The second session of the 112th Congress begins this month with a focus on the last thorny issue of 2011: how to deal with the payroll tax and unemployment insurance. While Congress and the President struck a last-minute deal on these issues before the holidays, it expires on February 29. Conferees in the Senate and House have been named but no meetings have taken place.
The House will be in session a few days before the President delivers his State of the Union address on January 24. The Senate reconvenes formally on January 23.
Given that 2012 is an election year and the deep divisions between the two parties, legislative gridlock is expected to continue. But there are key issues that NLIHC expects will command our attention in 2012. They include:
Budget and Appropriations
The focus on deficit reduction looms large over the FY13 federal budget and appropriations process in this Congress. In 2011, Congress failed at numerous efforts to identify ways to reduce the deficit. The last of these efforts, according to the Budget Control Act of 2011, requires that funds to reduce the national deficit be sequestered from discretionary programs beginning in January 2013. Despite probable cuts to numerous programs in FY13, which would include affordable housing programs, both the Administration and Congress are expected to attempt to reduce spending prior to sequestration taking effect. The President’s budget is to be delivered to Congress in early February. This would be the third consecutive year that this Administration and Congress have attempted to curtail spending, with the two prior years’ efforts resulting in cuts to affordable housing programs.
The Budget Control Act of 2011 required Congress to form a bipartisan committee to develop a plan to reduce the federal deficit by $1.2 trillion over a ten year period. The act specifies that if a bipartisan Joint Select Committee on Deficit Reduction (the Super Committee) fails to produce a plan, the $1.2 trillion will be sequestered from discretionary spending. Sequestration would make across-the-board cuts to discretionary programs to reach the $1.2 trillion goal. The committee did not reach agreement by the statutory deadline of November 2011, triggering sequestration for FY13.
Sequestration would significantly reduce affordable housing resources available through HUD and the Department of Agriculture. At the same time, many Members of Congress are concerned about the impact that sequestration would have on the Department of Defense. With a year to debate the potential impacts and effects of sequestration, Congress is expected to devise proposals to modify the sequestration requirement, which could further negatively impact funding for affordable housing. If efforts to exempt Department of Defense programs from sequestration were effective, non-defense discretionary spending could be required to bear the entirety of the $1.2 trillion in cuts. The President, however, has stated that he will veto any bills that modify sequestration.
Housing Finance Reform
It is expected that Congress will continue to assess the future of government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. In the first session of the 112th Congress, the Senate Committee on Banking, Housing, and Urban and Affairs and the House Committee on Financial Services held numerous hearings on reform of the GSEs (see Memo, 10/14/11, 7/15/11, 5/27/11). At this point, it is doubtful that any meaningful proposal to reform the housing finance system will emerge this year.
The National Housing Trust Fund Campaign will continue to monitor all GSE-related legislation and advance all opportunities to fund the National Housing Trust Fund.
On January 4, the Federal Reserve released a report to the leadership of the Senate Committee on Banking, Housing, and Urban and Affairs and the House Committee on Financial Services. The report states that the GSEs, as directed by their regulator the Federal Housing Finance Agency (FHFA), must do more to stabilize the housing market, even at the expense of the GSEs’ bottom lines. One possible step is the implementation of an REO-to-rental program for properties acquired by the GSEs through foreclosure. NLIHC submitted comments in response to an FHFA request for information on how much a program could be implemented in September (see Memo, 9/16/11).
To read the report, go to www.federalreserve.gov/publications/other-reports/files/housing-white-paper-20120104.pdf.
Voucher Reform Bill
The Section 8 Savings Act (SESA) voucher reform bill is expected to be formally introduced and taken up by the House Financial Services Subcommittee on Insurance, Housing and Community Opportunity by early February. To date, two iterations of the draft bill have been circulated. The latest version included an unexpected and significant increase to minimum rents for voucher holders, public housing residents, and tenants in HUD-subsidized properties (see Memo, 10/7/11). Another draft bill, which would authorize expansion of the Moving to Work demonstration to all public housing authorities and make the program permanent, could well be attached to the SESA bill upon introduction or at mark up. These two proposals are very controversial and could slow the bill’s progress. In another impediment to the bill’s passage, the Senate has not introduced a voucher reform bill of its own.