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Sequestration: What Planned Cuts Mean for Critical Housing Programs

By Emily Cadik | March 2013


Introduction

On March 1, sequestration went into effect, meaning federal agencies will impose $85 billion worth of across-the-board spending cuts in FY 2013. The cuts will be applied to most programs in all agencies, split evenly between defense and non-defense discretionary programs. As a result, non-defense discretionary programs, including almost all housing and community development programs, will face a 5.1 percent funding reduction.

What is Sequestration? And How Did We Get Here?

Sequestration is an automatic enforcement mechanism to help ensure $2.1 trillion in deficit reduction over the next 10 years. It was part of a 2011 agreement to raise the federal debt limit in exchange for this assurance of long-term deficit reduction.

The agreement, authorized through the Budget Control Act of 2011, will reduce the deficit by $917 billion through 2021 by imposing caps on discretionary spending. A “Super Committee” was tasked with identifying an additional $1.2 trillion in deficit reduction to reach the overall deficit reduction target. Having reached no agreement, the remainder of the deficit reduction yet to be achieved will come from the even, across-the-board through the spending cuts required by sequestration.

Sequestration was originally set to take effect on January 2, 2013, but was delayed by the 2012 year-end agreement to avert the “fiscal cliff.” This legislation (the American Taxpayer Relief Act of 2012) called for $12 billion in spending cuts and $12 billion in new revenue to allow for a two-month delay of sequestration until March 1, 2013.

Sequestration’s Devastating Impact on Housing and Community Development Programs

Discretionary programs are already enduring $1.5 trillion in spending cuts through 2021 as part of the Budget Control Act, which will bring their funding to the lowest levels since 1962. Sixty percent of the cuts will come from non-defense programs, even though they currently make up only 18 percent of the federal budget. The Department of Housing and Urban Development’s Budget has already been reduced by over 10 percent since FY 2010.

The Office of Management and Budget’s report to Congress on sequestration indicates that the following cuts will be made to critical housing and community development programs under sequestration:
  • HOME funding: $50 million
  • Public Housing: $293 million
  • Housing Choice Vouchers: $1.4 billion
  • Homeless assistance: $96 million
  • Section 202 Housing for the Elderly: $19 million
  • Section 811 Housing for Persons with Disabilities: $8 million

These funding cuts will force hundreds of thousands of families off of assistance. For example, approximately 125,000 families in the Housing Choice Voucher program will lose rental assistance, and more than 100,000 formerly homeless people will be removed from their current housing and emergency shelters. In addition, communities that receive HOME funds will be prevented from building or rehabilitating 2,100 affordable housing units.

At a Glance:
  • Due to mandatory, across-theboard spending cuts known as “sequestration,” most federal housing and community development programs will suffer a 5.1percent reduction in funding in FY 2013
  • These programs are already enduring massive cuts due to previous deficit reduction efforts. Even before the sequestration, federal funding for domestic discretionary programs is at its lowest level since 1962, relative to GDP.
  • Low-income families that rely on affordable  housing programs will be hit especially hard by sequestration. This includes 125,000 families that will lose rental assistance, 100,000 formerly homeless people that will be removed from supportive housing or emergency shelters and 2,100 homes for low-income families that will not be built or rehabilitated. • These cuts will deepen the affordable housing crisis facing low-income families today. At current funding levels, only 1 in 4 eligible families receive rental assistance – leaving 10 million families paying more than half of their monthly income on rent.
A More Responsible Path to Deficit Reduction

Enterprise, together with the Campaign for Housing and Community Development Funding (CHCDF), urges Congress and the administration to support the following principles in any deficit reform efforts:
  • Low-income families and individuals should not be made worse off by deficit reduction actions; low income households should not experience increased housing or other cost burdens from deficit reduction or tax reform efforts.
  • Sequestration should be cancelled and replaced with a balanced package to reduce projected deficits through responsible mandatory savings and significant revenue increases
  • Any additional deficit reduction must take into account the already enacted $1.5 trillion in spending cuts. Funding for non-defense discretionary programs should not be cut below the levels adopted under the Budget Control Act.
  • Deficit reduction efforts that include inflexible spending mechanisms such as spending and/or revenue caps should be opposed because they are likely to result in additional deep cuts to housing and community development programs.
  • Tax provisions that facilitate community development investments and expand the availability of affordable housing for low-income households, such as the Housing Credit and New Markets Tax Credit programs, should be protected in any future deficit reduction or tax reform package.
Looking Ahead

On March 27, 2013, the continuing budget resolution will expire, and Congress will need to act in order to avoid a government shutdown. In negotiating a budget resolution, Congress will have an opportunity to identify more targeted spending cuts to achieve the required deficit reduction, or to simply repeal or further delay the sequester. However, pending congressional action to avoid implementing sequestration, federal agencies will begin taking action to carry out the cuts specific in the President’s sequestration order.