Cities Face $14 Billion Funding Gap for Spending on Housing

Long before the COVID-19 pandemic, America’s cities were experiencing a crisis in housing, with residents increasingly having to pay more for insufficient housing while wages remain largely stagnant. The COVID-19 pandemic has only exacerbated America’s housing problem.

Now cities are having to fund immediate needs, including shelters, mortgage and rental assistance, and eviction diversion programs for individuals and families facing unemployment, eviction, and/or homelessness. These unbudgeted expenditures on emergency response efforts have forced cities of all sizes to slash their spending. For many cities, this includes cuts to community development strategies and appropriated housing budgets that were already limited — cuts that will, in many cases, directly impact the long-term production and preservation of affordable housing in America.

City Housing Spending on the Rise: How Much is Intergovernmental Aid Helping? is a new report from the National League of Cities showing that for every $100 that state and federal governments invest per person, cities have $3 in additional housing spending needs per person. This means that cities have more than $14 billion in additional needs for housing cumulatively, just to get them back to historical levels of housing spending.

According to the analysis, most states are expected to face a significant gap between what they need to spend on housing in their communities and what they are receiving from state and federal governments. Not surprisingly, the two states with the biggest shortfalls are New York and California, at $4.5 billion and $3.5 billion, respectively.

Cities Face Unexpected Spending on Housing

In the face of the pandemic, cities are stretching their dollars in order to preserve necessary spending on emergency housing and rental assistance for individuals and families experiencing homelessness or loss of income. For example:

  • Seattle, Washington/King County secured hundreds of hotel rooms or hotel vouchers to house homeless residents and opened emergency spaces to reduce shelter density. The city has allocated $13 million for ongoing support, including sustaining hygiene services, reducing crowding in shelters and supporting permanent supportive housing programs. King County has increased expenditure authority of more than $4 million in CDBG and ESG funding on Housing and Community Development, and taken an advance of $1 million in future lodging tax revenues in support of homeless youth.
  • Washington, D.C. adopted emergency measures that allow the city to temporarily house homeless families for up to 60 days and has allocated more than $6 million to provide low-income renters with financial support of up to three months of rent arrears.
  • Chicago, Illinois plans to spend $2.5 million per month on shelter and quarantine space for homeless residents, in addition to the $3.29 million it has already spent on hotel rooms for people mildly ill and for first responders and health care workers. The city also donated $900,000 to A Safe Haven to support the provision of isolation and emergency shelter for homeless individuals.

Cities Need Federal Aid to Thrive

Cities are facing a significant revenue shortfall of $135 billion in this year alone, and without direct federal aid, cities cannot thrive. State and federal governments have largely reduced direct aid to local governments for housing since the 1980s, with one exception being the large pool of federal dollars recently provided through the Coronavirus Aid, Relief and Economic Security (CARES) Act. In particular, the CARES Act provided $5 billion in Community Development Block Grants and $4 billion for homeless assistance grants. This funding is allocated to states, counties and cities, and it is not enough.

Unlike the federal government’s budget, local governments cannot operate with a budget deficit. City budgets do not have financial flexibility in the face of a crisis such as COVID-19 and instead must find additional revenue streams or, in many cases, cut back on providing otherwise needed services. Cities need state and federal aid to help them address the financial stresses of COVID-19 and are advocating for that funding as part of NLC’s Cities are Essential campaign. And as emergency orders and legislations have lifted, housing stability is occupying the minds of residents — particularly black, indigenous and communities of color households hardest hit by the pandemic — and local elected officials alike.

To learn more about city spending on housing and the role of federal aid, access the full Policy Brief here.


About the Authors 

Anita Yadavalli is the Program Director of City Fiscal Policy at NLC. Anita leads NLC’s Public Sector Retirement initiative, with a focus on research and education for city leaders on retiree healthcare benefits, as well as research and programming on other city fiscal policy issues.




Lauren Lowery is the program director for housing & community development at the National League of Cities. Follow her on Twitter @lowery_la.




Screen Shot 2020-04-17 at 10.38.11 AMNatasha Leonard is a Senior Program Specialist for Housing & Community Development at the National League of Cities. Follow her on Twitter @NatashaJLeonard.