HUD Releases Emergency Funds to Soften the Sequester's Impact

Local housing authorities are in dire straits. Without funds, some may have to eliminate rental assistance.
August 27, 2013
Seekers of Section 8 housing lined up at 8:30 a.m. ahead of hundreds of others who were turned away shortly after 9 a.m. in Bloomington, Ind.
Under the sequester, Section 8 Housing Choice Vouchers experienced a 5 percent cut that effectively became a 9 percent cut because housing authorities spent money in the months leading up to the federal budget reductions that they expected to receive based on previous years. AP/Jeremy Hogan

To avoid a worse-case scenario for local public housing authorities, the U.S. Department of Housing and Urban Development (HUD) is disseminating one-time emergency funds -- a pot of money that amounts to a mere $103 million, less than one percent of the total funds allocated each year for rental vouchers across the country.

Still, affordable housing advocates say it's the closest thing to a silver lining in the aftermath of budget cuts by Congress in March. Under the sequester, Section 8 Housing Choice Vouchers experienced a 5 percent cut that effectively became a 9 percent cut because housing authorities spent money in the months leading up to the federal budget reductions that they expected to receive based on previous years. So far, HUD has approved 218 applications out of the 283 housing authorities seeking emergency funding.

Vouchers are just one of several critical federal programs for the poor that fell under the sequester's ax this year. Unemployment benefits, nutrition assistance for seniors and energy assistance for low-income homes have also suffered cuts.

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This contingency money from HUD has been available in the past, but in previous years it was for other types of emergencies. For example, if a town's economy depended on a manufacturing plant that closed unexpectedly, a large cross section of the residents might become unemployed, with diminished financial resources to pay for housing. This year Congress included the sequester as one such unforeseen circumstance. If housing authorities can demonstrate that they already spent down their reserves, took precautions against over extending their budgets and are still on the cusp of eliminating vouchers currently in circulation, they can access the federal contingency funds.

The emergency funds are meant as a final option for housing authorities in crisis mode, but some housing directors say it's encouraging short-sighted behavior. "There's a perverse unintended consequence in all of this," says Richard Williams, who oversees two public housing authorities in Vermont, including one, St. Alban's, that's been granted about $24,000 in emergency funds from HUD.

"Really we should always maintain reserves for the unexpected," Williams says. Instead, he argues, the prospect of receiving emergency funds might cause some housing authorities to deplete their reserves. "It creates the potential for people to make bad management decisions, thinking that they'll get more money."

While the emergency fund may soften the blow of the sequester this year, the long-term consequences of the cuts aren't clear yet. Are the number of available vouchers permanently reduced? Would housing authorities try to preserve the number of vouchers by requesting permission from HUD to dilute the value of each voucher? "I think housing authorities across the country are going to be in dire straits," says Alvin Nash, the director of a city housing department in Dubuque, Iowa, that is scheduled to receive $130,000 in emergency funds. The cuts have no correlation with demand for rental assistance, which is only increasing, Nash says. "The elderly, the disabled, and the very poor -- they don't have a lot of alternatives. This is it."

Dubuque is authorized by HUD to distribute 1,063 vouchers each year, but as a cost-cutting measure the city had limited the number of vouchers in use to 855. When the sequester hit, the city was forced to freeze the program further. Each month about 11 voucher holders naturally leave the program, and when they do, Dubuque can't give those available vouchers to other families or individuals in need. That's one consequence of the emergency HUD funds: If Nash's department tried to keep the number of vouchers at 855, Dubuque wouldn't qualify for the HUD money it requested. By the end of the year, Nash expects the number of vouchers in circulation to drop to 800. "I should call it secastration," he says, "because that's what it feels like."

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