President Barack Obama delivered his FY17 budget request to Congress on February 9. The request is the first formal action toward completing FY17 appropriations bills before the October 1 start of the next fiscal year. The President’s proposed budget is within the spending caps set by the “Bipartisan Budget Act” (BBA) of 2015 (see Memo, 11/09/2015), but incudes several “off-budget” initiatives that would require approval by Congressional authorizing committees. For HUD, the FY17 proposal includes a massive ten-year investment in rent assistance dedicated to ending family homelessness in the United States by 2020. This proposal would have to be taken up by the Senate Committee on Banking, Housing, and Urban Affairs and the House Financial Services Committee.
HUD’s FY17 Request
The proposed FY17 HUD budget dedicates 85% of its request to the renewal of existing rent assistance and proposes helpful policy changes.
Homeless Assistance for Families
The request seeks $11 billion in mandatory spending over the next ten years, 80% of which would be for new housing vouchers and 20% for rapid rehousing assistance. Altogether, the funds would help 550,000 families. The Administration is expected to send draft legislation to the Hill to authorize the $11 billion in funding, which would be spread over the ten-year period and would not be subject to annual appropriations. The funds would be distributed through the Continuum of Care framework in partnership with local public housing agencies. This proposal is in addition to the discretionary programs on homelessness within the voucher and regular homeless assistance accounts.
Housing Choice Vouchers
According to HUD, the request includes sufficient funds to renew the 2.2 million housing vouchers in use in 2016. As part of the voucher account, the White House also seeks $15 million for a new Mobility Counseling Demonstration program to help families with housing vouchers move to and stay in areas of opportunity. In addition to the vouchers requested to be funded through the proposed Homeless Assistance for Families initiative, the FY17 request seeks $88 million for 10,000 new vouchers for homeless families with children. For the HUD-Veterans Affairs Supportive Housing (VASH) vouchers, the Administration is requesting $7 million for a Tribal HUD-VASH program to serve Native American veterans living in and around designated tribal areas who are homeless or at risk of homelessness. The Administration also seeks a significant increase for voucher administrative fees, from FY16’s $1.650 billion to $2.077 billion in FY17. HUD intends to “fully fund” administrative fees under a new fee formula that HUD plans to implement for calendar year 2017.
Project-Based Rental Assistance
The request includes $10.816 billion for the project-based rental assistance account, fully funding 12-month contract renewals for the 1.2 million units with project-based assistance. Of the requested funds, $235 million are for Performance-Based Contract Administrators.
The request would continue HUD’s commitment to several preservation tools, including requiring action against owners who receive rental subsidies and do not maintain safe properties, and requiring the HUD Secretary to follow certain protocols when preserving project-based housing through a foreclosure and when transferring project-based assistance from one property to another.
Of the requested funds, HUD is seeking to set-aside up to $4 million for preservation-related tenant advocacy and capacity building technical assistance for tenant organizations. These funds would be used through HUD’s current agreement with Americorps VISTA as well as through a notice of funding availability, with funds being available for tenant groups, nonprofit groups, and public entities to support preservation efforts and improve tenant services.
To subsidize the operation and capital needs of the nation’s 1.1 million units of public housing, the request would increase funding for public housing operating subsidies from FY16’s $4.5 billion to $4.569 billion in FY17 and would decrease capital funds from FY16’s $1.9 billion to $1.865 billion in FY17. Of the total that public housing agencies would need to operate their public housing units, the request seeks only 87%, referred to as a “87% proration.”
Homeless Assistance Grants
For FY17, HUD seeks a $414 million increase for its Homeless Assistance Grants, from $2.250 billion in FY16 to $2.664 billion in FY17. The increase would create 25,500 beds of permanent supportive housing for individuals experiencing chronic homelessness, fund rapid re-housing interventions for 8,000 households with children, and provide $25 million for projects targeted to youth experiencing homelessness.
Housing for People with Disabilities and Elderly People
While the request would increase funding for the Section 811 Housing for Persons with Disabilities programs, it would not be enough for any new units. For FY17, HUD’s request of $154 million would pay for the housing assistance renewals of more than 27,000 units in 2,350 housing properties. The request also seeks to continue the policy through which HUD can transfer Section 811 subsidies to properties that comply with Olmstead requirements that prohibit the unlawful segregation of persons with disabilities.
HUD also seeks an increase for the Section 202 Housing for the Elderly program, but these amounts would only be enough to renew existing contracts and would not provide funding for new units. For FY17, HUD is seeking $505 million, up from FY16’s $433 million, to renew contracts for nearly 400,000 Section 202 units. This amount includes $75 million to renew approximately 75,000 service coordinator grants.
The request would level fund HOME at FY16’s funding of $950 million, but also make the traditionally $10 million stand-alone Self-Help Homeownership Opportunity Program a set-aside within the HOME program.
HUD also wants to eliminate the set-aside for Community Housing Development Organizations (CHDOs), which are private nonprofit, community-based organizations that have staff with the capacity to develop affordable housing. In order to qualify for designation as a CHDO, the organization must meet certain requirements relating to their legal status, organizational structure, and capacity and experience. The HOME statute requires that not less than 15% of each participating jurisdiction’s grant be reserved for projects owned, developed, or sponsored by CHDOs. In its budget documents, HUD says that it “is extremely difficult for participating jurisdictions receiving smaller and smaller allocations, to administer this 15% set-aside.”
Also within the HOME program, HUD is seeking authority to not allocate HOME funds to participating jurisdictions that received less than $500,000 in HOME funds for any three of the prior five consecutive fiscal years.
The request would decrease funding for Community Development Block Grants from FY16’s $3 billion to $2.8 billion in FY17. The Administration again is seeking to increase the set-aside for colonias in states along the US-Mexico border (California, Arizona, New Mexico, and Texas) from 10% to 15% of the states’ allocations.
HUD also requests that CDBG and HOME be two of the four programs in its proposed Upward Mobility Project. The other two programs are the Social Services Block Grant and Community Services Block Grant, administered by the Department of Health and Human Services. The Upward Mobility Project would allow states, localities, or consortia of the two to blend funding from the four programs to promote opportunity and reduce poverty.
The request seeks level funding for the Housing Opportunities for Persons with AIDS program at $335 million.
Other HUD Programs
The President would level fund HUD’s Office of Healthy Homes and Lead Hazard Control at $110 million. For housing counseling assistance, the request seeks level funding for FY17 at $47 million.
The request would increase resources to Native American Housing Block Grants from FY16’s $650 million to $700 million in FY17. This program has not been funded at $700 million since FY10. According to HUD budget documents, the $50 million requested increase is because of “the overwhelming need for adequate, decent housing in Indian Country, and to support the President’s Native Youth priorities.”
The President’s request seeks an increase for HUD’s Fair Housing Initiatives Program (FHIP), from FY16’s $40 million to $46 million in FY17. The FHIP program provides funding to state and local governments and to public and private nonprofit organizations that administer programs to prevent or eliminate discriminatory housing practices through enforcement, education, and outreach.
While the request seeks a sizable increase for the Choice Neighborhoods Initiative (CNI) program, which provides resources for the redevelopment of neighborhoods, it does not seek to set-aside the majority of CNI funds for public housing agencies, as the request has in previous years. For FY17, HUD seeks $200 million for CNI, up from FY16’s $125 million.
The request seeks several changes to the Rental Assistance Demonstration (RAD) program, which currently allows PHAs and some project-based owners to change their subsidy platforms to either project-based rental assistance or project-based vouchers but does not provide any additional public funds. The request seeks to make Section 202 Project Rental Assistance Contract (PRAC) owners eligible to convert their subsidy stream under RAD. The request also seeks new RAD statutory language to ensure residents’ right to continue their tenancy, by imposing the demonstration’s prohibition on rescreening or termination of residents during redevelopment efforts on Rent Supplement, Rental Assistance Payment, and Mod Rehab properties that convert under RAD. The President seeks $50 million in funding for RAD, to be targeted to PHAs and Section 202 PRAC owners to cover the incremental subsidy necessary for properties to feasibly convert.
For the voucher, project-based rental assistance, and public housing programs, the request seeks to increase from 3% to 10% the threshold over which tenants can deduct medical expenses from their incomes before rents are calculated. Unlike a similar proposal Congress is considering as part of H.R. 3700, the “Housing Opportunity Through Modernization Act,” the request would not raise the income threshold for medical expense deductions and increase the standard deduction for elderly households and households that include a person with a disability.
The request also seeks policy changes related to the compensation of PHA employees, allowing PHAs to establish replacement reserves, giving PHAs more flexibility to shift funds between their capital and operating accounts, changing CDBG grantee and accountability guidelines, updating the HOPWA distribution formula, and establishing a utilities conservation pilot to reduce PHA energy and water consumption.
USDA’s FY17 Request
USDA is seeking to increase funding for the Section 521 Rental Assistance program by $15 million, from FY16’s $1.390 million to $1.405 billion in FY17, and the Section 515 Rental Housing direct loan program, from FY16’s $28 million to $33 million in FY17. USDA budget documents note that direct loans for approximately 11,500 properties will mature by 2024. The total USDA multifamily inventory consists of about 14,556 properties.
The request also seeks a $3 million increase to $18 million for FY17 for the multi-family housing voucher program and seeks to expand eligibility for these vouchers to tenants of Section 515 properties with maturing mortgages. Currently, only tenants of Section 515 properties with mortgages that are prepaid receive such vouchers.
Treasury’s FY17 Request
In the FY17 budget proposal for the Department of Treasury, the Administration is seeking policy changes to the Low Income Housing Tax Credit (LIHTC) similar to those proposed for FY16. These changes include allowing LIHTC projects to elect an “average income” criterion where at least 40% of the units in a LIHTC project would have to be occupied by tenants with annual incomes that average no more than 60% of the area median income (AMI).
Under the proposal, no rent-restricted unit could be occupied by a tenant with an income over 80% AMI. Tenants making less than 20% of AMI would be treated as earning that much for income averaging purposes. NLIHC’s policy agenda includes a similar proposal, but would require projects that use the income averaging criterion to provide at least 30% of a project’s units to households with incomes below 30% AMI.
Another proposed policy change would allow states to convert some of their private activity bond (PAB) volume cap received for a particular calendar year into tax credits applicable to the same year. The conversion ratio would change each calendar year to respond to shifting interest rates, and there would be a maximum amount of the PAB volume cap that could be converted.
The Administration proposes adding a fourth required allocation preference to clarify states’ obligations to allocate tax credits in a way that affirmatively furthers fair housing. The proposal would also add preservation of federally assisted affordable housing to the Internal Revenue Service’s selection criteria that each state must include in its Qualified Allocation Plan.
Additionally, the proposal would remove the qualified census tract (QCT) population cap. HUD could designate as a QCT any census tract that meets the current statutory criterion of having a poverty rate of at least 25% or having at least 50% of its households earning incomes less than 60% AMI.
Finally, the Administration proposes requirements to implement the Violence Against Women Reauthorization Act (VAWA) of 2013, which extended protections for survivors of domestic violence to the LIHTC program. The legislation that was signed into law failed to include changes to the Internal Revenue Code or enforcement provisions that Treasury believes are necessary to impose VAWA protections in LIHTC buildings. To remedy this problem, the FY17 proposal would require all long term use agreements to include housing protections, which would apply to both low income and market rate units in the LIHTC development.
HUD budget request appendix, https://www.whitehouse.gov/sites/default/files/omb/budget/fy2017/assets/hud.pdf
USDA budget request appendix, https://www.whitehouse.gov/sites/default/files/omb/budget/fy2017/assets/agr.pdf
For Treasury’s budget proposal, go to: https://www.treasury.gov/resource-center/tax-policy/Documents/General-Explanations-FY2017.pdf
Webinar: The Administration's 2017 Budget: What Does it Mean for Rural Housing? The Housing Assistance Council will host a February 17 webinar on what the Administration’s FY17 proposed budget means for rural housing programs. The webinar will include a brief presentation and a Q & A session. Register for the February 17, 2pm ET webinar, http://www.cvent.com/events/the-administration-s-2017-budget/event-summary-d58e0cfea99d4673bfded96c8bed2477.aspx
NLIHC is working with dozens of other national organizations to ensure strong funding for the Senate and House Appropriations Subcommittees on Transportation, Housing and Urban Development. Without strong subcommittee funding, the increases sought by the President will not be possible. View and sign onto the letter by February 19, http://nlihc.org/issues/budget/302b
View NLIHC’s budget chart, http://nlihc.org/sites/default/files/FY16HUD-USDA_Budget-Chart.pdf