Housing and Community Development Expenditures
Housing and community development expenditures include the construction, operation, and support of housing and redevelopment projects. Also included in this category are any other activities the government uses to promote or aid housing, including public housing, rental assistance (e.g., Section 8 vouchers), the promotion of homeownership, and the development and revitalization of communities (rural regions and commercial).
Housing and community development expenditures do not include temporary shelters or housing for the homeless. The US Census Bureau includes these expenditures in its count of public welfare expenditures.
Further, although the Census Bureau places housing and community development programs into the same expenditure bucket, some of these programs operate very differently and thus can produce a wide range of policy outcomes. Specifically, many housing programs preserve or support existing housing opportunities for lower-income communities, whereas many community development programs invest in broader places or regions.
- How much do state and local governments spend on housing and community development?
- How does state spending differ from local spending, and what does the federal government contribute?
- How have housing expenditures changed over time?
- How and why does spending on housing and community development differ across states?
How much do state and local governments spend on housing and community development?
In 2018, state and local governments spent $53.9 billion on housing and community development, or 1.5 percent of total direct general expenditures1. Spending on housing and community development was lower than on most other major state and local expenditure programs2. Again, it’s worth noting that this Census Bureau category combines these two programs, so state and local government spending on each is an even smaller share of overall spending.
In 2018, 87 percent of housing and community development spending went toward operational costs, such as rent subsidies, homeownership education, planning, workforce development, and other services. The remaining 13 percent was for capital outlays, such as the construction and rehabilitation of public housing and infrastructure.
How does state spending differ from local spending, and what does the federal government contribute?
Local governments spend a larger share of their budgets on housing and community development than states. In 2018, 2.6 percent of local direct general spending went to housing and community development programs compared with 0.6 percent of state direct general spending. Much of this local spending is by special districts (e.g., the Philadelphia Housing Authority) because the boundaries of these housing programs (and the communities they support) do not always map onto existing government boundaries.
But the federal government is the main funder of housing and community development programs. In 2018, the federal government spent $50 billion on housing assistance and $42 billion on community and regional development. Of that $92 billion in federal spending, $37 billion was transferred to state and local governments for housing and community development programs in 2018. As such, the federal government funded roughly two-thirds of total state and local spending on these programs.
Examples of federal grants to state and local governments include the HOME Investment Partnerships Program, the Community Development Block Grant, the Housing Trust Fund, various HUD homelessness assistance programs, Housing Opportunities for Persons with AIDS, the Indian Housing Block Grant program, and the Low-Income Housing Tax Credit.
Several other large federal programs directly support renters and homeowners but are administered through special local jurisdictions, such as public housing agencies and housing finance agencies. The Housing Choice Voucher program, known as Section 8, is the largest direct housing assistance program.
In some cases, federal agencies directly award contracts to property owners and nonprofits to provide low-income housing and other forms of supportive housing. Though homeownership programs have been de-emphasized in favor of tenant-based rental assistance programs in recent years, federally guaranteed mortgages still constitute a sizable share of the national housing market.
Neither the federal or the state and local expenditure totals include housing assistance delivered through tax benefits. Indeed, individual tax incentives remain heavily tilted toward homeownership, even after the Tax Cuts and Jobs Act reduced annual expenditures on the home mortgage interest deduction from around $75 billion to $25 billion.
How have housing and community development expenditures changed over time?
From 1977 to 2018, in 2018 inflation-adjusted dollars, state and local government spending on housing and community development increased from $14.0 billion to $53.9 billion, an increase of 284 percent. Over the same period, state and local spending on all other expenditures grew 182 percent. However, the spending growth for housing and community development is in part merely a reflection of relatively low spending levels. As a share of total state and local direct general expenditures, spending on housing and community development has been low for the past 40 or more years. From 1977 to 2018, the share of state and local spending going to housing and community development rose from 1.2 percent to 1.7 percent.
As of 2018, state and local spending on housing peaked in 2011 at $63 billion (in 2018 inflation-adjusted dollars). This is in part because the Budget Control Act of 2011 created budget caps on discretionary federal programs, including housing and community development transfers to state and local governments. However, because both the Coronavirus Aid, Relief, and Economic Security Act and the American Rescue Plan included funds for housing and community development, state and local housing and community development expenditures should grow in 2020 and 2021, but the Census Bureau will not release that data for a few years.
How and why does spending on housing and community development differ across states?
Across the US, state and local governments spent $165 per capita on housing and community development in 2018. Among states, Massachusetts spent the most per capita ($408), followed by Alaska ($377), New York ($361), and Maryland ($264). Wisconsin spent the least per capita ($59), followed by Wyoming ($61), Arizona ($63) and Arkansas and New Mexico (both $65).
Per capita spending is an incomplete metric because it doesn’t provide any information about a state’s demographics, policy decisions, and administrative procedures or the choices its residents make. For example, most spending on housing and community development goes to places with large low-income populations, a lot of federal public housing, and many rental subsidy recipients. As a result, spending on housing and community development is higher in states with large cities, as most housing assistance supports tenants in urban areas. (This is why the District of Columbia spent $1,460 per capita on housing and community development, a total far higher than any state. Although the District’s government functions as both a state and locality, it most closely resembles a central city in terms of its population and economic activity.) While many rural counties face severe housing need, a relatively small portion of total housing spending supports rural housing.
Thus, another way to look at state and local housing and community development spending is per low-income resident. In 2018, Massachusetts spent the most per low-income resident ($1,839), followed by Alaska ($1,516), Maryland ($1,219), and New York ($1,200). (The District of Columbia spent $5,387 per low-income resident). On the opposite end of the spectrum, New Mexico spent the least per low-income resident ($159), followed by Arkansas ($167), Arizona ($185), West Virginia ($207), and Texas ($213).
More broadly, construction costs, credit availability, an aging housing supply, and delayed homeownership are four factors driving a decrease in housing affordability. Another is restrictive land-use zoning. However, these factors vary by state.
Interactive Data Tools
State and Local Finance Initiative state fiscal briefs
Overcoming the Nation's Daunting Housing Supply Shortage
Jim Parrott and Mark M. Zandi (2021)