PROJECTState and Local Backgrounders


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  • Housing and Community Development Expenditures

    State and Local Backgrounders Homepage

    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.

    The Census Bureau places housing and community development programs into the same expenditure bucket but 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?

    In 2019, state and local governments spent $57 billion on housing and community development, or 2 percent of total direct general expenditures.1 Spending on housing and community development was lower than on most other major state and local expenditure programs.2 Further, this Census Bureau category combines two distinct programs, so state and local government spending on each expenditure is an even smaller share of spending.

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    In 2019, 86 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 14 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 2019, 3 percent of local direct general spending went to housing and community development programs compared with less than 1 percent of state direct general spending. Much of this local spending is delivered 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.

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    State and local housing and community development expenditures are mostly funded by the federal government (and thus the programs are often influenced by federal rules). In 2019, the federal government spent $51 billion on housing assistance and $27 billion on community and regional development. Of that $78 billion in federal spending, $38 billion was transferred to state and local governments for housing and community development programs in 2019. As such, the federal government funded 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 (but are not included in these direct spending totals).

    The federal, state, and local expenditure totals do not include housing assistance delivered through tax benefits like the mortgage interest deduction. 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 2019, in 2019 inflation-adjusted dollars, state and local government spending on housing and community development programs increased from $14 billion to $57 billion, an increase of 296 percent. Spending growth on housing and community development over this period was higher than most other major programs, but this in part reflects the relatively low spending on housing and community development. In real dollars, housing and community development spending increased $42 billion from 1977 to 2019 while public welfare spending increased nearly $600 billion. (For more information on spending growth see our state and local expenditures page.)

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    As a share of total state and local direct general expenditures, spending on housing and community development has been low for the past 40 years. From 1977 to 2019, the share of state and local spending going to housing and community development was always above 1 percent but below 2 percent. 

    As of 2019, state and local spending on housing peaked in 2011 at $64 billion (in 2019 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.3 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 will likely be higher 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 $172 per capita on housing and community development in 2019. Among states, Massachusetts spent the most per capita ($432), followed by New York ($416), Alaska ($319), and Maryland ($270). Wyoming spent the least per capita ($41), followed by New Mexico ($61), Wisconsin ($62), and Arkansas ($63).

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    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 $1,670 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 2019, Massachusetts spent the most per low-income resident ($2,143), followed by New York ($1,561), Alaska ($1,367), and Maryland ($1,312). (The District of Columbia spent $6,919 per low-income resident). On the opposite end of the spectrum, Wyoming spent the least per low-income resident ($165), followed by Arkansas and New Mexico (both $167), and Arizona ($214).

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    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 Data: Exploring the Census of Governments

    The cost of affordable housing: Does it pencil out?

    State and Local Finance Initiative state fiscal briefs

    What everyone should know about their state’s budget

    Further reading

    Overcoming the Nation's Daunting Housing Supply Shortage
    Jim Parrott and Mark M. Zandi (2021)

    Notes

    1 Data are from the census expenditure functions E74, F74, G74, and K74.

    2 Direct general spending refers to all direct spending (or spending excluding transfers to other governments) except spending specially enumerated as utility, liquor store, employee-retirement, or insurance trust. Unless otherwise noted, all data are from the US Bureau of the Census, Survey of State and Local Government Finance, 1977–2019, accessed through “State and Local Finance Data,” Urban-Brookings Tax Policy Center, accessed December 22, 2021, https://state-local-finance-data.taxpolicycenter.org/. The census recognizes five types of local government in addition to state government: counties, municipalities, townships, special districts (e.g., a water and sewer authority), and school districts. All dates in sections about expenditures reference the fiscal year unless explicitly stated otherwise.

    Research Areas State and local finance
    Policy Centers Urban-Brookings Tax Policy Center