In early March, a draft of proposed budget cuts to the Department of Housing and Urban Development surfaced, showing that the Trump administration was considering cutting up to $6 billion from some of the most important housing assistance programs in the country.

Ben Carson, the newly installed secretary of HUD, sought to reassure HUD employees and others involved in the housing economy that this proposed 14% funding cut was simply a starting point in a long process of negotiations.

“Please understand that budget negotiations currently underway are very similar to those that have occurred in previous years. This budget process is a lengthy, back and forth process that will continue. It’s unfortunate that preliminary numbers were published but, please take some comfort in knowing that starting numbers are rarely final numbers,” Carson said.

But even as a starting point, the proposed cuts are baffling if the goal is to build and sustain a strong housing market.

Among the programs that would see significant cuts are the public housing capital fund, with $1.3 billion cut —a reduction of 32%, and the public housing operating fund, with $600 million cut, or 13%. Three important programs that affect local efforts to build affordable housing would be defunded altogether: the Community Development Block Grant program, the HOME Investment Partnership Program and Choice Neighborhoods.

Other programs seeing significant cuts under the proposed budget include:

• Direct rental assistance programs (including Section 8 and homeless vets): $300 million cut, about 1.5% of its overall budget

• Section 202 program (elderly assistance): $42 million cut, 10% of its overall budget

• Section 811 housing for people with disabilities: $29 million cut, or nearly 20% of its overall budget

• Native American housing block grants: $150 million cut, more than 20% of its overall budget

A Chicago Tribune article quoting Douglas Rice, a senior policy analyst at the Center on Budget and Policy Priorities, estimates that the funding levels detailed in the budget document could lead to a loss of about 200,000 rental-assistance units nationwide.

Housing advocates hope that some of the money cut from community housing would be replaced by increased spending in a massive infrastructure bill being prepared for Congress, but there is no definite provision as yet.

How will these cuts affect the overall housing market?

Megan Hustings, interim director of the National Coalition for the Homeless, predicts an increase in homelessness or shelter dependence, according to the Chicago Tribune.

“It’s a cycle — a slow ride to the bottom that people tend to experience. Folks and families will use every resource they have before they go to a shelter,” she said. “You cycle down, and once people end up in a shelter or homeless, they have absolutely no resources left. They are out on their own.”

This cycle of housing instability ultimately means fewer first-time homebuyers. According to the Office of Policy and Development Research at HUD, “Affordability assistance helps low-income families overcome wealth barriers and achieve favorable debt-to-income ratios that keep monthly payments low… Even small amounts of down payment assistance increase the probability of moving first-time buyers into homeownership.”

Two of the programs being defunded, HOME Investment Partnerships and the Community Development Block Grant program, help eligible homebuyers with down payment and closing costs. 

Programs that create homeowners just by helping with down-payment amounts are the lowest-hanging fruit in our industry. These are people with jobs and qualifying income who just need a one-time lift from the government.

 But that one-time lift is not just beneficial to the new homeowners — the overall housing economy benefits as well, since homeownership begets more homeownership. 

A study by the Joint Center for Housing Studies of Harvard University found that children of homeowners are more likely to become homeowners themselves, and at a younger age, than children of parents who did not own homes. 

This was true even when children stayed in the same schools as when their parents rented, as homeownership by their parents increased their chances of staying in school longer and graduating.

And, according to the Pew Research Center, homeownership among minority households has seen the steepest decline of all groups since the peak of homeownership recorded  in 2004.

“Today, only 41.3% of black households own their homes, a 16% decline compared with 2004. Among white households, 71.9% are homeowners, down 5% from 2004. For Hispanic households, peak homeownership occurred in 2007. Since then, homeownership among Hispanic households has seen a 5% decline, from 49.7% to 47.0% today.”

 Therefore, cuts to HUD housing assistance programs seem likely to affect minority buyers disproportionally, who were already the most impacted by the financial crisis. An article in The Atlantic in 2015, quoting a report from the ACLU, found that “black families will continue to suffer the effects of this disproportionately for decades to come: By 2031, white household wealth will be 31% below what it would’ve been had the recession never happened, according to the report. For black households, wealth will be 40% lower, which will leave black families about $98,000 poorer than if the recession hadn’t taken place.”

Affordable housing assistance programs have been essential in helping minority families bridge the gap to homeownership, which is especially important given the increasing prominence of minorities in the U.S. population. 

“Families of color will make up 43% of the nation’s population by 2030. Yet, families of color have, on average, a much harder time getting a mortgage than do white families,” the Urban Institute’s Headship and Homeownership research paper stated in 2015. 

“Will the housing market contract as these families become the nation’s majority, or will the mortgage market become more inclusive to accommodate a more diverse population?”

This is the big question our industry faces going forward, and one that is made immeasurably harder if HUD affordable housing programs are cut. 

Trump’s business-friendly outlook should make this one easy to remedy, as leaders in the housing business — not just affordable housing advocates — have sounded the alarm about the long-term effects of these cuts.

 Trulia’s Chief Economist, Ralph McLaughlin, said, “We fear that such cuts could ultimately dampen economic growth by increasing housing stress for working-class Americans – teachers, firefighters, healthcare workers and more – who are vital for supporting higher-paying base industries in their respective markets.”

The short-term gains made by cutting the HUD budget today will have consequences on homeownership for decades to come. Here’s hoping the Trump administration decides to play the long game instead.