HUD Fiscal ’11 Budget Unveiled

AFFORDABLE HOUSING FINANCE • January/February 2010

$350 million included to convert public housing to Sec. 8

BY BARRY G. JACOBS

The Department of Housing and Urban Development’s (HUD) fiscal 2011 budget includes $350 million for a new program to convert about 300,000 public housing and privately owned assisted housing units to project-based subsidies with long-term contracts and tenant mobility. This would be the first phase of a multiyear conversion program.

The budget would also provide $1 billion for a national affordable housing trust fund created by the Housing and Economic Recovery Act of 2008. The trust fund was to have been financed with contributions from Fannie Mae and Freddie Mac, but those contributions have been put on hold because of Fannie and Freddie’s financial problems.

For existing HUD programs, the budget is a mixed bag of funding increases and reductions, as the Obama administration struggles with the problem of huge budget deficits. Sec. 8, homeless assistance, and the public housing operating fund get more money in 2011, while the public housing capital fund, HOME, and housing for the elderly and disabled face cuts.

“President Obama has committed to reducing the federal deficit. HUD’s fiscal year 2011 budget reflects that fiscal discipline,” says HUD Secretary Shaun Donovan. “With the Recovery Act and fiscal year 2010 funding having stabilized HUD’s programs after years of slow starvation, the time has come to begin transforming them—to make HUD’s housing and community development programs more streamlined, efficient, and accountable.”

The proposed transforming rental assistance program is aimed at converting an assortment of HUD programs to a uniform funding system, with one set of regulations, while retaining affordability for very low-income households.

Under the initial phase of the program, public housing authorities (PHAs) and private owners of Sec. 8 moderate rehabilitation, rent supplement, and Sec. 236 rental assistance program projects would be offered the option of converting to a simplified form of rental assistance, with long-term, property-based subsidy contracts with a resident mobility feature. The latter would enable tenants to move with a portable voucher that becomes available, without reducing the number of units with project-based assistance.

The administration is again seeking $250 million for its Choice Neighborhoods initiative to support the transformation of distressed neighborhoods into mixed-income communities through the preservation, rehab, and transformation of public and assisted housing projects. The program, which Congress funded as a $65 million HOPE VI set-aside this year, would combine housing aid with services, education, transportation, and access to jobs.

As part of the community development component, the budget includes a new $150 million catalytic investment fund, a competitive grant program to provide seed money to support innovative approaches to create jobs and restructure local economies. The fund would provide economic development and gap financing to capitalize and implement economic investments for neighborhood and community revitalization.

For existing programs, the budget would provide $19.6 billion for tenantbased Sec. 8 rental assistance and $9.4 billion for project-based Sec. 8, up from $18.2 billion and $8.6 billion this year, with the bulk of the funds earmarked for the renewal of expiring contracts.

The tenant-based funding also includes $85 million for incremental vouchers under two competitive demonstration programs to address the needs of families and individuals who are homeless or at risk of homelessness. One program would combine voucher assistance with support services funded by the Department of Health and Human Services (HHS), and the other would provide housing assistance in conjunction with HHS aid and educational support funded through the Department of Education.

The budget includes $2.1 billion for homeless assistance, up from $1.9 billion this year, as HUD begins to implement the consolidation of the Shelter Plus Care, supportive housing, and Sec. 8 moderate rehabilitation singleroom occupancy program into a single Continuum of Care program under the Homeless Emergency Assistance and Rapid Transition to Housing Act.

The budget also increases funding for the public housing operating fund from $4.77 billion this year to $4.82 billion, which HUD says should fully fund formula allocations to PHAs. The housing opportunities for persons with AIDS program would get a slight boost, from $335 million to $340 million.

On the other hand, the budget cuts public housing capital funding from $2.5 billion to $2 billion; Indian housing block grants, from $700 million to $580 million; HOME, from $1.8 billion to $1.6 billion; Sec. 202 housing for the elderly, from $825 million to $274 million; and Sec. 811 housing for the disabled, from $300 million to $90 million.

There is no Sec. 202 or Sec. 811 funding for new construction. According to HUD, the suspension of new capital funding will provide time for modernization.

More money requested for Sec. 515 loan program

The administration’s fiscal 2011 budget for the Rural Housing Service (RHS) includes $95 million for Sec. 515 rural rental housing loans, up from $70 million appropriated this year, reflecting a shift in policy to support new construction as well as the rehabilitation of existing properties. The multifamily revitalization program would be terminated.

The budget would hold funding for the Sec. 538 guaranteed multifamily loan program steady at $129 million, with no interest subsidy and no guarantee fees.

Rural rental assistance funding would be trimmed from $980 million this year to $966 million in fiscal 2011, to support the renewal of about 212,000 expiring contracts and provide assistance for additional Sec. 515 and farm labor housing units. The budget also includes $18 million for rural housing vouchers to protect tenants from rent increases when projects leave RHS programs.

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 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.