Public Housing and Assistance Programs

The federal government has been involved in housing policy since the 1930s, creating a complex network of programs designed to ensure that low-income Americans have access to safe, decent, and affordable housing. The Department of Housing and Urban Development (HUD), established as a cabinet-level agency in 1965, administers most federal housing assistance programs, though significant housing subsidies also flow through the tax code and other federal agencies. These programs serve approximately 5 million households directly through rental assistance and millions more through mortgage insurance, tax credits, community development funding, and homeless assistance. This page examines the major federal housing programs, their statutory foundations, and the policy challenges they address.

Historical Background

Federal housing policy originated during the Great Depression, when the collapse of the housing market contributed to the broader economic crisis. The National Housing Act of 1934 created the Federal Housing Administration (FHA), which introduced the long-term, fixed-rate, amortizing mortgage that became the standard for American homeownership. The United States Housing Act of 1937, also known as the Wagner-Steagall Act, established the federal public housing program, authorizing the federal government to provide loans and subsidies to local public housing authorities for the construction and operation of low-rent housing for families that the private market could not adequately serve.

The Housing Act of 1949 declared the national goal of "a decent home and a suitable living environment for every American family" and authorized a massive expansion of public housing construction. The Housing and Urban Development Act of 1965 created HUD and consolidated federal housing functions within a single department. The Housing and Community Development Act of 1974 created the Section 8 rental assistance program and the Community Development Block Grant program, shifting federal housing policy from direct construction of public housing toward demand-side subsidies that allowed low-income tenants to rent from private landlords. The Cranston-Gonzalez National Affordable Housing Act of 1990 created the HOME Investment Partnerships Program, and the HEARTH Act of 2009 reauthorized and restructured federal homeless assistance programs.

Housing Choice Vouchers (Section 8)

The Housing Choice Voucher (HCV) program, commonly known as Section 8, is the largest federal rental assistance program, serving approximately 2.3 million households. Authorized under Section 8 of the United States Housing Act of 1937, as amended (42 U.S.C. section 1437f), the program provides tenant-based rental subsidies that allow eligible low-income families to rent housing in the private market.

Under the HCV program, eligible families receive a voucher from a local public housing authority (PHA). The family selects a housing unit in the private market that meets the program's housing quality standards and where the landlord agrees to participate in the program. The PHA pays a housing assistance payment directly to the landlord, covering the difference between the tenant's required contribution (generally 30 percent of adjusted gross income) and the lesser of the unit's rent or the PHA's payment standard for the applicable bedroom size and location. The payment standard is set by the PHA based on HUD's Fair Market Rent (FMR) calculations for the area.

Eligibility for the HCV program is based on income and family composition. In general, a family's income must not exceed 50 percent of the area median income (AMI), and PHAs must ensure that at least 75 percent of new admissions are families with incomes at or below 30 percent of AMI (extremely low-income families). Demand for vouchers vastly exceeds supply: most PHAs maintain waiting lists that are years long, and many have closed their waiting lists entirely due to the volume of demand. The Congressional Budget Office has estimated that approximately three out of four eligible households do not receive federal rental assistance due to limited funding.

Project-Based Vouchers

In addition to tenant-based vouchers, PHAs may project-base up to 20 percent (or, under certain conditions, more) of their voucher allocation. Project-based vouchers (PBVs) are attached to specific housing units rather than following the tenant. This provides a guaranteed revenue stream to property owners, which facilitates the development and preservation of affordable housing. Tenants in project-based units who have lived in the unit for at least one year have the right to request a tenant-based voucher to move, subject to voucher availability.

Public Housing

The federal public housing program provides housing directly owned and operated (or managed) by approximately 3,000 local public housing authorities across the country. The program currently serves approximately 900,000 households in approximately 1 million units. Public housing was originally constructed under the United States Housing Act of 1937 and subsequent legislation, with the federal government providing capital funding and operating subsidies and local PHAs managing the properties.

The public housing stock has declined significantly from its peak. No new public housing has been authorized for construction since 1998 (under the Faircloth Amendment to the Quality Housing and Work Responsibility Act of 1998, which capped the total number of public housing units at the level existing as of October 1, 1999). Meanwhile, the existing stock has deteriorated due to decades of deferred maintenance and insufficient federal capital funding. HUD has estimated that the public housing capital needs backlog exceeds $70 billion.

The Rental Assistance Demonstration (RAD), created by Congress in 2012, allows PHAs to convert public housing units to project-based Section 8 contracts. This conversion enables PHAs to access private financing for capital improvements while maintaining long-term affordability restrictions. RAD has become a primary vehicle for the preservation and rehabilitation of the aging public housing stock, with over 200,000 units having been converted or approved for conversion.

Low-Income Housing Tax Credit

The Low-Income Housing Tax Credit (LIHTC), established by the Tax Reform Act of 1986 and codified at 26 U.S.C. section 42, is the largest source of federal subsidy for the construction and rehabilitation of affordable rental housing. Unlike HUD programs that provide direct spending, LIHTC operates through the tax code. The Internal Revenue Service allocates tax credit authority to state housing finance agencies, which award credits to developers of qualifying affordable housing projects through a competitive process.

Developers who receive tax credits sell them to investors (typically through syndicators) in exchange for equity in the project. This equity reduces the amount of debt the project must carry, enabling lower rents. In return for the tax credits, the developer must ensure that a specified percentage of units are rented to households at or below 60 percent of AMI at restricted rents for a minimum compliance period of 30 years (15 years of credits plus a 15-year extended use period). The program provides two types of credits: the "9 percent" credit for new construction and substantial rehabilitation (worth approximately 70 percent of eligible costs in present value) and the "4 percent" credit used in conjunction with tax-exempt bond financing (worth approximately 30 percent of eligible costs).

LIHTC has financed the construction or rehabilitation of approximately 3.6 million housing units since its creation, making it the most productive affordable housing program in the country. The program has also been the subject of criticism regarding its cost-effectiveness (the transaction costs associated with tax credit syndication consume a portion of the subsidy), the depth of affordability it achieves (most LIHTC units serve households at 50-60 percent of AMI rather than the extremely low-income households most in need), and the geographic distribution of credits (some states have used credits primarily in low-poverty areas while others have concentrated development in high-poverty neighborhoods).

Homeless Assistance Programs

Federal homeless assistance is governed primarily by the McKinney-Vento Homeless Assistance Act of 1987, as amended by the Homeless Emergency Assistance and Rapid Transition to Housing (HEARTH) Act of 2009 (42 U.S.C. sections 11301-11408). The Act authorizes several programs administered by HUD through the Continuum of Care (CoC) program, which is the primary federal framework for organizing and funding local homeless assistance systems.

The CoC program funds a range of interventions including emergency shelter, transitional housing, rapid re-housing (short-term rental assistance and services to help homeless individuals and families quickly obtain and maintain permanent housing), and permanent supportive housing (long-term housing combined with supportive services for chronically homeless individuals, typically those with disabilities). HUD awards CoC funding through an annual competition in which local CoCs submit consolidated applications reflecting their community's strategic plan for addressing homelessness.

The Emergency Solutions Grants (ESG) program provides formula funding to states and localities for street outreach, emergency shelter operations, homelessness prevention (short-term assistance to prevent individuals and families at risk of homelessness from losing their housing), and rapid re-housing. The Housing Opportunities for Persons With AIDS (HOPWA) program provides housing assistance and supportive services for low-income persons living with HIV/AIDS.

HUD conducts an annual Point-in-Time (PIT) count, a snapshot of the homeless population on a single night in January. The 2023 PIT count identified approximately 653,104 people experiencing homelessness on a single night — the highest number recorded since the count began in 2007. Of these, approximately 60 percent were in sheltered locations (emergency shelters and transitional housing) and 40 percent were unsheltered. The McKinney-Vento Act also includes education provisions (administered by the Department of Education) that ensure homeless children and youth have access to public education and school stability.

Fair Housing

The Fair Housing Act, enacted as Title VIII of the Civil Rights Act of 1968 (42 U.S.C. sections 3601-3619) and amended by the Fair Housing Amendments Act of 1988, prohibits discrimination in housing on the basis of race, color, religion, sex, national origin, familial status, and disability. The Act applies to most housing transactions, including sales, rentals, mortgage lending, and homeowners' insurance, with limited exemptions for owner-occupied buildings with four or fewer units, single-family homes sold by owner without a broker, and housing operated by religious organizations and private clubs for their members.

Fair housing law encompasses two distinct theories of discrimination. Intentional discrimination (disparate treatment) occurs when a housing provider treats an individual differently because of a protected characteristic. Discriminatory effects (disparate impact) occur when a facially neutral policy or practice has a disproportionate adverse effect on a protected group without a legally sufficient justification. In Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc., 576 U.S. 519 (2015), the Supreme Court held that disparate impact claims are cognizable under the Fair Housing Act, though it emphasized that such claims must be based on a robust causal connection between the challenged practice and the statistical disparity.

HUD enforces the Fair Housing Act through the Office of Fair Housing and Equal Opportunity, which investigates complaints, conducts compliance reviews, and brings enforcement actions. The Act also provides for private enforcement through lawsuits in federal court. HUD's Affirmatively Furthering Fair Housing (AFFH) mandate, rooted in Section 3608(d) of the Fair Housing Act, requires federal agencies and recipients of federal housing funds to take proactive steps to overcome patterns of segregation and to promote fair housing choice — a mandate whose specific requirements have been the subject of significant regulatory change across administrations.

Federal Housing Administration

The Federal Housing Administration, now a component of HUD, insures mortgages made by private lenders, reducing the risk to lenders and enabling them to offer more favorable terms to borrowers. FHA mortgage insurance is particularly significant for first-time homebuyers, borrowers with lower credit scores, and borrowers making smaller down payments. FHA-insured mortgages require a minimum down payment of 3.5 percent for borrowers with credit scores of 580 or above, compared to the 5-20 percent typically required for conventional mortgages.

FHA's Mutual Mortgage Insurance Fund, which backs single-family mortgage insurance, is required by statute to maintain a capital reserve ratio of at least 2 percent of insurance in force. The fund experienced significant stress during the 2008 housing crisis and required a $1.7 billion draw from the Treasury in 2013 — the first such draw in the program's history. The fund has since recovered to above its statutory minimum.

HOME Investment Partnerships Program

The HOME Investment Partnerships Program, authorized by Title II of the Cranston-Gonzalez National Affordable Housing Act of 1990 (42 U.S.C. sections 12741-12756), is the largest federal block grant to states and localities designed exclusively for affordable housing. HOME provides formula grants to participating jurisdictions — states, cities, urban counties, and consortia of local governments — to fund a broad range of activities including the construction and rehabilitation of affordable rental housing, homeowner rehabilitation, tenant-based rental assistance, and homebuyer assistance (down payment and closing cost assistance).

HOME funds must be used to benefit low-income households, with at least 90 percent of rental assistance and rental housing funds serving families at or below 60 percent of AMI and at least 20 percent of rental units in HOME-assisted projects reserved for families at or below 50 percent of AMI. Participating jurisdictions must match every dollar of HOME funds with 25 cents of non-federal funding. HOME-assisted rental units are subject to affordability periods ranging from 5 to 20 years depending on the amount of HOME investment, while homeownership units are subject to recapture or resale restrictions to preserve the affordability investment.

HOME has been a critical flexible funding source for local affordable housing strategies, often used in combination with LIHTC, CDBG, and other federal, state, and private financing to assemble the complex capital stacks that affordable housing projects typically require. The program has assisted more than 1.3 million units since its creation, though its annual appropriations have fluctuated and have not kept pace with the growing need for affordable housing investment.

Community Development Block Grants

The Community Development Block Grant (CDBG) program, authorized by Title I of the Housing and Community Development Act of 1974 (42 U.S.C. section 5301 et seq.), provides annual formula grants to states, cities, and counties for a broad range of community development activities. Eligible activities include housing rehabilitation, public infrastructure improvements, economic development, public services, demolition, code enforcement, and homeownership assistance. The principal requirement is that at least 70 percent of CDBG expenditures must benefit low- and moderate-income persons.

CDBG funding is allocated by formula based on factors including population, poverty rate, overcrowded housing, and age of housing stock. Entitlement communities (metropolitan cities and urban counties that meet population thresholds) receive funds directly from HUD, while smaller communities receive funds through their state governments. CDBG grants provide significant flexibility to local governments in designing programs that address locally identified needs, though this flexibility has also drawn criticism regarding the difficulty of measuring program outcomes and ensuring that funds effectively reach the populations most in need.

Federal housing assistance programs collectively represent a substantial but insufficient response to the nation's affordable housing challenges. The National Low Income Housing Coalition estimates a nationwide shortage of approximately 7.3 million affordable and available rental homes for extremely low-income renters. Bridging this gap will require sustained investment in both demand-side rental assistance and supply-side housing production, along with regulatory reforms at the state and local level to reduce barriers to housing construction. The fundamental challenge of housing policy remains reconciling the goal of universal access to affordable housing with the fiscal constraints and political dynamics that have historically limited the scale of federal investment.