As anyone who watches the news knows, if Congress does not act by March 1, 2013, sequestration will kick in. When people talk about sequestration, or “sequester cuts, they are referring to a series of draconian budget cuts, totaling $1.2 trillion that are scheduled to go into effect on March 1, 2013. These cuts are evenly split between defense and domestic discretionary spending (with some exemptions, such as Social Security, Medicare, and veterans’ benefits). So, how will these cuts affect affordable housing? Not all programs will be impacted; the Low-Income Housing Tax Credit Program is safe (for now). This is because the Tax Act passed in December extended the 9% credit floor for all of 2013, and also retroactively excluded the military Basic Allowance for Housing (BAH) until January 1, 2014 (but only for certain areas of the Country). However, when the sequester hits, may HUD and Rural Development programs will take a hit.
Project-based Section 8 will be cut by 8%, and 250,000 housing choice vouchers will be eliminated, meaning up to 1 million people will lose their housing assistance. The only HUD program that could be exempted from the cuts is the HUD Veterans Affairs Supportive Housing Program (HUD-VASH), which provides vouchers for homeless veterans.
Owners with project-based rental assistance and those with significant numbers of voucher residents should be prepared for the possibility of these cuts and plan accordingly.