National Housing Law Project Housing Law Bulletin

During the week of September 13, the Senate HUD-VA Appropriations Subcommittee and Committee finally marked up a $27.16 billion HUD funding bill for FY 2000 that begins on October 1, 1999. It is anticipated that the bill will receive Senate floor action late in the week of September 20^th, and that a conference committee would negotiate a compromise version between the House in the Senate, which would in turn be passed by each chamber prior to the end of this fiscal year on September 30th.

The bill contains some good news for HUD programs when compared to its House counterpart, H.R. 2684./1/ Its funding levels are higher than the House both in the aggregate (the House bill was approximately $26 billion) and for several specific programs – apparently sufficiently higher to avoid a presidential veto threat. In addition, the bill’s administrative provisions contain some new legal authorities that could help preserve housing and protect tenants. However, the bill contains no new funding for incremental vouchers, as requested by both advocates and the administration, which could help close the growing housing affordability gap for very low-income families.

The Senate bill, although formulated under restrictive budget caps effectively limiting funding to approximately 13 percent less than FY 1999, was able to provide higher program levels by adopting the Administration’s recommended budget gimmickry technique of making an "advance appropriation" of $4.2 billion for Section 8 renewals in the Housing Certificate Fund. This technique allows appropriators to appropriate the budget authority now for some of the Section 8 contract renewal needs that will not need to draw outlays until after FY 2001 begins on October 1, 2000, but to avoid counting the full budget authority against the caps for FY 2000. These are essentially the tails on those 12-month renewal contracts for existing Section 8 contracts that do not expire until several months into FY 2000, and would in turn not require a full draw down of renewal funds during FY 2000. The immediate effect is to free up $4.2 billion in budget authority for this year’s HUD budget. The long-term consequence is that next year, in providing funds for FY 2001, appropriators will have to count the $4.2 billion, in addition to the projected growing budget authority needs of renewal contracts expiring next year.

This issue portends big trouble down the road without relief from the budget caps or other extraordinary measures to reform how the appropriations process treats Section 8 renewals. The Senate Committee estimates that the price tag for using the advance appropriation gimmick in FY 2000 will be an $8 billion growth in the projected budget authority requirements of the Housing Certificate Fund next year over this year’s appropriated baseline level, a cost "very difficult to meet under any budget constraint."/2/ As if that problem is not daunting enough, the Committee added, "Even more troubling is the Administration’s out-year budget forecast that proposes flat funding for Section 8 contracts of $11.5 billion for the next ten years. This would mean that some 1.3 million families will lose their federal housing assistance over the next ten years."/3/ Clearly, this bump in the rug can be pushed around no longer, and solutions must be developed over the next year.

Concerning funding levels for specific programs,/4/ the Senate bill would provide higher funding levels than the House for the following major programs:

• Housing Certificate Fund ($11.05 billion vs. the House’s $10.54 billion)/5/
• Public Housing Operating Fund ($2.9 billion vs. the House’s $2.82 billion)
• Homeless Assistance Grants ($1.02 billion vs. the House’s $970 million)
• Community Development Block Grants ($4.8 billion vs. the House’s $4.5 billion) The only major reduction from the House level in the Senate version would be $75 million less in funding for the HOPE VI program for the redevelopment of public housing.

Within the Housing Certificate Fund, the Senate provides $100 million for the cost of HUD’s implementation of its recent "markup" initiative (or the Senate version thereof, as explained infra). The bill also provides authority, and apparently funding, for enhanced vouchers to protect tenants of HUD multi-family buildings undergoing prepayment or opt-out from the Section 8 program, after HUD has first made every effort to renew expiring contracts. The report also states that an additional $2.05 billion beyond the appropriated level should be available for renewals from recaptures, carry-overs and transfers from prior related accounts. Finally, it again admonishes HUD to improve its accounting procedures to provide accurate fiscal forecasts of its program accounts, especially Section 8.

The Senate bill also includes many "Administrative Provisions," of which a few merit special mention here. Section 203 of the bill would continue to provide HUD with flexibility in handling multi-family properties facing foreclosure or disposition from the HUD inventory, including the authorization for HUD to provide up-front grants for rehabilitation. Section 206 would continue last year’s provision clarifying the right of owners of certain multi-family properties to prepay their mortgages and convert to market-rate use, subject to compliance with a minimum 5-month notice requirement. Section 218 would permit HOME funds to be used for certain preservation transactions.

Based on the language of Senator Bond’s recent "Save My Home Act," S. 1319,/6/ Section 221 would revise HUD’s current authority to renew expiring below-market project-based Section 8 contracts. This section would restate that HUD has discretion to renew expiring contracts at rent levels up to market rents, but require HUD to make such renewal offers for properties located in "low vacancy areas" or that are predominantly occupied by elderly or disabled families./7/ Like S. 1319, this section would authorize HUD to provide renewal contracts of up to ten years in length.

Section 222 would authorize HUD to provide enhanced vouchers to tenants whose owners elect not to renew their expiring project-based Section 8 contracts. Formerly, this protection was extended only to certain tenants in properties with certain HUD-subsidized mortgages whose owners converted to market-rate through prepayment. These special vouchers would permit payment standards for tenants who choose to remain in a converted property to be set at the actual post-conversion rents for the units, if higher than the ordinary local payment standard, subject only to the PHA’s "rent reasonableness" determination.

Many of these provisions may face revision prior to final enactment, either during Senate floor action or in the Conference Committee process.

Notes

1    See House Appropriations Committee FY 2000 Housing Appropriations Measure Slashes Current Services by Bleeding Individual Programs, 29 HOUS. L. BULL. 145 (July/Aug. 1999) (reviewing House Committee version of H.R. 2684).

2    Draft Senate Committee Report at p. 34.

3    Id.

4    You can find a chart comparing the 1998 and 1999 enacted budgets, the President's FY2000 request, and the House and Senate Appropriations bills at <http://www.nlihc.org/news/chart91799.htm>.

5    Of this amount, the Senate proposes $10.855 billion for renewals of expiring Section 8 contracts, both tenant-based and project-based.

6    See Preservation Issue Heats Up in Congress, 29 HOUS. L. BULL. 133 (July/Aug. 1999) (describing new and revised legislative proposals, including S. 1319).

7    While requiring HUD action represents some progress on this issue, the bill apparently fails to define "low vacancy" area (unlike S. 1319), and omits mandatory protection for units occupied by larger families. In light of HUD’s use of Metropolitan Statistical Area-wide vacancy data to make similar determinations elsewhere, a mandate with no guidance may prove difficult to implement and fail to protect housing resources located in stronger submarkets.