2005 Final Budget and 2006 Proposed Budget Jeopardize Federal Housing Programs

Advocates and housing authorities were just coming to terms with the FY 2005 budget for federal housing programs when the President’s proposed budget request for FY 2006 presented another set of drastic housing cuts. While many of the worst cuts were prevented in the final FY 2005 budget, the inadequate funding in this budget combined with the Bush administration’s planned cuts for 2006 could leave millions of families across the country without housing assistance and could drastically limit the impact of local housing and community development programs.

FY 2005 Final Budget
Due to some dogged advocacy by local leaders, housing authorities, and the Center on Budget and Policy Priorities, the FY 2005 omnibus appropriations bill passed both the House and Senate on November 20 without the administration’s proposal to deeply cut the funding for the housing choice voucher program or to convert it to a block grant program.
Congress will preserve funding for existing vouchers and provide housing authorities with funding for the cost and number of vouchers in use. This funding formula will maintain the loss of vouchers from 2004, meaning an approximate 60,000 reduction in vouchers. But because utilization rates of vouchers fell in the last year, the funding may be sufficient to support all of the vouchers currently in use.

Some housing authorities may still have to cut families from the program, shift greater rent burdens to tenants, impose minimum rents, reduce payment standards, or take other measures to curb budget deficits. Many agencies staved off funding cuts in 2004 by tapping into their reserves. This will not likely occur in 2005, since the bill directs HUD to reduce program reserves for all agencies from one month to one week by September 30, 2005. Administrative fees were cut by $10 million and funding for the Family Self-Sufficiency program was reduced by $2 million.

Housing authorities with Moving To Work Agreements, like the Chicago Housing Authority, will be funded pursuant to their agreements, though are still subject to the problematic new funding formula.

Though not ideal, this result appeared to be the best solution with an administration determined to block grant, absent any of the basic protections for families, most social programs.

Funding for the project-based Section 8 program, including Moderate Rehab contracts, increased by $227 million from FY 2004. HUD may recapture funding to amend project-based contracts or for contract administration.

Public housing capitol and operating funds received a 5% cut in funding from 2004, but $10 million of that money is earmarked for program to provide bonuses to housing authorities that move families out of the public housing program. Not surprisingly, HOPE VI, which the administration intended to cut entirely, received a huge cut in funding, from a $570 million annual allocation in 2003, a $149 million annual allocation in 2004, to $144 million allocation in 2005 through September 2006.

President’s Proposed FY 2006 Budget
While the FY 2006 proposed budget does not single out Housing Choice Vouchers, it proposes to cut at least $3 billion in funding for other HUD programs. And the administration is again trying to block grant the Housing Choice Voucher program, this time with a proposed block grant funding method which will make it easier in years to come to erode the program’s funding. HUD has also indicated that it may be proposing legislation to eliminate many of the federal rules, such as regulations requiring housing authorities to target their programs to the neediest families, and allow housing authorities to target voucher programs to more moderate-income families.

The administration requested a small increase in funding for the voucher program in 2006. Most of the increased funding will be needed to cover increased costs due to changes in the rental market and to renew vouchers issued in 2005 to replace other federal housing assistance, such as Project-based Section 8. Less than half of the money necessary to restore vouchers cut this year would be available under the proposed budget.

The Section 811 program, which provides permanent housing for people with disabilities, has been hit with the worst budget cuts, almost a 50% cut in funding. All new funding would be restricted to tenant-based rental assistance and renewal of existing subsidy contracts and could not be used to construct new housing for persons with disabilities.

Public housing programs may face cuts of $564 million. Capitol funds face a 13.6% cut from 2004 and operating funds a 4.8% cut from 2004, in spite of both programs facing deep cuts over the last several years.

The administration’s budget requested a significant decrease in funding, approximately $272 million less from 2005 equivalent to 47,000 units, for the Project-based Section 8 program. It could be either a true cut in Project-based Section 8 funding or a reflection of HUD’s anticipating roughly 47,000 units expiring from the Program.

On the other hand, the HOME investment partnerships program, which finances the development of affordable rental and home ownership housing and assists first-time homebuyers, received an increase of $81 million, though most of the money is earmarked to the down payment assistance program. In addition, the block grants to state and local governments, again providing construction dollars for rental and home ownership projects, received a $60 million cut from 2005.

The budget proposes consolidating 18 programs, including the Community Development Block Grant, used by many cities to create affordable housing, as well as support for homeless shelters, day care centers, and senior centers in poor communities, into the Department of Labor and the Department of Commerce.