Proposed Federal Urban Policy Overhaul Shows Signs Of A '60s Flashback
Six months after his re-election, President George W. Bush is seeking to place his distinct imprint on federal urban policy.
In the popular press, Bush's proposals for both Section 8 housing vouchers and Community Development Block Grant (CDBG) funding have been characterized as classic Republican “cutting and gutting.” True to form, however, Bush is not just “cutting and gutting” but seeking subtly to make a radical shift in federal policy. In so doing, he is proposing to wipe out popular reforms put into place by his own Republican predecessors - partly by claiming they are Democratic programs that have failed.
It is unlikely that Bush will succeed in an overhaul this year; both programs have strong support in Congress and appear likely to make it through at least one more fiscal year without significant change. But even if his “Strengthening America's Communities Initiative” doesn't fly this year, Bush does not look like he is going to give up. A task force designed to promote the idea met for the first time during April in Fresno, hosted by Mayor Alan Autry, a task force member.
On Section 8, Bush is seeking to take a housing assistance program revamped by the Reagan administration on a voucher model and move it toward a block grant model. On the CDBG program, Bush is proposing to do away with a block grant program shaped by the Nixon administration and replace it with a new set of programs that are targeted at economic development efforts. Along the way, he is seeking to shift control over much federal urban policy from the Department of Housing and Urban Development (HUD), which has a constituency of mostly Democratic central-city mayors, to the Department of Commerce, which has a constituency of mostly Republican business leaders.
Not surprisingly, low-income housing advocates and local officials around the country are making a lot of noise. One coalition of community development organizations said the president wants to “divert the public's attention from the huge funding cuts that he wants to make to housing and community development programs that help low-income people.” (It's true that Bush proposes scrapping $5.1 billion in HUD programs - mostly CDBG - and replacing them with $3.7 billion in Commerce Department programs.) The Section 8 debate has been more technical but no less spirited.
Throughout it all, one thing is clear: Bush is proposing a far more radical shift than either Ronald Reagan, who happily ignored most urban programs, or his father, who appointed the inspiring Jack Kemp as HUD secretary.
In the case of the CDBG and a number of other federal programs, the Bush administration argues that their purpose should be narrowed and re-defined. “Most of these programs,” the administration's overview of the Strengthening America's Communities Initiative states, “currently lack clear goals or accountability measures.”
But that was the whole point when the Nixon administration created the CDBG program in 1974, mostly as a sop to the emerging suburban constituencies of the time. The Great Society effort of the 1960s had created a passel of categorical urban aid programs - federal programs designed to address specific categories of urban problems. Among other things, these programs were designed to provide aid directly to Democratic mayors, bypassing Republican state governments.
It was Nixon, seeking to mollify a Democratic Congress even while nurturing suburban Republicans, who rolled these programs into block grants, giving local governments more spending flexibility. The CDBG has survived with bipartisan support ever since. Whether or not it is “successful” depends on your definition of success, but it is certainly popular.
The Bush proposal would re-establish strong federal control over the goals and purposes of community and economic development programs by using the money to target specific development strategies in specific distressed communities. In this way, the Bush administration proposal represents an eerie mirror image of the Johnson administration's original vision of urban aid.
But it's a tough sell on Capitol Hill. Virtually all American municipalities feed at the CDBG trough, and they are fighting hard to keep maximum funding and maximum flexibility. Many presidents have learned the hard way that it is difficult to target federal aid once Congress gets involved. In the words of Baltimore developer Robert Embry, who hatched the Urban Development Action Grant program as an assistant HUD secretary in the Carter administration, “If you want Congress to pass a program for distressed areas, you had better make sure there are 218 distressed areas in the country.” (The House of Representatives has 435 members; 218 is 50%+1.)
Bush's Section 8 reform proposals are even more indicative of how things have changed for Republicans during the last 20 years. The last major Section 8 revamp came when Reagan ditched Johnson-era housing programs aimed at housing production in favor of voucher programs that gave low-income renters the ability to obtain housing in the private marketplace. Most Section 8 vouchers are given to extremely poor people, usually those making 30-50% of median income. The tenants pay 30% of their income for rent; HUD pays the rest.
Though controversial at the time, the voucher approach was a logical evolution. The original construction programs were aimed at eliminating substandard housing for the poor - the biggest problem of the 1960s. The voucher programs were aimed at dealing with the biggest problem of the 1980s - the fact that poor people couldn't afford housing.
But over the long term maintaining a market-oriented voucher program has proven more expensive than building affordable housing for the simple reason that there is no brake on rents in the open market. The gap between market rents and the incomes of poor people has grown, meaning that the feds have had to throw more money into the subsidies, especially in high-cost housing markets like California.
Furthermore, during the past few years, Congress has expanded the Section 8 voucher program to provide ongoing housing assistance to poor families who had been living in the federally assisted housing projects originally built during the '60s and '70s. Many of those projects reverted to market rents after 30 years. All this means there are more than 2 million families using Section 8 vouchers, and most of HUD's discretionary funding now goes to Section 8.
The specifics of Section 8 are very technical, and Section 8 defenders have provided fine-grained rebuttals claiming that program costs are not rising as fast as the Bush administration claims. The bottom line, however, is that Bush's proposal would cap on Section 8 expenditures and possibly create a block grant program for local public housing authorities.
The administration appears to be hoping to free up money to fund a home ownership program that would focus on families that are poor (60% of median income) but not extremely poor, as Section 8 does. Bush is proposing a Single-Family Ownership Tax Credit program, similar to the Low-Income Housing Tax Credit program.
Difficult as it is to keep Section 8 going in an expensive market like California, it would be just as difficult to accomplish ownership goals, especially if the tax credits were focused on single-family detached dwellings. On the other hand, an ownership program would “lock in” costs at the front end of a project so that federal subsidies would not have to keep rising as the real estate market goes up.
There is nothing wrong with re-thinking the goals of federal programs over time. A more targeted community development program might be more effective than a block grant program at achieving certain goals; an ownership housing program might help stem the Section 8 program's red ink. But Bush's proposals highlight the idea that there are no permanent solutions. One generation's magic bullet - liberal or conservative - can become the next generation's boondoggle or sacred cow.