Industry News

RD and HUD Issue Proposed Budgets

U.S. Department of Agriculture:

Overall, the U.S. Department of Agriculture (USDA) Rural Development (RD) Housing and Community Facilities (HCF) FY 2008 budget is reduced by $175 million, which amounts to a 1/3 cut in the entire RD HCF budget over the last six years. Primary budget cuts include the Section 515 multifamily direct loan program, which is again budgeted for zero funding (compared to $100 million last year). In addition, Section 514/516 farm labor housing direct loan/grant programs suffer a $21 million cut in the budget ? funding is reduced from $31 million to $10 million. The Section 502 single family direct loan program is also zeroed out, while the Section 523 self-help housing grant program, which covers administrative costs for nonprofit community organizations running self-help housing programs, sustains a $24 million cut.

As CARH members know, Section 521 Rental Assistance (RA) contracts, which were originally five years in length, were cut to four years in FY 2005 and FY 2006 in order to lower the dollar total for RA. The FY 2007 budget proposed shortening them to two years; H.J. Res. 20 provides two-year contracts in the total amount of $616 million. The proposed Fiscal Year 2008 budget would provide $567 million for rural rental assistance; with the funds to be provided under one-year contracts.

The Fiscal Year 2008 proposed budget also allows for $27.8 million for rural housing vouchers for low-income tenants in Section 515 projects where loans have been prepaid. To the extent that these funds are not needed for vouchers they can be used to for revitalization/preservation activities, subject to an authorization bill.

Increases are being proposed for the agency's guaranteed loan programs. The budget contains $200 million for Section 538 guaranteed multifamily loans, with the fee being raised to 3% and $4.849 billion for Section 502 guaranteed loans. The Administration intends to submit legislation approving subsidized Section 502 guaranteed loans for very-low- and low-income home buyers.

Additional information regarding the FY 2008 budget proposal is available on the web at (http://www.usda.gov/budget).

U.S. Department of Housing and Urban Development:

The FY 2008 proposed budget for the U.S. Department of Housing and Urban Development (HUD) requests $35.2 billion. It includes increases for Section 8, the public housing operating fund, and homeless assistance. This is a $1.6 billion, or 4.5 percent, increase over the proposal for FY 2007. This budget again strongly promotes homeownership, but does contain some increases in funding for rental housing.

The request includes $16 billion for tenant-based rental assistance including HUD's Housing Choice Voucher Program, a nearly $582 million increase over FY 2006 levels. HUD indicates this request will allow the agency to renew all existing rental housing assistance contracts. The $16 billion for tenant-based Section 8 includes $14.445 for contract renewals and $5.813 billion for project-based Section 8. The Administration has budgeted $4 billion for the public housing operating fund and $2.024 billion for the capital fund.

However, an approximate $450 million net (7%) cut is proposed for public housing. Capital repair sustains a large cut (which more than offsets a slight increase in the Operating fund), and $99 million for the HOPE VI housing program is rescinded in the proposal. Other programs sustaining cuts include Community Development Block Grants ($736 million cut; 20% less than last year), Section 811 Disabled Housing ($112 million cut; 47% less than last year), Section 202 Elderly Housing ($160 million cut; 22% less than last year), and Lead Paint Prevention.

Finally, zero funding for Brownfields Redevelopment, Rural and Economic Development Grants, and CDBG Section 108 loans is budgeted. In the budget proposal summary, HUD has proposed leveraged financing demonstration projects in both Section 202 ($25 million request) and Section 811 ($15 million request) (http://www.hud.gov/about/budget/fy08/fy08budget.pdf). By removing the barriers that deter low-income housing tax credit (LIHTC) applicants from making use of Sections 202 and 811, their main goal is to increase the production of units serving these special needs populations. HUD will consider mixed-finance arrangements, including low-income housing tax credits and "other creative financing options for development and, or rental operating assistance," while developing the program.

Additional information regarding the FY 2008 budget proposal is available in HUD's budget proposal summary at (http://www.hud.gov/about/budget/fy08/fy08budget.pdf).