HOUSING POLICY

WASHINGTON UPDATE

Congress Moves to Boost 2008 HUD Funding

BY BARRY G. JACOBS

AFFORDABLE HOUSING FINANCE • SEPTEMBER 2007

Housing advocates can find good news and bad news in the fiscal 2008 Department of Housing and Urban Development (HUD) appropriations bill moving through Congress.

The good news is substantial funding increases for major programs, including Sec. 8 and Community Development Block Grants (CDBGs), and a resounding rejection of cuts proposed by the Bush administration.

The bad news is that the HUD bill, like several other funding measures, is facing a presidential veto that the Democrats almost certainly won’t be able to override.

Before legislators left for the August recess, the full House passed the HUD appropriations bill (H.R. 3074) by a vote of 268 to 153, and the Senate Appropriations Committee approved its version of the bill (S. 1789).

Following House Appropriations Committee action on the bill, which also includes funding for the Department of Transportation, the Office of Management and Budget issued a statement of policy saying that the administration “strongly opposes H.R. 3074 because, in combination with the other FY 2008 appropriations bills, it includes an irresponsible and excessive level of spending.”

The House bill includes about $36.3 billion for HUD, and the Senate measure provides about $36.2 billion, while the administration asked for about $33.7 billion.

The House bill provides $16.33 billion for Sec. 8 tenant-based assistance—$330 million above the budget request—including $14.75 billion for voucher renewals. Public housing authorities’ (PHAs’) renewal allocations would be based on their fiscal 2007 funding, as adjusted by the fiscal 2008 annual adjustment factor (AAF) and certain other adjustments.

The House also provided $30 million for incremental vouchers for non-elderly disabled families and homeless veterans. The Senate committee approved $16.6 billion for tenant-based assistance, including $14.94 billion for voucher renewals. The Senate bill would base PHA renewal allocations on the most recent 12 months of HUD voucher management system data, with AAF and other adjustments. It also would protect some PHAs against reductions in their 2007 renewal funding.

The Senate bill includes $30 million for incremental voucher assistance under the family unification program, and $75 million for incremental voucher aid for homeless veterans.

For Sec. 8 project-based assistance, the House bill provides $6.48 billion, including $6.24 billion for contract renewals. The Senate measure has $5.81 billion—the amount requested by the administration—with $5.52 billion for renewals.

The House appropriated $4.18 billion for community and economic development, compared with the budget request of $3.04 billion, with $3.93 billion for CDBGs. The Senate committee approved $4.06 billion for community and economic development, with $3.71 billion for CDBGs.

The Senate bill also would bar the use of any funds appropriated by the act to support projects that involve the use of eminent domain, unless eminent domain is employed only for a public use.

For public housing, the House approved $2.44 billion for the capital fund, $4.2 billion for the operating fund, and $120 million for HOPE VI, while the Senate committee provided $2.5 billion, $4.2 billion, and $100 million, respectively.

Under the Senate bill, PHAs with fewer than 500 public housing units could elect to be excluded from asset management requirements imposed by HUD’s operating fund rule. However, any small PHAs seeking to stop their operating fund reductions at less than the full formula cut would have to accept the asset management rules.

Other funding, with the House amounts first, includes: HOME, $1.76 billion and $1.97 billion, with no specific funding in either bill for downpayment assistance; homeless assistance grants, $1.56 billion and $1.59 billion; Indian housing block grants, $627 million and $630 million; housing opportunities for persons with AIDS, $300 million in both bills; Sec. 202, $734.6 million and $735 million; Sec. 811, $236.6 million and $237 million; fair housing, $45.5 million and $52 million; and lead hazard reduction, $130 million and $151 million.

Both bills include commitment limits of $185 billion for the Federal Housing Administration (FHA) Mutual Mortgage Insurance Fund; $45 billion for the FHA General and Special Risk account, which insures multifamily programs; and $200 billion for Ginnie Mae mortgage-backed securities.

In addition, both bills would raise the maximum FHA multifamily high-cost adjustment from 140 percent to 170 percent on an area-wide basis, and from 170 percent to 215 percent on a project-by-project basis in high-cost areas.

House approves Sec. 8 legislation

The House has passed Sec. 8 voucher reform legislation (H.R. 1851) that would simplify rent and income determinations for Sec. 8 and public housing, streamline Sec. 8 inspection requirements, and provide an expanded replacement program for the Moving to Work (MTW) demonstration program.

The bill would give PHAs authority to set alternative rents for tenant-based Sec. 8 and public housing. A PHA could establish a rent structure based on the rental value of a unit with a ceiling rent and, for tenantbased assistance, a ceiling on the tenant contribution. The ceiling rent and tenant contribution would be adjusted periodically based on an inflation index or a recalculation of the rental value of the unit.

PHAs could also establish a tiered rent structure in which tenant payments are based on broad tiers of income, with tiers and rents adjusted annually through a cost index, or a rent structure in which tenant payments are based on a percentage of family income, with lower percentages for earned income.

Also, annual income reviews would not be required for families that receive at least 90 percent of their income through fixed-income payments, such as Social Security, Supplemental Security Income, and pension payments.

The revised inspection requirements would allow housing assistance payments to be made for a unit that doesn’t meet housing quality standards (HQS) in the initial inspection, as long as the deficiencies aren’t life-threatening conditions. Assistance payments would have to be suspended if the deficiencies aren’t corrected within 30 days.

The bill would allow PHAs to inspect assisted units biennially, rather than annually. If a unit fails inspection, the PHA would have to withhold assistance until the unit is brought into compliance with the HQS. The PHA could use the withheld assistance to pay for repairs.

The bill also would authorize Sec. 8 tenant-based voucher renewal funding based on leasing and cost data for the prior calendar year. The leasing rate calculated for the prior year could exceed a PHA’s authorized voucher level.

The limit on project-based vouchers would be raised from 20 percent to 25 percent of a PHA’s voucher funding. For individual projects, the limit would generally be the greater of 25 percent of the units or 25 units. This limit wouldn’t apply to housing for the elderly or disabled, to families receiving supportive services, or to housing consisting of single-family properties. In addition, the limit would be raised to 50 percent of the units in a project in areas meeting three conditions: fewer than three-quarters of their voucher recipients become program participants; the PHA has raised the payment standard to 110 percent of the fair market rent; and the PHA grants an automatic 90-day extension to families having trouble finding housing.

The bill would establish the housing innovation program (HIP) to replace MTW.

As in MTW, PHAs participating in HIP would have flexibility in designing approaches to providing housing assistance to low-income families. HUD could designate up to 60 PHAs to participate in the program, including all existing MTW agencies. The agency could designate an additional 20 PHAs that would be subject to special requirements, including one-forone replacement of any public housing demolished or disposed of.

Committees approve Sec. 515 funding

The House and the Senate appropriations committees have approved fiscal 2008 agriculture appropriations bills that again reject the administration’s proposal to eliminate funding for the Sec. 515 rural rental housing program.

The House bill (H.R. 3161) provides $99 million for Sec. 515, and the Senate bill (S. 1859), $70 million. The House also approved $27.8 million for a multifamily revitalization program, which includes rural housing vouchers and Sec. 515 loan restructuring, while the Senate committee provided $33.4 million.

The House approved $99 million for Sec. 538 guaranteed multifamily loans, while the Senate committee provided $150 million.

For rural rental assistance, the House bill includes $533 million and the Senate measure, $497 million, with assistance under both bills to be provided through one-year contracts.

The administration’s proposal to eliminate funding for Sec. 502 direct single-family loans was rejected in both bills, which instead provide $1.13 billion for such loans. The House also provided $3.712 billion for Sec. 502 guaranteed loans, and the Senate committee, $3.56 billion.

For farm labor housing, the House bill includes $50 million for Sec. 514 loans and $25 million for Sec. 516 grants, compared with $27.7 million for loans and $10 million for grants in the Senate measure.