A housing cash crunch

Urban Chronicle

Funding: The need for affordable-housing aid is on the rise, but recession, defense spending and tax cuts could make it hard to come by.

November 15, 2001|By Eric Siegel | Eric Siegel,SUN STAFF

ADD ADVOCATES of affordable housing to the growing list of those affected by the aftermath of the Sept. 11 terrorist attacks on America.

At a meeting last week in Washington that was part of the annual conference of the Enterprise Foundation, providers of low-income homes and apartments were portrayed as being caught in a classic squeeze.

On one end, the demand for low-income housing and apartments is growing as the recession curtails the ability of those on the lower rungs of the economic ladder to move out of poverty.

On the other end, the capacity of lenders and philanthropists to respond to the increased need is reduced by the downturn, while the the focus of the federal government is understandably more on security than on social programs.

The urgency with which Enterprise - the Columbia-based organization founded by the late Jim Rouse and his wife, Patty, to help rebuild distressed neighborhoods - regards the situation is underscored by a statement the nonprofit released at the conference.

The statement, "Now More than Ever, All Americans Need a Place to Call Home," noted that 15 million poor families lack decent housing or have to pay too much for what they have.

"The slowing economy, along with the recent and substantial loss of jobs in the United States, will put the prospect of an affordable home out of reach of even more low-income Americans," said Enterprise.

Enterprise promised a renewed effort to address the problem, a commitment shared by dozens of groups nationwide, including such Baltimore partners as Coppin Heights Community Development Corp. and Sandtown-Winchester's Habitat for Humanity.

The conundrum faced by the groups was succinctly summarized by Mark Willis, an executive vice president of financial giant J.P. Morgan Chase & Co.

The "hard reality" is that while the need for affordable housing is growing, "the corporate world is cyclical and we're in pullback mode," Willis said.

The pullback extends not only to corporate giving - "If profits are down, there's usually a decrease in philanthropic spending" - but also to a more cautious attitude toward lending.

Stacey H. Davis, president and Chief executive officer of the Fannie Mae Foundation, which gives $34 million a year in grants, was equally blunt about how nonprofit housing groups need to react to what she called an "extraordinary environment."

Every group needs to scrutinize its programs, she said, and some might need to scale back what they're doing.

"You may not be able to accomplish everything you want to accomplish," Davis said.

Robert Greenstein, executive director of the Center on Budget and Policy Priorities, predicted a "major national debate" when President Bush unveils his budget for 2003 early next year.

The Bush administration has indicated that initiatives unrelated to the war against terrorism will be shelved or cut, he said, adding that "one of the areas in the budget that is one of the most vulnerable is low-income housing."

Greenstein did not call for recycling the old "guns vs. butter" discussion. In fact, he acknowledged in response to a question that "whatever the administration requests for defense, it's probably going to get every penny of it."

Rather, he said, the dialogue would focus on whether to defer or cancel parts of the broad tax cut enacted in June that have not yet gone into effect and use that money for social programs for which funding suddenly seems to be evaporating.

The debate over the economic stimulus package before Congress is a precursor of that wider discussion, he said.

"The No. 1 low-income housing issue in terms of a decision in Washington - as well as the No. 1 child care issue, the No. 1 issue in terms of reducing the number of uninsured - is what we do with the parts of the tax cut that aren't yet in effect," Greenstein said.

"If we make no changes there, the question is not how do we meet unmet needs in areas like affordable housing, but which programs do we cut and by how much," he added.

Beyond the shadows cast by the recession and the terrorist attacks Sept. 11, the panelists saw some rays of hope.

Stockton Williams, Enterprise's director of public policy, said the recently approved appropriations for the U.S. Department of Housing and Urban Development for the 2002 federal fiscal year, which began Oct. 1, are "pretty good."

Most programs important to Baltimore and other cities, such as community development block grants and public housing operating funds, received the same or slightly increased funding , he said. But sharp cuts were made in the number of Section 8 rental vouchers approved and in money for a fund to boost lending in low-income areas.

Willis noted that cities and neighborhoods are "much more resilient" than in the past.

Williams pointed out that many programs that are the mainstays of affordable-housing initiatives today were enacted by Congress during years when the federal government was running large budget deficits. And he said technical changes in welfare reform, scheduled for reauthorization next year, and community reinvestment regulations could improve housing investment at little or no cost.

Greenstein noted that during an economic downturn, many middle-class people lose their jobs, making them more sympathetic to those who need assistance. At the same time, he said, polling suggests that the public has a more positive view of government than it had a few months ago.

"We need to try to take advantage of both of those developments in framing our message," he said.

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