In yet another budget year when Congress is focused on spending reductions, President Obama released an austere budget request for HUD and the Department of Agriculture affordable housing programs. The President’s request reflects a struggle to keep housing programs alive in the face of insufficient funding and competition with other Administrative priorities.
While HUD Secretary Shaun Donovan reported that HUD’s budget authority increased by 3% over FY12, the budget request includes large cuts to several of HUD’s main programs. For other programs, the President maintains funding at the FY12 level or at levels still well below the FY11 allocation. The FY11 funding level is the high water mark for numerous HUD programs in the last two years.
For the USDA Rural Housing Service, the President requests approximately the FY12 funding levels for several of the rental housing programs serving extremely low income (ELI) households but eliminates funding for another key rental housing program.
The President’s budget request for affordable housing resources is primarily a mix of maintenance-level funding, and cuts to housing programs due in part to the FY13 discretionary spending caps established by Congress and observed by the request.
The President’s HUD request relies in part on increasing cost burdens for the lowest income households as a revenue-generating measure for HUD. Other revenue-generating measures include eliminating or cutting some programs and combining others.
Tenant-Based Rental Assistance
The President requests $19.074 billion for the Tenant-Based Rental Assistance (TBRA) account, a slight increase over the enacted FY12 level of $18.914 billion. For contract renewals, the President requests $17.238 billion, a 1% increase over FY12 levels. Congress’s FY12 allocation for contract renewals, however, was not sufficient to renew all existing vouchers in FY12. The FY13 request, though slightly over the FY12 funding level, would fall short of funding all existing vouchers. HUD plans to make up this underfunding by implementing revenue-generating measures in the voucher program.
One revenue-generating measure establishes mandatory minimum rents in the TBRA, Project-Based Rental Assistance, public housing, Section 202, Section 811 and Section 236 programs (see article elsewhere in Memo). Minimum rents would increase rent payments for the lowest income households served by HUD’s programs in order to generate revenue to fund contract renewals. Another proposed revenue-generating measure, raising the threshold for medical deductions from 3% to 10%, would similarly increase costs for the lowest income tenants. The President’s budget request also includes a proposal to modify unit inspections, allowing less frequent inspections in order to generate savings.
Without these policy provisions that could be damaging to the poorest households, the President’s TBRA contract renewal request would be insufficient to fund all current vouchers. The Center on Budget and Policy Priorities estimates that without the cost savings envisioned in the bill, HUD’s request will result in the failure to renew 60,000 vouchers.
The budget requests $111 million for renewals of Section 811 Housing for Persons with Disabilities mainstream vouchers, 1% below the FY12 level. Section 811 vouchers were transferred from the Section 811 account to the TBRA account starting in FY11 and are now solely renewed out of the TBRA account.
The TBRA budget request includes $75 million in funding for new tenant protection vouchers, level with the President’s FY12 request and the FY12 enacted level, but a decrease of 32% below the FY11 level.
The President requests $75 million in new Veterans Affairs Supportive Housing (VASH) vouchers, an amount that is level with FY12 funding and a 50% increase over FY11 funding.
Administrative fees are increased by 17% over the FY12 funding level, restoring them to FY10 levels. The deep cut to administrative fees enacted in FY12 raised concern that public housing agency (PHA) voucher administration could slow and that PHAs would not be able to use all of their authorized vouchers.
Though this increase restores recent cuts, the budget also proposes a new discretionary use for the administrative fees in FY13, funding a new resident service initiative. Additionally, the Administration states that it can reduce administrative fees should there be insufficient funds in the TBRA account.
The President’s budget proposes a new sponsor-based assistance program within its TBRA request to serve homeless families and individuals. The proposal would enable PHAs to provide voucher funding, through a competition, to “not-for profit service providers that leverage and deliver supportive services for homeless families.” Under the proposal, PHAs could sponsor-base up to 5% of their existing authorized vouchers. HUD proposes that the authority for the sponsor-basing of vouchers could be achieved through the waiving of “provisions of Section 8 that would otherwise impede sponsor-basing.” HUD does not specify which provisions would have to be waived for such a program to be implemented.
The Administration once again does not request funding for Family Unification Program (FUP) vouchers. FUP vouchers were last funded in FY10 at $15 million. The Administration justified eliminating its request for the FUP set aside by saying that issuing FUP vouchers is already an eligible use of TBRA.
Project-Based Rental Assistance
The Administration requests $8.7 billion for the Project-Based Rental Assistance (PBRA) account, an amount HUD indicates is insufficient to renew all current contracts for a full year. The FY13 request is $639 million, or 7%, below FY12 funding. With only $8.7 billion in PBRA funding, HUD says it would renew just 5,300 property contracts for a full year, or about one-third of HUD’s PBRA portfolio, approximately 360,000 units. HUD would plan to issue short-term contracts for the contracts representing the other two thirds of its PBRA portfolio. In their roll-out of the FY13 request, HUD officials noted the possibility that new premiums in the Federal Housing Administration might result in HUD’s ability to push additional funds into the project-based Section 8 account in FY13.
The timing of contract payments would shift, reducing FY13 funds for contracts ending in FY14. These payments will eventually have to be made, but the HUD budget defers most of them to FY14. This creates pressure for the FY14 HUD budget to be sufficiently increased to meet this additional burden.
Offering short-term contracts to PBRA owners was a strategy used by HUD in FY07, when HUD admitted it did not fully understand and thus incorrectly estimated its renewal cost needs. Property owners, managers and advocates for the project-based Section 8 program are very concerned that investors will question the stability of the project-based program.
In addition to cutting project-based Section 8 funding by $639 million, the budget request relies on policy changes that would result in $411 million in revenue to the project-based account. These policy changes include increasing the minimum rents charged to the lowest income project-based tenants from $25 to $75 a month and the use of residual receipts accounts to offset assistance payments (see related piece on minimum rents elsewhere in Memo).
The Administration requests $2 billion for the public housing capital fund and $4.5 billion for the operating fund. This would increase the capital fund by 10% over the FY12 funding level but only restore funding up to the FY11 level. HUD estimates that the backlog of public housing capital needs as of 2011 is $26 billion.
The Administration’s FY13 request for operating funding is 14% higher than in FY12; however, in FY12, the operating fund was supplemented by PHA reserves. The FY12 appropriations bill authorized HUD to calculate PHA funding needs by taking into account what HUD determined to be an excess level of reserves held by PHAs. In 2011, the HUD Secretary stated that this was a one year strategy to save funds that would be discontinued in the FY13 request. While the FY13 request does not rely upon PHA reserves to fund the Operating Fund, it may not fully fund PHA operating expenses in FY13.
The Administration also proposes merging the public housing operating and capital funds, allowing PHAs flexibility in utilizing those funds. If full funding is not provided for the operating fund, however, this could result in PHAs relying on funds appropriated for the capital fund for operating expenses instead. Shortchanging capital projects will increase the accrual of capital needs at a faster rate.
The budget request includes launching the Rental Assistance Demonstration (RAD) by transferring $48 million from the capital fund and $102 million from the operating fund to TBRA and PBRA for unit conversions in FY13. HUD expects these funds to facilitate the conversions of 48,000 public housing units. The current maximum number of units allowed for conversion annually is 60,000 and the Administration proposes exempting Moderate Rehabilitation units from this unit cap. HUD says this would allow them to run a demonstration and evaluation of Moderate Rehabilitation unit conversion they hope would help better preserve this housing stock over the long term. HUD expects that 4,000 to 6,000 units of Moderate Rehabilitation, Rent Supplement and Rental Assistance Payment units would convert in FY13 in addition to the 48,000 public housing units. The Administration also proposes allowing Tenant Protection vouchers to be used as RAD conversion subsidies instead of being reissued as Tenant Protection vouchers.
A highlight of the President’s budget request is the $330 million increase to the Homeless Assistance Grants. This increase in an otherwise austere budget demonstrates the Administration’s commitment to advancing the federal plan to end homelessness for veterans in five years and the plan to end homelessness for families in ten years. The funding increase would bring the account to $2.231 billion, funding the Continuums of Care and rural housing stability assistance at $1.9 billion, the Emergency Solutions Grant (ESG) at $286 million, and the homeless data analysis project at $8 million. This increase in funding would enable HUD to further enact HEARTH, which the department has been unable to do fully without an increase in funding.
The funding request for the HOME Investment Partnership program is at only $1 billion, level with FY12. In FY12, HOME was cut by 38% from $1.6 billion. HOME is the only HUD production program that is currently funded.
The budget request includes several policy proposals focusing on residents. The Administration proposes changes to the funding and scope of the Family Self-Sufficiency (FSS) program. The FSS program would be funded by both TBRA and public housing funds and would be expanded to serve residents in project-based rental assistance properties.
The Administration proposes creating a program called Consolidated Opportunities for Resident Enrichment (CORE) that could be funded from public housing funds and TBRA administrative fees. The goal of CORE would be to promote positive quality of life outcomes for residents. PHAs could fund service coordination, case management, direct services, and tenancy preservation services for people with disabilities or the elderly. With CORE authorization, the HUD Secretary could choose to divert a small percentage of public housing and voucher funds to the CORE program. Individual housing authorities could, in turn, decide to operate a program under CORE.
The budget request also contains a proposal for a $50 million Jobs Plus Pilot, based on the Jobs Plus Demonstration and funded by the public housing capital fund. Funding would be distributed as bonus awards. The goal of the program would be to help residents gain employment and increase their earnings. The pilot would offer competitive grants for partnerships between PHAs, Workforce Investment Boards and other organizations. HUD anticipates the pilot to fund employment and job search services for 30,000 households.
HUD Programs for Special Needs Populations
The Section 202 housing for the elderly program would be funded at $475, a 27% increase over FY12, a 19% increase over FY11 but still well below the FY10 funding level of $825. The program would still not receive capital advance funding. HUD’s budget includes a proposal to provide rental assistance only similar to the new model for Section 811 Housing for persons with disabilities.
The FY13 request proposes a new Section 202 Housing for the Elderly Program Project Rental Authority, modeled after changes that were made to the Section 811 Housing for Persons with Disabilities Program in the Frank Melville Supportive Housing Investment Act. If adopted, Section 202 funds would be used to provide operating assistance only, and would be applied to multifamily housing complexes that are made affordable through other sources such as the Low Income Housing Tax Credit, HOME, or private financing. Under the proposal, states would administer and award Section 202 funds. The proposal would likely change the financing structure for new projects, and it appears that statutory changes may be required for the proposal to be fully implemented.
The Administration requests $150 million for Section 811, a decrease of 9 percent below the FY12 level. The Housing for Persons With AIDS (HOPWA) program would be funded at $30 million, 1% below FY12 funding.
Other HUD Programs
Other HUD programs would be cut or relatively level funded in the President’s budget request. The Community Development Fund would receive $3.143 billion, a 5% cut below FY12 funding and 10% below FY11. Community Development Block Grants would be funded level with FY12 at $2.948 billion, a 12% below FY11.
The Administration does not request any funding for the Self-Help Homeownership Opportunity (SHOP) program, saying that administering this program is already an eligible use of HOME funds. Given the deep cut to HOME, the elimination of SHOP funding would further constrain HOME funds.
The Administration requests $55 million for the Housing Counseling program and announces a new office of Housing Counseling at HUD in the budget request. The Housing Counseling program was funded at $88 million in FY10 and Congress unexpectedly eliminated funding for it in FY11. Funding was partially restored to $45 million in FY12.
Funding for Fair Housing and Equal Opportunity is requested at $68 million, a 4% cut below FY12 funding. The budget includes $120 million for Health Homes and Lead Hazard Control, level with FY12 and FY11 funding. HUD’s Office of Policy Development and Research would be increased by 13% to $52 million.
Rural Housing Service Programs
For the USDA’s Rural Housing Service, the Administration requests relatively level funding for three programs serving ELI households but eliminates funding for another. For the Farm Labor housing programs the President requests $26 million for Section 514 and $9 million for Section 516. This would be a 25% increase for Section 514 over FY12 funding, but would only restore the account to the FY11 funding level. The Section 516 program would see a 26% increase above FY12 level, again restoring funding to around the FY11 level. The Administration requests $907 million for the Section 521 Rental Assistance program, which would be a slight increase above FY12 funding levels but still fund the program at 5% below FY11 levels.
The Administration requests no funding for the Section 515 Rental Housing Direct program which was funded at $65 million in FY12 and $70 million for several years prior. USDA states that it is shifting the focus of the program from production to preservation in FY13. USDA says it will use its multifamily revitalization funds to accomplish its Section 515 work. The USDA budget request does include preservation funding for Section 515 and also includes funding for the preservation demonstration for Section 515, Section 514 and 516 housing programs in FY13.
The President’s austere housing budget is reliant on revenue generated from the Federal Housing Administration (FHA) and on policy provisions that will need to be scored by the Congressional Budget Office (CBO) in the coming month. CBO will evaluate the President’s proposal and calculate its own revenue estimates, which Congress will use to guide its appropriations decisions.
The committees on the budget and the committees on appropriations now begin their work (see article below on the first hearings in the budget committees as well. The Senate Committee on Appropriations has scheduled its first hearing for March 1 and the House Committee on Appropriations has scheduled its first hearing for March 24.
Congress’s FY13 appropriations will be a high mark for discretionary housing programs as the Budget Control Act of 2011 requires sequestration for discretionary programs. These across-the-board cuts of 9% would be exacted on the final FY13 funding levels on January 1, 2013.
The Campaign for Housing and Community Development Funding and other concerned organizations crafted a sign-on letter to appropriators calling for an increase to the FY13 Transportation, Housing and Urban Development, and Related Agencies (THUD) 302(b) subcommittee allocation.
The House and Senate appropriations committees each have 12 subcommittees. With this sign-on letter, advocates are supporting a funding allocation for the subcommittee that will result in HUD funding. This subcommittee allocation is referred to as a 302(b) allocation.
The letter notes the importance of affordable housing, community development and transportation funding to low income households and underserved communities. It calls for appropriators to increase the THUD allocation after the subcommittee was deeply cut in FY12.
NLIHC urges national organizations concerned about programs funded in the THUD bill to sign onto the letter by February 29.
The Campaign for Housing and Community Development Funding is a campaign of over 70 national organizations concerned about funding for affordable housing and community development programs. It is staffed by NLIHC.
View and sign onto the 302(b) letter here: https://nlihc.wufoo.com/forms/thud-302b-signon-letter/
NLIHC budget charts, 2/16 webinar slides, audio of 2/16 webinar: www.nlihc.org
HUD’s Congressional Justifications for FY13 request: http://portal.hud.gov/hudportal/HUD?src=/program_offices/cfo/reports/2013/main_toc
USDA budget information: http://www.obpa.usda.gov/budsum/FY13budsum.pdf
Additional information from the White House on HUD and USDA budgets: http://www.whitehouse.gov/omb/budget/Appendix
View CBPP’s preliminary analysis of the FY13 budget request: http://www.cbpp.org/files/2-15-12hous-memo.pdf