HUD Aims to Maintain Funding for Essential Programs

The budget by which the federal government operates is being carefully dissected and scrutinized as Congressional members of both parties look for ways to cut spending and reduce the deficit.

Mindful of this environment, HUD, in its fiscal year (FY) 2012 budget, proposed a plan of some modest cuts while still maintaining funding for the most vital programs for “the vulnerable people and often-distressed places that HUD helps,” department officials said.

Under the proposed plan, spending on housing programs would be cut by about $1 billion. Community Development Block Grants (CDBGs) would lose about $300 million. Cuts also would be made to HOME Investment Partnerships and to new construction components of the Supportive Housing Programs for the Elderly (Section 202) and Disabled (Section 811). HUD also projects some level of savings by simplifying rent-setting provisions of its Section 8 voucher program.

Budgets for FY 2012, which begins Oct. 1,2011, are works-in-progress, and at present all departments and programs seem to be up for grabs. For instance, the spending plan introduced in the House of Representatives in late February, after the HUD plan was revealed, proposed to cut the agency's funding by about 20 percent.

The final level of funding for HUD for the next fiscal year remains to be determined. But here's a look at what the department hopes to see on its books for affordable housing rental assistance programs come Oct. 1.

Tenant-Based Rental Assistance

HUD's Section 8 Tenant-Based Rental Assistance (TBRA), also called the Housing Choice Voucher program, is the nation's largest and preeminent rental assistance program for low-income families. For over 35 years it has served as a cost-effective means for delivering safe and affordable housing in the private market.

In FY 2012, HUD is requesting $19.22 billion for TBRA programs. With this request, HUD expects to assist over 2.2 million families by renewing existing vouchers and issuing new incremental vouchers to homeless veterans, victims of natural disasters, and other vulnerable families.

HUD's top priority for the TBRA program is to maximize the resources available to provide assistance to the neediest of our nation's citizens, which include the elderly, homeless families and individuals, disabled persons, veterans, and at-risk youth. HUD will also continue the award-winning initiative it launched in 2010 to develop tools for local housing agencies that improve the administration and utilization of vouchers. Specifically, the TBRA request includes:

• $17.19 billion for the renewal of existing Section 8 vouchers, maintaining affordable housing for over 2.2 million families in need, including the renewal of special-purpose vouchers funded in previous years;

• $1.65 billion for administrative fees associated with operating TBRA, HUD's largest program;

• $114 million for Mainstream Section 811 vouchers to give persons with disabilities access to affordable, private housing of their choice, and accommodate the provision of supportive services;

• $75 million in Tenant Protection vouchers to families at risk of displacement from public housing, due to moderate rehabilitation, or as a result of HUD Multifamily Housing programs through no fault of their own;

• $75 million in Veterans Affairs Supportive Housing (HUD-VASH);

• $60 million for Family Self-Sufficiency Coordinators to provide crucial services to families so that they can achieve employment goals, and accumulate assets to become financially self-sufficient; and

• $57 million in Housing and Services for Homeless Population vouchers.

Public Housing

On its own, the nation's housing market has not developed sufficient housing for America's poorest families. Private rental housing is in particularly short supply, a situation that has been exacerbated by shrinking incomes across the nation.

HUD's public housing stock has proved to be a small but valuable asset for addressing this shortage, especially as over half of the program's 1.1 million families have an elderly or disabled head of household. HUD's Public Housing program provides funds to locally controlled public housing authorities (PHAs) to supplement rents, maintain the buildings, and manage the programs. In FY 2012, HUD is requesting a total of $6.37 billion to operate public housing and address the capital needs of its physical assets. This request includes:

• $3.96 billion in Public Housing Operating Funds, coupled with $1 billion from PHAs operating reserves, to fully fund 3,100 PHAs to operate and manage approximately 6,980 Public Housing sites nationwide; and

• $2.41 billion in Public Housing Capital Funds to address the needs of affordable rental housing, including modernization capital grants, administrative receiverships, and financial and physical assessment support.

While HUD is committed to distributing operating and capital funds in the most effective way possible, the department recognizes that PHAs managing the sites face challenges maintaining an aging public housing stock on limited funding. Half of all public housing units were constructed before 1970 and require continued investment to remain viable. Underfunding will only increase the backlog of modernization needs, currently estimated at $20 to $30 billion, and expand the estimated 15.5 percent of units that don't meet physical condition standards.

Therefore, the federal government is seeking alternative, sustainable means, other than direct capital grants, to meet these needs—particularly because public housing serves tremendously vulnerable families who have few options in the event that their housing is lost. Accordingly, HUD is requesting $200 million in FY 2012 for a Transforming Rental Assistance (TRA) initiative demonstration, which is designed to preserve public and assisted housing by increasing access to other sources of public and private capital.

Specifically, this TRA funding request will cover the incremental cost of PHAs and site owners that want to convert public housing, Section 8 Moderate Rehabilitation, Rent Supplement, and Rental Assistance programs to an improved form of long-term, project-based Section 8 contracts. These funds are estimated to allow for the conversion of approximately 255,000 public housing units; 1,600 Rent Supplement and Rental Assistance Program units; and 6,000 Moderate Rehabilitation units.

Participation in the initiative will be voluntary. HUD intends through the conversion process to preserve sites that might otherwise be lost; assure the physical and financial sustainability of remaining sites; and enable owners to leverage private financing to address immediate and long-term capital needs, improve operations, and implement energy-efficiency improvements.

Project-Based Rental Assistance

HUD's Project Based Rental Assistance (PBRA) program provides rental assistance funding to privately owned multifamily rental housing projects. Eligible private owners include for-profit and nonprofit organizations, cooperatives, limited liability corporations, limited partnerships, and other types of joint ownership structures.

The amount of PBRA funding paid to each owner is the difference between what a household can afford (up to 30 percent of income) and the approved rent for an affordable housing unit in a multifamily rental housing project. These sites are financed in the same manner as entirely market-rate rental developments, utilizing private financing and equity or FHA insurance. In FY 2012, HUD is requesting $9.43 billion in funding for PBRA programs. This includes:

• $9.14 billion for the renewal and amendment of existing PBRA contracts, including Project-Based Section 8 contracts, Moderate Rehabilitation contracts, and Single-Room Occupancy contracts; and

• $289 million for project-based contract administrators to effectively administer the PBRA program.

With this funding, HUD expects to serve over 1.2 million low-income families, many of whom would face worst-case housing or homelessness without such assistance.

In addition, communities benefit from sites receiving this funding, as owners must hire and maintain local site management firms, maintenance workers, and other construction/rehabilitation firms to ensure that the site provides decent, safe, and sanitary housing for the residents, as well as professional legal, security, and insurance services.

Taken together, PBRA directly supports an estimated 55,000 jobs annually at sites throughout the country. In addition, owners of PBRA housing contract for services with local businesses and service providers that are estimated to produce another 45,000 indirect or induced jobs, totaling employment generation of 100,000 jobs annually.

PBRA also serves as both a redevelopment and preservation tool for private multifamily rental housing owners, creating a credit enhancement for the financing of the site, and in turn allowing owners to refinance, redevelop, and preserve their assets.