House THUD Subcommittee Proposes Cuts to HUD Programs; CNI and HOME Programs Impacted

The U.S. House of Representatives Transportation-HUD (THUD) Appropriations Subcommittee on May 5, 2014 released its draft fiscal year (FY) 2015 appropriations legislation for the Department of Housing and Urban Development (HUD). The bill includes a total of $40.3 billion for the Department of Housing and Urban Development, a decrease of $769 million below the fiscal year 2014 enacted level and $2 billion below the President’s request.

The Subcommittee notes in its summary that the $4.3 billion difference between the administration’s estimate of Federal Housing Administration (FHA) receipts in FY 2015 compared the Congressional Budget Office (CBO) estimate, helped offset the cost of HUD programs. Therefore, the program funding levels within the THUD Subcommittee bill, which uses the CBO estimates, are more accurately $1.8 billion below FY 2014 enacted levels.

More details regarding specific HUD programs can be found below.

Project Based Rental Assistance (PBRA)
The Subcommittee proposes $9.7 billion for the PBRA program, which is $4 million less than the President’s request.  The bill proposes to shift the PBRA funding cycle to a calendar year, in line with the President’s FY 2015 budget request. This would make renewal funding more predictable, but it would also mean that contracts expiring during FY 2015 will not receive a full 12 months’ of renewal funding.

Tenant Based Rental Assistance (TBRA)
The draft appropriations measure includes about $19.4 billion for the Tenant-Based Rental Assistance Program, which is about 1 percent more than the enacted FY 2014 amount but $170 million less than the President’s request. While it is unlikely this amount of funding would be sufficient to renew all vouchers in use, the measure does approve $75 million for HUD-Veterans Affairs Supportive Housing vouchers and $130 million for Tenant Protection Vouchers (TPVs). It also approves HUD’s use of unobligated balances remaining from amounts appropriated in prior years as TPVs, including recaptures and carryovers, to be used for voucher assistance for nonelderly disabled families and for disaster assistance.

Choice Neighborhoods Initiative
The Choice Neighborhoods Initiative (CNI) program receives a big hit in the Subcommittee’s proposed FY 2015, with funding proposed at $25 million, which is $65 million less than the FY 2014 enacted level, and $95 million less than the President’s request.  The Subcommittee stipulates that unobligated balances remaining from CNI and HOPE VI-appropriated funds in FY 2014 and prior years may be used by HUD as additional funds for the CNI program in FY 2015. The bill also states that no FY 2015 CNI funds may be granted to recipients that have previously received a Choice Neighborhoods Initiative Implementation Grant.

Rental Assistance Demonstration
The bill does not make any mention of the Rental Assistance Demonstration (RAD) program, which means it does not provide $10 million to enable RAD conversions nor does it lift the 60,000 unit cap, as the administration requested in its FY 2015 proposal.

Public Housing Capital & Operating Funds
The bill provides $1.775 billion for the Public Housing Capital Fund, $150 million less than the administration’s request and $100 million less than FY 2014. Of that, up to $8 million is to support ongoing Public Housing Financial and Physical Assessment activities and $45 million for supportive services, service coordinator and congregate services. The Subcommittee funds the Public Housing Operating Fund at $4.4 billion, a $200 million or 4.3 percent decrease from the administration’s request but equal to the FY 2014 enacted amount.

Section 202 and Section 811
The THUD Subcommittee request includes $420 million for the Section 202 Housing for the Elderly program, $36.5 million (9.5 percent) increase over FY 2014 levels, but $20 million less than the President’s request. $70 million of that is to be set aside for service coordinators and the continuation of existing congregate service grants for residents of assisted housing projects.

The Subcommittee also requests $135 million for the Section 811 Housing for Persons with Disabilities, which is $25 million less than the President’s request but $9 million more than the FY 2014 enacted amount.

The HOME Investment Partnerships Program (HOME)
The Subcommittee recommends funding the HOME program at $700 million, with $10 million set-aside from this amount for the Self-Help Homeownership Opportunities Program (SHOP). This amount is equal to about $300 million less than the FY 2014 enacted level and a $250 million less than the President’s request. 

Other Programs:

• Community Development Block Grant (CDBG):  The bill proposes $3 billion for the CDBG program, $200 million more than the President’s request but $30 million less than the FY 2014 enacted amount.
• Homeless Assistance Grants: The bill proposes $2.105 billion for homeless assistance grants, which is equal to the FY 2014 amount but about $300 million less than the President’s request.  This would also set-aside $1.8 billion for the continuum of care and rural housing stability assistance programs. The Subcommittee notes that the proposed amount should be sufficient for all current grants to be continued.
• Housing Opportunities for Persons with AIDS (HOPWA): The bill would provide $303 million for the HOPWA program, which is $27 million less than FY 2014 and $29 million less than the administration’s request.
• The bill does not contain funding for any new, unauthorized “sustainable,” “livable,” or “green” community development programs, which means that the Subcommittee recommends that no funding be provided for the Sustainable Communities or Project Rebuild.

 

HUD Budget Chart

 

Click here to read the THUD Subcommittee’s FY 2015 budget proposal.
Click here to read the THUD Subcommittee’s summary

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Summary of President FY 2015 Budget Request

On March 4, President Barack Obama introduced his fiscal year (FY) 2015 budget, requesting a total of $46.7 billion for Department of Housing and Urban Development (HUD) programs, as well as significant policy proposals aimed at improving the Low-Income Housing Tax Credit program and a proposal to modify and permanently extend the New Markets Tax Credit .

The proposed budget adheres to the $1.014 trillion discretionary spending cap as defined by the Bipartisan Budget Act of 2013, but also includes $56 billion in additional funding offset by $28 billion in alternative spending cuts, tax hikes, and deficit reduction measures. This additional spending, known as the Opportunity, Growth, and Security Initiative would have a direct impact on a few key HUD programs, including $125 million more for the Jobs-Plus program, $280 million in additional spending for the Choice Neighborhoods Initiative (CNI) and $75 million for Integrated Planning and Investment Grants. If enacted, these proposals would replace across-the-board sequestration cuts.

The “Green Book” which is used to provide general explanations of the administration’s budget and revenue proposals provides significant detail into different policy recommendations having to do with the Low-Income Housing Tax Credit (LIHTC) and other programs within the tax code.

Low-Income Housing Tax Credit

Significant LIHTC program proposals include:

• Allow states to convert Private Activity Bond (PAB) volume cap into LIHTCs that state housing finance agencies (HFAs) can then allocate as they see fit. Under the proposal, States would be authorized to convert PAB volume cap to be received for a calendar year into LIHTC allocation authorization applicable to the same year. The conversion ratio would be reset each calendar year to respond to changing interest rates. In addition, each State would be subject to an annual maximum amount of PAB volume cap that can be converted. For each $1,000 of PAB volume cap surrendered, the State would receive additional allocable LIHTCs for the calendar year equal to $1000 x twice the applicable percentage that applies for PAB-financed buildings and that is determined for December of the preceding calendar year.
• The budget would also allow for an alternative method for building owners to qualify for 4 percent LIHTCs. Under the proposal, an owner could qualify by meeting one of the following requirements:
  • There is an allocation of PAB volume cap in an amount not less than the amount of bonds that would be necessary to qualify for LIHTCs; – AND –
  • The volume cap so allocated reduces the State’s remaining volume cap as if tax-exempt bonds had been issued.
• Similar to a proposal included in the FY 2014 budget, the Obama administration proposes a third income election criteria whereby at least 40 percent of the units in the project would have to be occupied by tenants with incomes that average no more than 60 percent of AMI. No rent-restricted unit, however, could be occupied by a tenant with income over 80 percent of AMI; and, for purposes of computing the average, any unit with an income limit that is less than 20 percent of AMI would be treated as having a 20-percent limit. Maximum allowable rents would be determined according to the income limit of the unit.
• Allow the 9-percent temporary minimum applicable percentage to remain expired and increase the discount rate used in the present value calculation for allocated LIHTCs. The new discount rate would better reflect private-market discount rates and would apply to both 70 percent and 30 percent allocated LIHTCs.
• Add an eleventh “preservation of federally assisted affordable housing” selection criterion that HFAs must include in QAPs.
• Permit a REIT that receives LIHTCs to designate as tax exempt some of the dividends that it distributes and exclude dividends from the gross income of the shareholders that receive them.
• Provide protections for victims of domestic abuse in all Long-Term Use Agreements. This policy proposals stipulates that owners may not refuse to rent any unit in a LIHTC-produced building to person who has experienced domestic abuse and that owners could also bifurcate a lease so that the owner could (1) remove or evict a tenant who engaged in criminal activity directly relate to domestic abuse and (2) avoid evicting, terminating, or otherwise penalizing a tenant who is a victim of that criminal activity. The proposal would clarify that the continuing occupant could become a tenant and would not have to be re-tested for low-income status. the policy proposal would also clarify that occupancy restrictions or preferences that favor persons who have experienced domestic abuse would qualify for the “special needs” exception to the general public use requirement.

New Markets Tax Credit

The administration’s 2015 budget includes a proposal to modify and permanently extend the New Markets Tax Credit (NMTC) program. The NMTC program would have an annual allocation amount of $5 billion. The proposal also would permit NMTC amounts resulting from QEIs made after December 31, 2013, to offset AMT liability.

Other Tax Provisions

Renewable Energy Tax Credits: In addition to the LIHTC and NMTC proposals, the FY 2015 budget proposes to extend prior law related to the renewable electricity production tax credit for facilities on which construction begins before the end of 2014. For facilities on which construction begins after December 31, 2014, the proposal would permanently extend the renewable electricity production tax credit and make it refundable. The tax credit would also be available to otherwise eligible renewable electricity consumed directly by the producer, rather than sold to an unrelated third party and solar facilities that currently qualify for the investment tax credit would be eligible for the renewable electricity production tax credit in lieu of the investment tax credit through 2016. Solar facilities placed in service after 2016 would only be eligible for the renewable electricity production tax credit. The permanent 10-percent business energy credit for solar and geothermal property would be repealed for property placed in service after December 31, 2016. The temporary 30-percent credit for solar investments and the temporary credits for qualifying geothermal heat pump property, small wind property, combined heat and power property fuel cells, and microturbines would be allowed to expire.

Manufacturing Communities Tax Credit: The budget proposes a new Manufacturing Communities Tax Credit at $2 billion per year for 2015 – 2017. This credit would be structured similarly to the NMTC and would support investments in communities that have suffered a major job loss event such as a military base or major employer closure or a substantial reduction in a facility or operating unit, resulting in a long-term mass layoffs.

America Fast Forward Bond Program: The budget proposes the creation of an America Fast Forward Bond program as an optional alternative to traditional tax-exempt bonds, designed to attract new sources of capital for infrastructure investment.

Department of Housing and Urban Development

President Obama’s budget request funds the U.S. Department Housing and Urban Development at $46.7 billion, which is about $900 million (1.9 percent) less than the President’s FY 2014 budget request but $1.2 billion more than the total amount allotted to the agency in the recently-passed FY 2014 appropriations budget.

Rental Assistance Demonstration
Obama’s 2015 proposal requests an additional $10 million for the Rental Assistance Demonstration (RAD) program, targeted to to Public Housing properties in high-poverty neighborhoods, including designated “Promise Zones”. The budget also proposes to eliminate the 60,000 cap on the number of units eligible for RAD. This will enable HUD to address the more than 180,000 units of applications, and create approximately $6 billion in private financing for the recapitalization of public housing

Project-Based Rental Assistance
The 2015 budget requests $9.75 billion for the Project-Based Rental Assistance (PBRA) Program, which represents about 1.7 percent less than the FY 2014 enacted levels. The 2015 budget proposes several policy changes to the PBRA program, including: a proposal to fund all contracts on a calendar year, as opposed to the fiscal year to avoid short funding contracts in the future. HUD believes that this will allow all contracts to be funded for an entire year at the proposed level and will create more a more predictable and stable funding cycle.

Tenant-Based Rental Assistance
The 2015 budget proposes $20 billion for the Tenant-Based Rental Assistance (TBRA) Program, which is a 4.3 percent increase in funding over the FY 2014 enacted level. This includes $18.007 billion in TBRA contract renewals and $1.705 billion in TBRA administrative fees. This funding level not only supports all existing vouchers, but restores reductions in assisted housing units that resulted from the 2013 sequestration funding cut and provides an additional 40,000 new vouchers. Through this extra funding, HUD will be able to completely reverse the effects of sequestration. The budget also includes $75 million to create 10,000 new vouchers for homeless veterans through the Veteran Affairs Supportive Housing (VASH) program, which is exactly the same amount to which the program was funded in 2014. One interesting budget proposal is an expansion of the Family Self Sufficiency Program to include families living in privately owned HUD-assisted housing.

Choice Neighborhoods Initiative Program
The administration’s 2015 budget proposes $400 million for the Choice Neighborhoods Initiative (CNI) program, including $120 million through regular appropriations and $280 million through the Opportunity, Growth, and Security Initiative, which could provide up to ten new CNI grants to help revitalize distressed areas. This would be a major expansion of the CNI program, about $310 million more than what the program received in the enacted FY 2014 budget. Preference for these funds would go to designated Promise Zones or high-poverty communities where the Federal Government is working to invest and engage to create jobs, leverage private investment, increase economic activity, reduce violence, and expand educational opportunities. To further support Promise Zones, the Budget includes companion investments of $100 million in the Department of Education’s Promise Neighborhoods program and $29.5 million in the Department of Justice’s Byrne Criminal Justice Innovation Grants program, as well as tax incentives to promote investment, jobs, and economic growth.

In addition to the $280 million in additional CNI funding requested through the Opportunity, Growth, and Security Initiative, the proposed budget also requests $75 million for Integrated Planning and Investment Grants, which is an interagency partnership between the Department of Transportation (DOT) and the Environmental Protection Agency (EPA) and other Federal agencies aimed at expanding job opportunities and improving the quality of life for families by providing incentives to regions and communities to align planning efforts, invest public and private resources to attract businesses, modernize land use and building codes, attract private capital for community revitalization efforts, and sponsor robust community engagement efforts.

Public Housing Capital Fund and Public Housing Operating Fund
The budget proposes $1.925 billion for the Public Housing Capital Fund, which represents a 2.67 percent increase in funding over the 2014 enacted levels. The Public Housing Capital Fund is for capital and management improvement requirements at public housing properties. The FY 2015 budget also proposes $4.6 billion for the Public Housing Operating Fund, which funds the operating expenses of public housing units, and represents a 4.5 percent increase in funding over FY 2014-enacted level. The budget would also increase funding for the Jobs-Plus Pilot Initiative to $25 million from $15 million for FY 2015.

Other Programs:

• Section 202 Housing for the Elderly Program: The FY 2105 budget would provide $440 million to the Section 202 program, about 14.7 percent more than the FY 2014-enacted level and $40 million more than the President’s FY 2014 budget request.
• Section 811 Housing for Persons with Disabilities Program: The president’s FY 2015 budget request proposes $160 million in Section 811 funding, which is about 27 percent more than both the FY 2014-enacted level and the President’s FY 2014 budget request.
• Housing Opportunities for Persons with AIDs (HOPWA): The HOPWA program would receive $332 million to provide housing and supportive services to persons living with HIV and AIDs, which represents a modest increase of the FY 2014 enacted funding level of $330 million.

Community Development Block Grant Program and HOME Investment Partnerships Program
The Community Development Block Grant (CDBG) and HOME programs take a significant hit in the President’s FY 2015 budget, reducing funding for the CDBG to $2.8 billion and HOME to $950 million, which combined is $280 million less than 2014 enacted level. While a decrease in funding is proposed for these two programs, the administration’s budget also includes proposals to improve the program’s performance. One such proposal aims to eliminate small grantees, thereby improving efficiency, driving regional coordination and supporting grantees in making strategic, high-impact investments that address local community goals.

Homeless Assistance Grants
The Homeless Assistance Grants account provides funds for the Emergency Solutions Grant (ESG) and Continuum of Care (CoC) programs. The 2015 budget proposes $2.406 billion for the program, which is 14 percent more than the FY 2014 enacted funding level. This funding is intended to support new permanent supportive housing units, leading to over 330,000 HUD-funded beds assisting the homeless.

National Housing Trust
The President once again requests $1 billion for the National Housing Trust Fund,reconfirming the administration’s commitment to this program, which is authorized but has never been funded. The Housing Trust Fund, which would be a similar to the HOME program, would offset some of the proposed funding decreases in the HOME program and would be used to finance the development, rehabilitation, and preservation of affordable housing for extremely-low income families. The administration expects that over time, the program would produce approximately 16,000 affordable units using a mix of funding sources, including other public funds, tax credits, and private debt.

Other Initiatives
The budget provides $15 billion for Project Rebuild, a successor program to Neighborhood Stabilization Program (NSP), which is geared towards expanding opportunities for grantees to address abandoned and foreclosed commercial properties for redevelopment purposes. Project Rebuild would focus on hardest hit communities to address blight and rehabilitate homes in struggling neighborhoods. In addition to partnering with local governments, Project Rebuild funding will support new and existing community land banks, incentivize private investments in hardest hit communities, and fund job training programs to strengthen local workforce capacity. Collectively, these programs will stabilize neighborhoods and help the worst-affected communities turn the corner to recovery.

Resources:
FY 2015 Proposed HUD Budget
FY 2015 “Green Book”