National Housing Law Project Housing Law Bulletin

The Senate Appropriations Subcommittee recently recommended funding for HUD programs for Fiscal Year 1999 of $24.2 billion.¹ The House Appropriations Committee provided $2.4 billion more, or $26.6 billion in budget authority, for all HUD programs.² The chart appearing at the end of this article sets out the funding levels recommended by each committee compared to FY 1998-enacted levels and the Administration's request.

The highlights of the appropriations reports from the Administration's standpoint include the proposed increase in the FHA loan limits in both reports, the elimination of the three-month delay in issuance of certificates and vouchers in the Senate Report (though not in the House Report), and the House's decision to meet the budget request for incremental vouchers.

Selected Highlights

Increased FHA loan limits. One of the provisions most anxiously sought by the Administration was the raise in FHA loan limits. The committees handed HUD Secretary Cuomo a partial victory. The President's budget had sought to increase the loan limits to a single, nationwide limit of $227,150 which the Department saw as expanding homeownership opportunities for lower income families. The reported bills provide a more modest increase, raising the floor to $109,000 and establishing a new ceiling of $197,000 for high-cost areas. The Senate Committee report observes that, in addition to promoting homeownership, these changes in the FHA mortgage insurance limits will be a valuable tool in rural areas where first-time-buyer housing costs exceed the capacity of low-income households to pay. Both the House and Senate reports increase the nationwide floor on FHA loans. Although lower than the Administration's proposal, the increase is expected to expand homeowership opportunities for as many as 35,000 new home buyers annually.³

Senate lifts delay on reissuing vouchers/certificates. The Senate Committee declined to recommend the budget device adopted in recent appropriations measures requiring that 90 days pass before PHAs may reissue certificates and vouchers turned in by families who no longer need them. Some have estimated that this action would free up thousands more vouchers annually for use by poor households. The House declined to eliminate the delay.

Funding for more vouchers. Finally, although far apart on the number of incremental vouchers, both the House and Senate Committees, in funding some new assistance, acknowledged the vast recently documented need for more vouchers, and begin — if ever so slightly — to address it.

Full Funding for Expiring Section 8 Contracts

Both committees provided funding for renewal of all expiring Section 8 contracts — $9.54 billion in the Senate and $9.6 billion in the House.⁴ Each body includes more than $400 million for use for Section 8 relocation assistance, including the costs of so-called "sticky" vouchers for families who opt to remain in multifamily housing following a restructuring. The House also lists HOPE VI displacement needs as eligible for funding from the Section 8 relocation fund.⁵

The House Committee funded Section 8 contract amendments at $98 million, as well as Regional Opportunity Counseling for job-related services at $10 million.

Senate concerns about HUD's accounting and administrative capacity. The Senate Report recounts that both the Senate and House subcommittees requested that the General Accounting Office (GAO) perform a so-called "budget scrub" of all Section 8 accounts, both tenant-based and project-based, in an effort to ascertain accurate information regarding monies available in HUD's reserve preservation account. The Senate Report alludes to GAO concerns about HUD's accounting procedures and administrative capacity. The Senate concluded that the Administration's requested $1.377 billion for Section 8 contract amendments is not needed. It noted that $1.4 billion in excess Section 8 project-based funds remains unspent. This amount was therefore rescinded. The Senate Report blasts HUD for "misleading and confusing" accounting in its reports and cautions that correct financial projections are essential to HUD's continued support from the Senate Committee. Finally, HUD is directed to provide a report by May 1, 1999, on ways it intends to tackle skyrocketing Section 8 costs, including the expected $20 billion annual cost of expirations and anticipated funding shortfalls. In addition, the Senate Committee mandates that the final report address methods to fund incremental Section 8 assistance under the current budget agreement and include suggestions for program reductions or consolidations.⁶

Incremental Funding for Welfare-to-Work Vouchers

In response to the Administration's request for 100,000 additional vouchers, the Senate Committee recommended $40 million which will fund $4 million each for demonstration sites in Los Angeles; Kansas City, Missouri; Prince George's County, Maryland; Charlotte, North Carolina; Miami/Dade County, Florida; New York City; and Anchorage — cities whose Senators are represented on the Appropriations Committee. The assistance is to be targeted to families on public housing waiting lists who agree to participate in local self-sufficiency/welfare-to-work programs. The remaining assistance is to be "fair-shared." The Committee attributes the low funding level for incremental vouchers to its "lack of confidence in HUD's capacity to manage these resources efficiently, including HUD's continuing inability to provide accurate accounting of existing funds and out-year obligations."⁷

The House Committee recommended $100 million in new monies for welfare-to-work purposes but did not limit the vouchers to particular demonstration programs. Moreover, the House draft report includes language encouraging HUD to revise its Performance Plan to include performance measures that will test the capacity of incremental vouchers to aid welfare reform objectives generally, and specifically to determine whether families receiving the assistance (1) increase their earnings, (2) increase employment among families moving from welfare, (3) benefit from improved coordination among housing and welfare agencies, and (4) benefit from better housing quality and greater affordability.⁸

Public Housing Funding

The capital fund experiences the most dramatic increase of any of the public housing accounts. The Senate Committee recommends $50 million over last year's enacted level and meets the Administration's request. The House Committee approved a $450 million increase over the President's request. The funding increase is, in many ways, a reward for progress in the modernization program, long criticized as hopelessly backlogged.

The House Committee justifies increased funding based on backlog modernization needs of $20 million due to the age of the inventory. The House Report observes that 792,000 of the roughly 1.232 million units operated by PHAs — around 64 percent — are over 30 years old. In addition, the Committee sees modernization funding as a source for leveraging other resources, particularly to enhance mixed-income developments, with a role for job creation. Finally, the Committee previews a new reporting system under development, designed to help HUD rank rehabilitation needs. Extensive physical assessments are expected in the coming year in connection with this effort.⁹

The Senate recommends a considerably smaller increase for public housing modernization: $50 million.¹⁰ In addition, both the House and Senate Committees funded the Tenant Opportunity Program (TOP) as a $5 million set-aside from the public housing capital fund.

Public housing operating subsidies are level-funded at the current year's appropriation of $2.818 billion in both committees, an amount PHAs have claimed falls short of 100-percent funding for operating expenses required by the Performance Funding System.¹¹

HOPE VI, for the revitalization of severely distressed public housing, receives a $50 million boost by both committees, with total funding at $600 million. The Senate Report admonishes HUD to ensure adequate staffing for the HOPE VI office. The House Report expresses concern over the expenditure of HOPE VI funds "on relocation rather than revitalization" and directs that future relocation assistance come from the Housing Certificate Fund.¹²

Senate Recommends New Office to Address Rural Housing Needs

The Senate Committee, but not the House, recommends a new Office of Rural Housing and Economic Development to complement Department of Agriculture (USDA) functions. The Committee expects the USDA to continue in its leadership role with respect to rural housing but mandates execution of a memorandum of understanding between HUD and USDA to assure maintenance of effort with respect to rural housing programs. Among the new office's immediate tasks would be an assessment of the utilization of HOME and CDBG monies in non-entitlement communities and the design of strategies to guarantee equal access by rural areas to these programs.

Of the $35 million recommendation, $10 million is for the creation of a clearinghouse for innovative strategies to address rural housing and economic development needs. This includes $8 million to meet the technical assistance and capacity-building needs of local rural nonprofits, with funding to be awarded by June 1, 1999, after HUD consultation with the USDA. A special $5 million set-aside is designed specifically for nonprofits or community development corporations that have inadequate capacity in rural areas. Those areas are to be determined by HUD in collaboration with USDA and the Housing Assistance Council. Another $20 million is to fund activities of state housing finance agencies' work in rural communities. Grantee technical assistance and administrative costs for this funding is capped at 10 percent.

CDBG Contains Usual Set-Asides, HOME Sees
Some Growth

Overall, CDBG is recommended for funding at the President's requested level in the House, and with a $25 million increase by the Senate Committee. HOME Investment Partnerships is increased by $100 million over last year's enacted level in the House, but still $283 million below the President's request. Similarly, the Senate Committee would provide a $50 million increase over current year funding. Both committee reports reject HUD's CDBG initiative for the Regional Connections Program which would have established a $100 million competitive grant for states and localities to cooperate regionally to devise strategic plans to confront central issues involving metropolitan and rural areas. Both reports cite the need for involvement of the authorizing committees in establishing such programs and favor state and local decision-making on housing and community development issues.¹³

The House Report supports the HOME increase because the program "can document its results." According to the report, more than 280,000 new homes were produced by the program and over 91,000 first-time home buyers assisted. Among families renting HOME-assisted units, 97 percent have less than half of area median income. The House Committee expressed satisfaction with the performance measure included in the program to assess grantee efforts in affordable housing production.¹⁴ The Committee rejected HUD's proposal to combine the Section 202 elderly and Section 811 disabled program into the HOME program while drastically reducing funding for elderly housing. The House Report cited HOME's provision of additional units for the elderly. Of 52,000 units produced nationally over a four-year period from 1992 to 1996, only 681 were for the elderly.

The Senate Report requires HUD to study senior housing needs and to assess the physical condition of the current stock of housing for the elderly. HUD's mandate includes examining innovative ways to provide elderly housing that reduce costs and increase performance. Of particular interest to the Committee are approaches that will assist on-site care for the elderly by service providers. The Committee requests a report by February 1, 1999, on how HUD can partner with private industry, nonprofits and other federal agencies to improve the continuum of care to add to the quality of life for elderly people.

Increased Assistance for Homeless People

Both the House and Senate increased funding for homeless assistance grants to $1 billion from the $823 million funding level which the program has had for several fiscal years. The Senate Committee recommended that 30 percent of the funds support permanent housing and that a substantial portion serve persons with mental disabilities — providing an alternative to chronically homeless and chronically disabled individuals and families to the long-term stays in the emergency shelter system that are detrimental to their progress. The Senate Report also indicates that a new 25-percent match requirement for services will be required.¹⁵

The House version contains similar targeting, but stops short of specifically requiring the dedication of 30 percent of the funding to permanent housing. The Committee noted, however, that the House passed H.R. 217, the Homeless Housing Programs Consolidation and Flexibility Act, which requires such targeting.¹⁶ The House Committee requests a report by May 1, 1999, to provide a full accounting of the expenditure of homeless assistance grant funding and to analyze strategies for the "continuum of care and transition to permanent housing."

Fair Housing Private Enforcement Activities Undercut

Overall fair housing activities received a $10 million increase over FY 1998 funding. In the Senate version, most of the increase goes to government state and local fair housing agencies. Private enforcement efforts are level-funded in the Senate.

The Senate recommends that HUD develop policy guidelines on all aspects of fair housing policy by August 1, 1999. Both reports reaffirm the position that Fair Housing Initiatives Program funds not be used for actions against property insurers, asserting that adequate state and local regulation of insurance make such activities duplicative.¹⁷

The Senate bill includes a number of administrative provisions, some of which continue changes adopted in recent years and some of which adopt new policies. The elimination of the requirement for one-for-one replacement of public housing continues for demolition plans submitted by September 30, 1998.¹⁸ It continues restrictions on protections in Section 8 tenant-based assistance by eliminating the "take-one, take-all" and 90-day-notice provisions and the so-called "endless lease."¹⁹ Minimum rents of $25 to $50 are continued, as are all the other changes related to rents, including the authorization for ceiling rents and substitution of authorization for local preferences in place of the repealed federal preferences.²⁰

As included in recent appropriations acts, the bill would bar use of funds during FY 1999 for fair housing investigations or prosecutions that have a chilling effect on persons seeking to promote or prevent government activity.²¹

The bill would require HUD to adhere to existing requirements for notice and comment rulemaking.²² It would make the clean-up and redevelopment of Brownfields²³ an eligible activity under the Community Development Block Grant (CDBG) program.²⁴

The bill would give HUD flexibility to make rehabilitation grants and loans for the disposition of HUD-owned and HUD-held properties. It would require reports to Congress in January and August 1999 on all activity under this authority because of congressional concern about HUD accountability in making rehabilitation grants and loans from the general and special risk insurance funds.²⁵

Tenant-based assistance may be provided to eligible tenants in Section 221(d)(3) and 236 properties as if the owner had prepaid, but only to the extent needed to "minimize any rent increases or to prevent displacement of low income tenants…." The authority exists only where HUD has approved the transaction and rents are no higher than Fair Market Rents on the date of enactment.²⁶

HUD is required to give 24 hours' prior notice of all grant awards to the Senate and House Appropriations Subcommittees on VA, HUD and Independent Agencies.²⁷

HUD is barred from paying tuition, room or board for participants in its new community builders program that is designed to equip housing professionals to provide services to HUD's client base.²⁸

The House administrative provisions also closely mirror recent appropriations actions, including the minimum rent and elimination of federal preferences. The provision first adopted in FY 1996, which permits more flexible use of modernization funds for purposes such as replacement, is also recommended for extension. In addition, the so-called Section 8 reforms — such as elimination of "take one, take all" and in ending the 90-day notice requirement — included in recent appropriations measures are also adopted. Federal preferences continue to be suspended. The minimum rent in current law is continued. As mentioned earlier, the House continues to delay the issuance of Section 8 certificates and vouchers for three months.²⁹

Next Steps

Both measures will be considered in their respective bodies after the July 4 recess. During considerations leading up to the House committee recommendation, discussions -— at least at the staff level — involved attaching to the funding bill elements of the public housing reform legislation, including weakened targeting, the home rule flexible block grant, the rent choice provision, and the community work and self-sufficiency requirements. Although that action did not occur in the full House Appropriations Committee mark-up, the public housing measure may be considered when the House and Senate funding bills are reconciled if the authorizing committees can reach an accord on the parameters of the public housing bill.

¹  Departments of Veterans Affairs and Housing and Urban Development, and Independent Agencies Appropriations Bill, 1999, S. REP. NO. 216, 105th Cong., 2d Sess. (June 12, 1998) at 27 (to accompany S. 2168) (hereafter "Senate Report").
²  Departments of Veterans Affairs and Housing and Urban Development, and Independent Agencies Appropriations Bill, 1999, H. REP. NO. 610, 105th Cong., 2d Sess. (July 8, 1998), at 22 (to accompany H.R. 4194) (hereafter, "House Report").
³  See Senate Report at 53, and Section 219 of S.2168; and House Report at 35.
⁴  See Senate Report at 29; and House Report at 23.
⁵  See House Report at 23.
⁶  See Senate Report at 30.
⁷  See Id. at 29-31.
⁸  See House Report at 23-24.
⁹  Id. at 24-25.
¹⁰  See Senate Report at 31.
¹¹  CLPHA Congressional News (Mar. 10, 1998) at 1.
¹²  See House Report at 26.
¹³  See Senate Report at 40 and House Report at 29.
¹⁴  House Report at 30.
¹⁵  See Senate Report at 42.
¹⁶  See House Report at 322-333. H.R. 217 passed the House March 3, 1998, and was referred to Senate Banking Committee.
¹⁷  See Senate Report at 49-50 and House Report 39.
¹⁸  S. 2168, § 201(a).
¹⁹  Id. § 201(b).
²⁰  Id. § 201(c).
²¹  Id. § 203.
²²  Id. § 204.
²³  Brownfields refers to the program to clean up and revitalize environmentally compromised sites.
²⁴  S. 2168, § 205.
²⁵  Id. § 206.
²⁶  Id. § 207.
²⁷  Id. § 215
²⁸  Id. § 218.
²⁹  See House Report; H.R. 4194, tit. II, Department of Housing and Urban Development, §§ 201(a), (b) and (c) and § 202.