The Senate Appropriations Subcommittee on Transportation, Housing and Urban Development, and Related Agencies (THUD) held a hearing on April 2 regarding HUD’s FY15 budget request. HUD Secretary Shaun Donovan was the sole witness.

Subcommittee Chair Patty Murray (D-WA) said that HUD’s “budget remains tight,” leaving the Subcommittee with “difficult choices of how to allocate funding.” Ranking Member Susan Collins (R-ME) said that “balancing the need to deal with the debt while providing housing for the most vulnerable citizens is a challenge that seems to be more difficult each year I sit on this Subcommittee.” Senator Collins also noted the $2.7 billion gap between the Congressional Budget Office’s (CBO) estimate of FY15 Federal Housing Administration (FHA) receipts and HUD’s projections for FHA receipts. FHA receipts offset a portion of HUD expenses.

Senator Murray expressed concern about HUD’s proposal to shift funding for all Project-Based Rental Assistance (PBRA) contract renewals from a federal fiscal year to a calendar year. She said that the challenge HUD faces with fully funding the PBRA account “echoes the broader challenges of HUD’s increasing costs” to maintain rental assistance.

Secretary Donovan described the PBRA proposal as a way to provide 12-month contracts to owners instead of the short-term contracts that HUD has had to issue in the last two fiscal years. He thinks the change in the funding cycle will result in a “more reliable, clear system,” and will lower the “cost to taxpayers in the end because it lowers the cost of private financing.” He also said that the cost of the program remains the same regardless of the funding cycle start date. An additional $1.3 billion above the FY14 appropriation would be needed to fully fund the account in FY15 if the calendar year proposal is not adopted.

Senator Collins asked Secretary Donovan about efforts to modernize HUD’s inspection standards, which she thinks are outdated. He replied that HUD is conducting a full review of inspection standards, and will be shifting HUD’s multiple sets of inspection standards to a single comprehensive system.

Senator Tom Udall (D-NM) stated that the “lack of affordable housing is limiting economic expansion” in New Mexico. The Secretary responded that more must be done to provide critical housing resources, adding that the housing finance reform under consideration by the Senate Banking Committee should help address the shortage of affordable housing by providing funding for the National Housing Trust Fund and other programs.

Senators Murray, Collins, and John Boozman (R-AR) praised HUD’s work on the Veteran’s Affairs Supportive Housing (VASH) program. Secretary Donovan said that the Administration had worked to improve VASH and has collaborated with the Department of Veterans Affairs (VA) to “ensure vouchers are used properly.” The Secretary cited VASH as a major contributor to significantly reducing veteran homelessness in recent years.

Senator Murray asked Secretary Donovan whether there would be increased costs if the Rental Assistance Demonstration (RAD) cap of 60,000 units is increased. He responded that there would not be a net increase because funds appropriated for the public housing capital and operating funds would transfer to the PBRA account and that PBRA enables leveraging of private investment. Raising the cap to allow 180,000 units to convert to RAD would result in $6 billion in additional investment.
 
Secretary Donovan also testified before the House Appropriations THUD Subcommittee later on April 2. That hearing focused on oversight of HUD’s public housing programs and other proposals related to HUD’s FY15 budget request.

Subcommittee Chair Tom Latham (R-IA) said in his opening statement that he was concerned that the Administration employed “multi-billion dollar gimmicks” in the budget request. He stated that the Subcommittee needed to have “an honest discussion on how to serve our most vulnerable citizens.” He noted that two of the most important programs at HUD, public housing and Section 8 vouchers, serve these vulnerable households, more than half of whom are elderly or include a person with a disability.

Secretary Donovan echoed Mr. Latham’s concern about vulnerable households, saying there are “still too many families struggling to get by.” The Secretary said that one way HUD is addressing this need is by its “specific focus on innovative proposals” related to public housing in the FY15 budget request. Funding and policy changes for RAD, VASH, Tenant-Based Rental Assistance, and Project-Based Rental Assistance will address worst case housing needs of vulnerable households. The Secretary also said that, “once families are in these units, we want to see them succeed. This is where we are doing our most innovative work,” citing the Jobs Plus Pilot and the Family Self-Sufficiency program.

Both Chair Latham and Ranking Member Ed Pastor (D-AZ) questioned Secretary Donovan about RAD expansion. Representative Pastor asked about evaluations of RAD. The Secretary responded that public housing agencies (PHAs) are “voting with their feet” by applying for RAD conversions. PHAs in every state have applied, with a disproportionate number of small- and medium-sized PHAs among the applicants.

Representative David Price (D-NC) questioned Secretary Donovan about vouchers lost due to sequestration that the Administration says will be restored by its budget request. Mr. Price suggested that these vouchers should be targeted to people who are homeless, victims of domestic violence, and people who are institutionalized. The Secretary responded that “most of the additional vouchers created” would be general vouchers, and that targeting decisions would be left to local PHAs. He did not answer directly Mr. Price’s question on how many of the 40,000 general vouchers lost due to sequestration would be restored under the Administration’s FY15 proposed budget.

Representative Latham questioned Secretary Donovan regarding the PBRA account repeatedly throughout the hearing and referred to the Administration’s proposal to shift the funding cycle to the calendar year as a “gimmick.” The Secretary responded that HUD is proposing the shift to a calendar year so that it will “no longer have question marks” about the level of funding needed to fully fund PBRA. He emphasized that the baseline shift “creates no additional demand,” and provides only a “one time savings” for FY15. When asked about what it would cost to fund the PBRA program without a calendar year baseline shift in FY15, Secretary Donovan responded, “If you could find an additional $1.3 billion for funding under the current timelines, we will take it.” Mr. Latham said that additional conversation would be needed about HUD’s baseline shift proposal for PBRA.

The House THUD Subcommittee will hold a second hearing, with Secretary Donovan testifying again, on April 10 at 10 am ET in room 2358A of the Rayburn House office building for the purpose of continuing to examine HUD’s FY15 budget request.

The House Appropriations Committee is also expected to mark up its FY15 302(b) subcommittee allocations during the week of April 7.

View the Senate testimony: http://1.usa.gov/1kxVzoX
View the House testimony: http://1.usa.gov/1ilrmrB