Potential effects of federal policy devolution on local housing expenditures

As 1994 came to a close, the future of the U.S. Department of Housing and Urban Development (HUD) and the continued role of the federal government in low-income housing assistance was highly uncertain. The agency was targeted for elimination by congressional leaders, its budget was the object of recission attempts, and agency officials proposed a radical reinvention to alter housing programs and the delivery system for federal housing assistance. Given the likelihood of either more budget cuts (resulting in greater reliance on nonfederal sources of funds) or the devolution of policy responsibility through block grants, there is heightened concern for how local governments allocate housing funds. This article examines housing expenditure strategies of large U.S. cities. The analysis describes factors related to a greater use of nonfederal housing revenues by cities, and examines the impact of funding source on program and beneficiary targeting. The data suggest that reduced federal spending or a shift to block grants is likely to result in more housing benefits directed to moderate-income households and to homeowners and homebuyers.