HUD Programs in the 2016 Budget

Rural Housing Budget Requests More Rental Funding, Less for Self-Help, and Minimum Rent for Tenants

February 2, 2015, 2:30 pm – The Obama Administration’s detailed budget for FY16, released this morning, would keep many of the USDA rural housing programs at or near their FY15 levels. These include Section 502 direct and guaranteed loans, farm labor housing loans and grants, and Section 504 repair loans and grants. Increases are requested for Rental Assistance, preservation vouchers, and the Section 515 rental loan program. Like last year’s budget, this one proposes some changes in the Rental Assistance program, including a $50 minimum rent for tenants.

HUD Programs in the 2016 Budget

Rural Housing Budget Requests More Rental Funding, Less for Self-Help, and Minimum Rent for Tenants

Register for HAC’s WebinarFebruary 2, 2015, 2:30 pm – The Obama Administration’s detailed budget for FY16, released this morning, would keep many of the USDA rural housing programs at or near their FY15 levels. These include Section 502 direct and guaranteed loans, farm labor housing loans and grants, and Section 504 repair loans and grants. Increases are requested for Rental Assistance, preservation vouchers, and the Section 515 rental loan program. Like last year’s budget, this one proposes some changes in the Rental Assistance program, including a $50 minimum rent for tenants.

Homeownership

The $900 million in level funding proposed for Section 502 direct loans is a surprise, both because USDA budgets have generally proposed cutting the program and because the agency was not able to use all of its Section 502 direct funds in FY14.

Only $10 million is requested for Section 523 self-help, which received $25 million in FY14 and $27.5 million for FY15. In FY14, USDA used only $18.3 of the total appropriated. For this program – unlike Section 502 direct – unused funds from one year can be carried over to the next year. It seems possible that the budget assumes additional monies will be available by the end of FY15. USDA RD’s unofficial supplemental budget summary is not available yet, but may contain more information about this request.

The budget proposes two changes for the Section 502 guaranteed loan program. First, it would make it a direct endorsement program, consistent with VA and FHA’s guaranteed home loan programs. Second, it would require lenders to pay an underwriting fee of up to $50 per loan. The fee would become a dedicated funding source to offset the cost of systems upgrades and maintenance for USDA’s Guaranteed Underwriting System (GUS).

Rental Programs

A small increase is requested for Section 521 Rental Assistance, and funding for Section 542 vouchers would be more than doubled. The budget renews last year’s proposals for changes in the Rental Assistance program, including a $50 minimum rent. Advocates opposed that idea, and Congress did not adopt it.

Section 515 rental housing would receive an increase also, from the current $28.4 million to $42.3 million. It is not clear whether USDA expects to be able to fund any new construction with that amount. Again, it is hoped that USDA RD’s unofficial supplemental budget summary may provide more details about this request.

The budget requests a potentially significant shift in the use of Section 542 vouchers. Since FY06, when funding for these vouchers was first appropriated, they have been available to tenants only when Section 515 mortgages were prepaid. This year the budget proposes that vouchers be available when properties leave the program for any reason, an improvement advocates have supported in order to assist tenants after foreclosure or after a Section 515 mortgage reaches the end of its term. The budget asks that USDA be allowed to establish priorities among voucher-eligible tenants, however, seeming to indicate the department does not expect even $15 million to be enough for every eligible tenant.

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USDA Rural Dev. Prog. (dollars in millions)	FY13 Approp.a	FY14 Approp.	FY15 Admn. Bdgt.	FY15 Approp.	FY16 Admin. Budget
502 Single Fam. Direct Self-Help setaside	$900 5	$900 5	$360 0	$900 5	$900 0
502 Single Family Guar.	24,000	24,000	24,000	24,000	24,000
504 VLI Repair Loans	28	26.3	26.3	26.3	26.3
504 VLI Repair Grants	29.5	28.7	25	28.7	26
515 Rental Hsg. Direct Lns.	31.3	28.4	28.4	28.4	42.3
514 Farm Labor Hsg. Lns.	20.8	23.9	23.9	23.6	23.9
516 Farm Labor Hsg. Grts.	7.1	8.3	8.3	8.3	8.3
521 Rental Assistanceb	907.1	1,110	1,089	1,089	1,172
523 Self-Help TA	30	25	10	27.5	10
533 Hsg. Prsrv. Grants	3.6	3.5	0	3.5	0
538 Rental Hsg. Guar.	150	150	150	150	200
Rental Prsrv. Demo. (MPR)	17.8	20	20	17	19
542 Rural Hsg. Vouchers	10	12.6	8	7	15
Rural Cmnty. Dev’t Init.	6.1	6	0	4	4
a. Figures shown do not include 5% sequester or 2.5% across the board cut. b. The final FY13 appropriation for RA included a $3 million 514/516 setaside; the final appropriations for FY14 and FY15 have no setasides.