Renters Rejoice: Homeowners' Loss is Your Gain

Renters rejoice! If it seems like the government has been focused on helping homeowners (when they're not helping bankers, that is), now it's your turn.

While the rest of the federal government is slashing its budget, the U.S. Department of Housing and Urban Development is aiming for a 5 percent hike in 2011 – much of it to go towards helping renters get affordable housing. And better yet, HUD is getting homeowners to foot the bill.

The agency's secret weapon is the Federal Housing Administration, which has stepped in as a lifeline to mortgage-shoppers as other lending options disappear. During subprime lending's peak, FHA insured less than 2 percent of new mortgages. Now, with other borrowing options obliterated in the wake of the credit market's collapse, Americans are unexpectedly depending on FHA as their ticket to a mortgage – today FHA-backed loans account for one-third of all home purchase loans.

So HUD did what any popular kid would do: it decided to capitalize on all the attention. Two weeks ago, it announced hikes in the premiums it charges FHA borrowers, explaining that the increase would "strengthen the FHA's capital reserves, while enabling the agency to continue to fulfill its mission to provide access to homeownership for under-served communities."

Now it turns out that the agency has a second agenda: Take the windfall from all those FHA borrowers and share it with the nation's renters, who are typically poorer and in greater need of housing aid.

The new HUD budget infuses badly needed cash into the Section 8 voucher program, which helps low-income tenants pay rent but has too few vouchers available to serve everyone who qualifies. Facing a funding shortfall, many cities – including New York – have even had to cancel vouchers they had already handed out.

But HUD has even bigger plans in store. In introducing the budget this week, Secretary Shaun Donovan (pictured) announced an overhaul of all federal rental assistance programs and new strategies for financing repairs to public housing. Right now 13 different programs, run by a cast of thousands in three different bureaucracies, run more or less the same way they did in the 20th century. Going forward, HUD is creating one centralized and flexible source of funding that can be used in combination with private investments. And it's going to liberate public housing residents to choose where they live, if their local housing authority lets them.

It could be the next step toward the end of public housing as we know it – and a chance for HUD's 4.6 million tenants to move up in the world.