The fiscal 2007 Department of Housing and Urban Development (HUD) budget sent to Congress by the Bush administration includes some pluses and minuses for affordable housing, but in a time of big deficits and competing priorities, it’s probably as good as housing advocates could reasonably hope for.
“The president’s proposed budget is a real investment in building a society based on ownership and reaching out to those people and places in need to make sure every American has a place to call home,” said HUD Secretary Alphonso Jackson. “This budget places a premium on demonstrating results and allows HUD to sustain our core programs that are built on compassion while we continue to improve the way we serve communities around this country.”
One big plus for housing advocates is the administration’s abandonment of its plan to kill the community development block grant (CDBG) program, a major source of money for local housing rehabilitation programs, though the program is slated to take a big funding hit.
Last year, the administration proposed to fold the CDBG program into a new consolidated economic development block grant program administered by the Commerce Department, but the plan was roundly denounced on Capitol Hill.
For 2007, the budget keeps the program at HUD, but community development funding would be cut from $4.178 billion to $3.032 billion, and funding for CDBG formula grants would be reduced from $3.711 billion to $2.975 billion.
Overall, the budget provides $33.646 billion in discretionary budget authority for HUD in 2007, down from $34.268 billion in the regular 2006 appropriation. (Congress so far has also provided $11.890 billion in supplemental HUD funding for hurricane relief.)
The budget proposes increases for Sec. 8, HOME and homeless assistance, while public housing and special-needs housing would be cut.
For Sec. 8, the budget provides $15.920 billion for tenant-based assistance, up from $15.418 billion this year, including $14.436 billion for contract renewals. Renewal funding for each public housing authority (PHA) would be based on the amount the PHA was eligible to receive in 2006, as modified by an annual adjustment factor and costs associated with deposits to Family Self-Sufficiency escrow accounts and first-time renewals of tenant protection or HOPE VI vouchers.
The administration is again proposing to give PHAs more flexibility in operating their voucher programs to fit community needs, including the authority to design their own tenant rent policies.
The tenant-based Sec. 8 funding also includes $149 million for relocation and replacement housing assistance, including enhanced vouchers for prepayments and opt-outs, and $1.281 billion for PHA administrative fees.
The budget includes $5.676 billion for project-based Sec. 8, up from $5.037 billion this year, including $5.526 billion for contract renewals. As a cost-saving measure, the budget is proposing a $2 billion rescission of prior-year Sec. 8 funds.
The HOME program would get an increase from $1.757 billion in fiscal 2006, including $25 million for downpayment assistance, to $1.917 billion, including $100 million for downpayment aid.
Funding for homeless assistance grants would be boosted from $1.327 billion to $1.536 billion. Housing Opportunities for Persons with AIDS (HOPWA) would get an increase from $286 million to $300 million, while Indian housing block grants would receive $626 million, compared with $624 million this year.
On the downside, the public housing capital fund would be cut from $2.439 billion to $2.178 billion, while the operating fund would be held steady at $3.564 billion. The budget includes no new funding for the HOPE VI program, and it would rescind the $99 million appropriated for 2006.
The Sec. 202 elderly housing program and Sec. 811 housing program for persons with disabilities would take big hits under the administration’s 2007 budget. Sec. 202 would be cut from $735 million this year to $545 million, and Sec. 811, from $237 million to $119 million.
Rural Housing budget has no money for Sec. 515
The administration’s fiscal 2007 rural housing budget includes no new money for the Sec. 515 direct rental housing loan program, as the Rural Housing Service (RHS) seeks to shift the emphasis in that program to preservation and revitalization of the existing inventory.
The administration submitted draft legislation to Congress last year that would establish a revitalization program, including debt restructuring and incentives for owners to extend low-income use requirements, while also eliminating prepayment restrictions. The bill has not yet been formally introduced.
The 2007 budget also includes $74 million to provide rural housing vouchers to low-income tenants in Sec. 515 projects whose loans are prepaid and to fund the revitalization program, if it is enacted.
In addition, the budget provides $486 million for rural rental assistance, down sharply from this year’s $647 million. The budget would also cut the rental assistance contract term from four years to two, which the administration said is the minimum term that provides budget savings while also allowing the multifamily loan program to operate efficiently.
The RHS acknowledged that the shorter contract term will require additional costs for renewals in future years, but says the administration remains fully committed to meeting those renewal needs.
While eliminating funding for new Sec. 515 loans, the administration is proposing to double the money for the Sec. 538 guaranteed multifamily loan program from $99 million this year to $198 million in 2007.
The budget also includes $1.237 billion for Sec. 502 direct home loans and $3.465 billion for Sec. 502 guaranteed loans, up from $1.129 billion and $3.439 billion, respectively, in 2006 (excluding supplemental hurricane relief funds). The administration is also proposing to raise the one-time guarantee fee on new Sec. 502 loans from 2% to 3%. The fee for refinancing loans would remain at 0.5%.
Guidance issued on hurricane disaster vouchers
HUD has issued a notice, Public and Indian Housing (PIH) 2006-12, providing guidance on the disaster voucher program (DVP) for families displaced by hurricanes Katrina and Rita, which will be funded by $390 million included in the fiscal 2006 defense appropriations bill.
The program will replace the Katrina disaster housing assistance program (KDHAP) operated by the Federal Emergency Management Agency and HUD.
DVP assistance will be available to individuals or families who evacuated from a federally declared Katrina or Rita disaster area and who, immediately prior to evacuation, resided in a public housing unit, a unit receiving Sec. 8 tenant-based or project-based assistance, or a Sec. 202 or 811 unit; resided in an emergency shelter, transitional housing, supportive housing, Shelter Plus Care, or HOPWA unit; or were homeless.
In addition, except where a pre-disaster voucher recipient will receive DVP aid from its pre-disaster PHA in the most heavily impacted areas of Louisiana or Mississippi, the pre-disaster residence must have been destroyed, rendered uninhabitable or lack essential services.
Several categories of families previously assisted under KDHAP aren’t eligible for DVP assistance. These are families in Sec. 236 units without Sec. 8 or rental assistance payment aid, in Sec. 221(d)(3) below-market interest-rate units without Sec. 8, or in Federal Housing Administration (FHA) or non-FHA projects without rent supplement assistance.
For the first 18 months of DVP assistance, the regular voucher rules for calculating the amount of the subsidy won’t apply. Instead, the assistance will be the lesser of the gross rent (the rent to the owner plus any utility allowance for tenant-paid utilities) or the PHA payment standard established for the regular voucher program.
Accordingly, a DVP family won’t have to pay any rent for 18 months if the gross rent is below the payment standard. The DVP program is expected to expire on Sept. 30, 2007, and if a family has received DVP assistance for 18 months prior to that date, the assistance will be recalculated under the regular voucher program rules beginning with the 19th month.
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.