Characteristics and Dynamics of Homeless Families with Children. Section 4: Proposed New Resources for Subsidized Mainstream Rental Housing


Housing assistance is not an entitlement, and there is a very large gap between the number of families who need subsidies for affordable rental housing and the number of available subsidies. This puts families attempting to leave homelessness for mainstream subsidized permanent housing in direct competition with families who are housed but who have severe or worst case needs for housing assistance. This section considers two current proposals for increasing the resources available for housing subsidies: an expansion of the Earned Income Tax Credit (EITC) and enactment of a National Housing Trust (NHT).

Adding a Housing Subsidy to the EITC. Proposals discussed in a recent issue of Housing Policy Debate (Stegman, Davis, and Quercia, 2004) would use the EITC as a vehicle for reducing severe housing cost burdens. These proposals would tie the amount of the EITC explicitly to housing costs either: (1) by providing a supplement to EITC equal to the difference between 50 percent of earnings and actual housing costs or (2) by providing a supplement based on national median housing costs that retains the structure of the EITC subsidy, with families with greater earnings receiving greater subsidies up to the beginning of a phase-out point, after which the subsidy diminishes with increased earnings.

Attaching a housing subsidy to the EITC focuses on families with children, as does the EITC itself. However, the subsidy levels proposed would be too shallow to be used for placing families exiting homelessness in stable, affordable housing. The first approach would be most useful for those who already are housed but need some relief from a severe rent burden. For those attempting to move into a rental unit, a subsidy paying only the difference between rent and 50 percent of earnings would not be large enough to make the rent affordable and the owner of a housing unit willing to accept such a rental agreement.

The second approach would provide higher subsidy amounts. Nonetheless, because it is tied to earnings, it could not help families entirely dependent on benefit income such as SSI. Also, because this approach provides a benefit that increases with earnings (at the lowest levels of earnings), it would also not provide a large enough supplement for families with low wage jobs and less than full time work to be able to afford the rents in unsubsidized housing or in affordable housing with flat rents.

The greatest benefit of an expanded EITC—or of any program or policy that increases substantially the incomes of poor families—is that it would reduce the number of housed families with severe rent burdens, making them less likely to get on waiting lists for housing assistance and thereby taking them out of competition with families attempting to leave homelessness. An expanded EITC might also reduce the number of families who become homeless because they are evicted for failing to pay the rent.

NHT. The proposed NHT would provide a permanent, dedicated source of revenue for the production of affordable housing. The goal of the proponents of this legislation is to provide an amount needed to produce 1.5 million units of affordable housing over a 10-year period. Seventy-five percent of NHT funds would be used for rental housing, and at least 45 percent of NHT funds would be used for housing affordable to those with incomes at 30 percent of area median income. NHT funds would be allocated (as is the HOME program), 40 percent to states and 60 percent to local governments.

The proposal contemplates the use of NHT funds in mixed-income developments that also have other locally controlled Federal dollars, including HOME and LIHTC. NHT funds would be used to write down the rents of a portion of the units to levels affordable at 30 percent of area median income. Locally controlled Federal dollars could count as a one-to-one match needed to access NHT funds. A state or local government using its own revenue (or private revenue) for the match would need to provide only $1 for every $2 of NHT funds.19

The NHT is, in effect, a supplement to the HOME and LIHTC programs, and it would likely be used for many rental developments that also use one or both of those funding sources. Its relevance for providing mainstream permanent rental housing for homeless families is that, if enacted as intended as a supplement rather than a replacement for HOME and LIHTC funds, it could bring the flat rents of those programs within the reach of families with incomes below the poverty level. In that sense, it would play a role similar to Housing Choice Vouchers when vouchers are used in HOME or LIHTC developments. The difference is that vouchers are portable subsidies that can be used by a formerly homeless family to move among rental housing developments (subsidized or unsubsidized), whereas the deeply subsidized rents enabled by NHT funds would be tied to particular rental housing developments.

When used outside HOME and LIHTC developments, the NHT, like those programs, would be unlikely to provide rents affordable for most families leaving homelessness, unless those families also had vouchers.

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