National Housing Law Project Housing Law Bulletin

Budget Committees Approve Drastic Changes for Housing
in Fiscal Year 1996 Budget Resolutions

Both the House and Senate Budget Committees have completed action on Fiscal Year 1996 budget resolutions that will guide the actions of congressional appropriators for the coming year and into the next century. The budget proposals aim to achieve a balanced budget in seven years through a dramatic downsizing of government, including cuts to Medicare, Medicaid, Legal Services and other programs for the elderly, children and low-income persons. The Senate Budget proposal garners $2 trillion (with a “t”) in savings, while the House budget proposal suggests savings of $1.4 trillion over the next seven years.

Included among the drastic reductions in government programs nationwide, the Senate Budget proposal heralds unprecedented changes in low-income housing programs. The proposed budget assumes a reduction in community development block grants by 50 percent, while targeting funds to the most needy and reducing outlays by $7.6 billion over a five-year period. Section 8 contracts slated to expire over the next seven years would be renewed. This assumption is based on a stated commitment to assure continued subsidies to those currently receiving housing assistance.

The Senate budget would continue funding under the current structure for the Section 202 elderly housing program, the Section 811 housing for persons with disabilities program, and the Housing Opportunities Program for persons with AIDS. Two block grant programs — one for public housing and one for other existing housing assistance programs — are contemplated along with deregulation and funneling of federal housing dollars to the states and public housing authorities. These changes are expected to net savings of $5.7 billion over the next five years.

The House Budget Committee plan makes a smaller reduction in community development block grant funds and terminates programs under HUD’s Office of Policy Development and Research. Like the Senate proposal, the House budget assumes renewal of Section 8 contracts. Costs in the program are slated to be restricted by (1) restraining the issuance of new Section 8 vouchers and certificates, (2) reissuing only half of the vouchers and certificates turned in by tenants no longer in need of assistance, (3) reducing fair market rents from the 45th to the 40th percentile of median income, and (4) increasing the tenant contribution from 30 to 35 percent of income.

The deregulation of public housing authorities and the reduction in public housing modernization funds will yield savings of over $3 billion over seven years. In addition, the proposal assumes significant savings through reform of FHA multifamily property disposition rules. It also assumes savings of $7 billion over seven years through revision of the “mark to market” option, lowering the mortgage levels of federally subsidized privately owned apartments to their real market value.

The budget proposals are expected to be taken up shortly in each house. Although the resulting resolutions are technically nonbinding, they form the framework within which appropriators will make Fiscal Year 1996 funding decisions.