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The American Taxpayer Relief Act of 2012 (HR 8) temporarily averted sequestration, the automatic, across-the-board cuts to nearly all defense and non-defense discretionary programs, through pushing it back two months with the hope that Congress would strike an alternative deficit reduction deal by then. Since no deal was reached by this point, sequestration went into effect on March 1, 2013 when President Obama issued a sequestration order.

Sequestration includes significant cuts to discretionary programs. Discretionary spending (as opposed to mandatory spending like Medicaid) is determined each year through the congressional appropriations process. It includes virtually all targeted homelessness and affordable housing programs.

Sequestration will result in slightly more than five percent cuts to nearly all programs within the Department of Housing and Urban Development (HUD). The cuts will have a more immediate impact on programs that are not funded through yearly grants, such as Section 8 Housing Choice Vouchers and Public Housing. HUD estimates that as a result of sequestration 125,000 individuals and families, more than half of whom are elderly or disabled, will lose assistance provided to them through the Housing Choice Voucher programs. Sequestration will also do substantial harm to homeless assistance programs, as HUD estimates that more than 100,000 homeless and formerly homeless people, the majority of whom are members of families, disabled adults, or veterans, will be removed from housing or shelter programs. The cuts will also have devastating impacts on public housing agencies, as well as the Housing Opportunities for Persons with AIDS, HOME Investment Partnerships, and the Community Development Block Grants programs, among others. The one significant exception in cuts to HUD programs is programs for veterans administered by the Department of Veterans Affairs (VA), all of which are exempt, including the joint HUD-VA Supportive Housing (HUD-VASH) program.

The cuts will also apply to programs in other agencies that assist those experiencing homelessness such as the Department of Health and Human Services' Runaway and Homeless Youth Act (RHYA) programs and the Department of Justice's reentry and domestic violence programs. However, mainstream poverty programs that are funded through mandatory (as opposed to discretionary) spending, such as SSI/SSDI, Medicaid, Medicare, TANF, and SNAP, are exempt.

The sequestration of federally-funded housing and community development programs will severely impact the provision of safe, decent, and affordable housing and necessary supportive services, and the development and recovery of vibrant communities. Therefore, it is especially important that these programs, including the McKinney-Vento Homeless Assistance Grants program, are funded at increased levels in the upcoming fiscal year (FY) 2014 appropriations.