President Obama released his budget plan for Fiscal Year 2011 last week. The budget seeks to restore economic growth and opportunity, create jobs in the short- and long-term, and reduce the deficit in half by 2012.
Building on important investments already made in the 111th Congress, the President’s budget reflects his priorities for the Department of Housing and Urban Development (HUD). The budget invests in community economic development, affordable housing modernization, housing assistance for the homeless, and supports partnerships with the Departments of Education, Health and Human Services and Transportation.
The Housing Crisis Continues
Bush Republican economic policies have resulted in a “lost decade” for American consumers and homeowners. Only 67.3 percent of Americans owned their homes in the fourth quarter of 2009, the lowest percentage since the second quarter of 2000. [Wall Street Journal, "Homeownership Rate Declines"]
The dream of homeownership is barely within reach for millions of Americans and their families. After years of predatory practices by the mortgage lending industry, lax regulation and oversight by the Bush Administration, and excessive risk taking by Wall Street, Americans consumers and homeowners, our country continues to face a nationwide housing crisis.
Foreclosures continue to rise. According to RealtyTrac, more than 2.8 million homes faced foreclosure in 2009, a 21 percent increase since 2008 and a 120 percent increase since 2007. This was in addition to the 2.3 million properties that faced foreclosure in 2008. It is estimated that more than two percent (one in 45) of housing units received a foreclosure notice during the past year. [Realtytrac, Year End Report Shows Record 2.8 Million U.S. Properties with Foreclosure filings in 2009]
Existing home sales are beginning to rise but continue to be unstable. Over the course of 2009, there was an almost five percent increase in existing-home sales compared with sales in 2008. [National Association of Realtors, News Release, 1/25/10] This was the first annual sales gain since 2005. In December 2009, existing-home sales fell 16.7 percent from November 2009. This decline was likely due to increased sales in November as first-time home buyers tried to complete home sales before the original deadline for the tax credit.
Home prices continued to fall in 2009. Families across the country saw the value of their homes fall in 2009. The National Association of Realtors reported that the national median existing single-family home price was down almost 12 percent from 2008. [National Association of Realtors, News Release, 1/25/10] By the third quarter of 2009, 4.5 million homeowners had seen the value of their home drop below 75 percent of their mortgage value. [New York Times, "No Help in Sight, More Homeowners Walk Away"] As a result, these families often have few options and – assuming they can continue to pay their mortgages – feel trapped in their homes.
Despite a decline in home prices affordable housing remains difficult to find. Over the past decade, rising costs for necessities like food, housing costs, child care, and transportation have squeezed middle-class families. In 2008, roughly 8.5 million homeowners (11 percent) and 8.5 million renters (23 percent) experienced a “severe housing cost burden,” which means that they spent more than 50 percent of their income on housing costs. [Center for Housing Policy, Housing Affordability Trends for Working Households] These figures show that renters are especially feeling the pinch when it comes to housing costs.
The affordable housing crunch for renters persists. As the dream of homeownership has evaporated for many families, increased demand, costs, and standards for rental housing have made it more difficult for Americans to rent. In 2008, there were 36.7 million renter households across the nation. This is an increase of almost 2.5 percent since 2007. [National Low Income Housing Coalition, Research Note #09-01]
Unfortunately, while the number of extremely low income (ELI) renters increased from 8.9 million to 9.2 million from 2007 to 2008, the number of affordable units available to ELI renters declined from 6.2 million to 6.1 million available units. These figures show that many renters are unable to find affordable rental options for their families and that availability is decreasing at a time when families are less able to pay for housing costs.
Homelessness is rising. As families continue to struggle to find affordable housing, foreclosures continue to rise, and many Americans are finding themselves in a situation they never imagined: homelessness. A survey of housing assistance organizations in 2009 found that nearly 89 percent of respondents stated that some of their clients were homeless as a result of foreclosure. [A Joint Report from the National Coalition for the Homeless, the National Law Center on Homelessness & Poverty, et al, "Foreclosure to Homelessness 2009: The Forgotten Victims of the Subprime Crisis"]
In 2007, the National Law Center on Homelessness and Poverty estimated that 3.5 million people may experience homelessness in a year, an estimate made well before the full impact of the housing and financial crises. [National Coalition for the Homeless, How Many People Experience Homelessness?] Although data on homelessness are difficult to track, reports indicate that some cities have seen homeless rates increase by as much as 20 percent. [National Law Center on Homelessness & Poverty, Indicators of Increasing Homelessness]
Homelessness is a significant problem for the veterans community. Veterans represent one fourth to one-fifth of all homeless individuals in the United States. [National Coalition for the Homeless, Homeless Veterans] In fact, there are now more homeless Vietnam veterans than the number of service members who died in that war. [U.S. Department of Veterans Affairs, Overview of Homelessness]
The VA estimates that 45 percent of homeless veterans suffer from mental illness. [U.S. Department of Veterans Affairs, Overview of Homelessness] As more veterans return home from Iraq and Afghanistan with Post-Traumatic Street Disorder (PTSD) and other injuries, many more veterans will be at risk for homelessness.
The President’s Budget Proposal Balances a Need for Sustained Support with a Need to Reduce the Deficit
The President’s Budget responsibly recognizes and addresses the nation’s most-pressing housing problems. The Obama Administration seeks to strengthen the housing market to bolster the economy and help Americans access quality, affordable housing options. The President’s budget will promote transformation and modernization at HUD by focusing funding on innovative partnerships and initiatives. The budget proposal provides for:
· Funding to combat mortgage fraud and predatory lending’
· Increased investments in rental assistance programs, including a Transforming Rental Assistance Initiative to preserve public and assisted housing for future generation and a Housing Choice Voucher to help more than two million low- and very low-income families with rental assistance;
· Increased resources to implement the Homeless Emergency Assistance Rapid Transition to Housing (HEARTH) Act, which would assist the homeless and seek to prevent homelessness;
· Partnership opportunities with the Department of Education to coordinate Choice Neighborhoods, which would transform impoverished neighborhoods with concentrations of public and assisted housing through public, private and nonprofit partnerships; and
· Partnership opportunities with the Department of Health and Human Services to help homeless families and those at risk of homelessness.
The budget request recommends full funding of the Community Development Block Grants (CDBG), the largest source of federal grant assistance in support of state and local government housing and community development efforts as communities continue to face foreclosures and increased homelessness. As part of the Community Development Fund, the budget creates Catalytic Investment Competition Grants, which would provide capital to bring innovative economic development projects to scale. The grants will be targeted at communities experiencing severe economic hardship.
The Homeless Emergency Assistance Rapid Transition to Housing (HEARTH) Act was passed in May 2009, but has not yet been implemented. President Obama’s budget would secure $2.1 billion in funding to implement the program, which would address the problem of homelessness. This would include funding for approximately 10,000 new permanent housing beds and a program for rural areas with homeless populations. HUD will also partner with the VA to lower the number of homeless veterans.