Announcements
Jennifer Emerling / There Is More Work To Be Done
Jennifer Emerling / There Is More Work To Be Done
FY09 Budget Proposed
Administration Proposes Eliminating Many Rural Housing Programs
If the Bush Administration’s budget for fiscal year 2008 proposed winds of change for rural housing, the FY 2009 budget proposes a hurricane. As it did last year, the Administration proposes no funding for the major direct housing loan programs of the U.S. Department of Agriculture (USDA) – Section 502 direct for homebuyers and Section 515 for organizations developing rental housing – as well as USDA’s Rural Community Development Initiative and theRural Housing and Economic Development program at the U.S. Department of Housing and Urban Development (HUD). This year zeroes are also suggested for Section 523 support for community organizations that run self-help “sweat equity” programs, rental housing preservation efforts, and Section 514/516 farmworker housing loans and grants.
The Administration’s proposed budget for fiscal year 2009 was released on February 4, 2008. Congress will consider the Administration’s budget as it decides appropriations for FY 2009 (which begins October 1, 2008), but is not bound by the budget.
Complete budget documents are available at https://www.gpoaccess.gov/usbudget/ or https://www.budget.gov.
A PDF version of the following budget summary is available here.
More about USDA rural housing in the FY 2009 budget
More about HUD in the FY 2009 budget
USDA: One Big Number and Many Zeroes
Rental Assistance and Vouchers
The budget does propose a very large increase in the Section 521 Rental Assistance (RA) program, from $482.1 million in 2008 to $997 million in 2009. This increase is needed because RA contract lengths were shortened over the last several years, thus reducing the appropriations needed each year from 2004 to 2008. In FY 2004 Congress’s appropriation cut contracts to four years instead of the previous five years. In FY 2007, contracts were shortened further, most to two years and some to one year. All RA contracts issued in FY 2008 will be for one year. This means that in FY 2009 the contracts issued in 2005, 2007, and 2008 will need to be renewed. RD estimates that in 2009 about 230,000 of the 280,000 existing contracts will need to be renewed at a total cost of close to $1 billion.
The Rental Assistance request contains two innovations. First, the Administration proposes to use $100 million of the $997 million for a “pilot voucher program” for RA-eligible tenants. Few details are given, but it appears these vouchers would replace RA for some tenants in Section 515 properties. Unlike RA, which is project-based and remains with a property when a tenant moves out, each voucher would be tenant-based and would move with the tenant.
It seems these vouchers would be unlike the vouchers issued by USDA since 2006 for tenants who live in properties where Section 515 mortgages have been prepaid. RA is available only where a Section 515 loan exists, so tenants in a prepaid property lose their RA and receive vouchers to help them afford the rents in non-Section 515 properties, whether they remain in the prepaid property or move elsewhere. In contrast, the new vouchers would replace RA in properties that remain in the Section 515 program.
The budget’s second new rural housing proposal would require every tenant receiving RA or a voucher to pay a minimum rent of $50 per month.
Direct and Guaranteed Lending
The budget would eliminate or reduce all of USDA’s direct lending programs, and would instead emphasize loan guarantees. Unfunded programs would include Section 502 direct loans for single-family home purchases, Section 515 loans for multifamily housing development, and Section 514 farm labor housing loans. Section 504 repair loans would be greatly reduced, from $34.7 million in FY 2008 to $17.7 million.
Guarantees of loans made by private lenders – which cost the government far less than direct loans – would be substantially increased. The Section 502 guaranteed mortgage program would increase from $4.2 billion in 2008 to over $4.8 billion in 2009. Section 538 guarantees for rental housing would jump from $130 million to $300 million. There are no guarantee programs for repair loans or farmworker housing loans.
The 2008 budget said USDA planned to propose legislation to authorize subsidized guaranteed single-family housing loans for very low- and low-income rural residents, and then request funding for those loans. Such legislation was never introduced in Congress, and the 2009 budget does not mention the possibility of subsidized Section 502 guarantees. The 2009 budget would specifically prohibit providing subsidies for Section 538 multifamily housing guaranteed loans.
This year’s budget, like last year’s, also proposes raising the fee on new Section 502 guaranteed loans from 2 percent to 3 percent, explaining “this causes the loans to be less costly for the government without a significant additional burden to the borrowers, given that they can finance the fee as part of the loan.” Guarantee fees on Section 538 loans, on the other hand, would be prohibited.
Grants
Last year the Administration proposed a sharp cut in funding for the Section 523 self-help technical assistance (TA) program, which supports community organizations that run self-help “sweat equity” programs for low-income first-time homebuyers. This year, the budget suggests defunding Section 523 entirely, explaining that “demand for that program hinges on funding for single family direct loans,” which would receive no funding under this budget. Congress increased the program’s appropriation for FY 2008 rather than cutting it, but even the $39 million it provided is not enough to renew all expiring self-help TA contracts in 2008. Rural Development announced in late January that it will renew the contracts of performing grantees (that is, TA contractors who are meeting contract requirements) at 60 percent of their past funding levels. RD will not consider applications from any new organizations in FY 2008.
Preservation of Rental Housing
Rural Development has devoted serious attention to rental housing preservation over the last few years. Recent budgets have acknowledged the importance of rehabilitating Section 515 properties and assisting tenants displaced by loan prepayments, while requesting low funding levels. This year, USDA’s budget summary explains that because legislation proposed by the Administration in 2005 to authorize preservation efforts has not passed Congress, the budget requests no funding for preservation efforts.
H.R. 5039, a bill based on the Administration’s 2005 proposal, passed the House Financial Services Committee in 2006, and a revised bill, H.R. 4002, is currently pending in the same committee, whose Chairman, Rep. Barney Frank, has announced that rental preservation will be a top committee priority in 2008.
The budget not only provides no new preservation funding, but also proposes to cancel $20 million of the balance remaining in the revitalization program account from previous appropriations. Any other remaining funds could be used to provide vouchers for tenants in Section 515 properties whose owners prepay their mortgages.
|
USDA RD Program |
FY 2006 |
FY 2007 |
FY 2008 |
FY 2008 |
FY 2009 Proposed Budget |
|
Loans |
|||||
|
502 Single-Family Direct Loans |
$1,141 |
$1,141 |
$0 |
$1,129.4 |
$0 |
|
502 Single-Family Guaranteed Loans |
3,681 |
3,681 |
4,848 |
4,220 |
4,849 |
|
504 Very Low-Income Repair Loans |
35 |
35 |
22.9 |
34.7 |
17.7 |
|
514 Farm Labor Housing Loans |
38 |
38 |
14 |
27.7 |
0 |
|
515 Rental Housing Direct Loans |
100 |
100 |
0 |
70 |
0 |
|
538 Rental Housing Guaranteed Loans |
100 |
100 |
200 |
130 |
300 |
|
Grants and Payments |
|||||
|
504 Very Low-Income Repair Grants |
30 |
30 |
30 |
30 |
30 |
|
516 Farm Labor Housing Grants |
14 |
14 |
4 |
10 |
0 |
|
523 Self-Help TA |
34 |
34 |
9.5 |
39 |
0 |
|
533 Housing Preservation Grants |
10 |
10 |
9 |
9 |
12 |
|
521 Rental Assistance (b) |
653 |
616 |
567 |
482.1 |
997 |
|
542 Rural Housing Voucher Program |
16 |
16 |
27.8 |
5 |
0 |
|
Rental Preservation Revolving Loans |
3 |
3 |
0 |
3 |
0 |
|
Rental Preservation Demonstration (MPR) |
9 |
9 |
0 |
20 |
0 |
|
Rural Community Dev’t Initiative (RCDI) |
6 |
6 |
0 |
6.3 |
0 |
a. Figures shown for FY 2006 and 2007 are before 1 percent across-the-board cut.
b. Rental Assistance contracts were for four years in FY 2006, for two years in FY 2007, and for one year in FY 2008.
HUD Programs Face Cuts or Elimination
Many HUD programs would face substantial cuts in the proposed 2009 budget. Reductions are sought for Community Development Block Grants, tenant-based rental assistance, the Public Housing Capital Fund, Section 202 housing for the elderly, and Section 811 housing for the disabled. As in past years, the HUD Rural Housing and Economic Development program and the HOPE VI program are proposed for complete elimination. Congress in the past has not gone along with these zero numbers for either program. The proposed 2009 budget also has some increases – for homeless programs, HOME, project-based rental assistance, the Public Housing Operating Fund, and fair housing.
Detailed analyses of the HUD budget are available from several sources, including the Center on Budget and Policy Priorities, www.cbpp.org, and the National Low Income Housing Coalition, www.nlihc.org.
|
HUD Program |
FY 2006 |
FY 2007 |
FY 2008 Proposed Budget |
FY 2008 Approp. |
FY 2009 Proposed Budget |
|
Community Develop. Block Grants |
$4,220 |
$3,771.9 |
$3,035.6 |
$3,865.8 |
$3,000 |
|
HOME |
1,750 |
1,750 |
1,967(b) |
1,704 |
1,967 |
|
Tenant-Based Rental Assistance |
15,574 |
15,920 |
16,000 |
16,391 |
16,031 |
|
Project-Based Rental Assistance |
5,088 |
5,976 |
5,813 |
6,381.8 |
7,000 |
|
Public Housing Capital Fund |
2,464 |
2,464 |
2,024 |
2,439 |
2,024 |
|
Public Housing Operating Fund |
3,600 |
3,864 |
4,000 |
4,200 |
4,300 |
|
Public Hsg. Revtlztn. (HOPE VI) |
99 |
99 |
0 |
100 |
0 |
|
Native Amer. Housing Block Grant |
630 |
630 |
627 |
630 |
627 |
|
Homeless Assistance Grants |
1,326.6 |
1,441.6 |
1,561 |
1,586 |
1,636 |
|
Hsg. Opps. for Persons with AIDS |
289 |
289 |
300 |
300 |
300 |
|
202 Housing for the Elderly |
734.6 |
734.6 |
575 |
735 |
540 |
|
811 Housing for Disabled |
236.6 |
236.6 |
125 |
237 |
160 |
|
Fair Housing |
45.5 |
45.5 |
45 |
50 |
51 |
|
Rural Hsg. and Econ. Dev. (RHED) |
17 |
17 |
0 |
17 |
0 |
|
Self-Help Hmownp. Opp. (SHOP) |
20 |
19.8 |
39 |
26.5 |
39 |
|
Lead Hazard Control |
152 |
152 |
116 |
145 |
116 |
|
Housing Counseling |
42 |
44.5 |
50 |
50(c) |
65 |
a. Figures shown for FY 2006 and 2007 are before 1 percent across the board cut.
b. $200 million in counseling and foreclosure prevention activities is provided to the Neighborhood Reinvestment Corporation.
c. Housing counseling funding is under the HOME program.
d. Foreclosure prevention activities moved to appropriation for Neighborhood Reinvestment (not in HUD).
e. $25 million would be provided separately (not in HUD’s funding) to the Neighborhood Reinvestment Corporation (NeighborWorks America) for foreclosure prevention activities.
_____________________________
Posted: February 4, 2008
Most recent update: February 8, 2008
If you have problems accessing any of the material on this page, contact Leslie Strauss at HAC, leslie@ruralhome.org, 202-842-8600.