Community Development Block Grant Expansion Isn’t a Housing Supply Strategy
I almost can’t believe I’m writing this, but here’s one more post on the 21st Century ROAD to Housing Act, legislation that seems headed to a House/Senate conference. I’ve written multiple pieces on the policies in these housing bills, even before the ridiculously bad “ban” on institutional investors was inserted in the Senate bill, and I’ve even argued that these policies are based on a false premise.
So, why write even more? Well, one important point keeps getting buried: The main thrust of both the House and Senate version of the bill is to tweak, extend, and expand community development block grants (CDBGs).
I know that some people have very strong negative feelings about these grants, but I’m staying out of that discussion here. My point is simply that it is difficult to see how the ROAD Act’s changes to these grants will materially affect the supply of housing. Members of both chambers are touting the bill as a supply-side gift to housing affordability, but the details really don’t support that claim.
Here are a few examples, with more detail than I’ve previously provided.
Rental Assistance Demonstration Program. Section 201 of the Senate bill amends the Department of Housing and Urban Development Appropriations Act of 2012 (Public Law 112–55; 125 Stat. 673). It removes the limit on the number of public housing units that can be converted to project-based voucher or project-based rental assistance programs. It also repeals the end date, meaning that the Rental Assistance Demonstration (RAD) program will no longer be a demonstration program. Instead, RAD will be permanent.
While the RAD program—and whether it was successful—has been somewhat controversial, it was never really about increasing the supply of housing. According to the Department of Housing and Urban Development (HUD), for example:
RAD was created in order to give public housing authorities (PHAs) a powerful tool to preserve and improve public housing properties and address the $26 billion dollar nationwide backlog of deferred maintenance. RAD also gives owners of several HUD “legacy” programs (Rent Supplement, Rental Assistance Payment, Section 8 Moderate Rehabilitation, Section 8 Moderate Rehabilitation Single Room Occupancy, and Section 202 Project Rental Assistance Contracts) the opportunity to enter long-term rental assistance contracts that facilitate the financing of improvements.
So, it’s about converting to a different housing assistance approach, and it’s not at all clear that RAD has, or will, increase the overall supply of housing.
Opportunity Zones. Section 202, titled Increasing Housing in Opportunity Zones, allows the HUD Secretary to “give additional weight” to grant applicants located in, or that primarily serve, a community designated as an Opportunity Zone. Aside from whether the Opportunity Zone program results in additional building of any kind, beyond the level which would have been built anyway, HUD already awards grants for projects in Opportunity Zones. Even if the language required, rather than allowed the HUD Secretary to give these applicants “additional weight,” it’s not at all clear this change would substantially increase the supply of housing.
Whole-Home Repairs program. Section 203, the Whole-Home Repairs Act, establishes a pilot program to “provide grants to implementing organizations to administer a whole-home repairs program for eligible homeowners and eligible landlords.” The term “implementing organization” means:
…a unit of general local government or a State that…will administer a whole-home repairs program through an agency, department, or other entity; or…enter into agreements with 1 or more local governments, Indian tribes, municipal authorities, other governmental authorities, including a tribally designated housing entity, or qualified nonprofit organizations, to administer a whole-home repairs program as a subrecipient.
These grants could be used to make uninhabitable homes livable, but they can also be used for many other types of repairs, including retrofitting homes for people with disabilities as well as for “energy and water efficiency, resilience, and weatherization.” Either way, they are for repairs of existing structures.
The Build Now Act. Section 205, the Build Now Act, ostensibly rewards some local communities for building more housing. Unquestionably, though, it ties the total amount of a CDBG award for some local governments to their housing growth figures. Here’s the key language:
If, with respect to a fiscal year for which the allocation under section 106 is being determined, the housing growth improvement rate for an eligible recipient is at or above the median housing growth improvement rate for all eligible recipients other than extremely high-growth recipients, or if an eligible recipient is an extremely high-growth recipient, the Secretary shall allocate to the eligible recipient for that fiscal year, in addition to the amount that would otherwise be allocated to the eligible recipient under section 106, a bonus amount.
For starters, locations with very low home values and high vacancy rates will not be eligible for these bonus grants. Regardless, any set of annual growth rates will have a median, with half above that figure and half below. So, while half of these eligible recipients will get a bonus CDBG award, those awards could simply go to those locations where more growth and building are already occurring, for reasons that have little to do with the CDBG process. In any case, the CDBG awards go directly to governments, not private developers.
The Unlocking Housing Supply Through Streamlined and Modernized Reviews Act. Section 208 of the bill has been touted as a supply booster because it provides regulatory relief from the National Environmental Protection Act (NEPA) review process. However, current law already provides certain exemptions from the NEPA review process (for specific examples, see the Code of Federal Regulations, section 58, title 24), and the bill codifies (and broadens) those exemptions. Just as important, the bill gives this regulatory relief to entities receiving assistance (of all kinds) from HUD. In other words, only those receiving financial or other assistance from HUD receive NEPA regulatory relief, not all private developers and citizens who are subject to the NEPA rules. As with other provisions in the legislation, it is difficult to see how these Section 208 changes will substantially boost the housing supply compared to the status quo.
These are just a few examples, but there are many more.
For decades, the federal government has sent billions of dollars per year to states and local governments for “community development” and “housing” activities. It has been notoriously difficult to quantify positive economic outcomes from these grants, much less a specific boost in housing supply.
It is incredibly hard to fathom why a bill that tweaks, extends, and expands these grants would have a radically different outcome. If anything, the bill perpetuates the existing demand-boosting policies that make housing costs higher than necessary.