that approximately 108,000 people, 70 percent citizens or legal residents and including 55,000 children, would be affected. The proposed rule is explained in part as a way to re-direct limited housing resources to those eligible persons on long waiting lists for such assistance. Acknowledging that such redirection would result in proportionately larger assistance to families, HUD estimates the additional cost to be approximately $227 million annually, funds that Congress will need to appropriate.

If the rule is adopted, where do those families go?

On June 5, the Los Angeles Times reported the results of a point-in-time count of homeless persons indicating the number of homeless people in Los Angeles County totaled 59,000, an increase of 12 percent over the prior year. These increases are particularly alarming when considering the approximately $619 million spent by the county in 2018 on homeless initiatives. Some of those initiatives resulted in housing more homeless persons than ever last year, likely mitigating an even further increase in the number of homeless persons.

Circumstances which lead to homelessness are many and complicated and so are solutions. However, there is common agreement that more shelters and more affordable housing is required. Indeed, the budget recently proposed by Gov. Gavin Newsom includes $650 million for new shelters, rental assistance and to underwrite new construction of permanent affordable housing. Los Angeles Mayor Eric Garcetti has promised to build 10,000 affordable housing units over a 10-year period. Unfortunately, neither proposal adequately addresses the problem.

A study published in April 2019 by the Joint Center For Housing Studies of Harvard University, "Estimating the Gap in Affordable and Available Rental Units for Families," by Whitney Airgood-Obrycki and Jennifer Molinsky, recognized that in U.S. metropolitan areas low-income renter families face an insufficient number of units that are affordable and available to such families. Of 43.6 million renter households in the U.S. approximately one-third are families with children. Approximately 30 percent of owner households have children.

The study focused in part on four metro areas: Boston, Chicago, Atlanta and Los Angeles. The study reports that 62 percent of renter family households and 54 percent of childless rental households are cost-burdened: Spending more than 30 percent of their household income on housing and utilities. For extremely low-income families in Los Angeles, those whose income is not more than 30 percent of the area median income, there are only seven units affordable and available for every 100 such families. The number is only slightly better for very low-income families, those whose incomes are between 30 percent and 50 percent of the area median. There are only 17 units affordable and available for every 100 such families. The supply deficit for extremely low-income households is 124,000 units, and 41,000 units for very low-income households.

Nationally the numbers are not much better: 22 affordable and available units for every 100 extremely low income families, a deficit of 2.4 million units. Since renter families have greater percentages of heads of household who are black, 23 percent, and Hispanic, 31 percent, than owner families, 9 percent black and 16 percent Hispanic, the affordable housing gap has a disproportionate impact on those minority communities.

The crisis has been long in the making. In the late 1980s a task force comprised of representatives of state and local governments, financial institutions, housing activists and the business community examined the causes of the affordable housing crisis, which included rising housing costs and stagnant incomes, a decline in the number of affordable housing units, poor families bearing a disproportionate burden of their incomes for housing costs, and the need for rental assistance far exceeding its availability. The task force recommended a national housing policy involving a long-term federal commitment to produce affordable housing utilizing federal resources to encourage and facilitate the efforts of state and local institutions addressing the crisis.

Three decades later we are no closer to a resolution, and indeed there has been a steady erosion of the federal government's commitment to the creation and preservation of affordable housing. HUD's proposed rule change will only exacerbate a worsening crisis.

#352862

Ben Armistead

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