Calling it a break-or-make moment for the middle class, federal Housing Secretary Shaun Donovan unveiled a 2013 budget that proposes $44.8 billion in gross discretionary budget authority for the Department of Housing and Urban Development (HUD).
“The fundamental question we have is whether the American promise for somebody who works hard, plays by the rules, does the right thing will continue to have the opportunity to raise their families, send them to school, buy a house, and have something to retire on,” Donovan said. “Fundamentally, we need to make sure that what we do in the administration continues to protect that promise for families fighting to stay in the middle class and for families who are struggling to get into the middle class.”
Although the nation’s top housing official painted a generally good picture of the budget plan, low-income housing advocates criticized the proposal as a troubling mix of cuts and flat funding.
The budget request represents a roughly $1.6 billion, or 3 percent increase, in program investments, while still meeting the new requirements for a tighter budget, said Donovan, explaining that he expects to see a net savings as a result of increased receipts from loans made by the Federal Housing Administration (FHA).
New premium increases are reflected in the budget, including those for single-family, multifamily, and health-care loans, said Donovan in a conference call with reporters. He said additional FHA premium increases will be announced in the coming week.
The net discretionary budget authority is estimated at $35.3 billion under the proposal, a reduction from the $38.3 billion enacted for 2012.
Reforms to the rental-assistance programs are expected to save more than $500 million in fiscal 2013 without reducing the number of families served. In the project-based rental assistance program, HUD expects to achieve savings by aligning policy across the program and reducing costs by increasing the minimum rent from $25-50 a month to at least $75 per month for all HUD-assisted households. Current exemptions for families facing financial hardship would remain.
The budget provides $8.7 billion for project-based rental assistance, down from about $9.3 billion in fiscal 2012. The proposed savings would be generated by providing less than 12 months of funding up front on some contracts that straddle fiscal years. HUD says the move will not lower the number of families served or delay payments to landlords.
On the other side, advocates are sounding a warning.
“HUD has tried this budget gimmick before,” said Sheila Crowley, president of the National Low Income Housing Coalition (NLIHC). “And it wreaked havoc in the lives of hundreds of thousands of vulnerable people.”
Denise Muha, executive director of the National Leased Housing Association, also raised concerns, saying when a similar move at providing less than 12 months of funding was made about five years ago, it created a budget shortfall and other problems. “It’s kicking the can down the road,” she said. “It’s distressing and unnecessary.”
Crowley also criticized the increase in minimum rent. “The Budget Control Act created spending limits that are so unworkable that the federal government is reduced to picking the pockets of the poorest of the poor. It is Scrooge-like,” she said in a statement.
According to NLIHC, the increase would provide a savings of $150 million, which is just .003 percent of the total HUD budget.
In addition, the department is looking to consolidate the public housing operating and capital funds next fiscal year.
The Obama administration also is including $1 billion for the long-anticipated National Housing Trust Fund.
Donovan said the trust fund as well as Project Rebuild, President Obama’s $15 billion plan to put people to work rehabilitating homes, businesses, and communities, are “mandatory-side spending” and can be offset with a broad range of savings items.
When legislation is introduced for broad-based refinancing for underwater homeowners who are current on their loans, there will be a series of offsets proposed, according to Donovan, who declined to discuss the specifics until that legislation is unveiled.
Other highlights in the 2013 fiscal budget include:
- $3 billion in Community Development Block Grant formula grant program, level with 2012 budget;
- $1 billion for the HOME program, same as the 2012 level;
- $150 million for the Choice Neighborhoods Initiative, which will reach four to six neighborhoods;
- $100 million is restored for the Sustainable Communities Initiative;
- $75 million for HUD-VASH program, which would support an additional 10,000 vouchers for homeless veterans;
- $475 million is requested for the Sec. 202 program for seniors, up from $375 million in 2012;
- $150 million is requested for the Sec. 811 program for people with disabilities, down from $165 million in 2012. The budget also requests $111 million for the renewal of mainstream Sec. 811 vouchers through the tenant-based rental assistance account; and
- $2.2 billion in homeless assistance grants, a $300 million increase.