Federal Government Aid for the Homeless

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Homelessness is widespread, and many people expect the government to step in to solve such a large-scale problem. What should the role of the government be in combating homelessness? Some people believe it is the duty of the government to take care of all citizens in times of need. Others point out that government help has often been misdirected or inadequate; in some instances, it has even added to the problem. Some people assert that people in trouble should solve their problems themselves. Federal programs for the homeless reflect a consensus that limited government help is important and necessary, but that homeless people also need to help themselves.


Since 1860 the federal government has been actively involved with the housing industry, specifically the low-income housing industry. In 1860 the government conducted the first partial census of housing—by counting slave dwellings. Twenty years later the U.S. census focused on the living quarters of the rest of the population, conducting a full housing census. Since then the federal government has played an increasingly larger role in combating housing problems in the United States:

  • 1892—Congress designated $20,000 for a Labor Department study on slum conditions in Baltimore, New York, Chicago, and Philadelphia, the four cities with populations over 200,000 at that time. The study revealed that 14% of the cities' populations, mostly immigrants, lived in slums under crowded conditions. Most of these people spent one-third or more of their income on rent.
  • 1908—President Theodore Roosevelt appointed a Housing Commission to study the problems in American slums; among the suggestions made by the panel were broad federal acquisition of slum properties and direct loans from the federal government to finance the renovation and construction of decent, sanitary housing that the poor could buy or occupy at low interest rates or rents.
  • 1925—Borrowing and mortgaging properties reached their highest levels ever to that date. The rate of foreclosures also started to rise, leading to increased homelessness. Although no one knew it at the time, the debts that Americans had run up for their housing would be a major problem just a few years later.
  • 1929—Stocks trading at the New York Stock Exchange suffered a tremendous crash in prices. The Great Depression had begun.
  • 1932—As many Americans lost their jobs and failing banks called in their loans, homelessness sky-rocketed. The Emergency Relief and Construction Act authorized the Reconstruction Finance Corporation to lend government money to corporations to build housing for low-income families.
  • 1933—The National Industrial Recovery Act allowed the Public Works Administration (a government-sponsored work program) to use federal funds for slum clearance, the construction of low-cost housing, and subsistence homesteads; close to 40,000 units were produced that year.
  • 1937—The United States Housing Act of 1937 established the Public Housing Administration (which was later merged into the Federal Housing Administration [FHA] and the Department of Housing and Urban Development [HUD]) to create low-rent housing programs across the country through the establishment of local public housing agencies.
  • 1938—The National Housing Act Amendments were implemented. They allowed the FHA to insure low-income rental projects built for profit.
  • 1940—The U.S. Census, reporting on the first comprehensive survey of the nation's housing stock, showed that 18% of housing units needed major repairs, 31% lacked running water, 44% had neither a bathtub nor a shower, and 35% lacked a flush toilet. The worst conditions generally were found in inner-city slums and in the South, where many sharecroppers lived in shacks.
  • 1941—The United States entered World War II (1939-45). The economy surged to meet wartime needs, and millions of young men entered the military. As a result, the Great Depression came to a close.
  • 1946—The Farmers Home Administration (FmHA) was created under the Department of Agriculture to provide low-income housing assistance in rural areas.
  • 1949—The Housing Act of 1949 set the goals of "a decent home and a suitable environment" for every family and authorized an 810,000-unit public housing program over the next six years. Title I of the Act created the Urban Renewal program; Title V created the basic rural housing program under the FmHA, which put the federal government directly into the mortgage business.
  • 1961—President John F. Kennedy made decent housing for all Americans a national objective. He wanted to accelerate urban renewal projects to make more mortgage funds available to homebuyers and to provide decent housing for low-income and minority households. Congress responded by passing the Housing Act of 1961, creating a new program for FHA-insured, low-income rental housing. This was the FHA's first direct subsidy program.
  • 1965—Congress established the Department of Housing and Urban Development. Its goal was to create a new rent supplement program for low-income households in private housing.
  • 1968—The Housing and Urban Development Act was passed in response to President Johnson's "Message to Congress on Housing and Cities." The president declared that America's cities were in crisis and set a national housing goal of twenty-six million new units (six million targeted to low- and moderate-income households) over the next ten years. Congress provided two new options for low- and moderate-income rent subsidy programs and mortgage insurance for low- and moderate-income families with poor credit histories.
  • 1970—A massive reorganization of federal housing organizations was completed. FHA was merged into HUD. With this reorganization, the FHA began to provide support for lower-priced housing and directed home ownership and rental opportunity programs for low-income households in inner cities.
  • 1973—President Nixon declared a moratorium on housing and community development assistance, suspending all subsidized housing programs.
  • 1974—The Housing and Community Development Act of 1974 created a new leased-housing program that included a certificate (voucher) program, expanding housing choices for low-income tenants, and fair-market rent ceilings to control the cost of the program. The voucher program soon became known as Section 8, after the section of the act that established it.
  • 1981—The Housing and Community Development Amendments of 1981 required subsidized tenants to pay up to 30% of their income for rent before qualifying for assistance under Section 8 and further limited benefits of public housing programs to the neediest households.
  • 1983—The Housing and Urban-Rural Recovery Act of 1983 established rental rehabilitation programs and modified components of the Section 8 program to limit its benefits. Under Section 8, an experimental housing voucher program was established, and new rehabilitation grants and housing development grants were created.
  • 1987—The Stewart B. McKinney Homelessness Assistance Act was passed. This was the first federal act aimed directly at helping homeless people. It established new programs and funding for HUD to provide emergency shelter to homeless people and eventually help secure permanent housing for them.
  • 1989—The HUD Reform Act of 1989 was enacted. Its intent was to clean up HUD and prevent the misuse of funds that had been plaguing the agency.
  • 1990—The National Affordable Housing Act renewed the federal government's commitment to home ownership, tenant-based assistance, and subsidized housing. The Low-Income Housing Preservation and Residential Home Ownership Act demonstrated a federal commitment to permanent preservation of assisted low-income, multi-family housing; the act also repealed the rental rehabilitation grant and the rehabilitation loan program. A special homeless assistance component of the moderate rehabilitation program was retained.
  • 1997—The Quality Housing and Work Responsibility Act of 1998 thoroughly reformed public housing initiatives. It removed disincentives for residents to work, provided rental protection for low-income residents, deregulated the operation of public housing authorities, authorized the creation of mixed-finance public housing projects, and gave more power and flexibility to local governments and communities to operate housing programs.


Widespread public outcry over the plight of the homeless in the early 1980s prompted Congress to pass the Stewart B. McKinney Homeless Assistance Act of 1987. Congress renamed the act the McKinney-Vento Homeless Assistance Act in 2000 (H.R. 5417) to honor Representative Bruce Vento's service to the homeless. The range and reach of the act has broadened over the years. Most of the money authorized by the act went, initially, toward the funding of homeless shelters. The program also funded a Supportive Housing program, a Shelter Plus Care program, and the Single Room Occupancy program in addition to the Emergency Shelter Grant program. Amendments to the act later enabled funding and other services to support permanent housing and other programs to help the homeless. HUD administers most McKinney-Vento funds.

Program Structure

In 2005 programs administered under the McKinney-Vento Act fell into three distinct categories. A cluster of activities known as the Continuum of Care (CoC) programs provided competitive grants intended to help communities and organizations provide comprehensive services to the homeless. A noncompetitive formula grant program, the Emergency Shelter Grants Program, provided funds for emergency shelters to states, large cities, urban counties, and U.S. territories. The Title V program freed properties for use to house the homeless.

Continuum of Care

According to HUD (Homeless Assistance Programs, http://www.hud.gov/offices/cpd/homeless/programs/index.cfm), the concept behind Continuum of Care programs is as follows: "A continuum of care system is designed to address the critical problem of homelessness through a coordinated community-based process of identifying needs and building a system to address those needs. The approach is predicated on the understanding that homelessness is not caused merely by a lack of shelter, but involves a variety of underlying, unmet needs—physical, economic, and social."

Nonprofit groups and local government entities applying for funds under these programs are expected to survey and assess local needs and to write a comprehensive plan for combating homelessness and meeting needs. Grant recipients are required to assess their clients' progress and make changes in the program in response to ongoing evaluation. Three major programs and some additional demonstration and rural efforts have developed over the years.


The aim of the Supportive Housing Program is to provide housing and services that will enable clients to achieve economic independence and control over their lives. SHP provides up to $400,000 in matching funds for construction of new buildings for housing homeless people; it also provides funding for the acquisition or refurbishing of existing buildings. The program underwrites 75% of the operating cost, including administration, and up to 80% of the cost of support programs. These programs must help clients achieve independence by providing skills training, child-care, education, transportation assistance, counseling, or job referrals. Elements of the program include transitional housing for twenty-four months, permanent housing for the disabled, supportive services without housing, havens for the hard-to-reach and the mentally ill, and other innovative programs to solve problems of homelessness.


The Shelter Plus Care Program helps agencies that specifically target the hardest-to-serve homeless: those with mental and physical disabilities living on the street or in shelters, including drug addicts and AIDS sufferers. The program provides for rental assistance funded by HUD and other sources. Housing in this program can be in the form of group homes or individual units with supportive services. Grant funds must be matched with local dollars. Subsidies for projects are available for ten years; assistance to sponsors and tenants is available for five years. Rental assistance includes four types of contracts:

  1. Tenant-Based Rental Assistance—Direct contract with a low-income tenant
  2. Project-Based Rental Assistance—Building owner contracts
  3. Sponsor-Based Rental Assistance—Contracts with nonprofit organizations, and
  4. SRO-Based Rental Assistance—Single room occupancy contracts provided by public housing authorities (PHAs)


Single-room occupancy housing is housing in a dormitory-style building where each person has his or her own private room but shares kitchens, bathrooms, and lounges. Single Room Occupancy Program (SRO) housing is generally the cheapest type of housing available. Funding is intended to encourage the establishment and operation of such housing. Subsidy payments fund a project for a period of ten years in the form of rental assistance in amounts equal to the rent, including utilities, minus the portion of rent payable by the tenants.


Other programs folded under the Continuum of Care designation by HUD include demonstration programs for safe havens for the homeless and innovative homeless programs as well as rural homeless housing programs.

Program requirementEmergency shelter grantsSupportive housing programShelter plus careSingle-room occupancy
Type of grantsFormula grantCompetitive grantCompetitive grantCompetitive grant
Eligible applicantsStates
Metropolitan cities
Urban counties
Local governments
Other governmental agencies
Private nonprofit organizations
Community mental health centers that are public nonprofit organizations
Local governments
Public housing authorities
Public housing authorities
Private nonprofit organizations
Eligible program servicesEmergency shelter
Essential social services
Transitional housing
Permanent housing for people with disabilities
Supportive services only
Safe havens
Innovative supportive housing
Tenant based rental assistance
Sponsor based rental assistance
Project based rental assistance
Single-room occupancy based rental assistance
Single-room occupancy housing
Eligible activitiesRenovation/conversion
Major rehabilitation
Supportive service
Operating costs
Homelessness prevention
New construction
Operating and administrative costs
Supportive services only
Rental assistanceRental assistance
Eligible populationHomeless individuals and
People at risk of becoming
Homeless individuals and families for transitional
housing and supportive services
Disabled homeless individuals for permanent
Hard-to-reach mentally ill homeless individuals
for safe havens
Disabled homeless individuals
and their families
Homeless individuals
Initial term of assistance
Matching funds
1 year
States: no match for first $100,000 and dollar-for-dollar match for rest of funds.
Local governments:dollar-for-dollar match for all funds.
Up to 3 years
Dollar-for-dollar match for acquisition, rehabilitation, and new construction grants. Operating costs must be shared by 25 percent in the first 2 years and 50 percent in the third year. A 25-percent match for supportive service grants
No match for grants used for leasing oradministrative costs.
5 or 10 years
Dollar-for-dollar match of the federal shelter grant to pay for supportive services
10 years
No match required

Emergency Shelter Grants (ESG)

The Emergency Shelter Grants program provides homeless persons with basic shelter and essential supportive services. It can assist with the operational costs of the shelter facility, and for the administration of the grant. ESG also provides short-term homeless prevention assistance to persons at imminent risk of losing their own housing due to eviction, foreclosure, or utility shutoffs.

—Emergency Shelter Grants, HUD, February 1, 2005

The ESG is HUD's formula grant program administered as a part of its community planning and development grant program. Recipients of funding are states, large cities, urban counties, and U.S. territories that have filed consolidated community development plans with HUD. ESG is called a formula program because the amounts allocated are based in part on population and poverty levels within the planning entities that participate. ESG funds flow from governmental entities to organizations that actually operate shelters and provide services. Money may be used to help individuals avoid homelessness by providing emergency funds.

Title V

HUD maintains information about and publishes listings of federal properties categorized as unutilized, underutilized, in excess, or in surplus. States, local governments, and nonprofit organizations can apply to use such properties to house the homeless. Title V does not provide funding; it provides properties to agencies for housing use. Groups may apply for funding under the Continuum of Care program to modify, refurbish, or adapt such structures for residential uses.

Consolidations, New Initiatives, and Reorganizations

HUD's programs, particularly those under Continuum of Care, have overlapping objectives yet operate under separate rules and requirements. (See Table 5.1.) The U.S. General Accounting Office (GAO), now Government Accountability Office, an investigative body of the U.S. Congress, studied the McKinney programs in 1999 and concluded that the number of programs and the differences between them create barriers to their efficient use (Homelessness: Coordination and Evaluation of Programs Are Essential, Washington, DC, 1999).


HUD's program administrators evidently reached much the same conclusions as GAO. In its fiscal year (FY) 2004 budget request to Congress (Fiscal Year 2004 Budget Summary, HUD, February 3, 2003) and again in its FY 2005 budget summary (Fiscal Year 2005 Budget Summary, February 2, 2004), HUD proposed consolidating its three major programs under Continuum of Care, along with the demonstration and rural assistance programs, into a single Homeless Assistance Grants program. The department believed that this consolidation would facilitate comprehensive delivery of services while reducing administrative expenses, both at HUD and on the part of grant recipients. President George W. Bush's proposed budget for McKinney-Vento assistance programs for FY 2006 was $1,415,000,000, up from $1,241,000,000 in FY 2005.


In 2004 HUD proposed that Congress fund a new program called the Samaritan Initiative. The new program targeted an estimated 150,000 individuals HUD considers "chronically homeless." In FY 2005 HUD received $50 million to provide housing for the chronically homeless. The U.S. Department of Health and Human Services and the U.S. Department of Veterans Affairs also provided services for drug abuse and health treatment.


The national effort to provide housing for those in need is far more massive than would be indicated by the expenditure of about $1.5 billion on assistance to the homeless. HUD's expenditures on public and Native American housing were projected to be $23.8 billion in FY 2005. (See Table 5.2.) If these funds are added to projected expenditures on homeless programs, total spending on subsidized housing in FY 2005 would be $25.3 billion. Of this total, 5.8% is allocated to helping the homeless and 94.2% to ensuring that people do not become homeless. To help people stay housed, the government has housing programs that help poor and low-income people.

Households in Subsidized Housing

In 2002 over 5.1 million families, or 4.6% of U.S. households, lived in subsidized housing. (See Table 5.3.) Of those in subsidized housing, 2.6 million households had income below the officially defined poverty level; these households were 2.3% of all households and just over half of all subsidized households (51%).

The U.S. Census Bureau provides estimates of families living in poverty and of poverty-stricken households (a sector that includes family as well as nonfamily groups and singles). In 2002 there were roughly seventy-five million families in the United States but more than 111 million households. The Census Bureau estimated in

Fiscal year
Fiscal year
Fiscal year
Homeless assistance programs
Homeless assistance grants1,2171,2601,257
Shelter plus care renewals193193
Samaritan housing program50
Emergency food and shelter153
    Total, homeless1,2171,2601,485
Public and Indian housing
Housing certificate fund15,93816,41316,909
Public housing capital fund2,7122,6962,674
Revitalization of severely distressed public housing projects570149
Public housing operating fund3,5773,5793,573
Native American housing block grants645650647
    Total, public and Indian housing23,42523,49323,756

Statistitcal Abstract of the United States 2004-2005 that in 2002 more than 13.5 million households lived below the poverty level. Elsewhere, the Census Bureau estimated that 7.2 million families (or 9.6% of all families) were living in poverty in 2002 (Poverty in 2002, U.S. Census Bureau, September 2003). In 2002 more than 5.1 million households lived in subsidized housing. (See Figure 5.1.) In the 1990-2002 period, those in subsidized housing peaked in 2002. Total households living in subsidized housing increased 18.1%.

Types of Programs

Virtually all government housing programs are targeted to poor or low-income households. For this reason subsidized housing is "means-tested," meaning that the income of those receiving help must be below a certain threshold. The qualifying income level—much like the definition of poverty—changes over time. Beneficiaries of housing assistance never receive cash outright. The benefits are therefore labeled "means-tested noncash benefits."

HUD has operated many different kinds of housing programs, but these can be classified under three headings: public housing owned by the government, tenant-based programs that provide people vouchers to subsidize rent, and project-based programs that underwrite the costs of private owners who, in turn, pledge to house low-income people.

Public housing and voucher programs account for roughly equal proportions of subsidized units. Project-based programs, also known as "private subsidized

Below poverty level
Type of benefit received1980199019952000TotalNumberPercent of totalAbove poverty level
Total households82,36894,31299,627106,418111,27813,50510097,773
Receiving at least one noncash benefit14,26616,09821,14820,13122,4787,8065814,672
Not receiving cash public assistance7,8608,81913,33514,46516,8905,0033711,887
Receiving cash public assistance*6,4707,2797,8135,6675,5882,803212,785
Total households receiving—
Food stamps6,7697,1638,3885,5636,2453,834282,411
School lunch5,5326,2528,6077,1857,9303,092234,838
Public housing2,7774,3394,8464,6895,1252,593192,532
*Households receiving money from Aid to Families with Dependent Children Program (beginning 2000, Temporary Assistance for Needy Families Program), Supplemental Security Income program or other public assistance programs.
Note: Data covers civilian noninstitutional population, including persons in the armed forces living off post or with their families on post. A means-tested benefit program requires that the household's income and/or assets fall below specified guidelines in order to qualify for benefits. There are general trends toward underestimation of noncash beneficiaries. Households are classified according to poverty status of family or nonfamily householder.

projects," account for the most units, but these "private subsidies" take many forms, some quite complicated. A look at the major programs follows.


HUD's FY 2005 budget anticipated funding for 1.2 million public housing units. Public housing has been decreasing in numbers (1.37 million in 1998, for example), in part because of an initiative to remove, modernize, and refurbish many poorly constructed and dilapidated public housing units. An estimated 3,150 public housing authorities manage the 1.2 million units. In FY 2005, $2.7 billion was allocated to fund major repairs and modernization of units and $3.6 billion was allocated for operating costs.

Public Housing Residents

On its Web site HUD provides a data server on public housing residents called Resident Characteristics Report (http://www.hud.gov/offices/pih/systems/pic/50058/rcr/index.cfm). As of March 31, 2005:

  • Average annual income was $10,725. Only 7% of the public housing population earned more than $25,000 a year.
  • Among residents, 31% had wage income, 19% had Temporary Assistance for Needy Families (TANF) income, 54% had Social Security income, and 18% had other income (the same person could have income from more than one source). Four percent had no income from any source.
  • The average rental payment was $243 per month.
  • Females with children were 38% of families, 18% were elderly and not disabled, and 11% were elderly with a disability. A number of other, overlapping, categories were shown as well, but notably missing was a category for male-headed families with children.
  • Half (50%) of heads of households were white, 46% were black, 2% were Asian, and 1% were American Indians or Alaska Natives. One in five heads of household (21%) were of Hispanic origin.
  • Nearly half (46%) of households consisted of just one person, 20% of two, 15% of three, 10% of four, 5% of five, 2% of six, and 1% of seven persons. No households had more than seven persons.
  • The 932,850 units reporting data had 2,075,079 household members, with an average household size of 2.2 persons.
  • Of units occupied, 7% had no bedroom, 34% had one, 30% had two, 23% had three, 5% had four, and 1% had more than five bedrooms.
  • Thirteen percent of the population had been in public housing for more than twenty years, 17% for ten to twenty years, 21% for five to ten years, 23% for two to five years, 11% for a year or two, and 16% had moved during the past year. The rest did not report on length of stay.

Public Housing Agencies

Management of public housing is handled by housing agencies (sometimes called authorities) established by local governments to administer HUD housing programs. The Housing Act of 1937 requires that PHAs submit annual plans to HUD but also declares it to be the policy of the United States "to vest in public housing agencies that perform well the maximum amount of responsibility and flexibility in program administration, with appropriate accountability to public housing residents, localities, and the general public."

PHAs thus operate under plans approved by HUD and under HUD supervision, but they are expected to operate with some independence accountable to their residents, local (or state) governments, and the public. Not all PHAs have "performed well," and HUD has been accused of lax supervision. PHAs and public housing generally reflect the distressed conditions of the population living in government-owned housing. PHAs have been charged with neglecting maintenance, tolerating unsafe living conditions for tenants, and with fraudulent or careless financial practices.

Responding to such accounts, Congress created the National Commission on Severely Distressed Public Housing in 1990. In its report, released in August 1992, the Commission concluded that severely distressed public housing was a national problem. The Commission reported that 86,000 (or 6%) of the nation's public housing units were plagued by crime and deteriorated physical conditions in violation of HUD standards. Five years later the National Housing Institute, a not-for-profit advocacy group, charged that HUD still did not know how much, or which parts, of its public housing inventory met its own "troubled housing" definition despite the fact that these troubled properties represented a significant portion of the available low-income housing in the United States (J. Atlas and E. Shoshkes, Saving Affordable Housing, What Community Groups Can Do and What Government Should Do, National Housing Institute, 1997).

Troubled housing refers to low-income projects that are badly deteriorated, are located in unsafe neighborhoods, or are in danger of being lost to market-rate housing conversion or foreclosure. In an effort to improve its accountability for the conditions of low-income housing, HUD began to implement a new Public Housing Assessment System (PHAS) in January 2000. PHAS is used to measure the performance of public housing agencies. The four primary PHAS components are:

  1. Physical Inspection Indicator—Ensures that PHAs meet the minimum standard of being decent, safe, sanitary, and in good repair
  2. Financial Condition Indicator—Oversees the finances of PHAs
  3. Management Operations Indicator—Evaluates the effectiveness of PHA management methods
  4. Resident Satisfaction and Service Indicator—Allows public housing residents to assess PHA performance

A March 2002 GAO report commissioned by Congress studied the implementation of PHAS and its progress. The study found that HUD had also formed the Public and Indian Housing Information Center, a database that collected additional information not addressed by PHAS, such as compliance and funding. The findings indicated that as of 2002, PHAS's method of evaluation considered only component three, managerial deficiencies, to declare PHAs as troubled. The plans were to incorporate all four components. Table 5.4 shows the number of the then existing 3,167 authorities investigated that would have been classified as troubled if all four PHAS components had been applied instead of just one ("New Assessment System Holds Potential for Evaluating Performance," Washington, DC: GAO, March 2002). The table shows that 532 PHAs were "troubled" overall or in one area (16.8%), 827 were high performers (26.1%), and 1,808 were standard performers (57.1%).

A 2005 report from the GAO confirmed that HUD continued to have major problems ("Major Management Challenges at the Department of Housing and Urban

PHAS designationNumber of authorities
designated under one
Number of authorities
that could be designated
under four indicators
Overall troubleda90
Troubled in one areaa424
Substandard physical169
Substandard financial249
Substandard managementb4524
Standard performer3,1221,808
High performera827
aHUD designated no high performers for fiscal year 2001. The only troubled performers were those that were troubled in the management area. b When performance is assessed using all four indicators, housing authorities that are troubled in more than one area become overall troubled. Some of the 45 housing authorities that were troubled in the management area alone under one indicator moved into the overall troubled category when their physical and financial condition were taken into account. As a result, only 24 housing authorities remained troubled in the management area alone under all four indicators.

Development," GAO, February 23, 2005). According to the report, HUD had made some progress in addressing management problems. However, since "some of HUD's corrective actions are still in the early stages of implementation and additional steps are needed to resolve ongoing problems," its rental housing assistance programs remain "high risk."


As a result of the 1992 recommendations of the National Commission on Severely Distressed Public Housing, Congress authorized $300 million for an urban revitalization demonstration program in the FY 1993 Appropriations Act. The program came to be named HOPE VI. The acronym stands for Housing Opportunities for People Everywhere. Up to that point, HUD had four different HOPE initiatives; no HOPE V was ever launched (James Bovard, "HUD's Biggest Farce?" Free Market, vol. 18, no. 11, November 2000).

The aim of HOPE VI was to eliminate or upgrade the 86,000 deteriorated units identified by the Commission. In the FY 1993-2002 period, HUD reported revitalization grants totaling $5.04 billion and expended $335.6 million on demolitions. In its FY 2004 budget summary, HUD claimed budget authority for FY 2003 of $574 million. HUD documented that 55,000 housing units had been demolished and 140,000 approved for demolition under HOPE VI and other programs, and no new funding was required for FY 2004 as the agency worked through its existing backlog. In FY 2005, $110 million in funds were available to public housing authorities for revitalization programs.

Critiques and Implications

The findings of the National Commission in 1992 and the launch of an initiative like HOPE VI (aimed at demolishing public housing) illustrates the sometimes troubled history of public housing. HOPE VI itself has been severely criticized by advocacy groups. A 2002 report entitled False HOPE (prepared by the National Housing Law Project, the Poverty & Race Research Action Council, Sherwood Research Associates, and Everywhere and Now Public Housing Residents Organizing Nationally Together, June 2002) found that HOPE VI:

  1. Appeared headed toward eliminating twice the number of units found to have been "severely distressed" by the National Commission
  2. Has eliminated rather than increased units available to the lowest income population
  3. Has made it very difficult for residents to participate in program decisions
  4. Has not improved the "living environment" of those in HOPE VI sites, and
  5. Has failed to provide data on project outcomes

Data on the number of public housing units available to house low-income people support the general charge that the number of units has declined from nearly 1.37 million in 1998 to 1.22 million in 2003, a drop of 150,000 units. If people who inhabit units slated for demolition are not able to find accommodation under HUD Section 8 Voucher programs, they are at greater risk of becoming homeless.


How Voucher Programs Work

Voucher programs pay a portion of the rent for qualifying families. Only low-income families are eligible, specifically those with incomes lower than half of an area's median income. Under some circumstances, families with up to 80% of the local median income may also qualify; such cases may involve, for instance, families displaced by public housing demolition. The family pays 30% of its income in rent. Vouchers are issued by the Public Housing Agency, which executes assistance contracts with the landlord, who must also qualify.

Two major voucher programs are available: tenant-based and project-based. In tenant-based programs, the voucher "follows" the tenant when the tenant moves to another qualifying unit. In project-based programs, the voucher "attaches" to a project. Families are directed to participating projects after they qualify. Tenants cannot automatically transfer their voucher in a project-based dwelling to another—but they may qualify for tenant-based vouchers after they move.

In addition to these two basic programs, HUD also has five other voucher programs. Conversion vouchers are used to help tenants relocate when public housing is demolished. Family unification vouchers are used to help families stay together. Homeownership vouchers assist families in purchasing a first home or another home if the family has not lived in a house in the past three years. Participants must be employed and have an income of at least minimum wage. Vouchers for people with disabilities and welfare-to-work vouchers assist the elderly or non-elderly disabled and families transitioning from welfare to work.

In all of these programs, the housing supplied is privately owned and operated and rents paid are at or below fair market rent (FMR). HUD determines the FMR in every locality of the nation by an annual survey of new rental contracts signed in the past fifteen months. The FMR is set as the fortieth percentile of rents paid, meaning that 40% paid a lower rent and 60% paid a higher rent. HUD has chosen the fortieth percentile to increase housing choices while keeping budgets at reasonable levels. Table 5.5 presents FMRs used by HUD in a sample of cities around the country in 2005. Rents in certain cities are calculated at the fiftieth percentile under new HUD rules that went into effect in 2001 for thirty-nine markets, which resulted in a raise in the FMR in these localities.

Of the cities in Table 5.5, the highest FMR for 2005 was in Boston, Massachusetts ($1,266 per month). The lowest FMR was in Louisville, Kentucky ($553 per month).

Voucher Usage

As shown in Table 5.6, the amount of subsidized housing and Section 8 housing vouchers declined across all categories between 2003 and 2005. Project-based Section 8 housing has declined dramatically because funding for new construction stopped in 1983 with some minor exceptions (including construction/rehabilitation aimed at supporting homeless programs). Support of housing in such units continues, but the housing stock is going out of use through demolitions and conversions. Thus in 2005 the vast majority of Section 8 housing vouchers were tenant-based.

Characteristics of Voucher Residents

Although tenant-voucher residents have a fractionally higher average household income than public housing residents, they also have a larger family size. Therefore, two-thirds of voucher users (66%) and a little more than

Area definitionFair market rental
rate, 2005
Albany-Schenectady-Troy, NY679
Albuquerque, NM699
Atlanta, GA834
Bergen-Passaic, NJ1,132
Boston, MA1,266
Cincinnati, OH-KY-IN652
Columbus, OH640
Dayton-Springfield, OH595
Denver, CO888
Detroit, MI805
Honolulu, HI1,087
Houston, TX733
Kauai County, HI1,061
Louisville, KY-IN553
Maui County, HI1,149
McAllen-Edinburg-Mission, TX593
Nashville, TN654
Newark, NJ1,020
New York, NY1,075
Omaha, NE650
Philadelphia, PA914
Salt Lake City, UT682
Springfield, MA772
Tulsa, OK640
Tuscon, AZ673
Washington, DC1,187
Public housing1,300,4931,241,4661,220,937
Section 8 tenant vouchers1,391,5262,077,3361,803,013
Section 8 project-based

half (56%) of public housing residents have an extremely low income for their family size (See Table 5.7). The shift of the subsidized population from public housing toward voucher housing represents not an improvement so much as a shift in policy, whereby the provision of housing in the future appears to be headed for privatization. Barbara Sard has argued in the HUD journal Cityscape: A Journal of Policy Development and Research ("Housing

Public housingTenant vouchers
    Average income$10,725$11,080
Percent with income of:
Above $25,00076
Percent below 30% of median income5666
Average monthly payment$243$253
American Indian/Alaska Native11
Average household size2.22.6
Percent with 4 or more people1825
Percent with 2 bedrooms3037

Vouchers Should Be a Major Component of Future Housing Policy for the Lowest Income Families," vol. 5, no. 2, 2001) that tenant-based voucher programs give low-income people choices in housing and avoid problems of concentrating all poor people in housing projects.


The two biggest low-income housing programs in the United States are public housing and the Section 8 programs. Section 8 funds are distributed under HUD's Housing Certificate Fund. Other HUD programs fund housing for people living with AIDS (Housing Opportunities for Persons with AIDS, or HOPWA), elderly people, Native Americans and Native Hawaiians, and persons with disabilities. A new 2005 program, the Prisoner Reentry Initiative, helped ex-prisoners find housing as well as with job training and other services.

The homeownership voucher program provides vouchers to participants in the tenant-voucher programs who meet income and eligibility requirements to help them buy their first homes. The program assisted 2,000 low-income families from 2002 through 2005; in 2006 the program plans to assist 3,000 families with purchasing homes.

In 2004 the Self-Help Homeownership Opportunity Program (SHOP) supported the construction of 5,200 new homes for low-income people. Other HUD programs aim to increase privately owned low-income housing stock. FHA provides mortgage insurance for multi-family projects, and the Low-Income Housing Tax Credit program, available to developers who provide a portion of their projects at low rents, added an estimated 100,000 low-income units in 2003. Funding under HUD's Community Development Block Grant program also has money for low-income housing.

HUD maintains demographic and income data only on participants in the major programs. For that reason, information on the characteristics of participants in many other HUD subsidy programs aimed at low-income people is unavailable. The programs cited above do not include mortgage insurance and other FHA programs aimed to assist the more affluent general population to own a home.

Federal Home Loan Bank

Federal law requires each of the twelve district Federal Home Loan Banks to establish an Affordable Housing Program. Member banks then provide grants and below-market loans to organizations for the purchase, construction, and/or rehabilitation of rental housing. Only 20% of the units created with these funds have to be affordable for and occupied by very low-income households.

In addition, the Federal Home Loan Banks offer a loan program called the Community Investment Program. This provides long-term funding at fixed rates to develop rental housing or finance first-time home purchases for families and individuals with incomes up to 115% of the area's median income. This means that middle-income people can build or buy homes using these funds, but the expenses are considered part of the low-income housing assistance budget.

Rural Housing Programs

A variety of rural housing programs are administered by the Rural Housing Service (RHS), a division of the U.S. Department of Agriculture. (Table 5.8 lists program data from 1979-99.) These programs make federal money available for housing in rural areas, which are considered places with populations of 50,000 or less. Eligibility for rural housing programs is similar to that of subsidized urban programs. The requirements vary from region to region, and applicants must meet minimum and maximum income guidelines. The subsidies come in the form of grants or low-interest loans to repair substandard housing; subsidized mortgages for low-income home ownership; and grants to cover down payment and purchasing costs of low-income homes.

Table 5.8 shows the various programs that were available under RHS funding in millions of dollars and the number of households helped in 1999. In 2003, $1.6 billion was appropriated; of that, $721 million went to

RHS housing programTotal dollars spent, fiscal year 1979Total dollars spent, fiscal year 1994Total dollars spent, fiscal year, 1999Number of households helped, fiscal year 1999Type of assistance
Single-family housing direct loans (sec. 502)$2,870.0*$1,656.8*$966.9*15,000Loans subsidized as low as 1 percent interest
Single-family housing guaranteed loans (sec. 502)$725.9*$2,980.0*38,600No money down, no monthly mortgage insurance loans
Single-family home repair grants and loans (sec. 504)$33.7$52.7$46.89,021Grants for elderly and loans subsidized as low as 1 percent interest
Single-family housing mutual self-help grants (sec. 523)$5.6$12.8$25.41,350Grants to nonprofit and public entities to provide technical assistance
Multifamily direct rural rental housing loans (sec. 515)$869.5*$512.4*$114.3*2,181Loans to developers subsidized as low as 1 percent interest
Multifamily housing guaranteed loans (sec. 538)$74.8*2,540Guaranteed loans for developing moderate-income apartments
Multifamily housing farm labor grants and loans (secs. 516/514)$68.8$56.3$33.2622Grants and loans subsidized at 1 percent interest
Multifamily housing preservation grants (sec. 533)$23.0$7.21,800Grants to nonprofit organizations, local governments, and Native American tribes, usually leveraged with outside funding
Multifamily housing rental assistance (sec. 521)$423.0$446.7$583.442,000Rental assistance to about one-half the residents in RHS rental and farm labor units
*Dollar amounts represents private-sector loan levels guaranteed by RHS or loans made directly by RHS during the year. Actual federal outlays are much lower because they cover the subsidy cost, not the face value of the loans or guaranteed loans. The subsidy cost is the estimated long-term cost to the government of a direct or guaranteed loan calculated on a net present value basis, excluding administrative costs.

assist renters and $4.2 million toward single-family home loan guarantees.

In the fourth quarter of 2004, homeownership in rural areas, at 76.4%, was 7.2% higher than the national rate (69.2%), but affordable housing is in short supply in rural areas. Much of the rural low-income housing where renters, migrant workers, and a high population of minorities live is substandard. There are four major areas affected by housing inadequacies: the Mississippi Delta, Native American trust lands, the Colonias bordering Mexico, and Appalachia.

Unfortunately, like HUD, RHS has been plagued by accusations of mismanagement. The GAO report "Rural Housing Services, Opportunity to Improve Management" (June 2003) found that the RHS could be improved by reducing costs and centralizing administration. A May 2004 GAO report said that the RHS had consistently overestimated its budget needs ("Rural Housing Service: Agency Has Overestimated Its Rental Assistance Budget Needs over the Life of the Program," GAO-04-752).

Projects for Assistance in Transition from
Homelessness (PATH)

Projects for Assistance in Transition from Homelessness (PATH) is a federally funded program administered by the federal Center for Mental Health Services through grants to state mental health agencies. These state agencies provide PATH-funded services to homeless people with mental illness primarily through local or regional mental health service providers. PATH funds can be used for outreach, screening, diagnostic treatment, habilitation, rehabilitation, community mental health services, case management, supportive and supervisory services in residential settings, and other housing-related services.

Education for Homeless Children and Youth (EHCY)

In response to reports that over 50% of homeless children were not attending school regularly, Congress enacted the McKinney-Vento Act's Education for Homeless Children and Youth (EHCY) program in 1987. The program ensures that homeless children and youth have equal access to the same free, appropriate education, including preschool education, provided to other children. EHCY also provides funding for state and local school districts to implement the law. States are required to report estimated numbers of homeless children and the problems encountered in serving them. The McKinney-Vento Homeless Education Assistance Act, part of the No Child Left Behind Act of 2001, reauthorized the program and included the following new guidelines.

  • Homeless children cannot be segregated.
  • Transportation has to be provided to and from schools of origin if requested (a school of origin is the school the student attended when permanently housed, or the school in which the student was last enrolled).
  • In case of a placement dispute, immediate enrollment is required pending the outcome.
  • Local education agencies (LEAs) must put the "best interest of the child" first in determining the feasibility of keeping children in their school of origin.
  • LEAs have to designate a local liaison for homeless children and youth.
  • States have to subgrant 50% to 75% of their allotments under EHCY competitively to LEAs.

Unaccompanied Youth Services

The Runaway and Homeless Youth Program (RHYA), administered by the Department of Health and Human Services, began in 1974 and provides financial assistance to community-based crisis and referral centers that serve runaway and homeless youth and their families. Transitional Living Program for Older Homeless Youth was created in 1988 as part of RHYA to assure long-term assistance to this segment of the homeless ("Family and Youth Services Bureau—Transitional Living Program for Older Homeless Youth," U.S. Department of Health and Human Services http://www.acf.dhhs.gov/programs/fysb/tlp.htm, March 10, 2004). Services are geared to the following areas:

  • Living accommodations that are safe and stable
  • Skill building on two levels: life-skills such as housekeeping, budgeting, and food preparation, and interpersonal skills such as relationship-building, decision-making, and stress management
  • Education area addresses furthering secondary and post secondary achievement, job preparation, and substance abuse education
  • Mental and physical health care, which includes counseling, health assessment, and treatment in emergencies

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Federal Government Aid for the Homeless

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Federal Government Aid for the Homeless