Subsidyscope

Direct Expenditures in the Housing Sector

The federal government spent approximately $59.1 billion in fiscal year 2009 on grant programs that may provide a subsidy to the housing sector. This funding, administered by four agencies across more than 60 active programs, accounted for over 8 percent of all government grants made that year ($716.8 billion). Also during fiscal year 2009, housing-related contracts totaled $1.5 billion, less than one percent of all government contracts ($523.8 billion). Of the $1.5 billion in housing contracts, $0.3 billion, or 20 percent, were not competed.1 While not all contracts contain a subsidy, non-competed contracts are more likely to contain a subsidy than competed contracts.

It is important to note the distinction between spending on grants and contracts, and the subsidies conveyed through that spending. Not all of the money obligated to a grant or contract ends up subsidizing the housing sector; for example, some grant funds are devoted to administering the grants or other activities that do not affect housing availability or prices. Unfortunately, little data are available that would help estimate the subsidy portion of spending on housing-related grants and contracts. In the absence of this information, Subsidyscope reports the total amount spent on grants and contracts that are most likely to contain a subsidy. As stated above, not all the spending in these programs would properly be counted as a subsidy; thus, the spending estimates presented here constitute the upper bound of government subsidies in this sector.

The direct expenditure totals presented on this Web page are compiled using government data from USASpending.gov and the Catalog of Federal Domestic Assistance. This federal data can sometimes be of poor quality, particularly in the form of potential errors or omissions made by the reporting agencies. Users of this data should be aware that it is often updated over time. Subsidyscope reports the data as it appears at the time of our analysis (denoted by the time stamp at the bottom of each Web page).

Figure 1: Expenditures on Grant Programs in the Housing Sector, FY2000-2009 ($ billions)

Spending on Grants Jumps to Nearly $60 Billion in FY2009

Based on its review, Subsidyscope determined that all federal grant programs in the housing sector potentially contain a subsidy (see Section B. 4. of our methodology). As shown in Figure 1, these programs distributed $59.1 billion in housing-related spending in fiscal year 2009—a 54 percent increase over the $38.4 billion reported in fiscal year 2008. Much of this increase is attributable to stimulus funding and to a boost in obligations to the Community Development Block Grants program.2 Unfortunately, as noted above, estimates of the actual subsidy provided by these programs are often not calculated or made available. These spending estimates constitute an upper bound of the actual subsidy conveyed to the housing sector.

The vast majority of housing grant funds are administered by the U.S. Department of Housing and Urban Development (HUD). The U.S. Departments of Agriculture, Justice and the Interior, among others, also operate housing-related programs (though not all were active in fiscal year 2009).3 While the federal government funded 66 active housing programs in fiscal year 2009, much of the direct spending took place in a handful of large programs (described below). Most housing grant programs are relatively small, with nearly 40 programs in fiscal year 2009 reporting obligations of less than $50 million and several reporting no obligations at all (see Table 1 at the bottom of the page).

In many cases, these funds are first granted to state or local governments, which then administer the funds to the ultimate beneficiaries. In particular, HUD operates several large block grant programs that provide grants to state or local governments for a variety of housing-related activities, often through predetermined formulas that allocate the funds based on factors such as population or need.4 For example, in fiscal year 2009, the Home Investment Partnership (HOME) Program distributed more than $1.8 billion to states, cities and counties that, in turn, distributed the funds locally to improve the supply of affordable housing.5

Unlike other types of government spending which focus on homeownership, such as tax deductions and government-backed mortgage guarantees, the majority of grant programs target rental housing. In fact, 73 percent of all grant spending is targeted solely at helping renters, with the remaining 27 percent helping a mix of both renters and homeowners. The five largest housing grant programs are described in more detail below, and the full list of programs is available in Table 1 at the bottom of the page. For additional information on grants to the housing sector, visit Subsidyscope’s searchable database.

Although not reported by USAspending.gov (and thus not in Subsidyscope's grant database or grant totals), the government enacted multiple foreclosure prevention programs in response to the housing and financial crisis. For example, the Home Affordable Modification Program (HAMP) was created in 2009 with the goal of lowering monthly mortgage payments for struggling homeowners.6 HAMP and several other assistance programs were funded in part through $50 billion in allocations from the Troubled Asset Relief Program (commonly known as TARP), though only about $710 million had been disbursed through the end of fiscal year 2009.7 HAMP has funded permanent modifications for an estimated 500,000 homeowners as of October 2009. Other foreclosure prevention programs, such as HOPE for Homeowners, are discussed on Subsidyscope's risk transfers page.

The Five Most Costly Housing Grant Programs (FY2009)

Section 8 Housing Choice Vouchers: $16.3 billion

The Section 8 Voucher program is the largest housing-related grant program, receiving $16.3 billion in funding in fiscal year 2009—nearly 28 percent of all housing grants. These resources are distributed to local public housing authorities (PHAs), who, in turn, provide payment vouchers to landlords on behalf of low-income renters. The voucher recipient pays 30 percent of their income directly to a landlord, and the PHA pays the difference between this and the fair market rent of the area.8 Once a household is assigned a voucher, it is generally ‘portable,’ meaning that the household can apply it to any eligible unit in any area of the U.S. where a voucher program exists.9 In 2009, the Section 8 Voucher program provided an estimated 2 million vouchers to households earning below 80 percent of the area median income.10

Section 8 Housing Assistance Payments (HAP) Program: $8.8 billion

Unlike the Section 8 Voucher program (which ties rental assistance to a household), the Section 8 HAP Program ties rental assistance to a unit of housing via a contract with HUD.11 In fiscal year 2009, this program made $8.8 billion in rental assistance payments to existing owners of project-based Section 8 housing on behalf of eligible families.12 This estimate includes $2.0 billion in funding from the 2008 American Recovery and Reinvestment Act (ARRA).13 Though no new Section 8 HAP contracts have been signed since the 1980s, existing contracts with housing projects continue to provide assistance for at least 1.3 million units of affordable housing.14

Community Development Block Grants/Entitlement Grants (CDBG): $7.4 billion

In fiscal year 2009, nearly $7.4 billion were distributed through CDBG Entitlement Grants (including $667 million provided through ARRA).15 The CDBG program, which aims to improve both housing and economic opportunities for low-income households, consists of several distinct programs, of which Entitlement Grants is only one (see Box 1 for additional information on CDBG programs).16 The CDBG Entitlement Grants program is administered primarily to urban areas through a statutory formula.17 In fiscal year 2008 (the latest year for which this data is available), approximately 30 percent of the funds supported activities directly related to housing, and another 24 percent supported public improvements such as new or refurbished fire stations, streets and sidewalks.18 The remainder was spent on other public services like financial counseling or economic development.19

Public and Indian Housing: $4.4 billion

HUD provided $4.4 billion in operating assistance to PHAs in fiscal year 2009.20 Through more than 3,100 PHAs, these funds provided roughly 1.2 million units of publicly-owned housing to families generally earning below 80 percent of the area median income.21 Similar to Section 8, these families pay 30 percent of their income towards rent with the balance paid by grant funds.22

Public Housing Capital Fund: $5.3 billion

In addition to the operating funds mentioned above, PHAs also received $5.3 billion through HUD’s Public Housing Capital Fund to support capital improvements to public housing in fiscal year 2009.23 This estimate includes funding from ARRA which, at $3.0 billion, comprised more than half of the funding for that program in 2009. These capital funds can be used for the development, financing or modernization of public housing.24

Figure 2: Expenditures on Non-competed Contracts in the Housing Sector, FY2000-2009 ($ millions)

Spending on Non-competed Contracts: About $280 Million in FY2009

In addition to awarding grants, the government directly contracts with organizations to provide housing-related goods and services, such as the management or sale of HUD-owned homes and apartment buildings, property appraisal, or program evaluation.25 In fiscal year 2009, the federal government executed non-competed contracts totaling nearly $280 million in the housing-sector.

As noted above, Subsidyscope presents spending on programs deemed likely to contain a subsidy, rather than the subsidy amount itself. Under a contract, a subsidy occurs when the government pays more than fair market value for a good or service. In many cases it is difficult to determine when a subsidy is included, as the fair market value may be a matter of opinion. Therefore, Subsidyscope does not attempt to determine which specific contracts include a subsidy or measure the amount of the subsidy. We do presume, however, that competed contracts—contracts that are subject to an open bidding process—are generally less likely to have a subsidy component, even though the bidding process may include certain preferences.

Subsidyscope's focus on non-competed contracts reflects the fact that the federal government generally prefers agencies to compete contracts because competition is expected to result in lower costs and/or better quality goods and services. In contrast, non-competed contracts are generally assumed to be more likely to cost the government higher than the fair market value.26

In fiscal year 2009, some of the largest of these contracts relate to Management and Marketing (M&M) services. When an FHA-insured loan goes into default, HUD relies on local M&M contractors to manage and market the sale of the property.27 Other contracts are directed toward the maintenance or construction of military housing; these military contracts are among the few related to new construction.28

The total amount of contracts reported is likely to underestimate the government’s role in construction and other activities in the housing sector. As is apparent in the Grants section above, HUD and other agencies provide funds to nonprofits, states, or other entities, who in turn may contract or subcontract with other entities to construct or renovate housing.29 These contracts and subcontracts are not reflected in the estimates presented here.

Subsidyscope has previously determined that there can be problems with the quality of the contracts data that are reported by agencies to USAspending.gov. In order to sort government contracts by economic sector, Subsidyscope uses the North American Industry Classification System (NAICS) codes to match contracts to the appropriate economic sector, or Product Service Codes if NAICS codes are not available. (See Section C of Subsidyscope's methodology for more on how contracts are organized by sector.)

Specifically, for the data presented in Figure 2 above, Subsidyscope found that there is significant variation in agencies' use of NAICS codes when reporting contracts to USAspending.gov over the ten-year period from fiscal year 2000 to 2010. This inconsistent application of NAICS codes as well as other reporting variations are likely responsible for the large drop in the reported number of non-competed contracts in the housing sector from fiscal year 2000 to 2001 and the spike in contracts in fiscal year 2005. Subsidyscope believes that levels of contracting were actually more consistent during this time period than Figure 2 represents.

To access Subsidyscope's search interfaces for direct expenditures data from the federal government’s USAspending.gov web site, click here for grants and here for non-competed contracts. The table below provides an aggregate summary of the grants made by each program in the housing sector in fiscal year 2009, retrieved from Subsidyscope's searchable database of grants.

Table 1: Housing Sector Direct Expenditure Programs, FY 2009

1. Subsidyscope analysis of USAspending.gov.
2. Some of the increase in Community Development Block Grant (CDBG) funding may be related to a provision of the Housing and Economic Recovery Act of 2008 (HERA) that created the “Neighborhood Stabilization Program.” HERA appropriated $3.9 billion to this program. According to this U.S. Department of Housing and Urban Development (HUD) document, HERA directed HUD to "treat these funds as if they are CDBG funds." For more information see: Boyd, Eugene and Gonzales, Oscar R. Congressional Research Service (CRS). “Community Development Block Grants: Neighborhood Stabilization Program; Assistance to Communities Affected by Foreclosures.” March 13, 2009. pp. Summary, 2.
3. Subsidyscope analysis of USAspending.gov.
4. Government Accountability Office (GAO). “A Glossary of Terms Used in the Federal Budget Process.” September 2005. p. 60; and HUD. “Community Development Block Grant Program.” Last Updated: November 19, 2010.
5. Catalog of Federal Domestic Assistance. "Home Investments Partnerships Program (HOME)."
6. U.S. Special Inspector General for the Troubled Asset Relief Program (SIGTARP). “Factors Affecting Implementation of the Home Affordable Modification Program.” March 25, 2010. p. Summary.
7. According to CBO, "$50 billion was made available through the TARP, and the remaining $25 billion was to be provided through Fannie Mae and FreddieMac….The Treasury has committed roughly $8 billion of the HAMP funding provided through the TARP for grants to selected state housing finance agencies and another $8 billion for programs of the Federal Housing Administration. For more information, see: CBO. “Report on the Troubled Asset Relief Program—November 2010.” November 2010. p. 7.
8. Maggie McCarty et al. Congressional Research Service (CRS). “Overview of Federal Housing Assistance Programs and Policy.” July 22, 2008. p. 8.
9. Maggie McCarty et al. CRS. "Overview of Federal Housing Assistance Programs and Policy.” July 22, 2008. pp. 8; and McCarty, Maggie. CRS. “Overview of the Section 8 Housing Programs.” January 29, 2008. pp. 8-9.
10. McCarty, Maggie. CRS. "Overview of the Section 8 Housing Programs." January 29, 2008. p. 7; and Maggie McCarty et al. "Overview of Federal Housing Assistance Programs and Policy." July 22, 2008. p. 8.
11. McCarty, Maggie. CRS. "Overview of the Section 8 Housing Programs" January 29, 2008. pp. 6-7.
12. Subsidyscope analysis of data from USAspending.gov; and Catalog of Federal Domestic Assistance. "Section 8 Housing Assistance Payments Programs Special Allocations."
13. Subsidyscope analysis of USAspending.gov. As shown in Table 1 below, the regular Section Housing Assistant Payments Program received $6.77 billion in FY2009. The additional $1,984 billion in ARRA funding is reported in a separate line item entitled “Section 8 Housing Assistance Payments Program Special Allocations (Recovery Act Funded).”
14. McCarty, Maggie. CRS. "Overview of the Section 8 Housing Programs" January 29, 2008. pp. 6; and Maggie McCarty et al. CRS. "U.S. Department of Housing and Urban Development (HUD): FY2011 Appropriations." July 26, 2010. p. 16.
15. Subsidyscope analysis of USAspending.gov. As shown in Table 1 below, the regular Community Development Block Grants/Entitlement Grants Program received $6.714 billion in FY2009. The additional $667 million in ARRA funding is reported in a separate line item entitled “Community Development Block Grant ARRA Entitlement Grants (CDBG-R)(Recovery Act Funded).”
16. Maggie McCarty et al. CRS. "Overview of Federal Housing Assistance Programs and Policy." July 22, 2008. pp. 15-16.
17. Maggie McCarty et al. CRS. "Overview of Federal Housing Assistance Programs and Policy." July 22, 2008. p. 15; and HUD. "Community Development Block Grant Entitlement Communities Grants." Last Updated: August 27, 2009.
18. HUD. "Use of CDBG Funds by Entitlement Communities Spreadsheet." See: CDBG Expenditure Reports on the HUD website.
19. Ibid.
20. Indian Housing Authorities were made ineligible for funding through this program by the 1996 Native American Housing Assistance and Self-Determination Act of 1996 (NAHASDA) See: Catalog of Federal Domestic Assistance. "Public and Indian Housing." According to CRS, NAHASDA reorganized how federal housing assistance was conveyed to Native Americans, eliminating several programs and replacing them with a block grant. See: Maggie McCarty et al. CRS. "Overview of Federal Housing Assistance Programs and Policy." July 22, 2008. p. 7.
21. HUD. "Budget Fiscal Year 2011. p. 14; and Maggie McCarty et al. CRS. "Overview of Federal Housing Assistance Programs and Policy." July 22, 2008. p. 9.
22. Maggie McCarty et al. CRS. "Overview of Federal Housing Assistance Programs and Policy." July 22, 2008. p. 9.
23. Subsidyscope analysis of USAspending.gov. As shown in Table 1 below, the regular Public Housing Capital Fund Program received $2.358 billion in FY2009. The additional $2.972 billion in ARRA funding is reported in a separate line item entitled “Public Housing Capital Fund Stimulus (Formula) Recovery Act Funded.”
24. Catalog of Federal Domestic Assistance. "Public Housing Capital Fund."
25. HUD. "Frequently Asked Contracting Questions." Last Updated: September 27, 2010.
26. U.S. Department of Energy (DOE). "Competition in Contracting Guide." p. 2.
27. HUD. "FHA REO Management and Marketing Contractors." Last Updated: November 29, 2010.
28. Maggie McCarty et al. CRS. "Overview of Federal Housing Assistance Programs and Policy." July 22, 2008. p. 9.
29. HUD. "General Information about HUD Contracting." Last Updated: November 19, 2008.
Last updated March 30, 2011.