7/5/2012

On June 27, Econsult Corporation and the Public and Affordable Housing Research Corporation (PAHRC; a HAI Group subsidiary) released a research report that highlights what cuts in capital funding to public housing authorities mean to organizations, residents, and communities.  The study uses data from housing authority surveys as well as a cost benefit framework to estimate the amount that negative impacts resulting from a reduction in capital funding will subtract from intended savings.

The research suggests that “cuts in capital funds do not save as much as intended. Thus cuts in public housing capital funding may not be the most cost effective cuts to make in a climate of belt-tightening.  Such cuts can rob both previous investments made in the nation’s housing stock as well as future revenues.  In addition to further shrinking the affordable housing portfolio, these cuts can also set back impoverished and working class families struggling to graduate from federal assistance.  In the long term, capital fund cuts can contribute to disinvestment in surrounding neighborhoods and local communities.”

Key data from the report at a glance:

• Negative impacts offset savings in the long-term.  A long-term/permanent 20 percent cut of $6.7 billion to the capital fund using a three percent discount rate (which is close to today’s borrowing rate) is estimated to result in $10.3 to $22.5 billion in total negative impacts, or 154 to 336 percent of the savings generated by the funding cut.  That means that for every dollar cut in the capital fund account under this scenario, up to $3.36 in negative impacts is likely to occur.

• Negative impacts offset savings in the short-term.  A one-time/temporary 20 percent cut of $470 million to the capital fund using a three percent discount rate is estimated to result in $318 to $722 million in negative impacts, or 69 to 154 percent of the savings generated by the funding cut.  That means that for every dollar cut in the capital fund account under this scenario, up to $1.54 in negative impacts is likely to occur.

• Modernizing existing units and deferred maintenance see the most dramatic decreases under capital fund cuts, at 55 percent and 16.1 percent, respectively.  Using conservative estimates, these cuts would result in an estimated loss of approximately 231,000 public housing units (and likely higher if using more realistic estimates, such as a three percent discount rate).

• Capital fund cuts perpetuate a decline in neighboring property values.  Using conservative estimates, a 20 percent permanent cut to the capital fund would result in an aggregate $2.5 billion to $2.8 billion decline in property values and a loss of property tax revenues to municipalities between $28 and $40 million.

• Negative impacts create dramatic ripple effect.  Capital funding cuts would see: increased cost of housing; decreased quality of housing; higher costs associated with increased homelessness and social service program cuts; increased exclusion from information technology resources for low-income families; reduced supply to employers of low-wage earners; more crime; increased blight on immediate neighborhoods; less energy- and cost-efficient buildings; and more expensive repairs later.

Read the full study.

Read PAHRC’s press release about the report.

CLPHA will be providing members with a more detailed analysis of the report in the near future.  Questions or comments about this report can be directed to CLPHA Research and Policy Analyst Theresa Finney Dumais.