The Senate Appropriations Subcommittee on Transportation, Housing and Urban Development, and Related Agencies (THUD) held a hearing on the President’s FY14 HUD budget request to Congress on April 11, the day after the request’s release. HUD Secretary Shaun Donovan was the sole witness.
The Secretary reviewed the principles of HUD’s budget: assisting the housing market recovery, protecting current vulnerable residents, offering ladders of opportunity, and implementing program reforms.
Secretary Donovan said that it is of particular importance to HUD to protect the 5.4 million families HUD serves directly. These households, said the Secretary, have an average annual income of $12,000.
The Secretary said that HUD’s contribution to the President’s plan to create “ladders of opportunity” will be dedicating funding to the Promise Zones initiative. HUD will contribute funding from the Choice Neighborhoods Initiative, the Community Development Fund, and the newly renamed Office of Economic Resilience (formerly the Office of Sustainable Communities) for the Promise Zones initiative.
Secretary Donovan also described the reforms HUD is proposing, including program changes to the Section 8 program, streamlining efforts, expanding the Rental Assistance Demonstration, and piloting innovative strategies.
The Secretary testified that HUD anticipates $14.5 billion in receipts from the Federal Housing Administration (FHA) in FY14 that will offset HUD’s budget request. HUD is also requesting $940 million for the FHA’s Mutual Mortgage Insurance (MMI) fund to mitigate losses.
Secretary Donovan discussed the successes that HUD has had in recent years, including the progress that it has made on reducing veteran homelessness. Secretary Donovan emphasized that “sequestration threatens to thwart” HUD’s successes. The Secretary said that there will be no way to build on this success unless sequestration is reversed.
Ranking Member Susan Collins (R-ME) said that she is pleased with the progress the Administration is making on reducing veteran homelessness through the HUD-Veterans Affairs Supportive Housing (VASH) program. Senator Collins encouraged HUD to focus on these programs that are effective.
Subcommittee Chair Patty Murray (D-WA) asked the Secretary to describe the potential impacts of sequestration. Secretary Donovan said that if sequestration is not replaced, more than 100,000 families will not receive a voucher, and more than 700 public housing agencies (PHAs) will be forced to terminate families from the voucher program, even if the PHAs stop leasing now. Secretary Donovan also expects that sequestration would result in more PHAs turning back their entire voucher programs. In the first quarter of the year, HUD has seen 13 PHAs turn back their voucher programs and other PHAs turn back VASH vouchers.
The Secretary said that sequestration will also result in a loss of jobs. The cuts to the Community Development Block Grant would result in 20,000 jobs lost. For HUD’s entire budget, 50,000 jobs would be lost, said the Secretary.
Chair Murray questioned the Secretary on the funding request for the MMI fund. Secretary Donovan described the actions HUD has taken to protect the MMI fund including implementing five different premium increases that amount to $14.5 billion in FHA receipts. The Administration has applied these receipts to offset HUD program expenses in its FY14 budget. The Secretary said that he thinks HUD should now focus on addressing troubled loans rather than further premium increases. Secretary Donovan said that the Administration is requesting that Congress make policy changes to support the MMI fund rather than go through the regulation process that could take 18 months, preventing HUD from addressing these changes in a timely manner.
Chair Murray questioned Secretary Donovan on HUD’s steps to improve oversight, streamline reporting requirements, and update regulations to prevent cases of misuse of funds and unmet safety needs. Secretary Donovan stated that HUD has focused on both enforcement and correction. This approach has led to the number of troubled PHAs decreasing from 175 at the beginning of the Obama Administration to 52 currently. Secretary Donovan said that HUD, as a result of this effort, has a seen a 10% reduction in near-troubled agencies. Secretary Donovan further emphasized that HUD has a responsibility for oversight, but these entities have boards of directors and executives that also have a responsibility for oversight locally. Secretary Donovan said HUD will work to ensure that these individuals are held accountable.
Chair Murray also asked a question about new initiatives in HUD’s budget request that aim to address the housing and service needs of communities. Chair Murray asked how the Choice Neighborhoods Initiative (CNI) would encourage partnerships and leverage new money. Secretary Donovan emphasized that CNI and the next iteration of the Neighborhood Stabilization Program are not new programs, but are all tested approaches that will be coordinated better through Promise Zones. Secretary Donovan also said that CNI leverages money to meet community needs by attracting private capital and has already leveraged eight times the amount of federal spending devoted to it.
Ranking Member Collins questioned Secretary Donovan on the Administration’s policy choice to base its FY14 budget request on pre-sequestration funding levels. Chair Murray said that this approach is confusing for the appropriators especially around the reporting of FHA receipts. Senator Roy Blunt (R-MO) also questioned the Secretary on the Administration’s choice to use pre-sequestration funding levels in its budget request.
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