National Housing Law Project Housing Law Bulletin

Final approval of Fiscal Year 1998 HUD funding levels was approved by the Senate on Thursday, October 9, following House approval on October 8.¹ As of press time, we have only the conference report as a reference. Total funding for HUD programs of $23,661,775 was approved. This compares with $19.5 billion for FY 1997. Most, if not all, of the increase is attributable to renewal of expiring Section 8 contracts.

Section 8 Portfolio Restructuring

Uncertainties around the Housing Certificate Fund and its principal component, the Section 8 contract renewals, delayed the conferees in settling on a final number for these accounts. In the end, $9.373 billion was approved, with $8.18 billion dedicated to expiring contracts under HUD’s multifamily program, as well as those under the McKinney Homeless Assistance Act.² After several weeks of negotiation, involving the ranking members of the authorization committees as well as the appropriators, agreement was reached to include portfolio restructuring. A brief article elsewhere in this Bulletin outlines the major "mark-to-market" issues and their resolution.³

Administration’s Priorities for HUD

The Administration expressed specific concern over the failure of Congress to adequately fund presidential initiatives, including Brownfields Redevelopment of environmentally damaged areas, Empowerment Zones, Bridges to Work, housing certificates and regional opportunity counseling for families moving from welfare to work.⁴ In addition, the Administration criticized the funding level for the Fair Housing Initiatives Program. The conference report addressed several of these concerns. The Brownfields Redevelopment Initiative (also deemed an eligible activity under CDBG) was funded at $25 million and Empowerment Zones at $5 million. Although the Administration urged Congress to eliminate the three-month delay in reissuance of certificates and vouchers — objecting to its negative impact on families awaiting assistance — that measure was among the changes from past appropriations bills that were included in the conference agreement. The Administration simultaneously issued a Statement of Administration Support (SAP) for H.R.J. Res. 94 — Continuing Resolution, FY 1998, designed to keep government operating until October 23. Programs were funded at FY 1997 levels. The Continuing Resolution was signed by the President on September 30. It is anticipated that action on the outstanding appropriations measures will be completed before expiration of the Continuing Resolution, or another will be adopted.

Administrative Provisions

The conferees, following recent appropriations measures, agreed to make program changes through a series of "administrative provisions." During consideration of its bill, the House had declined to adopt the full range of administrative provisions, noting its desire for action on the pending authorization bill. The Senate exercised less restraint with respect to administrative provisions.

Ultimately, the conferees agreed to continue a number of the administrative provisions included in the FY 1997 Appropriations Act. Among the most significant are a minimum rent of up to $50, the mandatory three-month delay in reissuance of vouchers mentioned above, and suspension of federal preferences. In addition, the conferees continued the suspension of the one-for-one replacement requirement, the endless lease and the "take-one-take-all" requirement, and the 90-day-notice requirement for certificate and voucher evictions.⁵

Conference Report and Joint Explanatory Statement
of the Committee of Conference

The conference agreement did not disturb a wide range of directives imposed on HUD in both the House and Senate reports. For example, HUD, in collaboration with the General Accounting Office (GAO), is required to submit a report to the Congress by February 1998 on the likely impact of welfare reform on PHA operating subsidies and on the income levels of residents. An in-progress evaluation of the HOPE VI program by GAO is directed to be continued, to examine such questions as project commencement times (why it is taking so long between the funding of a project and the actual commencement of construction), impediments to employing public/private partnerships, the impact of a HOPE VI project on the surrounding neighborhood, as well as what is the appropriate percentage of HOPE VI grant to be used for supportive services and an assessment of the utility of those services.

The Joint Explanatory Statement of the Conferees included a number of new directives and clarifications. The conferees declined to create a new CDBG set-aside to fund the "New Approach Anti-Drug Program" for competitive grants to alternative (non-PHA) managers of federally assisted low-income housing for investigation and elimination of drug-related criminal activity, and related capital improvements. Instead, the conferees included $20 million in funding for this effort under the Drug Elimination Grant Program, thus raising the appropriated funding for that account from last year’s $290 million to $310 million.⁶

Under the HOPE VI program for rehabilitation of severely distressed public housing, a new demonstration to demolish obsolete elderly public housing was funded at $26 million, with a specific set-aside of up to $10 million to a development in Kansas City, Missouri, the home state of Senate Subcommittee chairman Kit Bond.⁷

A number of other administrative provisions are included, including a directive that HUD continue with existing requirements for notice and comment rulemaking.

Specific Program Requests

Preservation. Ten million dollars was directed to be made available by HUD to reimburse owners, nonprofits and tenant groups with LIHPRHA and ELIHPA plans of action pending at the time of enactment of the appropriations bill. The reimbursement is limited to documented direct costs for preparing the plan of action or related purchase agreement.⁸ The conferees made clear that granting close-out costs to any entities in the LIHPRHA or ELIHPA queue is within the total discretion of HUD. Moreover, the conferees indicated their view that funding in the Section 8 contract renewal account should cover "enhanced" vouchers for families residing in preservation-eligible programs on the date of prepayment.⁹

Increased set-asides from CDBG. The Community Development Block Grant experienced a significant increase in set-asides, from around $289 million in FY 1997 to as much as $362.5 million in the FY 1998 bill. Among several set-asides of interest to low-income people is $55 million for supportive services for public housing residents. These services may support congregate services for the elderly and disabled, as well as for families whose members either work or are making the transition to work through job training or education. Congress contemplates that these funds be competitively awarded and used to leverage funding from other sources, such as required matching grants from states, localities or private sources. Among the other set-asides are $5 million for the Moving to Work Demonstration Program, $7 million for service coordinators for elderly and disabled housing, and $60 million for lead-based paint hazard reduction.

The Administration’s favored economic development initiative, which supports a range of community economic development activities, was funded at $138 million, but the conference report specifies a long list of projects to which the funds must be targeted.¹⁰

Other significant accounts. Homeless Assistance Grants remained at $823 million, the same funding level as for the past several fiscal years.¹¹ The conferees did not modify homeless assistance programs in anticipation of an authorization bill that would consolidate them.¹²

Although private fair housing enforcement activities under the Fair Housing Initiatives Program (FHIP) were funded at the House-approved level of $15 million rather than the $10 million Senate recommendation, language in both the House and Senate committee reports could be interpreted to bar the use of FHIP funds to investigate claims of homeowner property insurance discrimination.¹³ Half of the total $30 million approved for fair housing activities will fund state and local government fair housing enforcement under the Fair Housing Assistance Program (FHAP).

The chart on page 159 sets out some of the most significant funding levels.

Rural Housing

In separate action, House-Senate conferees agreed on September 17 to FY 1998 funding for Department of Agriculture rural housing programs.¹⁴ On October 6, the House agreed to the conference report but Senate action had not been completed at the time this Bulletin went to press.

Funding levels increased for both the Section 502 direct loan and guaranteed loan programs, as did funding for the Section 515 rural rental direct loan program and Section 521 rural rental assistance. Section 502 direct loans were funded at $1 billion, an increase of more than $270 million over the FY 1997 level. Similarly, the Section 502 guarantee loan program was funded at $3 billion, an increase of $700 million over last year’s level. The Section 515 direct loan program for construction grants received increased funding at $128.6 million (compared with $58.7 million in FY 1997), and the Section 521 rural rental assistance program grew by $17.3 million, from $524.1 million in FY 1997, to $541.4 million.

Next Steps for FY 1998 and on to FY 1999

It is anticipated that the President will sign both the HUD and agriculture appropriations measures when they are presented to him. Action has already commenced on the FY 1999 budget with HUD’s submission of its proposal to the Office of Management and Budget.

1. H.R. 2158, Making Appropriations for VA, HUD and Independent Agencies Appropriations for FY 1998; H. REP. NO. 297, 105th Cong., 1st Sess. (Oct. 6, 1997). The report containing the legislative language is available on the World Wide Web through the Government Printing Office access at www.access.gpo.gov (search the October 6, 1997, Congressional Record for "105-297"). For related articles on congressional activity leading up to the conference, see Senate Adopts FY 1998 Funding for HUD Programs, 27 HOUS. L. BULL. 128 (Aug. 1997); Congress Moves on Low-Income Housing Appropriations Bills, 27 HOUS. L. BULL. 104 (July 1997).
2. 143 CONG. REC. H8325 (Oct. 6, 1997).
3. See Section 8 Restructuring Program Finally Approved, elsewhere in this issue.
4. Letter of September 25, 1997, from Franklin Raines, Director, Office of Management and Budget, to Rep. Bob Livingston, Chairman, House Appropriations Committee.
5. 143 CONG. REC. H8328.
6. Id. at H8346.
7. Id. at H8347.
8. Id. at H8326.
9. Id. at H8347.
10. Id. at H8347-H8349.
11. Id. at H8327.
12. Id. at H8349.
13. H.R. REP. NO. 175, 105th Cong., 1st Sess. 43 (July 11, 1997); and S. REP. NO. 53, 105th Cong., 1st Sess. 42 (July 17, 1997).
14. H.R. 2160, Making appropriations for Agriculture, Rural Development, Food and Drug Administration, and Related Agencies programs for the fiscal year ending September 30, 1998, and for other purposes; H.R. REP. NO. 252, 105th Cong., 1st Sess. (Sept. 17, 1997).

15. These figures are part of the total funding for relocation assistance.
16. The conference agreement endorses enhanced vouchers for preservation properties and flexibility for use of vouchers for non-elderly, disabled families affected by the designation of housing for the elderly. 143 CONG. REC. H8325.
17. This account was moved to CDBG.
18. Of the $55 million provided for self-sufficiency activities, up to $5 million may be used for Tenant Opportunity Program (TOP) activities.
19. Of the $55 million provided for self-sufficiency activities, up to $5 million may be used for the Moving to Work Demonstration.
20. Ten million dollars is directed to be funded out of CDBG for Operation Safe Home.
21. This amount includes $5 million for demonstration on methods to increase economic growth, access to private capital and encourage traditional financial institution investment in tribal and Native American areas.
22. The Senate provided these funds in the public housing capital account.
23. This includes a $10 million set-aside for a program to demonstrate mechanism for increasing the secondary market for non-conforming loans. 143 CONG. REC. H8349.
These funds will provide grants to three nonprofits to demonstrate ways of expanding homeownership opportunities through expanding the secondary market for non-conforming home mortgage loans to low-income borrowers. 143 CONG. REC. H8327.