President Barack Obama sent his FY15 budget request to Congress on March 4. In addition to requesting $1 billion for the NHTF (see article above), the request includes positive funding for housing programs that serve extremely low income households, despite the low overall discretionary spending caps set by Congress for FY15.
The President’s budget request would maintain assistance for extremely low income households currently served by HUD’s core rental housing programs, provide slight funding increases for a number of HUD programs, and decrease funding for certain critical housing production and other programs. The budget would maintain the status quo for USDA Rural Housing Services while seeking to impose a minimum rent on tenants. The budget also proposes several changes to the Low Income Housing Tax Credit.
The budget complies with the FY15 spending cap set by the Bipartisan Budget Act (BBA) but also includes a supplemental request of an additional $56 billion for the “Opportunity, Growth, and Security Initiative” (OGSI) (see Memo, 2/28). The OGSI would provide $28 billion in non-defense discretionary and $28 billion in defense spending, with the full amount offset by mandatory cost savings and increased revenue. The purpose of OGSI is to demonstrate areas where the President believes that additional investments should be made to help the nation “reach its full potential.” The OGSI would invest in education, research, infrastructure, public health, security, and defense and would create jobs and increase opportunity and mobility. Under OGSI, three HUD programs would get additional funding. They are the Choice Neighborhoods Initiative, the Jobs-Plus Pilot, and Integrated Planning and Investment Grants.
The House and Senate Budget Committees each held a hearing on March 5 on the President’s FY15 budget request with Office of Management and Budget (OMB) Director Sylvia Matthews Burwell as the sole witness. In her testimony before each committee, Ms. Matthews Burwell highlighted the President’s funding request and policy proposals for Homeless Assistance Grants and supportive services at HUD and at the Department of Veterans Affairs. Ms. Matthews Burwell said that the budget keeps the country on track to “end veteran homelessness in 2015” and “end chronic homelessness in 2016.” She also referenced the Administration’s investments in rental assistance, stating that this funding “plays an important role in helping extremely low income families avoid homelessness by providing stable and affordable housing.”
Chair of the House Budget Committee Paul Ryan (R-WI) called the President’s proposed budget “nothing to write home about,” objecting to the Administration’s proposal to increase spending. In contrast, Senate Budget Committee Chair Patty Murray (D-WA), called the President’s budget request a “strong proposal for a long term plan to expand upon our two year budget deal, create jobs and broad based growth, and expand opportunities for families and communities across the country.”
Dollar amounts requested for HUD and USDA programs, with comparisons to previous years are found in NLIHC budget chart at http://bit.ly/MLyt2i. Details for specific programs follow.
Tenant-Based Rental Assistance (TBRA). The President’s budget proposes to restore tenant-based Section 8 vouchers that were lost due to sequestration and maintain all vouchers in use in FY14. However, one preliminary analysis finds that the amount of funding that the President proposes would be insufficient to cover all vouchers lost during the sequestration battle.
The Administration requests $20.05 billion for TBRA, including $18 billion for contract renewals. HUD says that this amount will maintain all current tenants and restore the balance of vouchers lost due to sequestration. According to HUD, 74,000 vouchers were lost in FY13 because of sequestration and the FY14 appropriations could restore 34,000. HUD expects that the FY15 request would restore the remaining 40,000. However, a preliminary analysis by the Center on Budget on Budget and Policy Priorities estimates that HUD’s FY15 TBRA request would renew all current vouchers, but is unlikely to be enough to restore all lost vouchers.
In order to get to 74,000 restored vouchers, HUD assumes voucher cost savings measures that were enacted in the FY14 appropriations bill now being implemented, as well as new costs savings measures proposed in the FY15 budget. HUD also is counting new Veterans Affairs Supportive Housing (VASH) Vouchers.
Within the TBRA account, the Administration requests $75 million to provide 10,000 new VASH vouchers, consistent with FY14 and prior year funding. VASH vouchers are currently administered by PHAs but the budget includes a provision to also allow high performing Native American Housing Block Grant recipients to administer VASH vouchers to address veteran homelessness on tribal lands.
The Administration also proposes $150 million for Tenant Protection Vouchers (TPVs), a 15% increase over FY14 funding. HUD includes language that would ensure that TPVs are only provided as replacements for units lost and do not result in a “net gain of affordable housing resources.”
The Section 811 mainstream voucher renewals would be funded at $108 million, a 2% increase over FY14.
The budget request includes an increase for voucher administrative fees of more than $200 million, funded at $1.7 billion, a 14% increase over FY14 and a 32% increase over FY13. HUD says this is an overdue increase and that future requests will be informed by a study on administrative fee funding that HUD expects to complete by next year.
HUD proposes several policy provisions, including making improvements to project-based vouchers, expanding the sponsor-basing of rental assistance model as part HUD’s efforts to end homelessness, and changing the Fair Market Rent setting process. HUD also proposes to expand the number of agencies with Moving to Work (MTW) status to include more high performing public housing agencies (PHAs). There are no details on HUD’s MTW proposal in the request, but HUD expects to provide Congress with a full legislative proposal this spring. HUD also proposes to change the income recertification period for fixed income households to every three years to reduce administrative costs. Lastly, HUD proposes to change the medical expense deduction threshold from 3% to 10% of income, without proposing a concurrent increase in the standard deduction for households that are elderly or include a person with a disability.
The Administration requests $75 million in a stand-alone account for the Family Self-Sufficiency (FSS) program to serve all three of HUD’s core rental assistance programs, including the Project-Based Rental Assistance (PBRA) program. FSS funding was previously provided as part of the TBRA account, but in FY14, the program was funded on its own to allow the Secretary to waive existing requirements in order to create a unified self-sufficiency program for multiple rental assistance programs, including the PBRA program.
Project-Based Rental Assistance (PBRA). The PBRA account would be funded at $9.7 billion, 2% below FY14. HUD plans to adjust all PBRA contracts to align with the calendar year starting in January 2016, in order to more accurately predict the cost of renewing contracts and streamline administration practices. This change is projected to produce savings, accounting for the reduced funding request. In FY13 and FY14, HUD provided owners of PBRA properties with only partial year contracts, referred to as “short funding.” HUD proposes to return to full year contracts starting in FY15 under the new calendar year funding structure.
HUD also proposes creating a budget neutral demonstration on energy efficient retrofits for HUD-assisted properties that facilitates the “financing of energy and water conservation improvements.” The Secretary would have the authority to issue contracts for up to two years for up to 20,000 units. These contract would be funded through the PBRA account, but would be budget neutral because HUD would limit the cost of the performance-based contracts to the amount that would have been spent on utility costs. HUD would be required to perform an evaluation of this program authority every five years after execution.
HUD also proposes changes to the Low Income Housing Preservation and Resident Homeownership Act (LIHPRA) of 1990 to allow the HUD Secretary to terminate or modify prepayment limitations and distributions of surplus cash in order to preserve affordable housing units by acquisition or refinancing. Properties would be eligible only if they have 20-year contracts past the date of acquisition or refinancing and would be required to renew their Housing Assistance Payment (HAP) contract for a period of time as determined by the Secretary.
The request would continue current policy regarding the transfer of some or all project-based assistance and low income use restrictions from one or more multifamily housing project or projects to another project or projects. The request would extend the Mark-to-Market program until September 30, 2018. The program is set to expire on September 30, 2015. Mark-to-Market authority allow owners of assisted housing to restructure assisted mortgage loans when rents are marked down to market levels. Without the extension of this authority, the requirement to mark rents to market would remain, but the authority to restructure mortgage loans so that new lower rents could cover the financing will expire.
HUD’s FY15 request would also continue the current policy that requires HUD to maintain assistance on a property during a foreclosure of any property with a PBRA contract or other federal program. This policy gives HUD the authority to transfer the contract to a new owner or take other measures to protect the tenants and the assisted units.
Public Housing. The President would provide slight increases in public housing operating and capital funds in order to maintain current units and address some capital needs. The budget requests $4.6 billion for the Public Housing Operating Fund. This would be a 5% increase over the FY14 funding level and a 13% increase over FY13 funding. In FY12, Congress appropriated $3.9 billion for the Operating Fund but required housing agencies to use funds from their reserves, increasing operating funding to approximately $4.7 billion, slightly below the FY10 funding level. The FY15 request, while an improvement, still falls below the FY10 and FY11 funding levels.
As in the FY14 request, HUD requests full fungibility between the operating and capital funds. This would eliminate the fees that PHAs pay to use operating funds for capital projects and provide PHAs with other flexibilities. The budget proposal does not describe parameters for this flexibility beyond that the agency must be non-troubled and maintain its housing units in a “safe, clean, and healthy condition.” The request also includes a provision to create a “utilities conservation pilot” to reduce federal costs through energy efficiency. As in the FY14 budget request, HUD does not provide details for the pilot but plans to submit details to Congress in authorizing legislation.
HUD proposes to fund the Public Housing Capital Fund at $1.9 billion, 3% above the FY14 appropriation and 8% above the FY13 funding level. While an increase in funding, the request is below the FY10 funding level and will not make substantial progress on the $26 billion backlog of public housing capital needs.
The request includes two set-asides within the Capital Fund, including $20 million for emergency capital needs and $25 million for a Jobs-Plus Pilot, which was funded in the FY14 appropriations bill. The President’s Opportunity, Growth, and Security Initiative (OGSI) budget request includes an additional $125 million for the Jobs-Plus Pilot.
HUD also provides funding related to public housing in two additional accounts. The budget request includes $10 million for the Rental Assistance Demonstration (RAD), exclusively for a targeted expansion of RAD to public housing properties that cannot feasibly convert at existing funding levels, as all RAD properties now do, and are located in high-poverty neighborhoods. HUD’s request would also remove the 60,000 unit cap for public housing and Section 8 Mod Rehab RAD conversions. The request also includes $120 million for the Choice Neighborhoods Initiative (CNI). The OGSI request includes an additional $280 million in CNI funding, which makes the total request $400 million, consistent with HUD’s FY14 request. The Administration includes CNI as a key component of its broader Promise Zones initiative.
Homeless Assistance Grants. The budget includes increased funding of $301 million for the Homeless Assistance Grants to maintain the current level of housing and services provided by the Emergency Solutions Grant (ESG) and Continuum of Care programs and increase the level of housing and services provided to make progress on decreasing homelessness. The Continuum of Care program would be funded at $2.18 billion to continue current projects and allow for new project funding. ESG would be funded at $215 million. The Administration says that funding Homeless Assistance Grants at this level will end homelessness for veterans by 2015 and end chronic homelessness by 2016. The federal plan to end homelessness set a goal of ending chronic homelessness by 2015.
HOME Investment Partnerships. The Administration would cut funding for the HOME program by 5% to $950 million, adding to the approximately 40% cut in funding to the program since FY12. HUD proposes policy changes to HOME, including allowing funds that are recaptured from Community Housing Development Organizations (CHDOs) to be reallocated by formula, setting a single $500,000 qualification threshold for jurisdictions regardless of the amount appropriated for HOME, and changing the current “grandfathering” allowance so that jurisdictions that fall below this threshold three out of five years are ineligible for direct HOME formula funds. These provisions would reduce the number of small participating jurisdictions receiving HOME funding and the cost of administering the program.
Additionally, HUD includes a provision to facilitate the eviction of residents who “pose an imminent threat to other residents’ safety,” which has appeared in previous HUD budget requests.
The Administration also proposes a set-aside of up to $10 million in HOME funds for the Self-Help Homeownership Opportunity Program (SHOP), while again not requesting any funding in the SHOP account. SHOP is currently funded at $10 million through a separate account. The Administration has not requested funds for SHOP in its recent budget requests, instead citing SHOP activities as an eligible use of HOME funds, despite the recent decline in funding for the HOME program.
Supportive Housing. The Section 202 program would be funded at $440 million, an increase of 15% over the FY14 funding level and 24% above the FY13 level. HUD says that this increase in funding would provide $20 million for new Section 202 units. HUD continues to implement the new capital funding model for the Section 202 program, piloted with FY14 funding, and requires that development projects be leveraged with other federal, state, and local resources. HUD intends to “identify residual receipts.., recaptures, and other unobligated balances” to finance the Section 202 program.
HUD requests $160 million for the Section 811 program, a 27% increase over FY14, but close to FY13 funding. The Administration says this funding includes $25 million for Project Rental Assistance awards for new units. Section 811 unit funding is required to be leveraged with other federal, state, and local funding.
The Housing Opportunities for Persons with AIDS (HOPWA) program would be funded at $332 million, roughly level with the funding appropriated in recent fiscal years. The Administration proposes changing the HOPWA formula in order to focus on areas with greatest need. The formula would be based on the number of people living with HIV, the Fair Market Rents, and poverty rate.
Community Development Block Grant (CDBG). HUD proposes $2.87 billion for the Community Development Fund, with $2.8 billion for the Community Development Block Grant (CDBG) program. This would be an 8% decrease below FY14 appropriations of $3.03 billion and would be more than $1.1 billion below the FY10 funding level. HUD also proposes a number of reforms to the CDBG program that the Administration intends to include in a forthcoming legislative proposal. The reforms include helping grantees “target funding resources to areas of greatest need,” enhancing accountability, synchronizing program cycles with the Consolidated Plan cycle, reducing the number of small grantees, and increasing options for regional coordination, administration, and planning to achieve cost savings.
Other HUD programs. The Native Hawaiian Housing Block Grants would be funded at $13 million, a $3 million increase over FY14, level with FY12 and prior year funding. HUD requests level funding of $650 million for the Native American Housing Block Grants. The Fair Housing and Equal Opportunity program would be increased slightly to $71 million, which would restore funding to the FY12 level, with $46 million to the Fair Housing Initiatives Program and $23 million to the Fair Housing Assistance Program. The Healthy Homes and Lead Hazard Control program would be funded at $120 million, restoring the program to FY12 funding levels. HUD requests $50 million for its Policy Development and Research account, a slight increase over recent fiscal years.
HUD posted the Congressional Justifications for its programmatic changes on March 7, providing further detail on HUD’s funding requests and policy proposals included in the budget request. NLIHC will report on the justifications in the next issue of Memo.
USDA Rural Housing. The President proposes nearly level funding for USDA’s Rural Development rental housing programs. The Section 514 Farm Labor Housing Loans would be funded at $24 million, level with FY14 and slightly below the FY10 funding level of $27 million. The Section 516 Farm Labor Housing Grants would be funded at $8 million, also consistent with FY14 funding and slightly below the FY10 funding level of $10 million. The Section 515 Rental Housing Direct program would be funded at $28 million, the same as in FY14, but less than half of the $70 million the program received in FY11 and prior fiscal years.
The Administration requests $1.089 billion for the Section 521 Rental Assistance account, slightly below the FY14 funding level but approximately $250 million above the FY13 level. In FY13, due to insufficient funding and sequestration, the Administration was unable to pay private owners for one full month of their contracts at the end of the fiscal year. Congress attempted to prevent this from reoccurring by substantially increasing funding for the program in FY14. The FY15 request maintains higher funding for Section 515, but with a slight decrease below the FY14 levels due to cost savings that the Administration proposes to achieve through imposing minimum tenant rents. The Administration would institute a minimum rent payment of $50 for residents with Section 521 rental assistance in Section 514 or 515 properties. NLIHC opposes higher minimum rents in the absence of meaningful hardship protections.
Low Income Housing Tax Credit. The Administration’s request also includes several proposed policy changes for LIHTC. One change is to allow states to convert some of their private activity bond volume cap into LIHTCs. Another proposed change would allow for LIHTC projects to elect an “average income” criterion, which would require that at least 40% of the units in the LIHTC project would have to be occupied by tenants with annual incomes that average no more than 60% of the area median income (AMI) but are never, individually, more than 80% AMI or be treated as less than 20% AMI.
The Administration also proposes adding preservation of federally assisted affordable housing to the LIHTC’s allocation criteria to the Internal Revenue Service’s current list of ten selection criteria that every state LIHTC allocation plan must include. Also proposed are changes to implement the Violence Against Women Reauthorization Act (VAWA) of 2013 that brings VAWA protections to the LIHTC program. VAWA did not amend the Internal Revenue Code or contain provisions for enforcing its new protections in LIHTC buildings; the FY15 proposed changes would fix that.
The proposed budget and policy changes will be discussed at three upcoming events. The Campaign for Housing and Community Development Funding will present two briefings, “The President’s FY15 Budget Requests for Housing and Community Development Programs,” for Congressional staff in the House and Senate. Ten presenters will describe the details of President’s request for HUD and USDA Rural Housing programs and provide information including program funding history, current impact, and the Administration’s proposed funding changes. The Senate briefing will be on March 17 at 11 am in room 562 of the Senate Dirksen office building. The House briefing will be on March 17 at 1:30 pm in room 122 of the House Cannon office building. NLIHC urges advocates to encourage Congressional staff to attend. Staff can register by emailing email@example.com.
The National Housing Conference (NHC) will hold a forum on the President’s budget request on March 21 at 10am in the Main Auditorium of the Capitol Visitor Center. Presenters will discuss the budget request in the context of both great housing need and the many people working to serve that need. The forum will include a presentation of housing need data from NHC’s Housing Landscape 2014 report. Presenters include staff from local, state and federal level government, a nonprofit housing developer, advocates, and researchers. Register for the forum at: http://bit.ly/NnTLnA.
View HUD’s Congressional Justifications: http://1.usa.gov/1cOFBC9
View the HUD budget request: http://1.usa.gov/1hJWhiz
View the USDA budget request: http://1.usa.gov/MLCuUw
View Treasury’s FY15 proposals: http://1.usa.gov/1hKOyRW
View NLIHC’s FY15 budget chart: http://bit.ly/MLyt2i
View CBPP’s Analysis: http://bit.ly/Od8WQM