President’s Budget Brings Mixed Funding Results, Bold Initiatives to HUD Programs
Administration
Memo to Members: Vol 15, No. 5, February 5, 2010
President Obama sent his FY11 budget request to Congress on Monday, February 1, revealing a mixed picture for HUD funding following the Administration’s announcement of a three-year freeze for many discretionary funding programs. The President’s requested HUD budget would increase funding for vouchers and public housing operating expenses, decrease funding for some capital programs, and introduce several new program initiatives.
At a budget briefing on February 1, HUD Secretary Shaun Donovan described the decisions to increase and decrease funding as both promising and difficult steps in “the process of long-term rebuilding” for HUD programs, a reference to the cuts sustained by many programs during the previous Administration. “Having stabilized HUD’s programs after years of slow starvation, the time has come to begin transforming them--to make HUD’s housing and community development programs more streamlined, efficient, and accountable,” Secretary Donovan said in a press release.
The President’s budget proposes what HUD refers to as three “new and cross-cutting” initiatives: a Transforming Rental Assistance initiative, a Housing and Services for Homeless Persons Demonstration program, and a Catalytic Investment Competition. The first initiative, Transforming Rental Assistance, would begin to combine the more than 13 funding sources of rental assistance currently administered by the department into a single, more efficient rental subsidy while providing tenants with greater mobility options (see article elsewhere in Memo).
Housing and Services for Homeless Persons Demonstration, the second initiative, would provide $85 million to public housing agencies to house families and individuals who are homeless or at-risk of homelessness, and to partner with other agencies to provide services. Services would be administered by the Department of Health and Human Services; the Department of Education; and state agencies distributing Temporary Assistance for Needy Families (TANF), Medicaid, and behavioral health services (see article elsewhere in Memo).
The third new initiative, the Catalytic Investment Competition Grants, would provide $150 million in economic development gap funding for projects targeting the hardest-hit neighborhoods, in combination with other HUD-funded programs (see the Community Development Fund section of this article).
The President’s total net budget authority for HUD would be $41.59 billion, a $2.261 billion decrease from the net authority from FY10. However, Secretary Donovan said that an increase in receipts from Ginnie Mae and the Federal Housing Administration will allow HUD to provide a higher level of funding while reducing the total budget authority request.
Specific components of the Administration’s proposed FY11 budget for HUD are as follows.
Rental Assistance Programs. Secretary Donovan emphasized at HUD’s budget briefing the Administration’s commitment to maintaining full assistance for the tenant-based and project-based programs in order to preserve existing vouchers and contracts.
The Tenant-based Rental Assistance Program would receive $19.55 billion in the request, an increase of $1.4 billion over FY10, and would fund three new rental assistance initiatives in addition to the Housing Choice Voucher program.
The budget would continue to fund tenant protection vouchers at $125 million, a $5 million increase over FY10. These vouchers are provided to tenants of public or assisted housing when their units are demolished or sold. Family self-sufficiency coordinators would be level-funded at $60 million.
HUD anticipates that this funding level will allow renewal of all vouchers leased by December 2009 and will provide assistance to at least 100,000 more households than in FY10. The department anticipates serving a total of 2.2 million households, “the largest number of families ever assisted by this program,” by the end of FY11. The Administration expects its FY11 budget to renew all vouchers in use, renew all new vouchers funded in FY10, and provide $85 million for about 10,000 new vouchers for homeless individuals and families.
NLIHC is pleased that the Administration has increased funding for the voucher program, but does not believe the increase is sufficient to meet the needs of extremely low income households, especially in the time of a steep economic downturn. NLIHC is advocating for at least 250,000 new vouchers in FY11 to meet the existing and growing need for housing affordable to extremely low income households.
Several proposals to shift management of existing rental assistance programs and create new programs reflect HUD’s intent to streamline its multiple rental assistance funds under the new TRA initiative.
Along with changes to the capital portion of the Section 811 program (see section on Capital Programs below), HUD’s budget request proposes shifting the tenant-based rental assistance funds from the Section 811 program line item to the Tenant-based Rental Assistance Program. The Housing for Disabled Persons Mainstream vouchers currently in the Section 811 account would be fully renewed within this new account at $114 million.
The budget would provide $66 million for a new Disaster Housing Assistance Program (DHAP) for households assisted under the DHAP for Hurricanes Ike and Gustav. The budget does not include new funding for Disaster Displacement Assistance, which was funded at $80 million in FY09 and $3 million in FY10 (see related article elsewhere in Memo).
Two rental assistance programs funded in FY10 are not included in the FY11 request: the Veterans Affairs Supportive Housing (VASH) vouchers and Family Unification Program (FUP) vouchers. Non-elderly Disabled Vouchers were not funded in FY10 and do not appear in the President’s FY11 budget. Vouchers issued under these three programs are included in the general tenant-based contract renewal line item instead.
HUD also proposes several administrative changes to the Tenant-based Rental Assistance program that would strengthen oversight and evaluation, improve the technological management systems, continue studying a administrative fee allocation formula, study Housing Quality Standards, and eliminate the cap on the number of households a public housing agency can serve. This last administrative change is critical to the Transforming Rental Assistance initiative.
The President’s budget requests an increase of $830 million for the Project-based Rental Assistance account, bringing the total to $9.382 billion. This proposed increase is smaller than the one the program received between FY09 and FY10. However, according to HUD, the increase would be sufficient to fully fund the program’s approximately 18,000 contracts with private owners. The budget request also includes HUD’s potential use of its authority, provided in the 1998 Multifamily Assisted Housing Reform and Affordability Act, to make up to $10 million of project-based rental assistance funds available for financial assistance to tenant groups, nonprofit organizations, and others for use in preserving this housing stock and providing tenant services.
Public Housing. HUD’s request would fully fund the public housing operating fund at $4.83 billion, an increase of $54 million over FY10.
The Public Housing Capital Fund, however, would be cut under the President’s proposal from $2.5 billion in FY10 to $2.04 billion in FY11. The capital fund provides critical resources to improve the condition of the public housing stock. The Administration says that the impact of decrease will be lessened because of $4 billion in one-time funding for this account that was distributed through the American Recovery and Reinvestment Act of 2009 (ARRA). HUD says these funds will “reduce the backlog of capital needs” for public housing while allowing HUD funds to be used in other programs in FY11. While the Transformation of Rental Assistance (TRA) proposal could address a portion of the capital fund’s unmet need, it is NLIHC’s position that a cut to the capital fund will only serve to delay housing agencies’ ability to address the $20 billion to $30 billion capital needs backlog.
The budget request does not include funds for HUD’s Resident Opportunity and Self-Sufficiency grant program. This program has been funded at $40 million for the last several years.
For the second year in a row, the President’s budget would eliminate funding for the HOPE VI program and fund instead the new Choice Neighborhoods Initiative (CNI) at $250 million. For FY10, Congress ultimately provided $135 million to the HOPE VI program and funded CNI as a smaller demonstration program at $65 million.
Community Development Fund. Although the Community Development Fund (CDF) would decrease under the President’s budget from $4.45 billion to $4.38 billion, the largest component of the fund, the Community Development Block Grant formula grants, is level-funded at $3.99 billion.
Economic Development Initiative Grants and the Rural Innovation Fund would be discontinued in FY11. The Sustainable Communities Initiative, companion funding to HUD’s new Office of Sustainable Housing and Communities, would continue with level-funding at $150 million. In FY10, the President requested but did not receive funds for the University Community Fund, and this request appears again at $25 million.
The third of HUD’s three new and cross-cutting initiatives, the Catalytic Investment Grants, is included in the CDF account at $150 million. While few details about the program are known at this time, the program would target funding to communities with the greatest economic development need and provide funding for reclaiming vacant land, removing property related obstacles to economic recovery, and supporting economic activity in combination with transit-oriented development. In a briefing, Assistant Secretary Mercedes Márquez emphasized HUD’s intention to coordinate between departments and funding programs, and noted that HUD envisions the Catalytic Investment Grants being paired with other HUD funding sources, such as the Neighborhood Stabilization Program (NSP) or CNI, to leverage further resources and extend the impact of HUD’s funds.
Capital Programs. While voucher, project-based Section 8, and some public housing funds are strengthened in the President’s budget request, capital programs, including the HOME, Section 202, and Section 811 programs, are reduced.
The HOME program would be funded at $1.65 million in FY11, a $175 million decrease from FY10.
The budget proposes a dramatic decrease of funding for the capital portions of the Section 202 program for housing for the elderly and the Section 811 program for housing people with disabilities. The Section 811 program, which was funded at $300 million in FY10, would be funded at $90 million in FY11. This would fully fund contract renewals, contract amendments, construction amendments, and awards. An additional $114 million in rental assistance funds would continue to support the program but would be shifted to the Tenant Based Rental Assistance Program. In total, the Section 811 program would experience a $96 million decrease between FY10 and FY11. The Section 811 program is a small but effective program in preventing highly vulnerable people from becoming homeless by providing permanent supportive housing. NLIHC supports the House and Senate legislation to reform this program and allow it to more successfully serve this population. “The Administration continues to seek reforms to make this program more efficient and effective,” HUD’s budget documents say.
The Section 202 program would be funded at $274 million in FY11, a $551 million dollar decrease from FY10 funding. Of this proposed funding, $184 million would fully fund rental assistance renewals and contract amendments, and $90 million would be available for service coordinators and services in congregate housing. New construction and new project-based rental assistance would not be funded.
The budget request states HUD’s intention to redesign the Section 202 program to allow project sponsors to build larger projects with greater economies of scale, reduce regulatory barriers to allow sponsors to leverage other sources of funding, improve service provisions by building partnerships with the Department of Health and Human Services, and change application requirements to provide more preferences for the extremely frail elderly, “who are in the greatest need of supportive housing.” Past studies of the Section 202 program, HUD’s budget request says, have highlighted construction delays, cost overruns, and lengthy development times. Advocates, however, are concerned about cutting back production of affordable elderly housing units when the need for such units is great.
Secretary Donovan described the changes to the Section 811 and 202 programs as “the hardest decisions in the budget.” He said that these programs need to be reformed and aligned better with programs such as the Low Income Housing Tax Credit, which he said produce “ten times more housing” for the elderly. Citing problems with targeting projects to the areas with elderly housing need, high vacancy rates and difficulty in combining with other financing, Secretary Donovan said that both the 202 and 811 programs need reforming to become more efficient and effective programs.
Homeless Resources. Homeless Assistance Grants would receive a significant increase of $190 million dollars in FY11, to bring funding levels to $2.06 billion. Along with the new Housing and Services demonstration program, this increase serves to illustrate the Administration’s stated commitment to addressing the homelessness crisis. While pleased that the Administration is dedicating housing resources to support its commitment in these ways, NLIHC remains concerned that other budget requests, such as the elimination of any new Section 811 units, could well contribute to homelessness among vulnerable populations.
Fair Housing. Despite proposing an $11 million reduction in Fair Housing funding for FY11, the Administration spoke strongly of its support for HUD’s fair housing work during its February 1 briefing. HUD’s fair housing activities would be funded at $61 million, lower than the FY10 funding level but still at a level that is $7 million to $17 million above the programs’ funding levels from FY02-FY09. Secretary Donovan and Assistant Secretary for Fair Housing and Equal Opportunity John Trasviña spoke to the accomplishments the fair housing division has achieved in the last year and of their the plans to continue to strengthen HUD’s fair housing work.
Policy and Research. HUD’s Office of Policy Development and Research (PD&R) account would increase by $39 million, to $87 million, under the President’s FY11 budget. This increase would allow HUD to dedicate $55 million to “restore and enhance” housing surveys that provide HUD with critical data on housing need. Seven million dollars would be dedicated to evaluating the Choice Neighborhoods program, the Family Self-Sufficiency program, and Rent Reform options. NLIHC supports improving and expanding the data collection and program evaluation at HUD.
Additional Programs. Two programs serving special populations, the Native American Housing Block Grants and the Native Hawaiian Housing Block Grants, would be cut under the President’s proposal. The Native American grants would be funded at $580 million, a $120 million decrease from FY10. The Native Hawaiian grants would decrease by $3 million and be funded at $10 million for FY11.
The Housing Opportunity for Persons with AIDS (HOPWA) program would be funded at $340 million, a $5 million increase over FY10. This funding level would continue the trend of increasing resources for the HOPWA program.
The President’s proposal increases the Housing Counseling program slightly to $88 million. While only a $500,000 increase, this boost would mark the fourth year of improved funding for the program.
The Healthy Homes and Lead Hazard Control program would be level-funded for the third year at $140 million dollars. Prior to receiving level funding, this program had seen declines in funding for several years.
Low Income Housing Tax Credit. Finally, outside the HUD budget, the President also proposed extending the Low Income Housing Tax Credit (LIHTC) exchange program, created in the American Recovery and Reinvestment Act of 2009. Under this program, states’ LIHTC allocating agencies can exchange a portion of their 9% tax credit allocation for cash that can be used as equity in LIHTC-eligible projects. The President’s proposal would extend the program through 2010.
While the extension of the 9% exchange program is one of the changes needed to revitalize the LIHTC, advocates have also been seeking other changes, including extending the exchange program to the 4% LIHTC program, expanding the investor base by extending the ability of investors to use credits against past income, and amending the tax laws to encourage investment in LIHTCs by smaller corporations and limited partnerships.
NLIHC issued a statement and an updated budget chart upon the release of the President’s request. View the statement at: http://www.nlihc.org/detail/article.cfm?article_id=6736&id=48 and the budget chart at: http://www.nlihc.org/doc/FY11-Budget-Chart-HUD-Programs.pdf
The Administration’s complete FY11 budget proposal is available at: http://www.whitehouse.gov/omb/budget/Appendix/
