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One hundred forty miles away, in Washington, D.C., Republicans in Congress last month congratulated themselves on hammering out a conservative fiscal 2012 budget — a victory that entailed deep cuts to spending on urban and social issues. But here in Philadelphia those same cuts have sent programs that shelter the homeless, help the poor and people with disabilities repair and retrofit their homes, and assist residents facing foreclosure spiraling into crisis.
In next year's budget, there will be far less money to meet a growing need for housing-related services, which could mean a mushrooming number of homes that will leak and crumble, and a boom in the homeless population due to increased foreclosures. Funding provided by the stimulus package has also largely run out.
"It's going to be tough," says Michelle Lewis, president of Northwest Counseling Service, which assists Philadelphians facing foreclosure. "A reduction in staff. A reduction in resources available to help the residents. That's going to be determined agency by agency. For many, it will put them out of business. For us, it won't put us out of business, but it will have a devastating impact."
The fiscal year that begins in July will be the second consecutive year of deep cuts to two major federal programs that Philadelphia relies on for housing aid: The Community Development Block Grant (CDBG), the primary direct federal funding source for a broad range of city programs, will decline 11 percent; and the HOME Investment Partnerships Program, which provides cities funds to construct and rehabilitate homes for the poor, will fall by 39 percent. Together, they'll be cut by a projected $17 million in Philadelphia, and $1 billion nationwide.
The spending reductions create only modest savings in the federal budget, but are acutely painful for cash-strapped cities struggling to cope with decades of disinvestment, decline and now economic crisis. Since 2010, congressional Republicans have made deficit reduction the centerpiece of their agenda, focusing their cuts on programs that assist poor and working-class citizens. As a result, Philly's federal housing funding is down 33 percent from just two years ago.
"It's basically the safety net that's slowly being eroded at the federal level, and it's creating more and more of a challenge for us taking care of our citizens," says City Councilman Darrell Clarke.
Philadelphia once again faces difficult choices about how to spend its shrinking annual budget — and many of the tough cuts the city may be forced to make due to reduced federal allocations could trigger further declines, according to Rick Sauer, executive director of the Philadelphia Association of Community Development Corporations. The city's decreasing capacity to deal with housing issues, for example, could result in more abandoned or deteriorating properties, precipitating a decline in neighboring property values, which in turn would further decrease property-tax revenues.
"There are a number of studies," says Sauer, "that show that if someone loses their home they are a much greater cost to society."
Tens of thousands of Philadelphians depend on the grant money.
"We see the need growing right now, not shrinking," says Sauer. "The waiting lists for programs like home repair, like putting on a new roof or fixing a furnace, or adapting a house to make it accessible to someone in a wheelchair, they're going to grow. The waiting lists are already two years for these programs. Now they're going to be three or four years."
Without new sources of revenue, City Council will face unpleasant choices, like whether to prioritize creating new housing or preserving existing homes.
Though perhaps the city could spend its funds more wisely. Councilwoman Maria Quiñones-Sánchez says that city housing programs could operate more efficiently. More than half of federal funds are currently being eaten up by operating costs at the various city agencies that manage housing programs, including the Office of Housing and Community Development, the Redevelopment Authority (RDA) and the Philadelphia Housing Development Corp. Quiñones-Sánchez suggests consolidating the various city housing agencies to stretch ever-thinner funding further.
"Given the expected CDBG funding cuts, we should take this opportunity to review our funding priorities, including the large percent we spend on administrative costs, to insure we are leveraging our resources appropriately," she told City Paper via email.
Clarke also supports the creation of a city land bank, but says he's skeptical that consolidation will create more efficiency. Indeed, some of the operating costs go to city employees, such as RDA staff underwriting low-income housing developments, who are directly providing services.
"Sometimes," he says, "consolidation is a code word for laying people off. If that's what people want to do, they should just say it."
Mayor Michael Nutter is keeping his budget strategy quiet for now. The Department of Housing declined an interview on the subject, but released a statement saying that although the cuts "will severely impact the City's ability to provide housing and related services to low- and moderate-income households," they "are not generating any talk of consolidation."
Under Gov. Tom Corbett and the Republican legislature, state funds for housing — as for education and other programs — have also been cut, by nearly $5 million, including $500,000 in funding to retrofit homes for people with disabilities. More cuts could be on the way. Last week, budget secretary Charles Zogby announced that the state was already confronting a half-billion-dollar shortfall halfway through the fiscal year.
"Given the state of the economy, the governor and lawmakers will need to make many more difficult decisions about Commonwealth spending in the months ahead," said Zogby, signaling that further midyear cuts might be necessary. Progressives, who have called for the delay of a planned business tax break and for taxing the state's booming natural gas industry to offset cuts, criticized Zogby.
"Lawmakers should address our state's fiscal challenges in a balanced way rather than the cuts-only approach offered by Secretary Zogby," said Sharon Ward, executive director of the left-leaning Pennsylvania Budget and Policy Center.
The city contributes very little to its housing programs, and Sauer says it should contribute more. But that money will be hard-won in a shrinking general fund. One bright spot is the city's Housing Trust Fund, which uses a portion of a flat fee charged for real estate transactions for housing programs. Last week, Gov. Corbett signed legislation allowing a fee increase. This will, however, likely add up to no more than $3 million in additional funding. As long as politicians in Washington and Harrisburg insist on cutting spending, Philadelphia's housing emergency will only get worse — and the foreclosure crisis the city has been working to postpone could loom nearer.
Northwest Counseling's Lewis says the cuts could undermine Philly's foreclosure diversion court, which helps lenders and homeowners work out arrangements and avoid foreclosures.
"We try to serve people well before that point, before they end up in diversion court," says Lewis. "It's been largely successful because there's been a large and strong counseling network. But if you break up that network and overwhelm the courts, it could very well end in disaster."
