A Mixed Bag: HUD FY 2014 Budget Proposal Reflects Winners and Losers

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The Obama Administration’s budget request for the U.S. Department of Housing and Urban Development (HUD) for Fiscal Year 2014, which begins October 1, reflects a mix of winners and losers and contains a number of proposed program changes.

The Administration’s budget also includes positive and negatives for rural housing programs along with some tax credit proposals (see p. 12).

The Administration has proposed $47.6 billion in gross discretionary budget authority for HUD for FY 2014, an increase of 9.7% above the enacted FY 2012 and FY 2013 funding levels. On March 26, President Obama signed a six-month continuing resolution to fund the federal government for the balance of FY 2013.

Federal rent subsidies continue to account for a huge share of HUD’s proposed FY 2014. A 10% increase is proposed for project-based rental assistance compared to FY 2013 and a 5.5% increase proposed for tenant-based rental assistance (i.e. vouchers). The Department is proposing full-year funding for all Section 8 contracts.

The Department also proposes increases of:

  • 6.7% for public housing capital funds;
  • 7.9% for public housing operating subsidies;
  • 233.3% increase for the Choice Neighborhoods program, to $400 million;
  • 17.1% for Homeless Assistance Grants; and,
  • 6.7% for Supportive Housing for the Elderly (Section 202).

The same funding levels as FY 2013 are proposed for Native American Housing Block Grants; Housing Opportunities for Persons With AIDS program; and “HUD-VASH” rental vouchers for low-income veterans ($75 million, 10,000 vouchers).

Proposed Funding Cuts

Some programs are targeted for cuts from FY 2013 funding levels. These include cuts of:

  • 5% to the federal HOME program;
  • 5% to the Community Development Fund, including a 14% reduction to formula Community Development Block Grants; and,
  • 23.6% to Supportive Housing for Persons With Disabilities (Section 811).

Other budget requests include:

  • $1 billion in initial capital for the Housing Trust Fund;
  • $10 million in additional Section 8 subsidies for the Rental Assistance Demonstration (RAD) program. Proposed program changes would increase the cap on public housing conversions from 60,000 to 150,000 units; exempt Section 8 Mod Rehab units from the cap; make Section 8 Mod Rehab SRO properties eligible for RAD; and extend the sunset date for conversions of Rent Supp, RAP, and Mod Rehab projects by two years through September 30, 2015;
  • $200 million for the Neighborhood Stabilization Initiative, a successor to the Neighborhood Stabilization program, to help fund activities that revitalize distressed neighborhoods;
  • Proposed legislative reforms to the project-based rental assistance, Housing Choice Voucher, and public housing programs, including an expansion of the Moving to Work program; and,
  • A proposed legislative change to allow Ginnie Mae to securitize multifamily FHA risk-share loans originated by housing finance agencies.

Rural Housing Programs

Regarding rural housing programs operated by USDA’s Rural Housing Service, the Administration is proposing an increase of 11.9% over FY 2013 for Section 521 rural rental assistance; a 17.9% million increase for the Multi-Family Housing Revitalization program, including $13 million for rural housing vouchers; and the same funding level for Section 538 guaranteed rural rental housing loans. A 9.7% cut is proposed for Section 515 direct loans to finance rural rental housing projects.

Reaction

While the budget request included proposed increases for some programs, there were also some disappointments.

Barbara Thompson, Executive Director of the National Council of State Housing Agencies, said she was “very disappointed” by the proposed funding cut of $50 million to the HOME program, to $950 million in FY 2014. “HOME has just been cut so severely in recent years,” she said. Indeed, annual funding for HOME was $1.825 billion in FY 2010 before being cut to $1.607 billion in FY 2011 and then again to $1 billion in each of FY 2012 and 2013.

HOME funds have long been used to provide gap dollars for low-income housing tax credit programs as well as for other affordable housing purposes.

Garth Rieman, though, said NCSHA was very pleased about the budget’s legislative proposal to allow Ginnie Mae to securitize FHA multi-family risk share loans, saying this step would significantly reduce borrowing costs on such loans taken out by developers for affordable rental housing projects.

(HUD, USDA RHS budget documents: http://tinyurl.com/3mlqjwn)