National Housing Law Project Housing Law Bulletin

President Signs FY 1995 Rescission Compromise Package —
Bad News for Housing

On July 27, 1995, President Clinton approved a $16.3 billion compromise measure on the FY 1995 rescission which he had vetoed the month before.¹

The negotiated compromise centered around several of the Administration's pet initiatives, including AmeriCorps, the summer jobs program, and maternal and child nutrition programs. Cuts to low-income housing programs, however, dramatically increased as a result of the compromise. Annual contributions for assisted housing were reduced from $11.083 billion in the original FY 1995 appropriation to $5.131 billion. In addition, HUD was directed to identify an additional $1 billion in unspecified Section 8 cuts.

Following a favorable House vote of 276 to 151 on the compromise package on Thursday, June 29, Senate action was stalled by Senators Paul Wellstone (D-MN) and Carol Moseley-Braun (D-IL) who objected to drastic reductions in several low-income programs. On July 21, the Senate adopted the compromise on a voice vote of 90 to 7, following rejection of the Wellstone/Moseley-Braun amendments that would have restored cuts to the Low Income Housing Energy Assistance Program (LIHEAP) and education and job training programs.

The following table contains a comparison of the 103d Congress' FY 1995 housing appropriations with the 104th Congress' rescissions.

The rescission compromise contains several significant substantive and administrative provisions. Although the statute rescinds a huge amount of last year's funding for incremental Section 8 assistance, any remaining funds may be used only for limited purposes: for relocation; for replacement of demolished units or those that have been disposed of; for litigation settlements or court orders; for amendments of existing contracts; and for facilitating "mixed population" developments, primarily for elderly residents.

The statute contains sweeping HUD waiver provisions. The Secretary is authorized to reduce the Department's funding needs by waiving any provision of law concerning elderly housing and housing for persons with disabilities so long as the result would not impede program operation. In addition, HUD is authorized to "manag[e] and dispos[e] of HUD-owned and HUD-held multifamily properties without regard to any other provision of law."⁶ This provision would effectively undermine, for example, tenant participation or subsidy requirements adopted in last year's multifamily property disposition legislation.⁷

The administrative provisions have the potential for far reaching effects in PHA uses of modernization funds and, more importantly in the case of demolitions and dispositions, in dismantling current law on replacement units. The statute would permit PHAs, after consultation with tenants and local government officials, to use modernization funding for any currently authorized public housing purpose, including demolition, replacement housing, modernization activities for developments jointly held with non-public housing entities, as well as for relocation assistance. Rehabilitation and replacement and associated management improvements must still remain the principal use of the funds. Modernization funds, however, may not be used for operating assistance.⁸

Existing law requiring replacement of public housing units on a one-for-one basis is repealed for demolition and disposition plans approved by HUD on or before September 30, 1995.⁹ The statutory provisions are amended, however, to require PHAs to pay relocation expenses for displaced tenants and to ensure that rents following relocation do not exceed statutorily prescribed maximums. PHAs are barred from proceeding with demolitions and dispositions until tenants are relocated, but they are authorized to consolidate occupancy of residents among buildings and developments and with other housing in order to enhance services to residents.¹⁰ Replacement units could also be constructed on the original public housing site or in the same neighborhood, notwithstanding the site and neighborhood standards, 24 C.F.R. § 941.202 (1995), if "significantly fewer" replacement units are constructed.¹¹

As devastating as the FY 1995 rescission is for low-income housing programs, it appears to be simply a prelude to the FY 1996 appropriations process now concluded in the House and awaiting Senate action. As Congress moves toward downsizing government and vesting more and more decisionmaking authority in the state and local jurisdictions, the further withdrawal of financial support from federal housing programs serving the most vulnerable populations is a virtual certainty.

1. Emergency Supplemental Appropriations for Additional Disaster Assistance, for Anti-terrorism Initiatives, for Assistance in the Recovery from the Tragedy that Occurred at Oklahoma City, and Rescissions Act of 1995, Pub. L. No. 104-19, 109 Stat. 194 (July 27, 1995); see Stepped Up Congressional Activity on Rescission, Budget and Appropriations, 25 HOUS. L. BULL. 108 (June/July 1995). (Note that the date of President Clinton's initial veto was June 7, 1995, not June 8, as erroneously indicated in the above-cited article.)
2. For every item listed below, there was an initial recommendation to rescind funding. Where no rescission is indicated (—), the proposed cut was ultimately rejected.
3. Generally, where the rescinded amounts exceed the appropriation, the figure includes prior years' carryover.
4. The law mandates the deferral of expenditures, including last year's and prior year's obligations, until September 30, 1995. Id. 109 Stat. at 233.
5. The statute defers homeless assistance grant funds for obligation until September 30, 1995. 109 Stat. at 235.
6. Id. 109 Stat. at 233.
7. Multifamily Property Disposition Reform Act of 1994, Pub. L. No. 103-233, 108 Stat. 342 (1994).
8. 109 Stat. at 235, § 1001, amending Section 14 of the United States Housing Act of 1937, 42 U.S.C.A. § 1437l (West 1994).
9. 109 Stat. at 235, § 1002(a)(3), repealing § 18(b)(3) of the United States Housing Act of 1937, 42 U.S.C.A. § 1437p(b)(3) (West 1994).
10. 109 Stat. at 235, § 1002(a)(6), amending § 18(d) of the United States Housing Act of 1937, 42 U.S.C.A. § 1437p(d) (West 1994).
11. 109 Stat. 236, § 1002(a)(9), amending § 18 of the United States Housing Act of 1937 (42 U.S.C.A. § 1437p (West 1994)), by resignating existing subsection (f) as (g) and adding a new subsection (f) to § 1437p.