National Housing Law Project Housing Law Bulletin

House Passes HUD Appropriations Bill for FY 1997

Funding for HUD was approved by the House at just over $20 billion, a slightly higher level than for FY 1996. While there was considerable shuffling of monies from one pot to another, the major programs remain underfunded in light of the need.³

The following table lays out some specific program levels for FY 1997, as compared with FY 1996 funding and the Administration's requests.

The House provides little explanation or analysis of the reasons for increasing or decreasing funding for a particular program.

Section 8

No incremental assistance. For the second year in a row, and in keeping with congressional claims that budget constraints preclude continued commitment to increasing the supply of affordable housing, the appropriators recommended no funding for incremental Section 8 assistance. Not only will no new families receive Section 8 tenant-based assistance, housing authorities will be required to delay for three months the reissuance of turnover certificates and vouchers.⁸

Expiring contracts. H.R. 3666 includes $4.5 billion for expiring Section 8 contracts and, following the Committee's recommendation, approved funding for renewal of those contracts for one year.⁹

Portfolio restructuring authorized for multifamily properties. The Committee had included an administrative provision to "reengineer the portfolio" for FHA-insured multifamily projects with Section 8 contracts expiring in FY 1997. It had estimated that 63 percent of the 8,500 properties with Section 8 rental contracts expiring over the next seven years are over-subsidized, resulting in owners receiving rents exceeding those paid for comparable unsubsidized units in the area.¹⁰ Under the mechanics of the reengineering proposal, third parties, with HUD authorization, would have served as intermediaries to negotiate with owners to restructure the properties' mortgages in order to make market rents feasible. At expiration of the contracts, any above-market rents would have been dropped to market-rate levels. FHA's loan guarantee would have been decoupled from the mortgage, and rental subsidies would have been renewed only for a one-year term. Local governments would have been given the discretion to determine whether the form of the replaced subsidy would be project-based or tenant-based.

The Committee provision was stricken from the bill on the House floor by voice vote. This House action blocking HUD from proceeding with portfolio restructuring in the appropriations bill increases the likelihood that the House and Senate authorizing committees will act on the matter this year, although status quo renewals for another year present another option.¹¹

Public Housing

The House increased public housing operating subsidies by $50 million over FY 1996 levels, while decreasing modernization funds by $85 million.¹²

In addition to the set-aside for the Tenant Opportunity Program — decreased from $15 million in FY 1996 to $10 million — the Committee included (and the House adopted) Public Housing Capital Fund set-asides of $200 million for Indian housing development, $50 million for self-sufficiency-type supportive services (down from $53 million in FY 1996), and $5 million for a Jobs-Plus demonstration program designed to foster and replicate strategies to increase resident employment. The jobs demonstration will involve four to six urban housing authorities and be targeted to at least one family development in each housing authority selected.¹³

The House accepted the Committee's recommended funding of $550 million for the revitalization of severely distressed projects (HOPE VII), a $70 million increase over FY 1996.¹⁴ As in the past, this funding is to be awarded competitively to permit the demolition of obsolete projects or revitalization of sites. Half the funds must be used for reconstruction or replacement units, the other half is to be used for demolition or tenant-based assistance to relocate displacees. The Committee had requested that the Government Accounting Office evaluate the Severely Distressed program results in terms of the number of units demolished, built and rehabilitated, and the associated costs, as well as the number of families aided. That study is due to the Congress by February 1, 1997.¹⁵

Housing Certificate Fund. Use of the Housing Certificate Fund is restricted to families displaced as a result of changes in project status due to "preservation activities, property disposition, portfolio reengineering and other activities."¹⁶

The bill also includes a $50 million set-aside from Section 8 rental assistance for disabled families. This set-aside would expedite the conversion to elderly-only buildings and would implement the recently enacted Housing Opportunity Extension Act provisions to facilitate relocating disabled residents from buildings designated for elderly residents only.¹⁷ In recommending the set-aside, the Committee acknowledged the "extreme crisis in availability of housing" experienced by the mentally ill and those with other disabilities.¹⁸

Prompt agreement urged on public housing reforms. The Committee noted that reforms in the 1996 rescission and appropriations measures have led to increased PHA efficiency and economies, but it cautioned that they expire at the end of the current fiscal year, barring the adoption of permanent legislation. It therefore urged the conferees on the housing authorization bills to act quickly in order to facilitate prompt and permanent implementation of reforms.¹⁹

Community Development Block Grants

The Committee had unexpectedly recommended reducing the CDBG program by $300 million from FY 1996. The bill was amended on the floor by Subcommittee Chair, Rep. Jerry Lewis, to fully restore the program to last year's level of $4.6 billion.²⁰ This restoration was reported to have been achieved by reducing funding for contract renewals in the Annual Contributions for Assisted Housing account by $100 million and by reducing FEMA disaster relief by $200 million.

The full House did follow the Committee's decision not to fund HUD's system of bonus or incentive pools proposed for four of its six block grants as a means of increasing local flexibility. In a deviation from Congress' recent penchant for block grants, the Committee had noted its concern that they would impede "the development of uniform performance measures."²¹

The Committee had expressed concern that improve-ments be made to controls on the CDBG program to ensure that activities accrue to the benefit of low- and moderate-income persons.²²

Tenant Opportunity Program. Funding for the Tenant Opportunity Program was reduced to $10 million from the President's request of $15 million. The Committee noted that it declined to fully fund the program pending completion of federal investigation into waste and fraud allegations.²³

Youthbuild. The CDBG funding includes set-asides for Youthbuild at last year's level of $20 million.²⁴ This program provides grants for the provision of education and job skills training to disadvantaged young adults through the construction and rehabilitation of housing for low-income and homeless persons.

Economic Development Initiative. The House ignored the Committee's recommendation of a $40 million set-aside for the Economic Development Initiative (EDI). EDI would have funded economic revitalization generating efforts that link low-income housing/community residents to jobs and support services.

HOME

The HOME program, which provides a formula allocation to state and local governments to produce affordable housing and cover related costs, is funded at last year's level of $1.4 billion.²⁵

Housing for Homeless People and Special Populations

McKinney Act programs. Funding for four McKinney Act programs for homeless people — (1) Emergency Shelter Grants, (2) the Supportive Housing program, 3) the Section 8 Moderate Rehabilitation program, and (4) the Shelter Plus Care program — holds at last year's level of $823 million, despite the Administration's request for $1.1 billion.²⁶

HOPWA. Funding for Housing Opportunities for Persons with AIDS (HOPWA) was approved at the Administration's requested level of $170 million.²⁷

Section 202. The House passed an amendment offered by Rep. Rick Lazio to increase funding by $100 million for a total of $695 million for the Section 202 housing for the elderly program.²⁸ This increase was approved despite the Committee's recommendation that funds for the program be greatly reduced. The Committee mandated that HUD report to Congress no later than February 1, 1997, on the effect of reforms on program reserves needed for long-term modernization and major repairs. The Committee also noted the importance of service coordinators in buildings for the elderly, and suggested that their funding become a routine element in future budgets.²⁹

Section 811. Passage of the Lazio amendment also increased Section 811 funding to $214 million, beyond the Administration's request.

Appropriators Continue to Recommend Substantive Program Changes

By approving continuation of several administrative provisions commenced in the FY 1996 Omnibus Appropriations measure or its predecessor funding measures, the House continues its current practice of authorizing through appropriations measures. Examples of substantive changes included in this bill are the continued minimum rent provisions for both public housing and Section 8³⁰ and gutting reforms of the single-family mortgage assignment program.³¹

1. H.R. 3666, An Act, Making appropriations for the Departments 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, 1997, and for other purposes (June 27, 1997); H.R. REP. NO. 628, 104th Cong., 2d Sess. (June 18, 1996).
2. H.R. 3666, 142 CONG. REC. (Part I) H6856 and (Part II) H6917, H6949 (June 26, 1996).
3. See, e.g., HUD, Rental Housing Assistance at a Crossroads: A Report to Congress on Worst Case Housing Needs (Mar. 1996) (available from HUD's Office of Policy Development and Research, Washington, DC 20410-6000, for $5.00. This report is reviewed at 26 HOUS. L. BULL. 68 (May 1996).
4. Sources: H.R. 3666, tit. II; H.R. REP. NO. 628, 104th Cong., 2d Sess.; HUD, Fiscal Year 1997 Budget (Mar. 19, 1996).
5. H.R. 3666, tit. II, pp. 21-22.
6. While the Housing Certificates Fund is authorized for use for tenants displaced as a result of preservation and property disposition activities, among other activities, neither the property disposition nor preservation programs are funded. H.R. REP. NO. 628, 104th Cong., 2d Sess. 28.
7. But see Major Restructuring Proposed for Native American Housing Programs elsewhere in this issue.
8. H.R. 3666, tit. II, pp. 22-23; H.R. REP. NO. 628, 104th Cong., 2d Sess. 28.
9. H.R. 3666, tit. II, p. 18; H.R. REP. NO. 628, 104th Cong., 2d Sess. 25.
10. H. REP. NO. 628, 104th Cong., 2d Sess. 41.
11. The House Appropriations Committee had authorized portfolio reengineering, noting, "…it is the hope of this Committee that all appropriate parties in Congress will make a concerted effort to craft a solution to this problem prior to the 1998 fiscal year." Id. at 25.
12. H.R. 3666, tit. II, pp. 24-25.
13. H.R. REP. NO. 268, 104th Cong., 2d Sess. 30.
14. H.R. 3666, tit. II, p. 25.
15. H.R. REP. NO. 628, 104th Cong., 2d Sess. 30. Some PHAs have challenged this 50/50 apportionment, as well as the designated use of capital funds for rental assistance, as being unduly restrictive. See CLPHA [Council of Large Public Housing Authorities] Congressional News (June 14, 1996), p. 1.
16. H.R. 3666, tit. II, pp. 22-23; H.R. REP. NO. 628, 104th Cong., 2d Sess. 28.
17. Pub. L. No. 104-120 (Mar. 28, 1996).
18. H.R. REP. NO. 628, 104th Cong., 2d Sess. 28.
19. Id. at 29.
20. H.R. 3666, tit. II, p. 28.
21. H.R. REP. NO. 628, 104th Cong., 2d Sess. 25.
22. Id. at 33.
23. H.R. 3666, tit. II, p. 25; H.R. REP. NO. 628, 104th Cong., 2d Sess. 29.
24. H.R. 3666, tit. II, p. 29.
25. Id. at 30.
26. Id. at 30-31.
27. Id. at 31.
28. Id. at 20.
29. H.R. REP. NO. 628, 104th Cong., 2d Sess. 27.
30. H.R. 3666, § 201. This mandatory minimum rent provision was initially adopted in the Balanced Budget Downpayment Act I, Pub. L. No. 104-99, § 402(a), 142 CONG. REC. H833 (Jan. 25, 1996). See also Minimum Rents: Issues and New Developments, 26 HOUS. L. BULL. 59 (May 1996), and Important Recent Developments Concerning Minimum Rents, elsewhere in this issue.
31. H.R. 3666, tit. II, Administrative Provisions, § 203. These reforms were first included in the Balanced Budget Downpayment Act II (Omnibus Appropriation Act), tit. II, § 221, Pub. L. 104-134. 104th Cong., 2d Sess. (Apr. 26, 1996). See FY 1996 HUD Appropriations Bill: A Triage Plan that Sacrifices the Poorest of the Poor, 25 HOUS. L. BULL. 193, 199 (Dec. 1995).