Biden Administration FY 2022 Budget Proposes $9 Billion Increase for HUD, $330 million for CDFI Fund, Includes Details on $213 Billion in Housing Infrastructure Spending Proposals

Published by Peter Lawrence on Tuesday, June 15, 2021 - 12:00am

The Biden administration May 28 released its $6 trillion fiscal year (FY) 2022 budget request, following up on the initial FY 2022 budget blueprint released April 9. The FY 2022 budget request incorporates not only annual discretionary spending and estimates of current law mandatory spending, but also the American Jobs Plan and American Families Plan, the administration’s key components of its infrastructure priorities, some of which are new mandatory housing and community development-related spending proposals.

Overall

The Biden administration requests $1.52 trillion in base FY 2022 discretionary spending, $753 billion for defense (a $12.2 billion or 1.6% increase from FY 2021) and $770 billion for nondefense (a $109 billion or 16.5% increase from FY 2021), the first such request where nondefense exceeded defense in recent history. These defense and nondefense discretionary budget requests are also the first such requests in a decade not limited by the Budget Control Act of 2011, which set defense and nondefense discretionary spending caps and constrained the ability of Congress to increase affordable housing and community development funding.

The FY 2022 nondefense budget includes a request of $68.7 billion for the U.S. Department of Housing and Urban Development (HUD), a $9.1 billion or 15% increase over FY 2021 appropriations of $59.6 billion according to HUD’s FY 2021 budget summary, and $330 million for the U.S. Treasury’s Community Development Financial Institutions (CDFI) Fund, a $60 million or 22% increase from FY 2021. A previous blogpost detailed Treasury’s FY 2021 “Greenbook” of tax proposals accompanying the budget request.

Housing and Community Development

In addition to the regular discretionary spending request, the FY 2022 budget request included details of the proposed $213 billion of one-time housing and community development infrastructure spending requests mostly proposed to be overseen by HUD and the CDFI Fund as part of the American Jobs Plan, highlighted in a May 26 White House Fact Sheet and summarized below:

  • $45 billion for the Housing Trust Fund;
  • $40 billion for the Public Housing Capital Fund;
  • $35 billion for the HOME program;
  • $17.5 billion for the U.S. Department of Energy’s Weatherization Assistance program to provide energy efficiency improvements, primarily for single family owner-occupied homes;
  • $12 billion for the Capital Magnet Fund;
  • $10 billion for a new consumer electrification rebate program based on the HOPE for HOMES Act introduced last year (S. 4052/H.R 7325) by Sen. Van Hollen, D-Maryland, and Rep. Welch, D-Vermont;
  • $10 billion for a newly proposed Community Revitalization Fund to support community-led redevelopment investments to restore vacant buildings for social services and community entrepreneurs, provide shared amenities, upgrade access to natural areas, remove toxic waste, build new parks, greenways and community parks;
  • $5 billion for an incentive program to encourage the removal of exclusionary zoning and harmful land use policies;
    • Sens. Klobuchar, D-Minnesota, Portman, R-Ohio, Kaine, D-Virginia, and Rep. Rochester, D-Delaware, recently introduced The Housing Supply and Affordability Act (S. 902, H.R. 2126) legislation designed to achieve similar goals.
  • $3 billion to fund the inspection and removal of lead-based paint from 175,000 homes;
  • $2 billion for new project-based Section 8 rental assistance contracts— the first new contracts in 20 years;
  • $2 billion for the Section 202 supportive housing for the elderly program, especially to finance new rental homes for the elderly;
  • $2 billion to build and rehabilitate rural housing through the U.S. Department of Agriculture’s (USDA) Rural Development (RD) section 502 direct loan and section 504 very low-income home repair programs;
    • The new section 504 loans are intended to finance energy efficient improvements to rural homes.
  • $2 billion for expanding development and rehabilitation of housing in tribal communities;
  • $2 billion for a new Community Development Block Grant (CDBG) program for resiliency investments in low- and moderate-income communities vulnerable to climate change;
  • $500 million in grants and low-interest loans to renovate multifamily housing to make it more energy efficient and resilient; and
  • $250 million for a new Main Street Revitalization Program to renovate small towns’ downtown business districts, including adding affordable housing.

These one-time spending requests are not likely to be considered in the regular budget and appropriations process, but rather as a part of infrastructure financing legislation Congress is expected to consider in the coming weeks. Furthermore, these funding requests would be spread over several fiscal years, generally over 5 such years.

Highlights of the FY 2022 HUD regular discretionary budget request follow.

Blog Graphic: Key Programs of the U.S. Department of Housing and Urban Development Budget
Click to Enlarge

 

Public and Assisted Rental Housing

Project-Based Rental Assistance (PBRA)

The request provides $14.1 billion for Project-Based Rental Assistance (PBRA), which is $595 million (4.4%) more than FY 2021 and $1.4 billion (11.2%) more than the FY 2021 request. This amount is enough to provide a full 12 months of renewal funding for contracts when they expire throughout the course of FY 2022.

Tenant-Based Rental Assistance (TBRA)

Tenant-Based Rental Assistance (TBRA) is proposed to be funded at $30.4 billion, a $4.6 billion (18.1%) increase from FY 2021 and $11.6 billion (61.6%) increase than the FY 2021 request. Of that amount, $25 billion is for Section 8 Housing Choice Voucher contract renewals, which is a $1.9 billion (8.3%) increase from FY 2021, and $8.0 billion (15.7%) more than FY 2021 request.

In addition to providing enough funding to renew all existing vouchers when they expire in FY 2022, the request would provide more than $2 billion for 200,000 new incremental vouchers to serve additional households in need. The proposal calls for prioritizing the additional rental assistance for those who are experiencing homeless or fleeing domestic violence. The budget request also includes funding for a new Mobility Related Social Services program to assist families in finding housing in higher-opportunity neighborhoods with access to jobs, services, schools and other resources.

For the HUD-Veteran Affairs Supportive Housing (HUD-VASH) program, the request provides $5 million, which is $35 million (87.5%) less than FY 2021 and $1 million (25%) more than the FY 2021 request. The HUD-VASH funding is reserved entirely for Native American veterans. The proposal also provides $100 million for Tenant Protection Vouchers, a $16 million (13.8%) cut from FY 2021, and the same as the FY 2021 request.

Public Housing Capital and Operating Funds

The budget maintains the merged Public Housing account established in FY 2021 including operating and capital subsidies and provides a total of $8.56 billion, a $769 million (9.9%) increase from FY 2021 and more than $5 billion (140.1%) more than the FY 2021 request. Of this amount, the request provides $3.2 billion in capital subsidies, $435 million (15.7%) more than FY 2021 and $3.2 billion (100%) more than FY 2021. In addition, the budget proposes $300 million for climate-resilient improvements to public housing (distinct from the one-time $40 billion in capital repairs proposed as part of the American Jobs Plan). For operating subsidies, the budget proposes $4.89 billion, a $48 billion (1.0%) increase from FY 2021, but $1.3 billion (36.8%) more than the FY 2021 request.

Rental Assistance Demonstration (RAD)

In a change from previous HUD requests, the budget does not propose to eliminate the public housing cap on the RAD program, but instead proposes to eliminate the Sept. 30, 2024 sunset date. Congress could choose to increase the cap in its FY 2022 HUD appropriations bills if it appears likely that the pace of conversions may come up to the current unit cap over the course of the fiscal year. FY 2018 appropriations increased authorization from 225,000 public housing units to 455,000 public housing units. However, as in previous requests, the budget requests incremental funding to facilitate RAD conversions, but lowers the amount requested from $100 million in recent years to $50 million. Furthermore, the request proposes to open RAD conversion eligibility to properties with Section 202 senior preservation rental assistance contracts and Section 811 supportive housing for people with disabilities, exempt Section 202 conversions from the fair market rent (FMR) cap to accommodate service provision and coordination, and allow public housing conversions to continue participating in the Jobs Plus Initiative

Community Planning and Development (CPD) Programs

The budget proposes to increase Community Development Block Grant (CDBG) and HOME Investment Partnerships Program (HOME) funding, reversing the policy of the Trump administration to eliminate both programs. CDBG is proposed $3.77 billion, a $295 million (8.5%) increase from FY 2021, and HOME is proposed at $1.85 billion, a $500 million (37%) increase from FY 2021.

Homeless and Supportive Housing Programs

McKinney-Vento Homeless Assistance Grants are proposed to be funded at $3.5 billion, $500 million (16.7%) more than FY 2021, and $727 million (26.2%) more than the FY 2021 request. This amount includes a $3.12 billion set-aside for the continuum of care and rural housing stability assistance programs, an increase of $350 million from FY 2021, and $290 million for Emergency Solutions Grants, the same as FY 2021.

The budget provides $928 million for the Housing for the Elderly (Section 202) program, a $73 million (8.5%) increase from FY 2021 and $75 million (8.8%) more than the FY 2021 request. Within this amount, the request includes $100 million for new Section 202 homes, which HUD estimates will finance about 1,100 new Section 202 units.

The Housing for Persons with Disabilities (Section 811) program is proposed to be funded at $272 million, a $45 million (19.8%) increase from FY 2021, and $20 million (7.9%) more than the FY 2021 request. The budget would provide $450 million for the Housing Opportunities for Persons with AIDS (HOPWA) program to provide housing and supportive services, a $20 million (4.7%) increase from FY 2021, and $120 million (36.4%) more than FY 2021 request.

Choice Neighborhoods Initiative

The budget proposes to fund the Choice Neighborhoods Initiative, which is designed to comprehensively revitalize high-poverty public and assisted housing communities, at $250 million, a $50 million increase from FY 2021.

FHA‐HFA Multifamily Loan Risk‐Sharing Program

The budget requests new authority for Ginnie Mae to securitize affordable multifamily loans made by Housing Finance Agencies (HFAs) and insured under the FHA’s 542(c) Risk‐Sharing program. As in interim measure, HUD has proposed reinstating the HUD‐Treasury Federal Financing Bank (FFB) Initiative to provide “Ginnie‐like” financing for HFA Risk‐Sharing loans that will sunset after three years. The proposed Ginnie Mae securitization authority would provide a permanent source of low‐cost capital for these affordable housing loans once FFB financing expires.

Housing Trust and the Capital Magnet Funds

The FY 2022 request proposes to eliminate the Housing Trust Fund and Capital Magnet Fund, and the Fannie Mae and Freddie Mac assessments that fund them. On April 6, 2021, HUD announced $693 million for the 2019 Housing Trust Fund (HTF) allocations. The U.S. Treasury’s Community Development Financial Institutions (CDFI) Fund announced Feb. 22, 2021 more than $175 million in awards for the 2020 round of the Capital Magnet Fund (CMF). For the 2021 rounds, if the annual new business purchases for the second through fourth quarter of 2021 of Fannie Mae and Freddie Mac are similar to the respective quarters in 2020, Novogradac is currently projecting about $805 million for the Housing Trust Fund and about $420 million for the Capital Magnet Fund. However, given the rising interest rates, the record originations resulting from refinancing loans in 2020 are unlikely to be repeated in 2021 and thus the amounts for the HTF and CMF are likely to be lower.

Housing government sponsored enterprises (GSEs)—Fannie Mae and Freddie Mac—assessments to fund both programs are not discretionary appropriations, and housing finance reform legislation is expected to address whether Congress wants to continue them and what level of funding they should receive. However, such legislation is not expected to advance this year.

Mark Calabria, the FHFA director originally appointed by President Trump, is expected continue the funding for the HTF and CMF “within the confines of the statute,” and he has publicly stated he believes the economic conditions in the statutory provision enabling the FHFA director to suspend the GSE contributions are unlikely to occur. A pending Supreme Court case, Collins v. FHFA, expected to be decided by the end of June could lead to President Biden being able to replace Calabria with a new director.

U.S. Treasury’s Community Development Financial Institutions (CDFI) Fund

The FY 2022 budget proposes to increase the CDFI Fund to $330 million, a $60 million (22.2%) increase from FY 2021 and $316 million more than the FY 2021 request. As noted in the previous post on the FY 2022 Treasury “Greenbook” of tax proposals, the budget proposes to make the NMTC permanent, which expires at the end of 2025, at $5 billion annually through 2025. However, the budget did not include an explicit request to allow the new markets tax credit (NMTC) to offset alternative minimum tax (AMT) liability, as the New Markets Tax Credit Extension Act (H.R. 1321/S. 456) would allow.

Next Steps

Normally, the next step in the budget and appropriations process would be for Congress to consider a FY 2022 budget resolution. However, because of how late the full budget request submission was, Congress appears poised to kick off the budget process when the House considers a FY 2022 “deeming” resolution to set the overall discretionary budget at $1.5 trillion, which would then enable the House Appropriations Subcommittees to begin consideration of the 12 annual spending bills. If congressional leadership decides to consider infrastructure legislation under budget reconciliation, Congress would need first to pass a budget resolution to provide reconciliation instructions. Timing for such a decision is uncertain at this point.

Assuming the deeming resolution passes as expected, the timing of the Transportation-HUD (THUD) and the Financial Services and General Government (FSGG) subcommittee FY 2022 markups of their respective spending bills are anticipated over June 22-July 1. The Senate appropriations process is expected to being in July, but may not finish until after the August recess.

In any case, given the late start to the process, Congress is not expected to enact all 12 of the FY 2022 spending bills before Oct. 1 when FY 2022 begins. Instead, Congress is likely to consider a continuing resolution to fund the government past Sept. 30 and likely through mid-November or early December. If Congress is unable to pass tax legislation before that point, it is possible that Congress could add tax legislation to a FY 2022 omnibus appropriations bill including any annual spending bills not yet enacted by that point. Tax extenders legislation in particular has a long history of being included in omnibus appropriations bills. The 12.5% increase in 9% LIHTC allocations expires at the end of 2021 and could be included in such tax extenders legislation.