HUD Funding Current and Future National Housing Conference Budget Forum Barbara Sard February 25, 2011.

HUD FundingCurrent and Future

National Housing Conference Budget Forum

Barbara SardFebruary 25, 2011

Deficits are a Real Problem

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Economic Downturn, Financial Rescues, and Legacy of Past Policies Drive Current Record

Deficits

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Deficit in 2021 Would Be Cut Nearly in Half Simply By Letting Bush Tax Cuts Expire

Source: Center on Budget and Policy Priorities based on data from the Congressional Budget Office. 4

5Source: January 2010 CBPP projections based on CBO data

But Rising Medicare, Medicaid and Interest Costs with Flat Revenues Will Cause Deficits to Continue to Increase

• The largest long-term deficit driver is the rising cost of Medicare and Medicaid.

• Reflects rising costs in entire U.S. health care system

• Cutting costs in Medicare and Medicaid without system-wide reform would lead to draconian cuts

• Thus, the key to addressing the future implosion of the budget is to reform the U.S. health care system.

The Big Enchilada: The U.S. Health Care System

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Non-Security Discretionary Programs Were15% of Total Spending in 2010

8*Chart represents actual FY 2010 outlays

House Proposal for 2011: Deep Cuts in HUD Block Grants

• Overall, H.R. 1 cuts HUD funding by $5.4 billion below 2010, a 12 percent cut, and by $7 billion, or 15 percent, below the President’s 2011 request.

• Block grants were cut the most sharply. • CDBG is cut by $3 billion, or 66 percent.• Native American block grant cut by $200M

(29%) and Native Hawaiian block grant eliminated.

• Public Housing capital funding cut 43 percent, more than $1B. PH loses $1.6 overall.

• HOME block grant reduced by $175M, or nearly 10%.

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House Proposal for 2011: Eliminates Expansions, New Initiatives

Despite record increases in severe housing needs:• No new vouchers for homeless veterans (VASH )

or families and individuals in need of services (proposed initiatives with HHS); no increase in Homeless funding.

• No funding for new units of supportive housing for the elderly and disabled (202/811), a cut of almost $800M.

• No funding for new Sustainable Communities grants, and $130M of already-awarded 2010 funds rescinded.

• No new funding for HOPE VI/Choice Neighborhoods grants; 2010 funding of $198M rescinded.

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House Proposal for 2011:Protects Rental Assistance Renewals

Renewal of ongoing rental assistance largely protected except for $1B+ cut in public housing capital funds.o Project-based Section 8 (PBRA) increased the full $731M over

2010 that had been incorporated in the end-of-year failed omnibus.

o For the Housing Choice Voucher program: $364M increase in renewal funding over 2010 appears to fully fund the renewal formula, but renewal funding for 811 Mainstream vouchers is largely omitted.

o Public housing operating formula close to full funding due to lower utility costs, despite cut of $149M.

o But sharp decrease in HCV administrative fees ($368M below 2010) and public housing capital fund cut could lead to fewer families served.

o Full renewal of smaller rental assistance programs (202/elderly, 811 project-based/disabled, Shelter-Plus-Care, Supportive Housing, HOPWA).

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2011 Outcome Uncertain

• There do not appear to be 60 votes in the Senate for the House bill, and President threatened a veto.

• Unclear what Senate can pass, but some cuts below 2010 funding levels seem likely.

• Final outcome for FY 2011 funding levels will have major impact on FY 2012 budget resolutions and final spending legislation.

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President’s 2012 HUD Budget

• Overall program gross discretionary budget authority (without offsets) would be $751M more than in 2010, but net new BA is reduced by $1,172M. How?– FHA and Ginnie Mae receipts

increased by nearly $2 billion. • Modest gross funding increase

reflects priority decisions.13

Priorities in 2012 HUD Budget

• Continues to prioritize renewal of existing rental assistance, but relies on tapping PHA reserves in public housing and HCV programs for full funding.

• Makes some modest progress against homelessness ($632M increase, including new vouchers).

• Funds Sustainable Communities, Choice Neighborhoods and TRA initiatives first proposed in 2010 or 2011.

• To fund these priorities, trims some HUD block grants:o CDBG formula: -$319M v. -$2.5B Houseo HOME: same -$175M as House

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Minimal Progress on Unmet Needs

• More than 7 million very low-income renter households had “worst case” housing needs in 2009, an increase of 1.2 million from 2007.

• Yet the budget requests funding for fewer than 40,000 new deeply affordable units, including the estimated 10,500 units funded by the $1 billion in non-discretionary funding requested for the Housing Trust Fund.– LIHTC proposals may make some additional

units available for poor households.15

Multiyear Discretionary Caps Threaten Deep HUD Cuts

• Section 8 and other rental assistance costs will rise:– More units will need renewal funding– Private market rents are increasing– Current modest increases in operating costs

unlikely to last.• Secretary noted 1% increase in rental assistance

costs requires 4% cut in other funding.• Reliance on excess reserves to fill budget holes of

limited future value.• If housing market improves, FHA market share

likely to decline, reducing HUD-generated revenue. 16

What is to be done?

• Defense alone on impacts will not avoid harmful cuts. Important to show value of programs: who is served, effectiveness etc.

• Time for policy changes that leverage additional funds, serve additional families or save costs without harming intended beneficiaries. E.g.:– Meet public housing capital backlog with private capital– SEVRA reforms included in 2012 budget would save

more than $1 billion over 5 years– Administrative streamlining

• Engage in deficit reduction and budget debates17

Principles for Deficit Reduction

• Deficit reduction should not place vulnerable families and individuals at risk or increase poverty and inequality.

• Deficit reduction should focus on the long term and not the short term, as immediate deep cuts in spending could undermine the fragile economic recovery.

• Savings should be achieved in the defense budget as well as in non-defense discretionary programs.

• A responsible deficit reduction plan must balance reduced spending in mandatory and discretionary programs with increased revenues over the long term.

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