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October 9, 2015: Update on Rural Development Rental Assistance Funding for Fiscal Year 2016

Following up on our news post of Sept. 4, Congress passed a continuing resolution (CR) on September 30, providing funding to the federal government until December 11, 2015. The CR contains language granting Rural Development (RD) the right to waive the provision in the 2015 appropriations act that prohibits the renewal of Rental Assistance contracts during the 12 months term of such contracts. The CR also gives RD authority to spend a larger amount of money for Rental Assistance (RA) contracts during the term of the CR than a proportional amount of last year's funding. The agency should therefore be able to fund RA contracts that expired in August and September, as well as those that will need renewal between now and Dec. 11. RD has informed NHLP that they are working with the Office of Management and Budget (OMB) to get authority to spend the CR funding as soon as possible.

What this means is that landlords in Section 515 rental and Section 514/516 farm labor developments should not be raising rents to try to accommodate the funding shortfall. NHLP’s opinion is that efforts by landlords to raise residents' rents by more than 10% per year violates 42 U.S.C. § 1490a(a)(3)(A).

The CR only operates until Dec. 11 and RD's capacity to renew RA contracts is up in the air as of that date.

Even if there is no government shutdown, RD has a funding crisis on its hands that will come into play by April or May of 2016. RD was short by about $90 million in funding for RA contract renewals in the last two months of FY 2015. It also projects that it will be $120 million short in Fiscal Year 2016. If, as expected, RD funds RA contracts that have expired retroactively, the agency will be short $210 million in Rental Assistance funding during FY 2016. This is about 20% of the amount needed for Rental Assistance during this year. There is no word yet as to how the agency plans to deal with this problem.

Another RD problem is the lack of funding for vouchers, which are issued to persons displaced by the prepayment of Section 515 loans. In Fiscal Year 2015, RD spent nearly $15 million on vouchers, $7 million of that came from appropriations and $8 million was a carryover form Fiscal Year 2014. The Administration asked Congress to fund the Voucher program at $15 million for this fiscal year. However, the House and Senate appropriations committees only approved $7 million. This means that RD is not likely to have sufficient funds to renew existing vouchers, let alone issue new ones.

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