LOOKING UP: AN ANALYSIS OF THE ADMINISTRATION'S PROPOSED FISCAL YEAR 2001 RURAL HOUSING BUDGET(c) Housing Assistance Council, 2000
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I. INTRODUCTION This report analyzes selected portions of the Clinton Administration's proposed
Fiscal Year 2001 budget and discusses their implications for rural
housing. The report includes a program-by-program review of funding requests
for the Department of Agriculture's Rural Housing Service (RHS)
and for the Department of Housing and Urban Development (HUD).
1
The FY 2001 budget generally presents good news for rural housing. The
RHS budget shows an increase overall, although the small increase in the
much-needed Section 515 rental housing production program, already
drastically cut in recent years, is disappointing. The RHS budget
continues to emphasize guaranteed loans, although direct loans generally
serve lower income residents. The budget proposes an increase over FY 2000
levels for almost every HUD program, including the new Office of Rural
Housing and Economic Development. The fate of the proposed increases for
both RHS and HUD is uncertain, however, because the overall budget is
expected to create controversy in Congress. Highlights of the Budget Proposals for Rural Housing The FY 2001 budget demonstrates the continued popularity of homeownership.
Ownership rates are increasing, and the President has set goals for
expanding them further. Thus the budget would increase RHS's Section
502 direct loan program by $200 million and the Section 502 guaranteed
program by $500 million self-help production, which reduces costs
by relying on homebuyers' or volunteers' labor to construct homes, is
particularly favored. The budget would add $12 million for RHS Section 523
self-help housing technical assistance (TA) grants and – unlike last year's
budget, which initially proposed no funding for the Self-Help
Homeownership Opportunity Program (SHOP) – suggests $17.5 million for
SHOP, albeit a reduction from the $20 million appropriated in FY 2000. Also popular with the Administration are government guarantees of loans
made by private lenders (banks, savings and loan institutions, or mortgage
bankers) and leveraged loans, which combine direct government loans with
private sector loans. Thus, in addition to the proposed increase in funds
for Section 502 guaranteed loans, the budget would double the Section 538
guaranteed rental loan program to $200 million. These arrangements
encourage the private sector to be involved in affordable housing. They
cost the government less than direct loans, but they produce housing for a
higher income group than direct loans. The budget proposes to change RHS's Farm Labor Housing program to a new account
combining Section 514 loans and Section 516 grants, with an increase
in total funding for farmworker housing. Under HUD's aegis, CDBG
and HOME would increase also, as would Homeless Assistance Grants, Housing
Opportunities for Persons With AIDS, fair housing efforts, Native American
housing block grants, Section 202 elderly housing, and Section 811 housing
for people with disabilities. Rental housing does not fare as well. The budget proposes only a slight increase in
funding for the already substantially reduced Section 515 direct loan
program for production of rural rental housing. A larger increase is
suggested for the Section 521 Rental Assistance (RA) program, which makes
up the difference between income and rent for people living in Section 515
or RHS-funded farmworker housing units, but the total still would not
be enough to meet the need. Substantial increases are proposed in HUD's
Section 8 program, which assists low-income tenants in both rural and
urban places, but $4.2 billion of the total $14.1 billion would come from
FY 2002 appropriations. Last year's budget proposed similar gimmicks
for both Section 521 and Section 8, and Congress declined to adopt the
strategy. Together, Section 8, Section 515, and RA provide decent, affordable
homes for the lowest income rural residents, including many working poor
families and many elderly people. HAC remains concerned about the poorest
rural residents – those who cannot afford a guaranteed bank loan, or even
a self-help home. Housing costs continue to rise in rural areas, making
affordability a growing problem for low-income rural families, the
majority of whom include at least one wage earner. In short, additional
subsidized rental housing, rental assistance, and deep subsidies for
homeownership are still essential if the federal government is to have any
hope of fulfilling its pledge of "a decent home and a suitable living
environment for every American family." Next Steps in the Process The budget proposals now will move through the congressional
appropriations process, emerging in late summer or fall as bills to fund
the agencies for the fiscal year beginning October 1, 2000. Last year, in
adopting appropriations for FY 2000, Congress struggled with caps on
discretionary spending (including housing and community development)
imposed by the 1997 budget agreement. This year, observers expect Congress
to eliminate the caps, which have proven unrealistic, as well as
unnecessary in the current economic boom. Legislators may also consider
proposals to adopt a two-year budget and appropriations cycle.
2
Congress also may pass some authorizing legislation for housing this year.
The Housing Banking Committee's Housing Subcommittee completed work
on H.R. 1776 in February. It focuses on a number of homeownership issues
but may become a vehicle for other housing programs. At least one of the rural housing proposals in the President's budget
also requires a new congressional authorization. The Budget Authority (BA)
proposed for the Section 538 multifamily loan guarantee program works only
if Congress eliminates the requirement that 20 percent of projects funded
receive a modest interest subsidy. RURAL HOUSING SERVICE PROGRAMS
The Administration's FY 2001 rural housing budget continues a policy of
preferring relatively unsubsidized loan guarantees to direct loans. The
budget proposes to increase both types of loan programs, but $600 million
of the $800+ million total increase (about 73 percent) is for guaranteed
loans. HAC has consistently expressed concern about the trend towards
guaranteed loans because, while they are less costly to the government,
they tend to serve higher income households than direct loans do. Unlike the FY 2000 budget, which proposed reductions in total budget authority
BA), 3
this year's budget increases BA by more than $190 million
above the FY 2000 appropriations level. The actual outcome may or may not
be equally favorable because, once lowered, BA ceilings are usually not
raised back to former levels. In 1994 – the last year of substantial funding for the important
Section 502 direct and 515 programs – the total BA for rural housing was
$1.268 billion, which compared favorably to the $1.127 billion proposed
for FY 2001. Despite a proposed increase for FY 2001, however, Section 502
direct still has lost $145.4 million in BA and $500 million in program
dollars since 1994. Section 515, which assists those most in need, lost
80.9 percent of its BA and 77.8 percent of its program level from FY 1994
to FY 2001. Information on the proposed budget for specific programs is found under separate
headings in the text below. Appendix A summarizes the FY 2001 RHS
budget
and compares it to appropriations levels for FY 2000. Appendix B shows
changes in budget authority since FY 1994. Appendix C compares the estimated
units that can be produced with these funding levels. Appendix D sets
forth HAC's calculations of how the programs are targeted to low- and
very low-income people. Rural Housing Assistance Grants
The budget proposes to continue the Rural Housing Assistance Grant
(RHAG) program established in FY 1998, consolidating several rural housing
grant programs: Section 504 very low-income repair grants, Section 509(c)
compensation for construction defects grants, Section 509(f)/525
supervisory and technical assistance grants, and Section 533 housing
preservation grants. RHAG would have a single BA amount, $39 million for
FY 2001, a decrease from $34 million in FY 2000. However, in a change from
previous years, Section 516 farm labor housing grants are proposed to be
removed to a separate Farm Labor Housing program account. If Section 516
were still in RHAG the total would be $59 million, $14 million more than
the RHAG total in FY 2000. Within the RHAG total the Administration has flexibility to determine
the level for each individual program. RHS estimates that in FY 2001 RHAG
funds would provide $30 million for Section 504 grants, $8 million for
housing preservation grants, and $1 million for Section 509(f)/525. Advocates of this consolidation approach believe that without it, the
small grant programs would be vulnerable to elimination as Congress
searches for budget reductions. Others view it as potentially hiding cuts
in individual programs from the scrutiny of members of Congress with a
particular interest in a specific grant program, thus making further
reductions easier in the future. Section 502 Homeownership Loans Section 502 encompasses two distinct programs for homeownership loans –
direct, subsidized loans, and guaranteed, unsubsidized loans. Direct loans
are made to households with low incomes (below 80 percent of the area
median) and very low incomes (below 50 percent of the area median), but at
least 40 percent of the direct program funds must be loaned to very
low-income households. Guaranteed loans are made to low and
moderate-income households. The direct funds are borrowed through the U.S.
Treasury and re-loaned to eligible borrowers. The following table illustrates the budget request amounts and compares
them to fiscal years 1999 and 2000. Section 502 Program Funding (dollars in millions)
Both the Administration and Congress favor loan guarantees since they cost the government almost nothing. The loan subsidy (including possible losses) rate is only 0.61 percent. It has declined from 1.64 percent in FY 1994. Budget Authority for Section 502 Programs (dollars in millions)
In 1999, the average income of Section 502 direct borrowers was $19,369 (54.0 percent of area median), compared to $33,285 for those with Section 502 guaranteed loans (92.7 percent of area median). The guaranteed Section 502 program, while unsubsidized (and despite some anti-consumer policies), does provide a positive supplement to the direct program. During FY 1999, 29.1 percent of 502 guarantees went to those with incomes below 80 percent of median, including both low-income (26.6 percent) and very low-income (2.5 percent) households.
Section 515 Rural Rental and Cooperative Housing The Section 515 program provides 30-year, 1 percent loans (amortized at a 50-year rate) to finance multifamily rental and cooperative housing development. By virtue of its terms and the availability of rental assistance, this program has been the mainstay of the Rural Housing Service. s efforts to serve the poorest of the rural poor: average income of tenants in units in the Section 515 portfolio is $7,617, and 88.7 percent have incomes below 50 percent of median, with the average being only 26.4 percent of median. In 1995, Section 515 funding was reduced by 59.3 percent of its 1994 level. The FY 2001 budget proposes to increase the program level slightly, from $114.329 million in FY 2000 to $120 million, an added 5 percent. The proposed level is still a 77.8 percent reduction from that in 1994. RHS staff estimate that a minimum of $50 million is needed for portfolio maintenance. The $70 million available for new construction would create only about 1,320 new units. After funding legislated set-asides and holding a very small reserve, there may not be sufficient monies to allocate enough for each state to fund one project. The shortage of funding has also led to a number of lawsuits by owners who by law are not permitted to prepay their loans, but – because funds have not been available – are also not provided with required incentives. Missing in all the slashing of Section 515 funds is any true concern for the plight of affected tenants. As BA is repeatedly lessened, the program will gradually (or perhaps not so gradually) become unable to carry out its statutory responsibilities. The budget number postpones the immediate threat, but does not restore Section 515 to a meaningful status. Section 515 Funding (dollars in millions)
Section 515 has the capacity to house the rural poor, and is expensive, with a subsidy rate at 49.27 percent because of the very low incomes of Section 515 tenants. The budget proposal does little to help and essentially continues an Administration policy of directing agency resources to housing that is less costly to the government. Section 515 Unit Production
Section 515 funding has been a good investment for the U.S. government. The delinquency rate for the 16,869-project portfolio is only 1.6 percent. The delinquency rate for projects owned by nonprofits is only 1.3 percent. Only 0.02 percent of total dollars lent are in default or delinquent.
Section 521 Rental Assistance The Rental Assistance (RA) program provides project-specific subsidy that is combined with either Section 514/516 farm labor housing or Section 515 rural rental housing. RA subsidizes the difference between basic rent (rent determined under subsidized mortgages) and 30 percent of tenant income. The FY 2001 budget proposes to continue the practice of providing the Secretary of Agriculture with discretion relative to the use of RA. (Prior to 1994, Congress earmarked RA funds for new construction, renewal, etc.) The FY 2001 RA budget request for $680 million is an increase of $40 million over the FY 2000 level. Rental Assistance is sorely needed. The last available tenant data indicated that 86,355 tenants in Section 515 financed units were rent burdened. Efforts should be made to increase the proposed level even further, to significantly reduce tenant rent burden. RHS's possible use of Rental Assistance funds is shown in the table below. An additional potential crisis is looming in the out years. HAC estimates the annual RA cost, not including servicing (primarily renewals), will reach $940.9 million by 2005, almost equaling the $1.091 billion total BA for rural housing in the 2001 budget. As HAC advised in our 1999 and 2000 budget analyses, RHS needs to begin planning on adjustments to avoid an eventual crisis.
Rental Assistance Assumptions For FY 2001a
Section 521 Rental Assistance Funding (dollars in millions)
Section 523 Self-Help Technical Assistance Grants The Mutual Self-Help Housing program provides administrative and supervisory funding to enable low-income families to construct their own homes cooperatively. Families contribute approximately 65 percent of total labor. The grant costs are offset over time by the reduced amount of interest subsidy resulting from lower house costs and mortgage levels. Almost all self-help homes are financed with Section 502 loans. Self-help housing has become more popular in recent years, due at least partially to escalating home costs. RHS and Congress responded to a dramatic increase in demand by more than doubling the Section 523 Self-Help Technical Assistance (TA) grant program from $12.65 million to $26 million in FY 1997, and then raising it to $28 million in FY 2000. The FY 2001 budget proposal increases the $28 million level to $40 million. This would be a very welcome addition to an excellent program. Section 523 Self-Help Technical Assistance Funding (dollars in millions)
The mutual self-help program evolved in the early 1960s. Its development contributed to the rise of the present-day rural housing movement by spurring interest and participation in the housing programs run by RHS (and formerly by the Farmers Home Administration, or FmHA) on behalf of low-income, rural families. 4
Section 523 Self-Help Housing Land Development Fund This small program provides 3 percent loans for the development of housing sites used exclusively in the self-help housing program. It is authorized in the law as a revolving fund, but in the past only a small portion of revolved monies have been made available through the budget and appropriation process. It has always been underfunded, but the 1999 budget substantially increased it to $5 million and essentially the same amount is requested for FY 2001. Organizations sponsoring self-help housing (technical assistance grantees) must frequently subdivide land and develop building sites to meet family demand for participation. The lack of a reasonable funding level has, in the past, bred apathy toward what should be a useful program. Section 523 Self-Help Land Development Funding (dollars in millions)
Funds for site development for self-help
housing projects are also provided through the Self-Help Homeownership
Opportunity Program (SHOP) administered by the Department of Housing and
Urban Development (HUD), and discussed in the HUD section of this report,
below. The advantages of SHOP further reduce demand for Section 523 site
loans.
Section 504 Very Low-Income Repair Loans and
Grants
Section 504 provides small loans (at 1 percent interest)
and grants of up to $7,500 (limited to the elderly) to very low-income
homeowners to make repairs primarily to remove health and safety hazards.
The program is generally used to ameliorate the unhealthy living
conditions of poor homeowners rather than to meet building code standards.
Demand for grant funds has always far outstripped supply.
The loan program has become increasingly well used. Record obligation
levels were recently reached. The $35.1 million obligated in FY 1996
was the most in the history of Section 504 (which dates to 1950). Unfortunately
the appropriation was reduced in 1997, 1998 and 1999. The program's funding rose
in 2000 because funds were appropriated for natural
disaster recovery. If the natural disaster loan amounts are discounted,
the FY 2001 budget proposal provides an increase above the FY 2000
amount.
Section 504 Funding (dollars in millions)
a. Included in RHAG.
Section 509(c) Compensation for Construction Defects A small amount of money is authorized under Section 509(c) to make the repairs and corrections necessary when an RHS 502-financed building has a defective condition – section 509(c) provides protection for low-income borrowers and is used only when there is no recourse against the builder. The budgets for fiscal years 1998 through 2001 have included this program in the RHAG, but provided no new funding. Carryover funds will continue to be utilized until expended. Section 509(c) Funding (dollars in millions)
a. Included in RHAG, but only with carryover funds. None of the RHAG funds have been allocated for 509(c).
Section 514/516 Farm Labor Housing Loans and Grants
Section 514 loans (1 percent for 33 years) and Section 516 grants (up to 90 percent of development costs) are used to provide housing for domestic farmworkers. The two programs are often used in combination. The budget calls for a new funding and accounting program for Farm Labor Housing. The FY 2001 budget proposes to remove Section 516 from the RHAG and combine three programs into one Farm Labor Housing program account. These three are: (1) the regular Section 516 grant program (which would receive $15 million), (2) the Section 516 migrant housing grant program (which would receive $5 million), and (3) the Section 514 loan program, converted to a subsidy grant (with budget authority of $15.777 million expected to generate a program level of $30 million). The purpose is to provide flexibility. The 514/516 program has always been woefully underfunded. A 1980 congressionally mandated study estimated a need for 700,000-800,000 new and rehabilitated units just to house migrant farmworkers. If the number of units produced since 1980 were deducted from 700,000, it still would take 1,020 years to meet farmworker housing need at the rate proposed in the Administration's FY 2001 budget (assuming no need for rehabilitation for the 514/516 units produced during the 1,000-plus year period and no further inflation in development costs). 5 A Section 516(k) program for housing to serve both migrant farmworkers and homeless persons has never been funded, although it could use funds from the new Farm Labor Housing program account. The authorizing legislation has recently been amended to (1) permit the use of Section 521 RA as operating subsidy in migrant projects, (2) change the definition of migrant farmworker to include migrant food processing workers for 516(k) projects and those utilizing Section 521 operating assistance, and (3) make limited partnerships with a nonprofit general partner eligible for Section 514 loans. Section 514/516 Funding (dollars in millions)
b. Budget provides $15.777 million for Section 514 subsidy. Program
level is estimated by RHS. The housing plight of farmworkers is briefly a matter of public
conscience when a television documentary on the subject is aired or when
migrant children perish in a labor camp fire. But public funding to help
is limited. Thus any funding increase is welcomed. Section 524 Rural Housing Site Development Loans This is a small, market-rate (currently 7.375 percent) loan program
available for the development of sites for low and moderate-income
housing. The program is usually neither well used nor well funded. Only
61.1 percent was obligated in FY 1999. The 2000 budget provided an
increase to $5 million, the same amount proposed for FY
2001. Section 524 Funding (dollars in millions)
Section 533 Housing Preservation Grants This popular competitive grant program enables public and nonprofit recipients to design how funds will be used to rehabilitate housing within a community. It has been slashed since 1994, by $1 million in FY 1995, $11 million (halved) in FY 1996 and an additional $3.9 million in 1997. It was included in the RHAG and slightly increased for 1998. Still in the RHAG for FY 1999, it was again reduced, followed by a further slight decrease in the FY 2000 RHAG. Reversing the general trend, the FY 2001 budget would slightly increase its RHAG allocation. Section 533 Funding (dollars in millions)
a. Included in RHAG. Following a steady reduction in many rural housing programs, RHS has placed most of its very low-income repair funding in the Section 504 program. While HPG is popular, and permits flexibility in use of the grant funds, it is limited to a market area, usually to a neighborhood. The Section 504 program is open to all rural areas.
Section 509(f) and 525 Supervisory and Technical Assistance Grants
The Section 509(f) and Section 525 programs provide capacity-building assistance to rural nonprofits in underserved areas. Appropriations of $2.5 million each year went unused in FY 1992 and 1993 for lack of regulations. For FY 1994 and thereafter, FmHA/RHS issued regulations for the program, calling it the "Housing Application Packaging Grants" program and specifying eligible counties and procedures for loan packaging and reimbursement. Unlike the underserved area concept, which is still in effect and targets other RHS funds to 100 needy counties, the packaging grant program is available to 300 counties with rural occupied substandard housing at or above 10 percent and rural poverty at or above 20 percent. The FY 2001 budget continues the program in the RHAG, and allocates an additional $1 million. Carryover funds will be used until depleted. Sections 509(f) and 525 Funding (dollars in millions)
a. Included in RHAG, using carryover funds.
Section 538 Guaranteed Multifamily Housing FY 2001 will be the sixth year for the Section 538 guaranteed loan program for multifamily housing production. The first three years were essentially demonstration, but this budget proposes to increase the program to $200 million from $100 million in FY 2000. The law requires that at least 20 percent of loans guaranteed under Section 538 must be subsidized down to the Treasury rate, which is moderately lower than the market rate. Despite this modest subsidy most tenants have incomes in the 81 to 115 percent of median range. RHS has proposed legislation to abolish the subsidy requirement. If it succeeds, the proposed FY 2001 budget authority will produce a program level of $200 million. Section 538 units are larger and costs higher than those produced with funding from the direct Section 515 program. In FY 1999 $74.8 million in guarantees leveraged an additional $116.6 million to produce 2,540 units. Section 538 Funding (dollars in millions)
Rural Housing Service Staffing The budget proposes establishment of a new consolidated salary and expense (S&E) account for Rural Development and the three Rural Development agencies (the Rural Housing Service, Rural Business-Cooperative Service, and Rural Utilities Service) since 1994 Rural Development has provided field staffing for all three agencies. Later, most support services of the three agencies were consolidated in Rural Development. In the current fiscal year, S&E is broken out as shown in the following table.
Salaries and Expenses, Rural Development Agencies, FY 2000 (dollars in millions)
Total Rural Development S&E by Year (dollars in millions)
Some of the slight decline is attributable to staffing reductions, as shown in the table below.
Number of Rural Development Field Offices (not including 47 State Offices)
Targeting The law targets the RHS rural housing programs (excluding Section 502 guaranteed loans) to particularly needy rural residents. Data on rural housing targeting is shown in Appendix D. Specific examples of legal intent within Title V of the Housing Act of 1949 include the following. Section 502(d) Requires that not less than 40 percent of 502 direct loan funds be used for very low-income families. Section 509(f) Targets 5
percent of rural housing funds to counties with high levels
Section 515(p) Targets
tenancy in Section 515 units heavily to persons and families
Section 532(a)(l)and (2) Requires
that priority in application processing be given to Section 515 funding merits increases to further targeting. Reduced funding for Section 515 reduces the possibility of assisting the poorest households. Elimination of Section 502 Deferred Mortgage Payment loans helped defeat the intent of that program to serve the very poor. In FY 1997 only 30.9 percent of RHS funding assisted very low-income households, far below the 61.9 percent level in 1991. In FY 1999 targeting was at an all-time low of 25.6 percent. For 2001, we estimate that this figure will be only 27.5 percent. An increase in the proportion of Section 502 program funding used for guaranteed loans and insufficient funding of the Section 515 program are directly responsible for this shift. Rural Community Development Initiative The Administration's budget would continue USDA's new Rural Community Development Initiative (RCDI), first funded in FY 2000, at the same $6 million funding level for FY 2001. Intended to fund intermediary organizations to provide capacity building aid to community-based rural nonprofits, this program has the potential to be very useful for local rural housing producers. Community Facilities Programs In addition to RHS housing appropriations, the 2001 budget proposal for USDA Rural Development includes other non-housing programs of great importance to the rural poor and their communities. Under the Rural Utilities Service, the budget proposes to raise water and waste disposal direct loans from $679 million in 2000 to $1,032 million in 2001. Water/waste grants would drop from $530 million in FY 2000 to $502 million. Also, under the Rural Housing Service the proposal is to keep direct community facility loans at $250 million in 2001 and to increase community facility grants from $14 million to $24 million. Rural Empowerment Zones and Enterprise Communities USDA's budget proposes $15 million in grants to rural Empowerment Zones (EZs) and Enterprise Communities (ECs), the same amount as in 1999 and 2000. Its budget summary says the Administration would provide mandatory spending . i.e., not subject to annual appropriations . For these areas, a change that requires legislation. In addition, Rural Development programs, including the rural housing programs, target portions of their funding to rural EZs and ECs. Rural Development estimates those targeted amounts will total about $20 million in FY 2000. Back to Table of ContentsDEPARTMENT OF HOUSING AND URBAN DEVELOPMENT PROGRAMS The Administration's FY 2001 budget request for HUD programs is one of the best in some years. Almost every HUD account would receive an increase in funding, although it is unlikely that the full requests will be approved by Congress in all areas. As in most recent years, the HUD budget is more positive than the funding requests for RHS, although the difference is not as stark as in some other years. The total HUD budget would be $32.1 billion in 2001, a $6 billion increase over FY 2000 appropriations. However, as was proposed in 2000, $4.2 billion in housing certificate funds would be delayed until the next fiscal year. There are several significant developments for rural housing in the HUD budget. The Office of Rural Housing and Economic Development would continue with a slight increase in funds. The Self-Help Homeownership Opportunity Program (SHOP) would receive less funding than this year, but it was not included at all in last year's HUD budget request. Many other programs used in rural (and urban) areas would receive increases. Key items in the 2001 HUD budget proposal include the following:
Community Planning and Development One of HUD’s largest divisions, the Office of Community Planning and Development (CPD) oversees the CDBG, HOME, homeless assistance, rural housing, and other programs. The HUD budget would increase overall funding for the CDBG program, including funds allocated to states and localities under the CDBG formula, while decreasing setasides within the CDBG account. But HUD’s method of reducing the overall amount of setasides is to assume that Congress itself will make no special purpose grants. In reality there are a number of these in most years (for example, $232 million in 2000). One CDBG setaside important to rural areas in the last few years has been the Self-Help Homeownership Opportunity Program (SHOP), created by Congress in 1996 and first funded in FY 1997. Through intermediaries, SHOP provides funds for site development for self-help housing projects. HUD has awarded substantial amounts of the available funds ($13.5 million in 1997, $4.8 million in 1998, and $6.0 million in 1999) to HAC, which in turn loans or grants the money to local organizations'sHOP received $20 million in both FY 1999 and FY 2000. In the published FY 2001 budget request, HUD asks for $17.5 million for SHOP. However, this is more than the $10 million sought by HUD in last year’s budget. Before an amended submission, HUD originally sought zero for SHOP in 2000. Two new CDBG setasides are $22 million for a Mississippi Delta Initiative and $20 million for a Community-Interfaith Partnerships Initiative. The Delta funds are part of a larger presidential plan to create a new $153 million Delta Regional Authority to aid the Lower Mississippi Delta Region. This proposal includes $30 million in new funds, with the balance coming from existing programs at HUD, Transportation, USDA, and four other departments. The Interfaith Initiative, operating out of the HUD Center for Community-Interfaith Partnerships, would provide competitive grants to increase the involvement of community- and faith-based groups in HUD programs. The budget revives an idea HUD floated informally last year for creation of Optional Entitlement Communities (OECs) that could receive CDBG formula funding directly from HUD. According to the budget narrative, HUD will propose that OECs be cities as small as 25,000 that are not currently part of an entitlement county, and urban counties as small as 100,000 population. Legislation would probably be needed, and chances of adoption in Congress are uncertain. A relatively small but important gain for rural areas is that the still new Office of Rural Housing and Economic Development seems to have established a permanent place at HUD. The FY 2001 budget request is for $27 million, a $2 million increase. This is a separate request under CPD, not a CDBG setaside. Also under CPD, HUD’s budget proposes to increase total funding for homeless aid programs. In addition, HUD proposes to fund 18,000 new vouchers for homeless persons moving to permanent housing. Community Planning and Development (millions of dollars)
a. Total available in FY 1999 was $32 million, including $7 million in unused FY 1998 funds from other programs.
Public and Indian Housing HUD’s FY 2001 budget requests a total of $14.128 billion for the housing certificate fund. This would include $13.01 billion to renew existing Section 8 rental assistance contracts/vouchers. The total would include a $4.2 billion advance appropriation, not available until FY 2002. For FY 2001, there would also be $690 million for 120,000 additional ("incremental") vouchers. Of this total 60,000 would be "generic" – distributed nationwide – with the rest earmarked for particular populations. As noted above, 18,000 (at a cost of $105 million) would go to homeless persons to obtain permanent housing. Thirty-two thousand (costing $183 million) would provide new Welfare-to-Work Vouchers. Public Housing Authorities and Tribally Designated Housing Entities compete for these vouchers, which provide rental assistance for welfare recipients who need housing assistance in order to transition to work. HUD proposes a $30 million increase in funds for Indian Housing Block Grants, which provide flexible funding to Tribes or Tribally Designated Housing Entities (TDHEs). Within this block grant program, $5 million would be set aside for an intermediary to promote Indian homeownership. Funding for all of the public housing programs would also rise. Public and Indian Housing (millions of dollars)
a. $4.2 billion would be an "advance appropriation" from FY 2002.
Fair Housing HUD’s FY 2001 budget request would continue a recent trend of increasing funds for fair housing activities. The new dollars would add five new state and local enforcement agencies to the 90 now receiving HUD funds. Another new initiative would be a Fair Housing Training Academy. Fair Housing (millions of dollars)
Special Populations HUD proposes to increase funding levels for the Section 202 elderly and the Section 811 disabled-persons programs. This is a shift for HUD, which until last year routinely sought large cuts in these two programs. Within the Section 202 account, funds for construction of new units would rise by $69 million, and $50 million each would be used for Elderly Service Coordinators and for capital grants to convert existing units to assisted living facilities. The Section 811 program would receive an increase of $9 million. Housing for Special Needs Populations (millions of dollars)
LOW INCOME HOUSING TAX CREDITS The Low Income Housing Tax Credit is a tax program administered by the Treasury Department and state housing finance agencies. While not a HUD program, the credit is an important housing production program and is mentioned in HUD’s budget proposal and the overall federal budget. As it has for the past several years, the administration is again proposing to increase the amount of tax credits available to each state from the current $1.25 per capita to $1.75 per capita. This increase has been proposed several times and has bipartisan congressional support, but has not yet been enacted.
COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS The 2001 budget also proposes an increase in funding for the Community Development Financial Institutions (CDFI) Fund, part of the Treasury Department. The Fund, which provides financing and technical assistance to CDFIs, received a $95 million appropriation for FY 2000 and would go up to $125 million in 2001. Back to Table of Contents | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||