Tuesday, February 15, 2005

Budget Cuts at HUD

President Bush has put out his FY 2006 budget proposal. There will be a lot of give and take between now and a final budget, but I received this email the other day on the proposed cuts at HUD:

"The National Low Income Housing Coalition prepared this overview of the
President's FY06 Request for the Department of Housing and
Urban Development and other housing programs. A printer-friendly version
of this memo and a side by side analysis of budget for FY04 enacted, FY05
enacted, and FY06 requested is available at www.nlihc.org.

Obviously, we all have much reason to mobilize against the budget proposal. In it's press release on the budget proposal, the National Low Income Housing Coalition summed up the impact of the proposed budget succinctly: While the effects of the HUD cuts will be deeply felt in every low income community in the country, they will make little difference to the deficit.

SHAC and other organizations will be actively engaging members of Congress, the press, and others in the coming months to express our opposition to the budget. We will be sending out information on opportunities for you to take part in this work soon. In the meantime, please contact us with comments and questions. Thank you. Bob

Analysis of President Bush's FY06 Housing Budget Proposal
Prepared by the National Low Income Housing Coalition
February 9, 2005

President Bush submitted his fiscal year 2006 HUD budget request to Congress on February 7. In the President's request, HUD budget is reduced by 11.5%, from $32.3 billion in FY05 to $28.5 billion in FY06.

Tenant-Based Rental Assistance
The President requests a total of $15.85 billion for the section 8 housing choice voucher program in FY06. Of that amount, $14.1 billion is for voucher renewals, $1.3 billion is for administrative fees, $55 million is for the Family Self Sufficiency Program, and $45 million is allocated for a central reserve fund to be used by the Secretary for unforeseen exigencies. The distribution of the funds for renewals will be based on a pro-rata share of each agency's FY05 budget and a 2006 annual adjustment factor plus the costs of any tenant protection vouchers.

The budget calls for an increase of $192 million for tenant protection vouchers for a total of $354 million. According to HUD, the more than doubling of tenant protection voucher funding is necessary due to anticipated increases in HOPE VI demolition, mandatory and voluntary conversion of public housing into tenant-based assistance, vouchers needed to complete the consent decree of the recent Walker vs. U.S. Department of Housing and Urban Development decision, and more opt-outs of section 8
project based properties.

HUD continues to use a budget-based approach in its renewal formula. Agencies will not be funded on actual leasing levels and costs. While the budget request does not propose major changes in the program, such as a Flexible Voucher Program, HUD states that it will move forward with reforms and submit a similar proposal to Congress in 2005.

Project-Based Rental Assistance
There is a dramatic dip in the funding request for FY06 for project-based housing, about $228 million. HUD officials state that the dip reflects not including a 3% add-on as in years' past as a safety feature (equaling about $220 million of the $228 million) and anticipated savings from HUD's rental housing income integrity program (income matching).

Public Housing Capital Fund
Notwithstanding the $21 billion backlog of public housing modernization needs, the President's budget requests $2.327 billion for the public housing
capital fund, $273 million less than was appropriated in FY05. HUD officials stated that this amount will be sufficient because of the fast pace of public housing demolitions, noting that 123,000 units have been demolished over the last eight years and another 45,000 units are currently scheduled for demolition. Meanwhile, funds to support the costs of public housing receiverships are almost tripled and funding for emergency capital repairs is cut from $30 million to $17 million.

The budget also calls for cutting the Resident Opportunity and Self Sufficiency (ROSS) program by more than half, from $53.5 million to $24 million. Technical assistance funding for public housing employees and residents is also cut from $38.7 million to $11 million. Neighborhood Networks, funded at $15 million in FY05, receives no funding in FY06.

Public Housing Operating Fund
The FY06 budget request calls for $3.4 billion for public housing
funds. The level for FY06 is not an increase from the funds appropriated
FY05 because the FY05 funds were based on a calendar shift, which allowed for one-time budget savings. The actual annualized level for FY05 is $3.4 billion. Even at the level of funding provided for in the budget request, operating funds would meet only 89% of housing authorities' actual operating costs.

The budget request notes that the new operating formula based on the Harvard
Graduate School of Design cost study is still pending implementation.

For the third year in a row, the HOPE VI program is slated for elimination, even though Congress continues to provide funding for the program. The FY06 request actually seeks a negative amount for HOPE VI (-$143 million). HUD officials stated that HUD will pursue Congressional rescission of FY05's $143 million for HOPE VI until HUD must issue the FY05 notice of funding availability.

Native American Housing Block Grants
The request cuts the Native American Housing Block Grant program from $621 million to $582.6 million and moves the $58 million Indian Community Development Block Grant to a set-aside within NAHBG, effectively cutting this program another $58 million. The ICDBG had been a CDBG set-side.

Housing Opportunities for Persons with AIDS
The President's request for HOPWA would cut the program from $281 million in FY05 to $268 million in FY06.

Community Development Block Grants
The most drastic cut in the HUD budget request is the elimination of the Community Development Block Grant program. This 30-year-old program, which has been vital in improving communities across the country, will be moved to the Commerce Department where it will be incorporated into a $3.7l billion program, Strengthening America's Communities grant program. It is not clear how the funds would be distributed in the new program, if housing activities would be a part of the new program, what part of the $3.71 billion in the Commerce Department's budget request represents CDBG activity vs. activities of any of the other 17 federal programs rolled into this new program. HUD was unable to describe in a briefing for public interest groups exactly how they propose to undertake this reform, and implied that drafting of the legislation will be up to the Department of Commerce.

Some CDBG set-aside programs would move to other departments except for:
the Self-Help Homeownership Opportunity Program (SHOP), the Indian Community Development Block Grant program, the Native Hawaiian Housing Block Grant program and University Programs. Included in the programs moving from HUD are empowerment zones/enterprise communities (to Commerce), Brownfields redevelopment to Commerce) and Youthbuild (to Labor). Set-asides that have supported the Housing Assistance Council, the Enterprise Foundation, LISC, Habitat for Humanity, the National Council of La Raza, and the Native American Indian Housing Council are gone.

Transferring the CDBG program to Commerce will require legislative action by the committees that currently have jurisdiction over the program, the Senate Banking, Housing and Urban Affairs Committee and the House Financial Services Committee. This is expected to be difficult to achieve.

The HOME program was increased about $41 million but the requested set-aside for down payment assistance was increased by $150 million to $200 million, leaving the HOME block grant cut from FY05's level.

Homeless Assistance Grants
The FY06 budget request increases funding for the homeless by $200 million dollars for a total of $1,440 billion. The increased amount includes $25 million specifically for prisoner re-entry housing, which has not been authorized by Congress. HUD has also stated that up to $200 million of the FY06 request is for Samaritan initiative programs, which also have not been authorized by Congress. HUD is planning to submit legislation to consolidate the three competitive HUD McKinney programs and may include the Samaritan Initiative in the legislation.

Rural Housing and Economic Development
The President's request would eliminate HUD's office of rural housing and economic development.

Housing for the Elderly
This program is cut from $746 million to $741 million. No funds are requested for predevelopment grants. Service coordinator funding is increased from $50 million to $53 million. Project rental assistance contracts are cut from five to three years.

Housing for Persons with Disabilities
In one of the most extraordinary cuts within the FY06 request, housing for persons with disabilities is cut in half, from $238 million to $120 million. None of these funds are for the construction of new units; up to $35 million is for new tenant-based assistance and the remaining funds are for tenant-based renewals.

Fair Housing and Equal Opportunity
The HUD request would cut the Fair Housing Assistance Program from $26 million to $16 million and cut the Fair Housing Initiatives Program from $20 million to $16 million.

Lead-Based Paint Hazard Reduction
The FY06 request cuts the lead hazard reduction program from $154 million to $119 million.

USDA's Rural Housing Service
The President seeks a steep cut in the Section 515 program, going from $99 million in FY05 to $27 million in FY06. There was one bright light in the rural housing programs where the Rural Rental Assistance Program was increased in the FY06 request from $587 million to $650 million."

My Thoughts

It sure seems like the Bush administration is getting ready to kill some programs. Watching YouthBuild get moved to Labor and the CDBG dollars get moved to Commerce means that housing advocates will have a more difficult time keeping track of how the dollars will be spent in the future. These are the people most likely to lobby for these dollars. By moving items into other budget areas, it suddenly becomes easy to kill programs without very many people noticing. It is also sad that Lead Paint Hazard Reduction dollars will be decreased after HUD implemented the toughest federal standards in the fight against lead poisoning. A decrease of approximately 20% does not bode well when there is already a significant shortage of money for dealing with the problem. There is much more I could say here, but this is long enough as it is.