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HUD Archives: News Releases

HUD No. 97-242
Further Information:For Release
In the Washington, DC area: 202/708-1420Monday
Or contact your local HUD officeOctober 27, 1997


WASHINGTON -- Legislation signed into law today by President Clinton will avert an affordable housing crisis that could have threatened up to 4.4 million Americans with homelessness, Housing Secretary Andrew Cuomo said.

Cuomo said the signing by the President of the Department of Housing and Urban Development's appropriations bill completes the work of solving the Section 8 crisis -- a goal Cuomo set as his top priority when he became Secretary.

"President Clinton and the Congress have worked together in bipartisan cooperation to solve the Section 8 crisis," Cuomo said. "The legislation signed by the President today is an historic achievement -- the first major housing legislation enacted in six years. The President's action will prevent many families from being put out on the street, averting an unprecedented explosion of homelessness nationwide."

Cuomo said the legislation will:

  1. Increase funding for Section 8 renewals by $4.6 billion this year to enable HUD to renew all expiring Section 8 contracts. The Section 8 program, under which contracts for 1.8 million affordable apartments housing 4.4 million people would expire this fiscal year, subsidizes housing for low-income people -- primarily disabled, elderly and families that work.

  2. End excessive rental subsidies to private landlords under the project-based Section 8 program. By cutting subsidies so that landlords receive rents from HUD at market rates, the measure will save taxpayers $562 million this year, nearly $1.6 billion over five years, and billions of dollars more in the years ahead -- while preserving affordable housing for 850,000 people.

"This bill will knock some common sense into out-of-whack rents," Cuomo said.

"By lowering HUD rental subsidies on project-based Section 8 apartments to the same level as rents in the private market, HUD will stop wasting taxpayer dollars on ridiculously high subsidies," Cuomo said. "We will allow landlords to collect common-sense rents and still make a fair profit for housing families in need."

HUD subsidies to landlords housing 850,000 poor people in project-based Section 8 units now often exceed market rents -- bringing landlords far higher rents than they could otherwise get.

For example, in New York City, the HUD-approved average rent for a subsidized apartment is $1,178 -- compared with a rent of $831 for the same type of apartment on the private market. In Detroit, the comparable figures are $716 for a subsidized apartment and $499 for an apartment on the private market.

Tenants pay 30 percent of their income toward the rent, with HUD subsidies making up the difference.

The high rental subsidies were originally established to encourage construction of affordable housing. Over the past 20 years, the subsidies escalated with inflation to far exceed rents for comparable apartments on the private market.

Despite the cuts in subsidies to landlords, the bill allows landlords to continue earning a profit by restructuring about $12.5 billion of their debt. Under restructuring, landlords refinance part of their mortgage balance at lower interest rates and with deferred payments. This will enable landlords to continue providing affordable housing even after HUD's Section 8 subsidies are cut.


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