Congress has approved a fiscal year 2006 Department of Housing and Urban Development (HUD) appropriations bill (H.R. 3058) that preserves the department’s basic program structure while continuing the current system for funding Sec. 8 voucher renewals. The bill provides a total of $34 billion for HUD, up $2.1 billion from fiscal year 2005 and $4.9 billion over the administration’s budget.

The increase over the budget was due primarily to the rejection of the proposal to consolidate community and economic development programs into a new program administered by the Commerce Department. That plan would have killed HUD’s Community Development Block Grant program, along with several smaller programs.

Separately, conferees on the state, justice, and commerce appropriations bill (H.R. 2862) dropped the Senate-approved provision for $3.5 billion in emergency voucher assistance for hurricane victims. The Senate amendment was sponsored by Sen. Paul S. Sarbanes (D-Md.), who said he was “very disappointed” that the House wouldn’t accept it.

The House and Senate conferees on the HUD bill adopted the House version of the renewal formula, which bases public housing authorities’ (PHA) 2006 voucher funding on the amount they received in 2005 before any pro rata reduction. This base amount will be adjusted by applying HUD’s 2006 annual adjustment factor. In effect, the formula continues the use of the controversial three-month “snapshot” approach tying funding to PHA costs in the May-July 2004 period.

The Senate version of the HUD funding bill would have based 2006 voucher renewal funding on PHA leasing and cost data for the most recent 12 months.

The bill provides $15.574 billion for Sec. 8 tenant-based assistance, including $14.09 billion for voucher renewals. The latter amount includes $45 million to adjust the baseline amount for PHAs that were significantly underleased when the baseline was set because of unforeseen circumstances or anomalous reasons, such as the timing of the PHA’s fiscal year or portability issues.

PHAs will receive a fixed budget to manage their voucher programs, and HUD can’t use recaptured funds or carryover project-based Sec. 8 money to increase tenant-based funding.

The tenant-based funds also include $180 million for tenant protection activities, including enhanced vouchers issued in connection with the termination of project-based assistance, and $1.25 billion for PHA administrative fees.

As a cost-control measure, the bill also rescinds $2.05 billion in prior-year Sec. 8 funds. If HUD can’t find that much in unobligated and recaptured Sec. 8 money, it must make up the difference through rescissions in other programs.

The bill also provides $5.088 billion for project-based Sec. 8, including $4.94 billion for contract renewals.

The bill generally requires HUD to maintain Sec. 8 project-based assistance in managing or disposing of HUD-owned and HUD-held properties. It also authorizes the department to transfer project-based rental assistance, debt and low-income use agreements from obsolete to viable projects, provided that no additional costs are incurred.

For public housing, the bill includes $2.464 billion for the capital fund, $3.6 billion for the operating fund, and $100 million for HOPE VI. While rejecting the administration’s proposal to kill HOPE VI, the conferees said in their report that “it is time to consider alternative approaches” that give PHAs the flexibility to deal with obsolete public housing and new tools to develop mixed-income housing.

The bill provides $1.775 billion for the HOME program, including $1.75 billion for the basic program, with 15% earmarked for housing developed, sponsored or owned by community housing development organizations, and $25 million for downpayment assistance.

The conferees also approved $742 million for Sec. 202 housing for the elderly and $239 million for Sec. 811 housing for the disabled. The Sec. 202 funds include $4 million for a demonstration project for intergenerational housing, where grandparents may be raising grandchildren.

For housing finance, the bill provides commitment limits of $185 billion for the Federal Housing Administration (FHA) Mutual Mortgage Insurance Fund; $35 billion for the FHA General and Special Risk Program Account, which covers multifamily mortgages; and $200 billion for Ginnie Mae securities.

Other funding provisions include: Indian Housing Block Grants, $630 million; community development, $4.22 billion, including $3.748 billion for formula CD block grants; housing opportunities for persons with AIDS, $289 million; homeless assistance grants, $1.34 billion, including $238 million for the renewal of Shelter Plus Care contracts; fair housing, $46 million; and lead hazard reduction, $152 million.

Senate approves tax bill with aid for areas hit by hurricanes

The Senate has approved a major tax bill (S. 2020) that includes additional housing and economic development aid for areas devastated by last year’s hurricanes.

The bill must be reconciled with a much different House measure (H.R. 4297) that came out of the Ways and Means Committee without the hurricane relief provisions.

The Senate bill establishes a Gulf Opportunity Zone (GOZ) for areas of Alabama, Louisiana and Mississippi designated by the federal government as needing individual or individual and public assistance because of Hurricane Katrina and provides special incentives for the redevelopment of those areas.

Under one provision, the three Gulf states could allocate additional low-income housing tax credits in their GOZ areas in 2006 through 2009. The additional allocation would be three times the normal allocation ($1.90 per capita for 2006) for each state’s GOZ population. In addition, the GOZ would be designated as a difficult to develop area, making it eligible for a 30% basis increase.

The bill would also allow Alabama, Louisiana, and Mississippi to issue additional tax-exempt private-activity bonds in an amount equal to $2,500 per capita for their GOZ populations.

For mortgage revenue bonds issued under this authority, first-time homebuyer restrictions would be lifted, targeted area purchase price and income limits would apply, and the home improvement loan limit would be raised to $150,000. The same provisions would apply to mortgage revenue bond financing for homes in certain areas damaged by hurricanes Rita and Wilma.

Also, the operator of a bond-financed rental property could rely on representations of income eligibility by prospective tenants displaced by Katrina, if their initial tenancy began within six months of their displacement.

The bill would also provide additional New Markets Tax Credit (NMTC) allocations of $300 million annually for 2005 and 2006 and $400 million for 2007 for community development entities investing in the GOZ. It would also reauthorize the NMTC program through 2008, with a $3.5 billion investment allocation for that year.

House passes bill to reform regulation of housing GSEs

The House has passed legislation (H.R. 1461) to reform the regulation of Fannie Mae, Freddie Mac and the Federal Home Loan Banks, setting up a new Federal Housing Finance Agency (FHFA) to replace the Office of Federal Housing Enterprise Oversight and the Federal Housing Finance Board.

The bill requires Fannie Mae and Freddie Mac to set up affordable housing funds supported by a portion of their after-tax earnings. Under a floor amendment, the funds would terminate after five years, and the required contributions would be 3.5% of earnings for the first two years and 5% of earnings for the next three.

For the first two years, the funds would have to give priority to housing activities in Katrina or Rita disaster areas or activities to aid hurricane victims.

Under the most controversial part of the floor amendment, nonprofit groups participating in election activities, including voter registration, would be ineligible for affordable housing fund assistance. An effort to remove this restriction was unsuccessful.

The bill does not include the mandatory limits on Fannie Mae and Freddie Mac mortgage portfolios favored by the Bush administration, though the FHFA would have the authority to adjust their portfolio holdings.

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.