*BLOG POST UPDATED 2/16/18 TO REFLECT CENTER ON BUDGET AND POLICY PRIORITIES’ CHANGE IN RENT INCREASE IMPACT ESTIMATIONS

President Trump’s budget proposal for FY 2019 goes several steps further than last year’s budget in dismantling HUD programs and funding. With total cuts of $8.8 billion, HUD programs and low-income families using these programs would be severely and negatively impacted if this budget is adopted with a 18.3% cut compared to FY 2017 enacted funding levels.  The budget was accompanied by an addendum which then added $2 billion back into the HUD budget. For details on HUD program funding amounts, see the National Low Income FY19 Budget Chart for Selected HUD and USDA Programs.

We are still analyzing the budget documents and impact for New York including Section 8 funding and homeless grants, but here are some preliminary highlights:

MAJOR CHANGES FOR PUBLIC HOUSING

President Trump’s budget eliminates federal funding for public housing capital repairs while shifting responsibility to state and local government and offering the private sector a role through expansion of the Rental Assistance Demonstration, with $100 million in RAD funding.  According to the White House budget documents:

“… the Budget facilitates a strategic reduction of the Public Housing portfolio and promotes cost-sharing with state and local governments to provide affordable housing.”

The budget also significantly reduces public housing operating funding cutting it by 40% compared 2017 levels, presumably to further incentivize housing authorities to convert properties to RAD. The RAD cap of 225,000 public housing units is lifted under this budget proposal as well.

With recent failures of heat and hot water systems plaguing public housing residents in New York City, now is the time for the federal government to invest in public housing capital not shirk responsibility.  While RAD can be an effective program, it requires not only additional federal funding but also significant increases in allocations of Private Activity Bonds and Low Income Housing Tax Credits to even make conversion of a small portion of NYCHA’s portfolio possible.  The Next Generation NYCHA plan calls for the conversion of 15,000 apartments under RAD.

RENT REFORMS & WORK REQUIREMENTS

The budget proposes new burdens on HUD-assisted households by increasing tenants’ share of rent. The White House also proposed setting new minimum rent standards and establishing work requirements in leaked draft legislation earlier this year. The budget alludes to a package of comprehensive rental reforms, which will likely have the same proposals as the leaked draft. These are significant changes to housing policy with conflicting goals.  For example, families who utilize child care while they are at work will no longer have this cost deducted from their rent calculation and will pay more in rent.  For low-wage families, this rent increase will make it harder to meet basic household needs.  The Center for Budget and Policy Priorities projects rents for HUD-subsidized tenants will go up by 32% or $1280 annually on average nationally. In New York alone, rents would go up by 23% for more than 200,000 residents. :

  • Rent Increases– “The Budget proposes fundamental rent reforms across HUD’s rental assistance programs. These reforms include increasing tenant rent contributions and minimum rents, reducing the frequency of income re-certification, and allowing communities to design programs that address local needs. In the first significant change to tenant rent structures since 1981, the Budget would increase the amount of rent paid by tenants from 30 percent of adjusted income to 35 percent of gross income for all work-able households, but would mitigate this increase for the elderly and persons with disabilities. For those tenants, who in certain circumstances, are unable to pay their rents, the Budget also includes a hardship exemption. These reforms would reduce Federal costs and put the programs on a more sustainable fiscal path, as well as encourage work and simplify program administration.”
  • Work Requirements– Work requirements are alluded to but are not specified in the budget documents. According to a leaked legislative proposal, they would apply to all HUD-assisted households with exceptions for elderly and disabled households.

HUD PROGRAMS ELIMINATED

Once again, President Trump proposes to significantly reduce the role of HUD in communities across the nation and recommends eliminating programs with widespread support such as:

  • Public Housing Capital- “…the Budget proposes to decrease the Public Housing portfolio through locally determined options, including strategically releasing certain housing assets to local control. In this effort, the Federal Government recognizes the need for greater contributions from State and local governments and the private sector to help address affordable housing needs for low-income families.”
  • HOME– “The Budget proposes to eliminate the HOME Investment Partnerships Program, recognizing a greater role for State and local governments and the private sector in addressing affordable housing needs.”
  • CDBG– “The Budget proposes to eliminate funding for the Community Development Block Grant (CDBG) program. The program is not well-targeted to the neediest populations and has not demonstrated a measurable impact on communities.”
  • NeighborWorks– “‘NeighborWorks America,’ was established by Federal charter in 1978 as a community/public/private partnership providing financial support, technical assistance, and training for affordable housing and community-based revitalization efforts nationwide. The Budget proposes to end Federal support of NRC and requests $27.4 million solely to prepare for the discontinuation of Federal funding”
  • Housing Trust Fund and Capital Magnet Fund– “The Housing Trust Fund, managed by the Department of Housing and Urban Development, provides grants to States to increase and preserve the supply of affordable housing primarily for extremely low-income families. The Capital Magnet Fund, managed by the Department of the Treasury’s Community Development Financial Institutions (CDFI) Fund, provides grants to CDFIs and nonprofit housing organizations that are leveraged to finance affordable housing and related economic development activities. Originally established by the Housing and Economic Recovery Act of 2008 with dedicated funding from Fannie Mae and Freddie Mac assessments, a total of $627 million has been allocated to the funds since 2016.”
  • CDFI Funds– “The Budget proposes to eliminate funding for the Community Development Financial Institutions (CDFI) Fund’s grant programs, but requests $14 million for oversight of existing commitments and administration of the CDFI Fund’s other programs. The CDFI industry has matured, and these institutions should have access to private capital needed to build capacity, extend credit, and provide financial services to the communities they serve.”

The budget also proposes elimination of the U.S. Interagency Council of Homelessness, Choice Neighborhoods, Self-Help and Assisted Homeownership Opportunity and Section 4 Grants.

INFRASTRUCTURE

President Trump also outlined an Infrastructure Proposal today calling for $200 billion in federal funds to spur at least $1.5 trillion in infrastructure investments with partners at the state, local, tribal, and private level over 10 years.  The federal contribution will be paid for by reducing funding for other non defense discretionary programs. The proposal also lifts the “volume cap’ for private activity bonds but it is unclear if or how this proposal will potentially impact housing bonds.  Affordable and public housing are not included in the infrastructure plan.

OUTLOOK

While Congress lifted top-line spending cap levels on defense and domestic priorities by a total of $300 billion for FY 2018 and 2019 in a budget deal last week, the President’s budget proposal remains a threat with infrastructure spending also intended to fit under these caps. In addition to the overall budget cuts, we are particularly concerned about increased rent burdens placed on low-income households and the shift in public housing funding responsibility to state and local governments.

We will be advocating against these cuts and policy proposals. Stay tuned for NY impact analysis and advocacy tools.

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