President’s FY 2017 Budget in Detail: Department of Housing and Urban Development

The administration’s budget proposal for the Department of Housing and Urban Development (HUD) is in many ways a reflection of the changes the administration has tried to make to the department throughout President Obama’s tenure.

Overall, the President’s request includes $48.9 billion for HUD, a $1.9 billion or percent increase from current funding levels. This does not include an additional $11 billion in mandatory funding he proposed to address family homelessness.

As he has done for several years in a row, President Obama’s budget focuses resources on newer competitive grant programs like Choice Neighborhoods (funded at $200 million, a 60 percent increase from current levels) at the expense of more traditional HUD block grant programs like the Community Development Block Grant program (funded at $2.8 billion, a $200 million cut) and HOME Investment Partnerships (funded at $950 million, level to current funding). The funding levels for CDBG and HOME are disappointing and, if enacted, would hurt communities across the country.

The request also references reforms to both CDBG and HOME that are focused on eliminating the number of entitlement communities that receive direct funding and better targeting funding to communities in need. Many of these reforms have been proposed for several years in a row and a legislative package that details these proposals has been discussed since former Secretary Shaun Donovan was in charge at HUD, but has never actually been released.

The administration has also continued its streamlining of programs across agencies and jurisdictions, and its attempt to allow grants work in tandem rather than exist separately within communities. The FY 2017 proposal for a second year in a row includes a pilot “Upward Mobility Project” that would allow up to 10 states, localities, or consortia to combine funding from four block grant programs, including HUD’s CDBG and HOME and the Department of Health and Human Service’s Social Services Block Grant and Community Services Block Grant. The request also includes an additional $1.5 billion within the Health and Human Services budget over 10 years for the participating communities.

Also for a second year in a row, the administration included a $300 million in request for a “Local Housing Policy Grants” program. The new program would allow states, localities, and regional coalitions of localities to apply for funding to support new local policy, program, or regulatory initiatives to “expand the supply and affordability of housing, increase access to jobs, and fuel economic growth.” Given the constraints of the federal budget, this program is unlikely to be funded by Congress.

The budget request makes bold requests for additional rental assistance resources aimed at eliminating family homelessness by 2020. The President proposes $11 billion in mandatory spending to serve a total of 550,000 families through an expansion of the housing choice voucher program (also referred to as Section 8 vouchers), permanent supportive housing, and rapid rehousing assistance.  He couples this with a discretionary investment in FY 2017 to immediately address homelessness.  Congress will undoubtedly ignore both the request for new mandatory spending and additional discretionary vouchers.

At the same time, the budget proposes a small cut to the Public Housing Capital Fund, which is the pot of money available to Public Housing Authorities to repair and update their properties. The demand for capital funding is high; more than half of the nation’s housing stock was constructed prior to 1970 and some units were built as early as 1936. In 2010, HUD estimated a nearly $26 billion backlog of unmet public housing capital repairs. The projected accrual of needs throughout the public housing inventory is estimated by HUD to be approximately $3.4 billion per year. Last year, HUD estimated that over 135,000 units had been lost to depreciation since 2000, at a rate of 9,000 per year. In FY 2016, the Public Housing Capital Fund received $1.9 billion and the President proposed a funding level of $1.875 billion for FY 2017.

In what is likely an acknowledgement of this deeply rooted problem with the nation’s public housing stock, the administration has over the past seven years proposed and implemented initiatives to shift rental assistance toward vouchers as opposed to public housing, particularly through programs like the Rental Assistance Demonstration that converts public housing into Section 8 properties.

This makes sense given the funding realities and the constraints on discretionary spending: Congress is not going to provide funding over $40 billion to rehabilitate and modernize all public housing units in America. Shifting public housing to Section 8 has its benefits, particularly in drawing in private capital to rehabilitate those properties, but properties that are not good candidates to convert are left behind with dwindling resources. This shift has largely happened without a broader policy discussion about the implications.

The dire need for public housing and vouchers isn’t debated, though, and the demand for rental assistance programs far exceeds the resources allocated to HUD by Congress every year; only one in four families eligible for rental assistance through HUD receive it.

Unlike many programs that provide assistance to low-income Americans like the Supplemental Nutrition Assistance Program (SNAP) and Temporary Assistance for Needy Families (TANF), HUD programs are not mandatory and fall within the constraints of discretionary funding, despite the fact that rental assistance is a set obligation that must be met annually. This poses a major obstacle to the HUD budget as the costs of the nation’s rental assistance programs are increasing while the overall HUD budget remains basically flat; approximately 86 percent of HUD’s budget is consumed by rental assistance programs. This leaves very little funding for community development programs and as the budget has been squeezed in recent years, funding for the Community Development Block Grant program has been cut by a quarter and the HOME Investment Partnerships program nearly in half.

Though the President’s budget proposal to create mandatory funding for additional vouchers will not solve this problem (even if Congress were to fund his proposal, existing vouchers would continue to be funded through discretionary spending), it could begin a conversation about the reality that the current HUD budget is simply not adequate to fully address both the basic housing needs of the country and HUD’s community development mission.

Recognizing that renewing existing voucher contracts and operating public housing is more similar to SNAP or TANF than it is to CDBG and shifting those programs to mandatory funding could free up HUD funding to make serious headway in other areas of housing and community development.

About the Author

Tess Hembree is the Policy Manager at Advocacy Associates.

Image: History of recent HUD funding chart from HUD’s FY 2017 Budget Presentation Slide Deck.

March 20, 2016

By Tess Hembree