While saying difficult decisions had to be made, Housing Secretary Shaun Donovan provided a first look into the 2011 budget proposal, including a Transforming Rental Assistance initiative and a $150 million competition aimed at creating jobs in the areas with high unemployment rates.
“This year, we are proposing long-term fundamental reforms to many of our programs,” he said during a media briefing on the Department of Housing and Urban Development (HUD) budget.
One area that the administration is targeting is rental assistance. HUD provides deep rental assistance to 4.6 million through 13 different programs with conflicting and different rules.
“We are proposing in this budget the first steps in a consolidation and reform of those rental-assistance programs, not just to streamline them and reduce costs but also to create a more flexible 21st century rental-assistance program that allows increasing mobility for residents, that allows them to choose where they would use their subsidies,” Donovan said.
The proposal would also allow leveraging private capital in many programs with a particular focus in the first year of the initiative on public housing, which has been almost completely unable to leverage and access private capital and is therefore facing a significant capital deficit in terms of the quality and upkeep of its units, he said.
The initiative’s initial phase is focused on the preservation of public housing and a subset of HUD-assisted multifamily properties through their voluntary conversion to a simplified form of rental assistance. The budget requests $350 million to preserve about 300,000 units of public and assisted housing.
The administration has also proposed Catalytic Investment Competition Grants as part of the Community Development Block Grant (CDBG) funding.
“We see in many different metropolitan areas and cities across the country a desperate need for new job creation at this point,” Donovan said. “Oftentimes what that will take is not just a small investment from our CDBG programs but a significant investment that would allow a game-changing intervention in some of those neighborhoods that have been hardest hit by this crisis and have the highest unemployment rates.”
The $150 million proposed under this program will go to a small number of communities to implement far-reaching economic development strategies.
Another set of reforms centers around ending homelessness. The budget marks the first year of HUD’s full implementation of the Homeless Emergency Assistance and Rapid Transition to Housing Act signed by President Obama last year.
According to Donovan, the plan will streamline and reform all of the department’s homeless programs to allow them to be more cost effective and to pursue new strategies like homelessness prevention and increasing investment in permanent supportive housing. The reforms are accompanied by a roughly $200 million increase in proposed funding, a 10 percent increase.
Donovan pointed out the Federal Housing Administration (FHA) represents about one-third of today’s mortgage market. Two weeks ago, HUD announced a series of changes aimed at the FHA, which is expected to more than double the agency’s receipts in 2011 to $6 billion. If Ginnie Mae’s numbers are included, the budget proposal reflects $6.9 billion in receipts.
Thanks to these receipts, the total HUD budget will be $48.5 billion compared with $46.9 billion in fiscal 2010.
Donovan said that net of the $6.9 billion in projected FHA and Ginnie Mae receipts, the budget proposes overall funding of $41.6 billion, a 5 percent reduction from fiscal 2010, requiring funding cuts to several key programs.
Several longtime programs, including Sec. 202 for seniors housing and Sec. 811 for housing for the disabled, face significant reductions. Only $273.7 million is requested for Sec. 202, a $551.3 million cut from this year. Only $90 million is sought for Sec. 811, a $210 million reduction from 2010.
This would freeze new developments under the two programs.
Other programs proposed for cuts include HOME, which would be funded at $1.65 billion, down from $1.83 billion. The public housing capital fund is proposed to be $2 billion, down from $2.5 billion.