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Southern California Public Radio - KPCC

Wednesday October 09, 2013

LA Housing Authority CEO Warns About Impact of Budget Cuts

By Ben Bergman, Business Reporter
U.S. Speaker of the House John Boehner (L) speaks at the U.S. Capitol in Washington, D.C., Oct. 8, 2013, following a press conference by US President Barack Obama (R) at the White House as the crisis over a U.S. government shutdown and debt ceiling standoff deepens on the 8th day of the shutdown.

It's been a terrible year for the Housing Authority of Los Angeles, and the nearly 150,000 residents who rely on it.

Remember sequestration? Those automatic spending cuts meant a $46 million drop in the Authority's annual budget, which was already at a historic low.

"This is probably the most serious situation the housing authority has ever faced," Housing Authority president and CEO Doug Guthrie told the L.A. City Council's housing committee Wednesday.

Guthrie brought both good and bad news. The good news is that the shutdown has little immediate effect. He expects both public housing and subsidized housing – known as Section 8 – to be funded through the end of the year. That's as long as the government doesn't default on its debt.

Guthrie warned of "catastrophic" effects if the government defaults on its debt, but the effects of the shutdown are more muted.

The biggest impact has been on the number of employees who administer Section 8. Normally there are 9,000 nationwide. Now there are 384.

"It's unnecessary for there to be a sense of panic," said Guthrie. "We're not there yet. I hope we can manage our way through these problems."

The bad news? Thanks to the automatic spending cuts, the housing authority is quickly depleting its reserves. They'll be completely gone by the end of the year.

"What we anticipate is, at that time, we will lower the subsidy we can provide for our Section 8 users," said Guthrie.

That means that, if landlords don't lower their rents, tenants would have to pay more, which is often very difficult for them to do.

Larry Gross, executive director of the Coalition for Economic Survival, said it is unfortunate that the budget disputes in Washington have largely been felt by the poor.

"It's a sad state of affairs," said Gross.

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