National Housing Law Project Housing Law Bulletin

A funding level of $24.692 billion for HUD programs during Fiscal Year 1999 has passed the Congress and been signed by the President.¹ Perhaps more far reaching than the annual appropriation is enactment of extensive changes to the public housing program which were debated over the last four years and included in the funding measure.²

The increase in HUD funding, while $325 million short of the President's request, is more than the FY 1998 enacted levels. Among the sources for the increased HUD appropriation — which permits full funding of all expiring
Section 8 certificates and vouchers and increases for public housing modernization and the HOPE VI program, among others — are savings achieved through excess Section 8 project-based funds identified by HUD and reforms made to the FHA single-family property disposition program.

Incremental Vouchers

Congress appropriated incremental vouchers for the first time in several years. A total of $283 million dollars was appropriated for 50,000 vouchers dedicated for households moving from welfare to work.³ The conferees observed that the basis for the additional vouchers is to address HUD concerns of unfair "disadvantage [to] very low-income families on waiting lists" as a result of the recently enacted changes in the public housing programs. The Department is also directed to devise measures to monitor the effect of the public housing changes on this population.⁴ The Senate had approved 7,000 vouchers in a limited demonstration restricted to seven states, while the House had appropriated 17,000 vouchers. Despite initial congressional approval of these small numbers, Secretary Cuomo successfully made increased funding for welfare-to-work vouchers the centerpiece of his overall funding strategy.

The 50,000 vouchers are touted by HUD and many housing advocates as a huge victory. Perhaps compared to recent bleak figures — some years it was zero — it is a victory of sorts. However, ironically, during the 1980s and the Reagan presidency, when the Cold War was on, defense budgets were burgeoning, national annual deficits were in the $200 to $300 billion range and there was a Republican Senate — Congress never appropriated fewer than 100,000 vouchers per year. Today, in contrast — at a time of virtually unparalleled economic prosperity, restrained Department of Defense budgets, a Democratic President and a $70 billion surplus — only half that number of vouchers is appropriated.

The Conference Report is explicit on how the new vouchers would work. Welfare-to-Work vouchers must serve families that currently do not receive housing assistance and for whom a voucher will facilitate obtaining or retaining a job and that have received Temporary Assistance to Needy Families (TANF) or state general assistance within the past two years. Housing authorities competing for the vouchers must develop a program in consultation with the local TANF administrator, along with any local entity administering Department of Labor Welfare-to-Work grants. The plan must include a proposed strategy for housing counseling and search assistance and landlord outreach, as well as requests for waivers from the United States Housing Act of 1937, if any. Generally, the plan must include certifications of support and coordination from responsible local TANF and Welfare-to-Work administrators.

One percent of the funding may be used for program evaluation. In addition, a minimum of $4 million each is set aside for local self-sufficiency/welfare-to-work programs in San Bernardino Country, California; Cleveland, Ohio; Miami/Dade County, Florida; Prince George's County, Maryland; New York City; and Anchorage, Alaska — areas represented by some of the leadership of the House and Senate appropriations committees and subcommittees.⁵

One striking gain by low-income advocates and residents is the conferees' agreement to drop the provision included in recent appropriations measures which requires a three-month delay in reissuing returned vouchers. According to HUD, this action is expected to free up an additional 40,000 vouchers annually and would be in addition to the 50,000 newly appropriated incremental vouchers discussed above.

Expiring Contracts Renewed

The Housing Certificate Fund is approved for funding at $10.326 billion. Of this amount, $9.6 billion will fund all contracts expiring in this fiscal year. An additional $433.5 million is for relocation assistance to aid families displaced as a result of HUD's disposition of its own properties or properties that are not remaining in the Section 8 project-based program, as well as public housing demolition. Among the other purposes for this fund are family unification through the use of vouchers to aid families with children facing foster care placement due to inadequate housing and to assist persons enrolled in witness protection programs. An additional $40 million is set aside for non-elderly disabled families displaced as a result of designation of their public housing developments as elderly only, elderly preferences, and the restriction of project-based units to elderly only.⁶

A new set-aside of $10 million is provided from the Housing Certificate Fund for Regional Opportunity Counseling which will provide housing search assistance and counseling for voucher holders as well as recruit and educate landlords to the benefits of participating in the program.

The Conference Report authorizes the funding of enhanced or "sticky" vouchers for residents who face rent increases when owners prepay federally assisted mortgages. The conferees clarify that the enhanced vouchers are renewable annually under the same terms and conditions. The Report provides:

Because appropriations for renewal of Section 8 certificates and vouchers are not provided on annual basis, it is not possible for HUD or public housing authorities to enter into binding commitments to provide this assistance for terms longer than one year. However, the Appropriations Committees have made it a high priority to ensure that sufficient funding is provided each year to allow for renewal of all expiring Section 8 assistance, including enhanced vouchers.⁷

An additional technical amendment clarifies that, where a family loses income through no fault of its own, its rent obligation will be reduced so that the family's rent is not more than the greater of either "(1) the percentage paid in rent before the mortgage prepayment that triggered the enhanced voucher, or (2) the normal Section 8 payment standard of 30 percent." HUD is directed to issue implementing regulations on this provision.⁸

Public Housing Revitalization Funds Are Up, Operating Subsidies Are Down

Although Congress increased funding for both the Modernization and HOPE VI programs for the revitalization of severely distressed housing, the public housing Operating Subsidy actually suffered a reduction, down to $2.82 billion from last year's $2.9 billion.⁹ The public housing Capital Fund, with an appropriated level of $3 billion, includes a $100 million set-aside for technical assistance for the inspection of public housing units and technical assistance for management, among other purposes, including annual resident surveys.

The Tenant Opportunity Program, funded as a $5 million set-aside in recent years, is level-funded.¹⁰ Similarly, the Drug Elimination Program is funded at last year's levels with $50 million in set-asides, including $10 million for the Inspector General's Operation Safe Home initiative and $20 million for the New Approach Anti-Drug Program that will offer competitive grants to alternative managers of public housing, federally assisted multifamily housing or non-federal multifamily housing for use in prosecuting drug-related criminal activity in such housing.¹¹

Paralleling the incremental voucher increase, HOPE VI is funded at $625 million, an amount higher than sought by the Administration, the House or the Senate. The Administration had requested level funding at $550 million, but the final bill provided an additional $75 million. The funds may be used for demolition of obsolete public housing, site revitalization and replacement housing, including vouchers, that will deconcentrate very low-income families, as well as for assistance to tenants displaced by demolitions. Funds may also be used for the provision of supportive services to residents, including education, job training and job acquisition assistance, child care and transportation. As in recent appropriations measures, the provision bars the use of HOPE VI funds in litigation settlements or judgments in the absence of specific authorization.

The conferees praise the "significant contribution" of the program to eliminating unworkable housing with sound replacement housing compatible with its neighborhood and including needed resident supportive services.¹²

Native American Housing Block Grants are increased by $20 million over the FY 1998-enacted level of $600 million.¹³ The monies may be used for purposes set out in Title I of the Native American Housing Assistance and Self-Determination Act of 1996 (NAHASDA).

New HUD Rural Housing Initiative

The House agreed to a Senate proposal to establish a new rural housing initiative within HUD, although funding for the program was scaled back $10 million from the Senate's initial funding level. A new Office of Rural Housing and Economic Development was established, funded at $25 million. Although its function and role are not specified, funds are allocated as follows: $4 million are reserved for capacity-building at the state and local level for developing rural housing and for rural economic development. Of this amount, $3 million must go directly to local rural nonprofits and Community Development Corporations (CDCs) and Indian tribes, while $1 million must be used to establish a clearinghouse of ideas for innovative strategies for rural housing and economic development and revitalization. The remaining $21 million is to be awarded by June 1, 1999, to Indian tribes, State Housing Finance Agencies, and state, community and/or economic development agencies, rural nonprofits and CDCs to support innovative housing and economic development activities in rural areas. All appropriated funds must be obligated on a competitive basis.¹⁴ The conferees stated that their objective in the creation of this new program is to foster replicable models rather than to automatically direct the funds to the most destitute rural areas.¹⁵

CDBG Funding Increases

The $4.75 billion appropriated for FY 1999 funds a variety of community and economic development activities by local governments that principally benefit low- and moderate-income people.¹⁶ These include housing rehabilitation, job training and infrastructure development. Retroactive to FY 1998, Community Development Block Grant (CDBG) funds may be used for environmental clean-up and economic development activities in conjunction with environmental regulatory agencies, related to so-called Brownfields projects.¹⁷ Brownfields redevelopment, previously a set-aside under CDBG, is now separately funded at last year's level of $25 million.¹⁸

Among the set-asides included within CDBG funding are $55 million for public and assisted housing residents' economic self-sufficiency programs. Up to $5 million may be used for the Moving-to-Work Demonstration in which selected PHAs test methods to aid their residents' transition off welfare. A minimum of $20 million must be devoted to grants for service coordinators and congregate services for elderly and disabled persons. Self-sufficiency grants may be made to nonprofits and other entities, as well as to public housing agencies. One test to be applied in the use of the funds is whether the activity impacts families whose head of household is working, seeking work, or engaged in job training or educational pursuits. Recipients of supportive services grants must also demonstrate that they have funding or service commitments from other sources. Examples of innovative approaches, coordination of services and efficient performance measurements during the three-year grant period will also influence the selection.¹⁹

The Economic Development Initiative, an Administration-favored program which provides grants for targeted economic investment, is funded at $225 million, a huge increase over the Senate- and House-passed levels. From the CPD account, $25 million is devoted to neighborhood initiatives aimed at improving distressed neighborhoods and testing efficient methods of integrating housing assistance with welfare reform.²⁰

Funds to provide housing for persons with AIDS (HOPWA), a separate CPD account, increased by $9 million — to $215 million — over the level enacted for FY 1998, but actually decreased by $10 million from the Senate- and House-passed bills. In HOPWA, language was also added to reduce the funding disadvantage experienced by a state when the incidence of AIDS in one of its large cities increases.²¹ In addition, the conferees require that HUD, among other things, report on the current HOPWA distribution formula and they urge the authorizing committees and the AIDS housing community to join with HUD in examining whether program redesign is indicated.

Homeless Programs to Emphasize Permanent Housing

Homeless assistance grants increased over last year's level by $152 million to $975 million. A minimum of 30 percent of these funds must be used for permanent housing. In addition, a 25-percent match in funding for services is required.²² The measure also requires a trigger for review and deobligation of funds unlikely to be used, and it expresses the conferees' belief that funding "significantly above $1 million" may be achieved through such deobligation.²³ One percent of the funds may be used for technical assistance and for tracking systems to assess the extent of the homeless population and the disposition of clients leaving homeless programs.

Funding Increased for Housing for Special Populations and Fair Housing

The Section 202 program, which makes capital grants for housing for the elderly, grew by $15 million over last year's appropriation of $645 million. The Section 811 program for persons with disabilities is funded at last year's level of $194 million.²⁴

The Fair Housing Initiatives Program which funds private enforcement entities is increased to $23.5 million, $8.5 million over last year's level. The Fair Housing Assistance Program, which funds government agencies involved in fair housing enforcement, experienced only a slight growth to $16.5 million, $1.5 million over last year's level.²⁵

Administrative Provisions

Even though the changes to the public housing laws that have been adopted in recent years as appropriations act riders have been permanently enacted through the Quality Housing and Work Responsibility Act of 1998,²⁶ a few unrelated administrative provisions were included in the appropriations measure.

These include elimination of the shopping incentive for voucher families who remain in the same unit upon initial receipt of housing assistance; clarification of the owner's right to prepay in the project-based Section 8 program; designation of Brownfields redevelopment as an eligible activity under CDBG (as mentioned earlier); increase in FHA loan limits;²⁷ and reinstatement of the PHAs' flexibility in the use of some of its funding, for example, using Modernization funding for replacement housing.²⁸

As mentioned above, reforms to the Single-Family Property Disposition program helped fund an increase in HUD's budget which facilitated renewal of all expiring Section 8 contracts as well as increases for some other programs. Specifically, the changes update the disposition program by:

• Deleting outmoded provisions;
• Instituting a new claims payment procedure under which HUD may pay a claim once assigned, rather than only after the property is conveyed, as in current law;
• Allowing HUD to take assignment of the notes and turn them over to private parties for servicing, foreclosure avoidance and foreclosure, among other purposes; and
• Vesting HUD with authority to grant FHA expanded authority to be an equity participant in private entities.²⁹

 

 
 
 
 

¹  Pub. L. No. 105-276, 105^th Cong., 2d Sess. (Oct. 21, 1998), "Making Appropriations for the Department of Veterans Affairs and Housing and Urban Development, and for Sundry Independent Agencies, Boards, Commissions, Corporations and Offices for the Fiscal Year Ending September 30, 1999, and for Other Purposes," H.R. REP. NO. 769, 105^th Cong., 2d Sess. (Oct. 5, 1998), to accompany H.R. 4191 (Title II, Department of Housing and Urban Development); see also 144 CONG. REC. H9361 (Oct. 5, 1998). The budget for selected programs is set out in a chart which appears at the end of this article.
²  See Congress' New Public Housing and Voucher Programs, supra page 143, in this issue.
³  H.R. REP. NO. 769, supra note 1, at 11.
⁴  Id. at 236.
⁵  Id. at 12.
⁶  Id. at 10-11.
⁷  Id. at 237.
⁸  Id.
⁹  Id. at 13.
¹⁰  Id.
¹¹  Id. at 13-14.
¹²  Id. at 238.
¹³  Id. at 15.
¹⁴  H.R. REP. NO. 769, supra note 1, Title II.
¹⁵  Id. at 239.
¹⁶  Id. at 16-19.
¹⁷  Id. at 25. Brownfields projects refer to environmentally compromised sites designated for clean-up and revitalization.
¹⁸  Id. at 19 and 25.
¹⁹  Id. at 18.
²⁰  Id. at 19.
²¹  Id. at 16 and 240.
²²  Id. at 20.
²³  Id. at 259.
²⁴  Id. at 20-21.
²⁵  Id. at 22-23 and 261.
²⁶  Title V of Pub. L. No. 105-276, 105^th Cong., 2d Sess. (Oct. 21, 1998). See Congress' New Public Housing and Voucher Programs, elsewhere in this issue, discussing this Act.
²⁷  A centerpiece of the Administration's budget had been raising the limit up to $170,362 that the FHA may insure mortgages as a means of increasing homeownership opportunities for low- and moderate-income families.
²⁸  Id. at 24-28.
²⁹  Id. at 302-304.
³⁰  Supra note 1.