Obama Administration Releases FY 2015 Budget Request

On March 4, the Obama administration sent Congress its fiscal year (FY) 2015 budget, which proposed funding for federal programs. Despite the limited overall discretionary spending caps set by the Bipartisan Budget Act (BBA) for FY 2015, the budget request increases the gross Budget Authority by 2.6 percent over FY 2014 levels, and by 10.1 percent over FY 2013 sequestration levels, to $46.66 billion. It also increases investments in several key programs, including Tenant-Based Rental Assistance, Veterans Affairs Supportive Housing Vouchers (VASH), and Choice Neighborhoods Funds.

The President’s budget request provides slight funding increases for a number of HUD programs, and decreases funding for certain critical housing production and other programs. The budget complies with the BBA, but it also includes a supplemental request of an additional $56 billion for the “Opportunity, Growth, and Security Initiative” (OGSI).

According to HUD, by closing a few unfair tax loopholes and reforming spending programs, Congress could achieve significant economic goals in research, education, manufacturing, and skills training. The $56 billion would be evenly split between defense and non-defense, consistent with the model established in the Bipartisan Budget agreement, providing equal dollar-for-dollar increases above the current law discretionary spending caps for both defense and non-defense.

The purpose of OGSI is to demonstrate areas where the President believes that additional investments should be made to help the nation “reach its full potential.” Under OGSI, three HUD programs, the Choice Neighborhoods Initiative, the Jobs-Plus Pilot, and Integrated Planning and Investment Grants, would get additional funding. It would provide:

• An additional $280 million for the Choice Neighborhoods Program, to fund comprehensive neighborhood revitalization strategies in seven to 10 additional high-poverty neighborhoods;
• An added $125 million to further expand the Jobs-Plus program to assist a total of 50,000 public housing residents to secure employment and increase their earnings; and
• $75 million for the Integrated Planning and Investment grants program to support 30 to 40 regional and community planning efforts that coordinate housing, land use, economic and workforce development, transportation, and infrastructure investments.

Details of Budget Request

Here are some of the dollar amounts and policy changes proposed in the administration’s budget request:

Tenant-Based Rental Assistance (TBRA). The administration requests $20.05 billion for TBRA, including $18 billion for contract renewals. HUD says that this amount will maintain all current tenants and restore the balance of vouchers lost due to sequestration. According to HUD, 74,000 vouchers were lost in FY 2013 because of sequestration and the FY 2014 appropriations could restore 34,000. HUD expects that the FY 2015 request would restore the remaining 40,000.

Within the TBRA classification, the administration requests $75 million to provide 10,000 new VASH vouchers, consistent with FY 2014 and prior year funding. The administration also proposes $150 million for Tenant Protection Vouchers (TPVs), a 15 percent increase over FY 2014 funding. HUD includes language that would ensure that TPVs are provided only as replacements for units lost and don’t result in a “net gain of affordable housing resources.”

HUD also proposes several policy provisions, including making improvements to project-based vouchers, expanding the sponsor-basing of the rental assistance model as part of HUD’s efforts to end homelessness, and changing the Fair Market Rent setting process. HUD also proposes to change the income recertification period for fixed-income households to every three years to reduce administrative costs. And finally, HUD proposes to change the medical expense deduction threshold from 3 percent to 10 percent of income, without proposing a concurrent increase in the standard deduction for households that are elderly or include a person with a disability.

Project-Based Rental Assistance (PBRA). The PBRA account would be funded at $9.7 billion, 2 percent below FY 2014. HUD plans to adjust all PBRA contracts to align with the calendar year starting in January 2016 to more accurately predict the cost of renewing contracts and streamline administration practices.

HUD also proposes creating a budget-neutral demonstration on energy-efficient retrofits for HUD-assisted properties that facilitates the “financing of energy and water conservation improvements.” The HUD Secretary would have the authority to issue contracts for up to two years for up to 20,000 units. These contracts would be funded through the PBRA account, but would be budget neutral because HUD would limit the cost of the performance-based contracts to the amount that would have been spent on utility costs. HUD would be required to perform an evaluation of this program authority every five years after execution.

HUD also proposes changes to the Low Income Housing Preservation and Resident Homeownership Act (LIHPRA) of 1990 to allow the HUD Secretary to terminate or modify prepayment limitations and distributions of surplus cash in order to preserve affordable housing units by acquisition or refinancing. Properties would be eligible only if they have 20-year contracts past the date of acquisition or refinancing and would be required to renew their Housing Assistance Payment (HAP) contract for a period of time as determined by the Secretary.

Public Housing. The budget requests $4.6 billion for the Public Housing Operating Fund to maintain current units and address capital needs. This would be a 5 percent increase over the FY 2014 funding level and a 13 percent increase over FY 2013 funding.

HUD proposes to fund the Public Housing Capital Fund at $1.9 billion, 3 percent above the FY 2014 appropriation and 8 percent above the FY 2013 funding level. The request includes two set-asides within the Capital Fund, including $20 million for emergency capital needs and $25 million for a Jobs-Plus Pilot, which was funded in the FY 2014 appropriations bill. The President’s OGSI budget request includes an additional $125 million for the Jobs-Plus Pilot.

HUD also provides funding related to public housing in two additional accounts. The budget request includes $10 million for the Rental Assistance Demonstration (RAD), exclusively for a targeted expansion of RAD to public housing properties that cannot feasibly convert at existing funding levels, as all RAD properties now do, and are located in high-poverty neighborhoods. HUD’s request would also remove the 60,000-unit cap for public housing and Section 8 Mod Rehab RAD conversions.

The request also includes $120 million for the Choice Neighborhoods Initiative (CNI). The OGSI request includes an additional $280 million in CNI funding, which makes the total request $400 million, consistent with HUD’s FY 2014 request. The administration includes CNI as a key component of its broader Promise Zones initiative.

Homeless Assistance Grants. The budget includes increased funding of $301 million for the Homeless Assistance Grants to maintain the current level of housing and services provided by the Emergency Solutions Grant (ESG) and Continuum of Care programs and increase the level of housing and services provided to make progress on decreasing homelessness. The Continuum of Care program would be funded at $2.18 billion to continue current projects and allow for new project funding. ESG would be funded at $215 million.

HOME Investment Partnerships. The administration would cut funding for the HOME program by 5 percent to $950 million, adding to the approximately 40 percent cut in funding to the program since FY 2012. HUD proposes policy changes to HOME, including allowing funds that are recaptured from Community Housing Development Organizations (CHDOs) to be reallocated by formula, setting a single $500,000 qualification threshold for jurisdictions regardless of the amount appropriated for HOME, and changing the current “grandfathering” allowance so that jurisdictions that fall below this threshold three out of five years are ineligible for direct HOME formula funds. These provisions would reduce the number of small participating jurisdictions receiving HOME funding and the cost of administering the program.

Supportive Housing. The Section 202 program would be funded at $440 million, an increase of 15 percent over the FY 2014 funding level and 24 percent above the FY 2013 level. HUD says that this increase in funding would provide $20 million for new Section 202 units.

USDA Rural Housing. The President proposes nearly level funding for USDA’s Rural Development rental housing programs. The Section 514 Farm Labor Housing Loans would be funded at $24 million, level with FY 2014 and slightly below the FY 2010 funding level of $27 million. The Section 516 Farm Labor Housing Grants would be funded at $8 million, also consistent with FY 2014 funding and slightly below the FY 2010 funding level of $10 million. The Section 515 Rental Housing Direct program would be funded at $28 million, the same as in FY 2014, but less than half of the $70 million the program received in FY 2011 and prior fiscal years.

The administration requests $1.089 billion for the Section 521 Rental Assistance account, slightly below the FY 2014 funding level but approximately $250 million above the FY 2013 level. Also, the administration would institute a minimum rent payment of $50 for residents with Section 521 rental assistance in Section 514 or 515 properties.

Low Income Housing Tax Credit (LIHTC). The administration’s request also includes several proposed policy changes for LIHTC. The administration proposes adding preservation of federally assisted affordable housing to the LIHTC’s allocation criteria on the IRS’s current list of 10 selection criteria that every state LIHTC allocation plan must include.

Community Development Block Grant (CDBG). HUD proposes $2.87 billion for the Community Development Fund, with $2.8 billion for the CDBG program. This would be an 8 percent decrease below FY 2014 appropriations of $3.03 billion and would be more than $1.1 billion below the FY 2010 funding level.

Other HUD programs. The Fair Housing and Equal Opportunity program would be increased slightly to $71 million, which would restore funding to the FY 2012 level, with $46 million to the Fair Housing Initiatives Program and $23 million to the Fair Housing Assistance Program. The Healthy Homes and Lead Hazard Control program would be funded at $120 million, restoring the program to FY 2012 funding levels.