HOUSING POLICY

WASHINGTON UPDATE

Budget Boosts Project-based Sec. 8, Reduces CDBG Funds

BY BARRY G. JACOBS

AFFORDABLE HOUSING FINANCE • MARCH 2008

President Bush has sent Congress a $38.5 billion fiscal 2009 Department of Housing and Urban Development (HUD) budget that includes a big increase in funding for project-based Sec. 8 assistance and a comparable cut in community development.

The overall funding is about $1 billion more than the fiscal 2008 level, excluding a $3 billion supplemental Community Development Block Grant (CDBG) appropriation to support Louisiana’s hurricane recovery efforts.

The administration is seeking $7 billion for project-based Sec. 8, up from $6.38 billion appropriated this year, along with a $400 million advance appropriation for fiscal 2010. HUD says this funding should be sufficient to renew all contracts into 2010.

CDBG funding would be cut from $3.87 billion to $3 billion, with formula CDBGs reduced from $3.59 billion to $2.93 billion. The budget also would rescind $206 million appropriated in fiscal 2008 for economic development initiative and neighborhood initiative grants.

The budget provides $11.88 billion in new fiscal 2009 funding for tenant-based Sec. 8 assistance, bringing the program total for the year to $16.03 billion because an advance appropriation of $4.16 billion is also available. The budget also includes a $4 billion advance tenant-based appropriation for fiscal 2010.

Tenant-based renewal funding for calendar 2009 would be based on public housing agencies’ funding eligibility for 2008, as adjusted by an annual adjustment factor and costs for first-time renewals of tenant protection and HOPE VI vouchers and for vouchers not in use during the previous 12 months because they were being held for a project-based voucher commitment.

The budget also includes cuts for:

• The public housing capital fund, from $2.44 billion to $2.02 billion;
• Sec. 202 elderly housing, $735 million to $540 million;
• Sec. 811 housing for the disabled, $237 million to $160 million; and
• Indian housing block grants, $630 million to $627 million.

The administration again is seeking no money for HOPE VI.

On the other hand, the administration is requesting increases for:

• Public housing operating subsidies, $4.2 billion to $4.3 billion;
• HOME, $1.7 billion to $1.97 billion, including $50 million for downpayment assistance; and
• Homeless assistance grants, $1.59 billion to $1.64 billion.

Housing Opportunities for Persons With AIDS would be held steady at $300.1 million.

The commitment limit for the Federal Housing Administration (FHA) General and Special Risk Account, which includes multifamily programs, would be reduced from $45 billion to $35 billion, while the FHA Mutual Mortgage Insurance Fund and Ginnie Mae limits would be unchanged at $185 billion and $200 billion, respectively.

RHS budget has no Sec. 515 funds, big increase for rental assistance

The Rural Housing Service (RHS) budget for fiscal 2009 has no money for Sec. 515 rural rental housing loans, Sec. 502 subsidized direct home loans, or farm labor housing.

However, funding for rural rental assistance would be more than doubled, from $482.1 million to $997 million, with aid to be provided through one-year contracts. The fiscal 2009 proposal includes $897 million for traditional rental assistance grants and $100 million for a pilot voucher program. Rental assistance and voucher recipients would be required to pay a minimum monthly rent of $50.

The budget has no money for the multifamily housing revitalization program, and $20 million in previously appropriated funds would be canceled.

The administration is requesting $300 million for Sec. 538 guaranteed multifamily loans and $4.85 billion for Sec. 502 guaranteed home loans.

Trust fund, GSE bills could mean big money for affordable housing

Affordable housing advocates will push hard for final action this year on legislation to create a national affordable housing trust fund and revise the regulatory structure for Fannie Mae and Freddie Mac, bills that could generate hundreds of millions of dollars for housing each year outside of the always tight appropriations process.

The House passed a trust fund bill (H.R. 2895) and a government-sponsored enterprise (GSE) bill (H.R. 1427) last year, and now that Senate Banking Committee Chairman Christopher Dodd (D-Conn.) is off the presidential campaign trail, action should pick up in the Senate.

Sen. John Kerry (D-Mass.) introduced a housing trust fund bill that is basically the same as the House-passed bill, allocating funds through a needs-based formula to states, Indian tribes, and localities for affordable housing activities. States and tribes would get 40 percent of the money and local jurisdictions, 60 percent.

The trust fund would get its money from amounts that Fannie Mae and Freddie Mac would be required to provide for affordable housing under GSE reform legislation and from FHA savings earmarked for affordable housing in pending FHA modernization legislation, sources that could provide an estimated $800 million to $1 billion a year. The trust fund could also receive money appropriated directly by Congress.

The House-passed GSE reform bill would require Fannie Mae and Freddie Mac to contribute annually 1.2 basis points for each dollar in their mortgage portfolios to an affordable housing fund to be operated by the new GSE regulator, which the bill would set up. However, these funds would go into the affordable housing trust fund if and when trust fund legislation is enacted.

Sen. Jack Reed (D-R.I.) introduced a GSE bill in the Senate (S. 2391) that would also provide money for affordable housing.

Reed’s bill would require Fannie Mae and Freddie Mac to set aside 4.2 basis points for each dollar of mortgages purchased, with 65 percent of the money to go to HUD for a new housing block grant program and 35 percent to be allocated to the Community Development Financial Institutions (CDFI) Fund.

The HUD block grant funds would be allocated to the states to be used for rental and ownership housing for extremely low and very low income families, including the homeless. For fiscal 2008, all funds would have to be used to provide aid to low- and moderate-income homeowners facing foreclosure and to make foreclosed homes available to low- and moderate-income buyers.

If an affordable housing trust fund is established, the Fannie Mae and Freddie Mac funds would go to the trust fund, instead of to HUD and the CDFI Fund.

House passes HOPE VI reauthorization bill

The House passed legislation (H.R. 3524) to reauthorize and revise the HOPE VI program for the revitalization of severely distressed public housing. The bill would generally require onefor- one replacement of all public housing units in existence on Jan. 1, 2005, that would be disposed of or demolished under a HOPE VI revitalization plan. HUD could grant a waiver reducing the replacement requirement to as low as 90 percent of the units to be lost.

Replacement units would have to be provided within 54 months after execution of the HOPE VI agreement. Displaced public housing families moving into these units would have to meet standards for continued occupancy of public housing but not any more stringent than standards for new occupants.

The bill would also prohibit the eviction of elderly and disabled tenants from Sec. 8 or public housing receiving HOPE VI assistance for drug-related criminal activity by a household member or guest unless the tenant knew, or should have known, of the activity.

The legislation would also establish requirements and incentives for energy-efficient green development in HOPE VI plans.

The bill would reauthorize the HOPE VI program through fiscal 2015, with an annual funding authorization of $800 million.

Barry G. Jacobs is editor of Housing and Development Reporter, the nation’s premier source for in-depth, factual coverage of all aspects of affordable housing and community development. The two-part publication includes informed reports and insightful analyses in “HDR Current Developments,” and an always up-to-date compilation of essential documents in the “HDR Reference Files.” Jacobs is also the author of the annually updated HDR Handbook of Housing and Development Law. For more information, call (800) 723-8077.