The Senate Appropriations Subcommittee on Transportation, Housing and Urban Development, and Related Agencies (T-HUD) held its first FY13 HUD hearing on March 1. HUD Secretary Shaun Donovan was the sole witness at the hearing on the President’s FY13 HUD budget proposal.
In her opening remarks, Subcommittee Chair Patty Murray (D-WA), commented that there are encouraging signs that the nation’s economy is recovering and that this improvement is good news for the housing sector since there remain significant housing challenges for the country to address.
Chair Murray remarked that the Budget Control Act of 2011 will require Congress to make difficult appropriations choices in FY13. For FY12 HUD appropriations, Chair Murray said that she and Ranking Member Susan Collins (R-ME) worked hard to protect programs that served the most vulnerable households but that focus required cutting other accounts. The FY13 budget, said Chair Murray, presents many of the same challenges as did the FY12 budget.
Senator Collins acknowledged the difficult fiscal constraints that HUD faced in constructing its FY13 budget proposal. The Senator praised the Administration’s inclusion of funding for Veterans Affairs Supportive Housing (VASH) vouchers, citing the success of reducing veteran homelessness through VASH vouchers. Senator Collins noted that veteran homelessness fell by nearly 20% in 2010. Senator Collins also commented on HUD’s request for $330 million in homeless assistance for FY13, saying that HUD should use homeless assistance funds to focus on proven strategies like Housing First. The Senator referenced the success of local groups in Maine in reducing homelessness using this housing model.
Secretary Donovan presented HUD’s four principles for the FY13 budget: supporting the recovery of the housing market, protecting current residents, continuing investment that leverages jobs and the private market and reducing regulatory barriers. Secretary Donovan noted that while HUD’s budget authority would increase by 3% in FY13 to $44.8 billion, because of offsetting receipts from the Federal Housing Administration (FHA), HUD’s expenditures would only total $35.4 billion in FY13.
The Secretary said that the FY13 budget proposal presented HUD with difficult fiscal choices resulting in decisions HUD would not have made before. HUD’s current residents have an average annual income of $10,200 and half of tenants are elderly or people with a disability, according to the Secretary. One of the difficult budget choices he discussed was raising the minimum rents of those households to $75 per month. If this policy is enacted, organizations estimate that more than 500,000 of the lowest income households would have rent increases (see Memo, 2/17).
Chair Murray expressed concerns about HUD’s funding request and policy proposals for the Tenant Based Rental Assistance Account (TBRA), or housing choice voucher program. She noted that the contract renewals are essentially flat-funded compared to FY12 despite the costs of inflation and new vouchers. Chair Murray also expressed concern over HUD’s policy provisions increasing minimum rents and the threshold for medical deductions for existing tenants, noting the burden these could place on households served by HUD’s programs.
Even if HUD’s policy provisions generated revenues for TBRA, Chair Murray noted, there does not appear to be sufficient funding for the account. Secretary Donovan said that HUD’s choice to serve all existing households with the same amount of funding as in FY12 required HUD to generate funds through policy provisions and said that these were not decisions that HUD would normally make under different funding circumstances.
The Secretary did not address Chair Murray’s concern that even with those policy provisions, there seems to be insufficient funding for contract renewals. The Secretary testified that he estimates that policy provisions in the Tenant Based Rental Assistance Account could generate $200 million in FY13. The Center on Budget and Policy Priorities (CBPP) estimates, however, that $450 million more than the President’s request would be needed to renew all existing vouchers in FY13 (see Memo, 2/17). Even if HUD’s policy provisions generated $200 million in revenue, HUD’s estimate would fall short of CBPP’s estimate by $250 million.
Chair Murray questioned why HUD chose to increase the administrative fee for TBRA in its FY13 request. The Secretary responded that the FY13 request for administrative fees would fund agencies at 81% of known need in FY13, $225 million above FY12 administrative fee funding, which was at 74% of need. (see related article on administrative fees). That is, 100% funding would provide all that HUD understands agencies need to administer the voucher program. Funding at less than 100% results in funding pro-rations. In its FY13 request, HUD is asking for 81%. As recently as FY10, administrative fees were at 90% of need.
As recently as FY10, administrative fees were funded at 90% of need, the Secretary said. Secretary Donovan called the increased request for FY13 a substantial increase and said that it is “absolutely critical.” “[The request] is the minimum necessary to try to get more confidence that housing authorities will actually be able to administer the program,” the Secretary said, noting that HUD still has some concerns that the requested amount will not be enough for some agencies. Both the Chair and Ranking Member expressed concern over HUD’s proposal to underfund the Project Based Rental Assistance (PBRA) account, and not offer full-year contracts for all existing properties. Senator Collins suggested that contracting with owners for only a short term instead of a full-year contract could offer a perverse incentive for property owners to defer maintenance of units if they were unsure of their contracts being renewed in the long term. Senator Collins also noted that it could cause participating property owners to leave the program.
Secretary Donovan said that HUD considered the two risks presented by Senator Collins as the agency made the very difficult decision to reduce funding in the PBRA account. He said that that HUD is now in a position to successfully address the operational challenges of issuing short term contracts and monitoring the quality of PBRA units in response to the Senator’s concerns about owners potentially deferring maintenance.
Discussing HUD’s requested increase for Homeless Assistance Grants, Secretary Donovan pointed to the success of the Homeless Prevention and Rapid Rehousing Program (HPRP), funded through the American Recovery and Reinvestment Act (ARRA), for which there are no additional funds. Of the households served, said the Secretary, 75% were experiencing homelessness and yet it took far less funding per household than expected to help house and stabilize each household. HUD hopes to continue investing in this successful model through funding the Emergency Solutions Grant (ESG) in the Homeless Assistance Grants account.
Senator Collins also raised HUD’s challenges with oversight of public housing authorities’ (PHA) use of funds and maintenance of units over the last year. She expressed disappointment that some residents were forced to live in substandard conditions but acknowledged HUD’s responsiveness to the issue. The Secretary outlined HUD’s plans to increase oversight and monitoring of PHA units in the future including merging HUD’s multiple oversight systems into a single system with additional visual data on units.
Senator Collins said the Senate THUD Subcommittee looks forward to HUD Assistant Secretary Carol Galante testifying on the Federal Housing Administration (FHA) at a hearing in the near future.
View Secretary Donovan’s testimony at: http://nlihc.org/doc/Donovan_FY13_Testimony.pdf
View Chair Murray’s opening statement at: http://appropriations.senate.gov/ht-transportation.cfm?method=hearings.view&id=05d64903-3fa9-463e-b848-c962539a18da