The budget proposal released by President Trump earlier this month includes some “gems” for housing market observers.  Like every president before him, the proposal reflects the president’s priorities.  Trump’s priorities appear to be a strong military and a more efficient, nimble, lean federal government.

Among the suggestions the president made are a slimmer budget for housing programs.  Presuming Congress goes along with the president’s budget, what would it do for housing markets?

The Budget Proposal

The budget proposal includes a reduction to the U.S. Department of Housing and Urban Development’s (HUD) budget by $8.7 billion.  That represents a decline by 16.4% to 44.1 billion in 2020.

A summary of the proposed budget changes for HUD

Source: U.S. Department of Housing and Urban Development

Low-income housing advocates decried the proposal as a step in the wrong direction.  HUD programs attempt to help low- to moderate-income households pay for rental housing and buy homes.

The Biggest Proposed Changes

Among the biggest proposed changes – they will almost certainly stay “proposed” forever – are requiring individuals receiving federal rental assistance to pay for more of their own housing costs, and requiring adults, except the elderly and disabled, to work at least 20 hours a week or attend training or educational activities.

The Administration’s proposal would also get rid of the Community Development Block Grant program and other grants providing money for affordable housing. Trump also proposed money for new infrastructure and economic development projects.

HUD Secretary Ben Carson explained the proposed changes as follows: “For generations, the idea of the federal government providing housing assistance meant only one thing—helping to pay the rent so families can have a roof over their heads … But we must also think about how we can help families to access financial programs, educational opportunities, and higher paying jobs. In short, we must think beyond investing in bricks and mortar, and think about investing in people.

Would the proposal increase evictions or improve the long-term financial picture of affected families?

That’s where political ideology steps in.

What about rent?  The proposal attempts to lower the amount of rent paid by the federal government, which could hurt owners of property that receive payment from low-income renters.  But if the proposed cuts improve the livelihood of program participants, then it could actually make it easier to collect higher rent.

What should real estate investors look for?

Congress will address the federal budget in coming months. Pay extra attention to what Congress decides to do with spending for affordable housing.

 

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