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Sequestration and Section 8 Housing

karen rittenhouse
2 min read
Sequestration and Section 8 Housing

Sequestration: the ten years of automatic, across-the-board budget cuts that started March 1. It’s here and it’s effects are being felt.

The federal Section 8 housing assistance program has had five consecutive years of inadequate and declining program funding. Things are about to get worse.

A March 8, 2013 letter from the US Department of Housing and Urban Development on the HUD.gov website states:

“As you are likely aware, due to the inability of Congress to pass legislation on balanced deficit reduction to avoid sequestration, the President was required by law to issue a sequestration order on March 1, 2013, canceling approximately $85 billion in budgetary resources across the Federal government for the remainder of the Federal fiscal year.

Based on our analysis, funding for the Section 8 Project-Based Rental Assistance program would be $8.9 billion. This represents a five percent reduction to the annualized funding level for HUDs Section 8 Program in the Federal fiscal year 2013.”

Public housing agencies were advised that they will have their Section 8 Administrative funds pro-rated at 68.5 per cent of what they are due for their work. Those in the the affordable housing field and those who live in federally-assisted housing are being warned by HUD to prepare accordingly.

What are some of the impacts to Section 8 tenants and property owners?

  1. Sequestration will reduce the amount of affordable rental housing made available by the federal government.
  2. Some underprivileged low-income occupants will be forced out of their homes.
  3. Landlords with marginal Section 8 properties will move into negative cash-flow.
  4. Property managers will lose income through reduced rents and landlord cutbacks.
  5. Lower lease rates could decrease property values.

Reductions on the table include:

  • tenants paying more toward their rent
  • landlords receiving less rent
  • dropping families from the Section 8 program

Public Housing Agencies have been authorized to take steps to address budget shortfalls including:

  1. holding back new vouchers
  2. increasing payment standards
  3. increasing minimum rents meaning paying out to fewer units
  4. moving those who live in larger units into smaller units
  5. not re-issuing vouchers that are turned in
  6. no longer issuing vouchers to families that have applied to waiting lists

Some housing agencies are already in the process of canceling vouchers recently issued to low income families and taking away vouchers from households that had not already found housing during the period allowed.

When testifying before the Senate Committee on Appropriations, HUD Secretary Shaun Donovan stated that these cuts would

“cause significant damage to our nation’s housing market at a time when it’s helping to lead our economic recovery.

More specifically, sequestration would mean about 125,000 individuals and families, more than half of whom are elderly or disabled, losing assistance provided through the Housing Choice voucher program, and becoming at risk of homelessness.

Sequestration would also result in more than 100,000 homeless and formerly homeless people, the majority of whom are families, disabled adults or veterans, being removed from their current house or emergency shelter programs, putting them at substantial risk of returning to the streets.”

Perhaps this change will help to clean up a program that was already struggling under the weight of its own inefficiencies.

Do you know how your local housing authority plans to deal with sequestration? Will you keep your Section 8 housing in light of this new information? Can you afford to keep your property Section 8 if they cut your rent by ten percent or even more?

Photo: taberandrew

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.