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Last Updated: 2006

The housing policy arena is characterized by a highly defined division of labor across governmental jurisidicitions. Funding for the largest housing programs is provided by the federal government, while local governments have responsibility for implementation of these programs. The federal government has passed laws regulating against discrimination in the housing market and regulating the operation of lending institutions. Local governments promulgate land-use and building regulations affecting housing. State government plays an intermediate role, providing lower levels of funding and program implementation that vary from state to state.

The federal government funds the largest programs of publicly subsidized housing through direct budgetary allocations as well as through tax expenditures. The Department of Housing and Urban Development (HUD) is responsible for the administration of the largest budget-based housing assistance programs, including the public housing program, the Housing Choice Voucher program, and the HOME program, the largest federal block grant designed to create affordable low-income housing. The Community Development Block Grant (CDBG), also administered by HUD, provides a large amount of funding for assisted housing. In each of these programs, HUD makes funds available to local entities that implement the program. The public housing and Housing Choice Voucher programs are operated by local public housing authorities, public agencies that are created in order to receive the federal funding from these two programs. The HOME and CDBG programs are block grants made to local governments who then use the funds for local governmental programs as well as distribute the funds locally to subgrantees (typically private or nonprofit organizations).

The federal government also authorizes tax incentives that account for large housing production programs such as the Low Income Housing Tax Credit and the Mortgage Revenue Bonds. In these programs, the federal government authorizes tax expenditures on a state-by-state basis. The implementation of these programs, like the direct budgetary programs, is done locally. Local governments allocate the tax credits and utilize the bonding authority to support specific assisted housing projects that are typically built and operated by private for-profit or nonprofit developers. The federal government also authorizes the mortgage interest deduction from personal income taxes. This is, in fact, the largest single federal subsidy program in housing. Individuals who own their homes and pay interest on a mortgage can deduct that interest on their federal income taxes.

Most state governments make direct budgetary expenditures for housing assistance. The overall amount, however, is not great. The spending of the federal government through HUD is many times greater than the aggregate of all state and local spending on housing and community development. State housing agencies typically operate their own housing assistance programs (i.e., they offer subsidies directly to families or to housing developers), and sometimes make intergovernmental transfers to localities for assisted housing.

Local governments very rarely devote any of their own revenues to subsidized housing programs, although this happens to a limited degree in some larger cities. They rely instead on the range of intergovernmental resources described above that are made available by the federal and state governments. Instead, local governments engage in housing policy in mainly two ways. First, they implement the programs funded by the federal and state governments. Local housing authorities run the public housing and housing voucher programs. Local housing and community development agencies (usually regular departments in the city government structure) implement the CDBG and HOME block grants. It is the local government that works most closely with the private and nonprofit developers who build and operate affordable housing. They do so by making loans and subsidies available to the developers.

The second manner in which local governments engage in housing policy is through the creation of land-use and building regulations. These regulations are very important in determining where and at what density housing can be built, what the materials and design alternatives are, and how the housing fits into the built environment around it. These regulations can have very large impacts on housing costs. Some suburban communities, for example, have been accused of rigging their local regulations so as to minimize the amount of affordable housing that is built. This has led a small number of states to create review processes by which local regulations and their implementation might be overturned by regional or state authorities. These programs are rare, however. In almost all states, local governments have unconstrained regulatory power in land-use and development matters.

SEE ALSO: Land Use


Victoria Basolo, “Passing the Housing Policy Baton in the US: Will Cities Take the Lead?” Housing Studies 14, no. 4 (1999): 433–52; Edward G. Goetz, Shelter Burden: Local Politics and Progressive Housing Policy (Philadelphia: Temple University Press, 1993); and Michael Stegman, State and Local Affordable Housing Programs: A Rich Tapestry (Washington, DC: Urban Land Institute, 1999).