Reducing Federal Housing Aid by Trump May Negatively Impact Individuals and Economy
The Trump Administration's HUD Funding Cuts:
The Trump administration plans to slash Department of Housing and Urban Development (HUD) funding by a staggering 43.6%. Among the biggest targets is housing assistance, with nearly $26.72 billion being eliminated from the State Rental Assistance Block Grant according to the White House's discretionary budget request for fiscal year 2026[1].
To put it simply, the administration intends to give states more control over rental assistance programs by adopting a state-based formula for grants[1]. This means states could design their own rental assistance programs, tailoring them to suit their unique needs and preferences. However, it's worth noting that a two-year gap in aid for "able-bodied adults" would leave elderly and disabled individuals as the primary beneficiaries[1].
Understanding what this proposed change means requires a look at federal housing policy. Curiously, a search for "State Rental Assistance Block Grant" on HUD.gov or through site-specific Google search tools comes up empty. Searching grants.gov, as suggested on the HUD site, reveals a page discussing HUD grants, which mentions two grants and offers a link to other HUD grant programs[1].
Block grants typically provide states with funds to spend as they see fit, within given parameters[1]. These funds are intended to support rental assistance, public housing, and elderly and disability housing[1]. Unfortunately, a state-based formula doesn't replace the lost funding, meaning less money will be available for housing programs overall[1].
Rental Assistance: Who Benefits
The block grants support various rental assistance programs, such as Housing Choice Vouchers (HCVs), Public Housing, Project-Based Rental Assistance, Section 202 Housing for the Elderly, and Section 811 Housing for Persons with Disabilities[1]. Over 5 million low-income households benefit from assistance programs that help them afford housing[1]. These households can be found in urban, suburban, and rural areas, with half living in urban areas, 31% in suburbs, and 20% in rural areas[1].
According to HUD, in 2022, over 4.6 million families received various forms of rental assistance[1]. However, only about 25% of eligible families are reached by HUD rental assistance, leaving the majority in need[1]. In 2024, 77% of those receiving help had incomes less than 30% of the local area median income, with another 22% having incomes between 30% and 50%, and 1% earning between 50% and 80%[1].
Economic Implications
If only one in four families have access to assistance now, what would happen with the cuts? Many families could find themselves unable to afford decent shelter, potentially increasing homelessness just as other programs designed to help the homeless decrease in funding[1]. State and local governments may be left to deal with the consequences, essentially taking on an unfunded mandate[1].
Picture a large-scale domino effect: if people become homeless, it becomes challenging to retain jobs, which in turn impacts the economy. The sudden loss of income for landlords who rent to low-income families could cause further problems[1]. Will wealthier individuals move in and take up the lower-end rental markets? It's uncertain, but reducing housing assistance significantly could seriously disrupt the housing market and bring about negative economic shocks nationwide[1].
[1] Source: White House discretionary budget request for fiscal year 2026, National Low Income Housing Coalition, Center on Budget and Policy Priorities
- The proposed changes by the Trump Administration to the HUD budget could potentially result in personal-finance difficulties for millions of households, as the elimination of $26.72 billion from the State Rental Assistance Block Grant may reduce the availability of rental assistance.
- With the Trump Administration's plan to give states more control over rental assistance programs, it's realistic to expect that state finance departments will need to prioritize these funds within their own budgets.
- To realistically address the needs of different households and regions, the state-based rental assistance programs may need to be tailored to take into account various developmental factors and parameters, such as the local prevalence of homelessness.
- As the proposed HUD funding cuts may affect grants intended for rental assistance, housing, and elderly and disability housing, it's important to consider potential sports (unintended consequences) in terms of the overall housing market and economy, including the possibility of increased homelessness and negative impacts on employment and the rental market.
