If Reagan administration housing proposals become law, sharp drops in federal housing subsidies for the nation's poor will begin in 1991, forcing the next administration to choose between huge spending increases or withdrawing assistance from millions of Americans, according to a study by the Senate subcommittee on housing and urban affairs.
Housing funds for about 200,000 families would run out in 1991, and over the following decade, aid for an estimated total of 1.2 million would expire under administration plans, the study said.
The decreases would come as five-year housing vouchers, the centerpiece of the administration's low-income housing policy, began expiring at the same time as 15-year Section 8 contracts start running out, said Sen. Donald W. Riegle Jr. (D-Mich) in a letter to Housing and Urban Development Secretary Samuel R. Pierce Jr.
The subcommittee projections show that "soon after the next president takes office," the country would "be hit with a very harsh choice: Either housing assistance would have to be taken from hundreds of thousands of low-income families and elderly people or huge increases in housing assistance would then have to be appropriated," said Riegle, the ranking Democrat on the subcommittee.
"In essence, Riegle is right. Somebody down the road after 1990 is going to have a choice . . . involving a lot of money. That's very clear," said June Q. Koch, assistant secretary of HUD for policy development and research. "The need to reauthorize budgets is always built into housing programs.
Koch said HUD is working on answers to Riegle's questions about details of the voucher program and its effects in coming years.
The housing subcommittee study estimated the sums needed to protect poor people from losing aid would have to "jump from about $2 billion in FY 1990 to about $7 billion in FY 1991, and . . . to about $10 billion in FY 1996, using conservative estimates of inflation."
Riegle said in his letter to Pierce that the "abrupt drop in housing assistance that would result from your present plans" would be devastating to low-income Americans and to local governments.
If 100,000 new housing vouchers are authorized each year, to run for five years, while no more of the 15-year Section 8 certificates are issued, as the Reagan adminsitration proposes, the number of families receiving subsidies would drop to about half a million by the year 2000, according to the subcommittee's projections.
Vouchers allow low-income families to shop for their own houses or apartments, and pay 30 percent of their income for rent. HUD then pays for the difference between that amount and the fair market rent.
Families can pay more than 30 percent of their income if they choose, an option not allowed under the Section 8 subsidy program the vouchers are designed to replace. Under Section 8, landlords may not charge more than fair market rent, but with vouchers property owners can ask for more than the market rents, which are established by HUD.
If a voucher recipient can find a below-market-rate home, on the other hand, he can keep the difference.
Much less money is needed in the first year for each voucher than for the Section 8 contracts, making "it appear that the same number of families can be assisted at less cost," according to Riegle. But the "administration's proposals may produce short-term budget authority savings at very high long-term costs of sharply lowered housing assistance or wildly fluctuating funding levels."
Since early in the Reagan administration, HUD has pushed vouchers as a more efficient means of filling the housing needs of low-income families. It ran into resistance in Congress, but received an $86.4 million appropriation in fiscal 1984 for voucher demonstrations, or trials. The demonstrations are just now getting started, because of "purely procedural" delays in implementing the program, a HUD spokesman said.
In the meantime, the administration has sent its fiscal 1986 budget to Capitol Hill with a request for 3,500 vouchers, a drastic cutback from the 100,000 vouchers HUD Secretary Pierce wanted.
Pierce, testifying in March before the Senate housing subcommittee, said that in the future the administration plans to ask for 100,000 vouchers annually.
The U.S. Conference of Mayors and the National League of Cities joined Riegle in expressing concern, with the League of Cities calling the convergence of expiring vouchers and Section 8 certificates "a ticking time bomb."
A survey by the Conference of Mayors "found as its overwhelming conclusion that the demand for housing assistance among lower-income households was increasing" and that resources to meet the demand are inadequate. The mayors group said another survey showed a shortage of housing the poor can afford already exists and "appears central" to their problems.
The present housing shortage "would pale by comparison with the problems that would be faced in the 1990s and beyond if assistance shifts to five-year vouchers," according to John J. Gunther, executive director of the Conference of Mayors.
As the housing pinch has grown, poor families also have been forced to pay a dramatically larger percentage of their income for housing, leaving them with less money for other needs, the General Accounting Office said in a new report.