The Obama administration makes a big push to get Americans off the streets by proposing a significant increase in funding to end homelessness.

Its fiscal 2017 budget plan requests a total $48.9 billion in discretionary funding, an increase of $1.9 billion above fiscal 2016 enacted level. This includes $11 billion in new funding spread out over 10 years to end homelessness among families by 2020 and to maintain progress in the years that follow, said Julián Castro, secretary of the Department of Housing and Urban Development (HUD).

The HUD spending plan also seeks $2.7 billion in Homeless Assistance Grants, a $414 million increase. This would help create an additional 25,500 units of permanent supportive housing for chronically homeless individuals and to invest in projects to help homeless youths.

In addition, the administration's final budget asks for $88 million for 10,000 new vouchers for homeless families with children.

In a call with reporters, Castro cited declines of 19% in family homelessness, 26% in chronic homelessness, and 36% in veteran homelessness between 2010 to 2015. “What we’re doing we know is working,” he said. “We’re convinced these investments will accelerate our progress and bring us closer to that day when every American has a place to call home.”

The National Low Income Housing Coalition (NLIHC) cheered the budget request that was sent to Congress.

Julian Castro, HUD secretary
Julián Castro

“The number of people who are homeless on any given night in our country should shame even the most conservative budget hawks,” said Sheila Crowley, NLIHC president and CEO. “The homeless state of emergency in many parts of the United States calls out for this bold initiative by our president.”

The proposed budget estimates that $182 million will be available in calendar year 2016 for the National Housing Trust Fund (NTHF). The NHTF, which HUD will implement for the first time this year, provides the first new federal resources in a generation for the production of rental housing for the lowest-income people in America. The funds are from a small assessment on the volume of business conducted in 2015 by Fannie Mae and Freddie Mac. The exact level of funding for the NHTF for 2016 will be made public at the end of February when Fannie Mae and Freddie Mac are required to report how much will be transferred to HUD to distribute to states, said NLIHC leaders.

Although the budget plan focuses on ending homelessness, there is no new funding for HUD-Veterans Affairs Supportive Housing (VASH) vouchers except for $7 million for the Tribal VASH program to serve homeless or at-risk homeless Native American veterans living in and around designated tribal areas. HUD would support existing VASH vouchers through renewals.

The proposal also seeks:

· $20.9 billion for the tenant-based rental assistance program (also known as the Housing Choice Voucher program), an increase of $1.2 billion. With this funding, the Housing Choice Voucher program will provide housing assistance to 2.2 million extremely low- to very low-income families to rent housing in the private market;

· $10.8 billion for project-based rental assistance, an increase of almost $200 million, which supports 12 months of funding for rental assistance contracts for 1.2 million families;

· $200 million for the Choice Neighborhoods Initiative, an increase of $75 million;

· $50 million for the Rental Assistance Demonstration program and expansion of its authority to convert additional properties to long-term, project-based Sec. 8 contracts that can leverage private financing for capital improvements;

· $2.8 billion for Community Development Block Grants (CDBGs), down from $3 billion in 2016; and

· $950 million in HOME funds, which maintains the 2016 enacted level.

Castro said the 2017 budget proposal also seeks to connect housing to the economic and educational opportunities. “We know that life doesn’t stop at someone’s front door,” he said. “Families need access to jobs and schools and medical facilities, and this budget helps secure that access.”

The spending plan proposes to make the CDBG program part of the Upward Mobility Project, a new initiative to allow states and localities to blend funding across four block grants, including the Department of Health and Human Services' (HHS) Social Services Block Grant and Community Services Block Grant, as well as HUD's HOME and CDBG, that share a common goal of promoting opportunity and reducing poverty. In exchange for more accountability for results, state and localities would be able to use the funds beyond the current allowable purposes of these programs to implement promising strategies for helping individuals succeed in the labor market and improving economic mobility, children's outcomes, and the ability of communities to expand opportunity.

LIHTC reform proposals

The administration is also again proposing several changes to reform the low-income housing tax credit (LIHTC) program.

First, states would be empowered to convert some private-activity bond volume cap into authority to allocate additional LIHTCs. Also, a building would be able to qualify for 30%-present-value LIHTCs without issuing bonds if the building receives an adequate allocation of tax-exempt volume cap. This proposal would provide states greater flexibility to address their affordable housing priorities, and would reduce transaction and financing costs. These changes would be effective for new volume cap received by states for calendar years beginning after the date of enactment, or for volume cap that is allocated to a building after that date.

In another proposal aimed at providing incentives for creating mixed-income housing, projects would be allowed to comply with an income-average rule for LIHTC eligibility. Under this new rule, the average income for at least 40% of the units in a project could not exceed 60% of the area median income (AMI). None of these units could be occupied by households with income greater than 80% of the AMI. Buildings must meet this new average income threshold calculated both: (1) with all low-income units weighted equally; and (2) with each low-income unit weighted according to imputed LIHTC occupancy rules. For rehabilitation projects containing units that receive ongoing subsidies administered by HUD or the Department of Agriculture (e.g., rental assistance, operating subsidies, or interest subsidies), a special rule would permit certain non-income qualified tenants to remain in residence without impairing the LIHTCs earned by the project. This provision adds to the two income criteria currently available for LIHTC developments and would apply to LIHTC elections that are made after the date of enactment.

Third, preservation of federally assisted affordable housing would be added to the selection criteria for LIHTC allocations. This factor would join the 10 criteria that state housing agencies must include in the qualified allocation plans (QAPs) that they consider when awarding LIHTCs. This change would apply to allocations made in calendar years beginning after the date of enactment.

Fourth, to remove any doubt, affirmatively furthering fair housing would be made an explicit fourth allocation preference in QAPs.

Fifth, the administration proposes to allow HUD to designate as a qualified census tract (QCT) any census tract that meets certain criteria for the prevalence of poverty or low-income households. A building in a QCT earns 30% more LIHTCs than it would in another location. The proposal would remove a current limit under which the aggregate population in census tracts designated as QCTs cannot exceed 20% of the metropolitan area’s population. As a result of this limit, some census tracts with qualifying levels of poverty or low-income households may currently fail to be designated as QCTs because neighboring tracts also qualify. This change would apply to allocations made after the date of enactment.

Sixth, the proposal adds protection for victims of domestic violence as a mandatory provision of the long term-use agreement required by the Internal Revenue Code between each LIHTC taxpayer and the state. To make the protection meaningful, victims of domestic violence would be given a right to enforce the agreement in state courts.

Additionally, the administration proposes to permanently extend the New Markets Tax Credit (NMTC). Up to $5 billion in qualifying investment would be allowed in each year beginning in 2020. The proposal would also permit the NMTC to permanently offset AMT liability for qualified equity investments made after Dec. 31, 2019.