The Department of Housing and Urban Development’s (HUD) proposed 2011 budget delivers a message, said Secretary Shaun Donovan.

“It demonstrates that there’s a different kind of partner at the federal level that’s committed to rental housing as a fundamental strategy in the wake of a crisis that ought to make us all step back and reassert that we need a balanced housing policy in this country,” he said. “We need to be focused not just on homeownership but also on rental housing.”

Donovan pointed to the proposal’s full funding of project-based Sec. 8 and a $1 billion commitment to the National Housing Trust Fund as examples of the administration’s commitment to rental housing.

During the prior administration, there were questions about the federal government’s support of Sec. 8 and other programs, said the nation’s top housing official.

 “Without that stability and commitment on the part of the federal government what we saw for our development partners is an eroding of trust and in the financing community an eroding of trust in the kind of partners that they had at the federal level,” said Donovan.

In an interview with Affordable Housing Finance, Donovan also said the administration is not phasing out the Secs. 202 and 811 programs despite proposed budget cuts. He also said the administration is working on the first-ever, comprehensive federal plan to prevent and end homelessness.

The $48.5 billion budget proposal introduces the Transforming Rental Assistance initiative, which seeks to simplify and reform HUD’s rental assistance programs. The plan provides $350 million to preserve approximately 300,000 units of public and assisted housing, increase administrative efficiency at all levels of program operations, and enhance housing choice for residents.

The 2011 proposal also requests nearly $2.1 billion for Homeless Assistance Grants, a $200 million increase from the prior year.

The progress seen in reducing chronic homelessness has been one of the industry’s most exciting achievements in recent years, said Donovan, citing a 30 percent reduction in the past four years.

The progress has been driven largely by innovation at the local level. “Now, it’s time for the federal government to step up, to learn from that example, and to make a federal commitment to ending chronic homelessness and tackling family homelessness and a range of problems that have increased during the economic crisis,” he said.

The Obama administration is also working on the first comprehensive federal plan to prevent and end homelessness, which is expected to be released in the spring.

Secs. 202 and 811 cuts

Donovan said tough decisions had to be made to balance the budget, and the Sec. 202 program for seniors housing and the Sec. 811 program for housing for the disabled face significant reductions under the plan. 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.

“Today, we produce 10 times more seniors housing and housing for people with disabilities with the low-income housing tax credit than we do with the [Secs.] 202 and 811 programs,” Donovan said.

In cases where the programs are used, other funding is necessary because the capital advances are not enough.  “[Secs.] 202 and 811 no longer produce something unique because the tax credit is there,” Donovan said, and they also can’t produce housing on their own.

HUD is saying that it needs to look at the programs to see how they can better work with the tax credit and other programs, according to Donovan.

“This is not about phasing out the programs,” he said. “This is about working with Congress and other partners to think about how these programs can be better utilized."

At a time when the nation is dealing with a budget deficit, the affordable housing community needs to find ways to improve programs as it advocates for resources for them, Donovan said.

TCAP update

On a separate issue, HUD has been administering several new programs established under the American Recovery and Reinvestment Act of 2009, including the $2.25 billion Tax Credit Assistance Program (TCAP).

“One of the benefits of this program has been that states can determine the best way to allocate the money, depending on specific conditions,” said Donovan. “For example, there are places in the country where there has been overbuilding of rental housing, and the focus of the TCAP money has been on rehab rather than new construction. In other places in the country, where there is still an enormous shortage of rental housing, new construction makes sense. That kind of flexibility is one of the great benefits of the tax credit program.”

There has been talk that HUD is unhappy about states imposing new rules as they implement TCAP.

While acknowledging that some concerns have been raised about state processes, Donovan quickly pointed out that HUD works with the National Council of State Housing Agencies and other industry groups to look at issues.

Noting that TCAP didn’t exist before the Recovery Act, Donovan said he is pleased with the way HUD, state agencies, and developers have rallied to build a brand-new program.

HUD allocated funding to the state agencies within eight days of the bill being signed, which allowed state agencies and developers to get to work and move projects forward, according to Donovan. As of early February, about $125 million in projects had been completed.

“Less than a year after the bill was signed, we’ve made a lot of progress and have seen a lot of positive momentum, particularly we’ve seen a jump in completed projects over the last few weeks,” he said. “As the weather begins to turn in parts of the country, we’ll see even more projects being completed and money being disbursed.”