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Secretary Testifies on FY11 HUD Budget

Capitol Hill
Memo to Members: Vol 15, No. 8, February 26, 2010

The House Appropriations Subcommittee on Transportation, Housing and Urban Development, and Related Agencies (T-HUD) heard testimony from HUD Secretary Shaun Donovan on HUD’s FY11 budget proposal at its February 23 hearing. 

Subcommittee Chair John Olver (D-MA) opened the hearing by praising aspects of the Administration’s budget, including HUD’s commitment to its Sustainable Communities Initiative and programs serving homeless households. Much of the focus in Mr. Olver’s opening marks, however, was on cuts the Administration has proposed, specifically its plan to zero out the programs that serve seniors and people with disabilities.

In his testimony, Secretary Donovan stated that HUD’s work over the last year and the $41.5 billion proposed for HUD in the President’s FY11 budget provide a foundation for the agency to provide security to tenants and homeowners, rebuild confidence in the agency’s work to help the economy grow, and “put money back into households’ pockets” by helping borrowers to refinance at lower rates.

Secretary Donovan focused his remarks on the Transitioning Rental Assistance (TRA) program, a new HUD initiative that would combine HUD’s 13 rental assistance streams into one program (see Memo, 2/5 ). He said that HUD rental assistance programs “desperately need simplification” to better serve the 4.6 million households in these programs.

As envisioned, TRA would allow public housing agencies and project-based owners to voluntarily convert their current federal subsidy streams to a new, more streamlined source of operating subsidy while giving residents in such units the choice to move with a tenant-based voucher. Secretary Donovan described the guiding principles of the TRA program as simplifying the current funding structures, shifting from capital and operating subsidy structure to a structure that leverages private funds, instituting market discipline that attracts private capital, and providing all residents with additional mobility choices. HUD is currently developing program details.

In speaking about the Administration’s proposal to increase funding for HUD’s homeless assistance programs by $200 million in FY11, the Secretary cited recent successes in reducing chronic homelessness by 30% in the last four years.

Both Mr. Olver and Representative Tom Latham (R-IA), ranking member of the Subcommittee, questioned the Secretary about the Administration’s decision to cut the Section 202 housing for the elderly and Section 811 housing for people with disabilities programs (see Memo, 2/5 ). Mr. Olver noted that Congress, and specifically the Committee, have increased the investment in these programs over the last three years, and he questioned the Administration’s position that funding should be halted until program reforms are completed. While two bills that would make significant changes to the programs have passed the House and are before the Senate, Mr. Olver stated that he understands as many as two-thirds of needed changes could be made by HUD now without legislation.

The Secretary said that, faced with difficult decisions about where to dedicate limited funds for FY11, HUD chose to shore up rental programs and allocate cuts to capital programs. Secretary Donovan also noted that the 202 and 811 programs produce a small number of units each year, 4,000 and 1,000 respectively, just one-tenth that of the Low Income Housing Tax Credit program. The Secretary did not address Mr. Olver’s question of why the program funding needs to be cut when improvements to the program could be made by the Administration.

Mr. Olver said he was also “disappointed” that HUD did not adhere to agreements made between the Administration and Congress on waiting to include the new Choice Neighborhoods Initiative (CNI) in the budget proposal until after the program is authorized by Congress. HUD proposed CNI, a new program to address distressed public and assisted housing stock in high poverty neighborhoods, in its FY10 budget proposal (see Memo 10/2/09 ). The proposal was included in the final FY10 appropriations bill before it was vetted by the House and Senate authorizing committees, something many thought was necessary for a new program of its scope.

HUD’s overall budget request anticipates a significant increase in revenue, or “offsetting receipts” from the Federal Housing Administration’s business, $6.9 billion in FY11 compared to $3.3 billion in FY10. These revenues offset HUD’s expenditures and result in an overall lower HUD budget request than would exist without these FHA revenues. Citing past discrepancies between HUD and Congressional Budget Office’s (CBO) projections for FHA receipts, Mr. Olver asked Secretary Donovan if the anticipated FHA receipts were in line with the CBO’s estimates.

The Secretary responded that, for FY11, HUD used conservative estimates including lower home prices than CBO uses and a higher decline in home prices than are currently expected, making HUD confident that its estimates of FHA receipts will be accurate. HUD began meeting with CBO to discuss these estimates on February 22.

A hearing on HUD’s budget request by the Senate Appropriations Subcommittee on T-HUD scheduled for February 25 was postponed and is expected to be rescheduled for March. The House and Senate Appropriations Committees’ hearings mark the first steps in Congress’s process to enact a FY11 budget (see Memo, 1/8 ). 

View the webcast of the hearing at: http://appropriations.house.gov/Subcommittees/sub_tranurb.shtml

View Secretary Donovan’s testimony at:  http://appropriations.house.gov/Witness_testimony/TH/Shaun%20Donovan_2_23_10.pdf

View NLIHC’s budget chart at: http://www.nlihc.org/doc/FY11-Budget-Chart-HUD-Programs.pdf