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House Appropriations Subcommittee Approves $68.2 Billion FY 2024 HUD Spending Bill, Effectively Reducing Funding, but Mostly Sparing Rental Assistance

Published by Peter Lawrence on Thursday, July 13, 2023 - 12:00AM

The House Appropriations Committee released its $90.2 billion fiscal year (FY) 2024 Transportation, Housing and Urban Development (THUD) spending bill July 12 (along with a summary), and the THUD Subcommittee reported it to the full committee later the same day. The full committee is expected to consider the committee-reported bill next week, but timing for a full House vote is uncertain. House leadership would like to bring the bill to a vote before they are scheduled to depart for the August recess July 28, but other priorities may preclude such a vote by that deadline.

According to the committee press release, the proposed funding level for the full bill is more than $8.6 billion (8.7%) less than the FY 2024 request. Furthermore, funding for the full bill is offset by a more than $25 billion cut to IRS enforcement funding enacted in the Inflation Reduction Act and by rescinding $564 million in unobligated balances in prior fiscal years of U.S. Department of Housing and Urban Development’s (HUD) Office of Lead Hazard Control and Healthy Homes, so the unoffset full bill funding is $34.2 billion or 34.6% less the FY 2024 request. However, most of the program funding cuts are on the Transportation side of the THUD bill, with $6.6 billion cut from U.S. Department of Transportation (DOT) grant programs, which is 59% below the FY 2023 enacted levels. The House Appropriations Committee cites the funding provided by the Infrastructure Investment and Jobs Act, the bipartisan infrastructure legislation that provided one-time increases to a variety of infrastructure programs, including those administered by DOT.

Given the Senate Democrats’ strong opposition to cutting IRS enforcement funding, such an offset will likely not be included in the Senate FY 2024 THUD bill. However, given that the Senate Appropriations Committee set overall funding allocation for the bill at nearly $23 billion more than the House funding allocation, the Senate FY 2024 THUD bill will likely not have the same level of cuts as the House bill. The Senate Appropriations Committee has scheduled consideration of its FY 2024 THUD bill for July 20.

For HUD, the bill provides net appropriations of $68.2 billion, an $8.0 billion (13.4%) increase from FY 2023, but a $2.3 billion (3.3%) cut from the FY 2024 request. However, given the dramatically cooled housing mortgage market over the past year, receipts from the Federal Housing Administration and Ginnie Mae, along with various HUD collections, are projected to be $7.6 billion less than FY 2023 according to the House Appropriations Committee. Those resources offset the needs for new HUD appropriated funds, so Congress had much less funding available to allocate to HUD programs. Furthermore, the FY 2023 enacted appropriations included $3.6 billion in emergency spending designated for rental assistance funding and the COVID-19 pandemic led to sharply increased rents, prompting a need for another $1.8 billion in HUD rental assistance renewal funding. The combination of these effects meant that $13.0 billion in increased HUD net appropriations would be needed just to maintain the same number of households assisted by HUD rental assistance and level funding for other HUD programs. With only $8.0 billion in increased net appropriations from FY 2023, there was in essence a $5.0 billion or 8.3% cut to HUD funding.

The FY 2024 appropriations process was initially held up during the debate on the nation’s debt limit earlier this year, given that House Republican leadership insisted on spending reductions in exchange for any increase in the nation’s limit. When Congress enacted H.R. 3746, the Fiscal Responsibility Act, legislation that raised the debt limit June 1, it also set spending caps on discretionary spending for FY 2024 (and FY 2025), including $703.7 billion for FY 2024 non-defense spending and $886.3 billion for FY 2024 defense spending. However, after the debt limit legislation was enacted, House Republican leadership decided that the spending caps were ceilings, not floors, and directed the House Appropriations Committee to set FY 2024 discretionary spending at $1.47 trillion instead of $1.59 trillion.  The nearly $120 billion (7.4%) cut will be mostly applied to FY 2024 nondefense spending.

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Highlights of the HUD program funding levels follow.

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Public and Assisted Rental Housing

Project-Based Rental Assistance (PBRA)

The House bill provides $15.8 billion for PBRA, which is $913 million (6.1%) more than FY 2023 but $84 million (0.5%) less than the FY 2024 request. The proposed amount appears sufficient to renew expiring contracts with a full 12 months of funding.

Tenant-Based Rental Assistance (TBRA)

TBRA is proposed to be funded at $31.1 billion, a $879 million (2.9%) increase from FY 2023 but a $1.57 billion (4.8%) decrease from the request. Of that overall TBRA amount, $27.4 billion is for Section 8 Housing Choice Voucher contract renewals, which is $973 million (3.7%) more than FY 2023 but $465 million (1.7%) less than the request. Like PBRA, this amount appears sufficient to renew expiring voucher contracts for all existing assisted households.

Unlike the FY 2022- and FY 2023-enacted HUD spending bills, the bill does not propose any new funding for new incremental vouchers. For the HUD-Veteran Affairs Supportive Housing program, the bill provides $55 million, the same as FY 2022 and FY 2023. Of that funding, however, $50 million is included under TBRA renewal account instead of a separate set-aside amount, and the remaining $5 million of such funding is for Native American veterans, as proposed in the request. The bill also provides $337 million for Tenant Protection Vouchers, level with FY 2022 but $48 million (12.5%) less than the request. The relatively newly authorized housing mobility services demonstration program designed to facilitate voucher holders to obtain housing in high opportunity communities is not provided any funding, which is a $25 million cut from the request.

Public Housing Fund

For FY 2022, Congress merged the public housing capital and operating fund accounts into the public housing fund account. The House FY 2024 bill provides $8.36 billion for the public housing fund, which is $151 million (1.8%) less than FY 2023 and $530 million (6.0%) less than the request. For capital subsidies, it provides $3.18 billion, which is $20 million (0.6%) less than FY 2023 and $45 million (1.4%) less than the request. For operating subsidies, it provides $5.10 billion, $6 million (0.1%) less than FY 2023 and $30 million (0.6%) less than the request.

Rental Assistance Demonstration (RAD)

As have previous House THUD annual spending bills, the bill does not include the request to eliminate the public housing unit cap on the RAD program, but it does propose to repeal the pending sunset date of Sept. 30, 2024. The FY 2018 omnibus bill increased authorization from 225,000 public housing units to 455,000 public housing units and extended program authorization for public housing conversions through 2024. The bill does not provide incremental funding to facilitate such conversions, as proposed by the request ($110 million). HUD has reported that it is unclear how quickly it will reach the 455,000-unit cap. The Senate may be more amenable to including incremental funding when it considers its FY 2024 THUD spending bill.

Choice Neighborhoods Initiative

The bill provides no funding for the Choice Neighborhoods Initiative, which is designed to comprehensively revitalize distressed public and assisted housing communities and is a successor program to the HOPE VI revitalization program. That is a $350 million cut from FY 2023 and $185 million cut from the request.

Community Planning and Development Programs

Like the FY 2022 and FY 2023 THUD bills, the bill includes–under the Community Development Fund account from which Community Development Block Grants, or CDBG formula grants, are funded–more than $2.2 billion of economic development initiatives, otherwise known as housing and community development “earmarks,” a decrease of $758 million (25.4%) from FY 2023. According to the House Appropriations Committee, this funding will assist 1,873 community development projects in 332 congressional districts. While earmarks were controversial, congressional leadership brought them back in FY 2022 with reforms to help facilitate the passage of large spending bills, and the House Republican leadership decided to keep them at the beginning of the 118th Congress earlier this year, although capped at lower overall amount. When members of Congress can cite specific funding for their district they secured, it makes it easier for them to vote for the bill. For the overall Community Development Fund, the bill provides $5.55 billion, a decrease of $843 million (13.2%) from FY 2023 but $2.14 billion (62.6%) more than the request. However, as mentioned above, $2.2 billion of this funding is specified via earmarks, so the amount available for CDBG formula funding is $3.3 billion, the same as FY 2022-23 and the request.

The bill provides only $500 million for the HOME Investment Partnerships Program (HOME), a $1 billion (66.7%) cut from FY 2023 and $1.3 billion (72.2%) cut from the request. The House Appropriations Committee cites that the $5 billion funding for HOME-ARP program enacted in the American Rescue Plan Act as justification for the significant cut, even though HOME-ARP can be used for a wider variety of housing activities and has different rules and regulations than the standard HOME program. Because funding for HOME isn’t directly tied to assistance for specific families but represents funding for future housing and community development activities, it is much more vulnerable than rental assistance funding.

Homeless and Supportive Housing Programs

McKinney-Vento Homeless Assistance Grants are proposed to be funded at $3.73 billion, $96 million (2.6%) more than FY 2023 but $20 million (0.5%) less than the request. This amount includes a $3.35 billion set-aside for the continuum of care and rural housing stability assistance programs, and $290 million for Emergency Solutions Grants.

The bill provides $913 billion for the Housing for the Elderly (Section 202) program, a $162 million (15.1%) decrease from FY 2023 and $110 million (10.8%) less than the request. Unlike recent HUD spending bills, the bill provides no funding for new capital advances to finance any new affordable rental homes for seniors, but does provide $6 million to support preservation of housing for the elderly. The bill also provides $112 million in renewal funding for service coordinators.

The Housing for Persons with Disabilities (Section 811) program is proposed to be funded at $208 million, a $152 million (42.2%) decrease from FY 2023, and a $148 million (41.6%) decrease from the request.

The bill would provide $505 million for the Housing Opportunities for Persons with AIDS (HOPWA) program to provide housing and supportive services, $6 million (1.2%) more than FY 2023 and equal to the request.

Housing and Community Development Mandatory Spending Proposals

As expected, the bill does not include the $60 billion proposed in mandatory spending in the request for one-time housing and community development investments.

Timeline and Factors that May Affect Spending Negotiations

As mentioned earlier, it is unclear when the full House is expected to consider the FY 2023 THUD bill, and given the $25 billion offset from IRS enforcement funding, it is not likely many (if any at all) House Democrats will vote for the bill. Unlike last year, when the Senate Appropriations leadership had not yet agreed to the spending allocations for the 12 annual spending bills nor considered any of them before the August recess, the Senate Appropriations Committee has already approved the spending allocations and will consider its FY 2024 THUD bill on July 20.

However, given that the $120 billion difference between House and Senate nondefense spending allocations, it will be very difficult for Congress to agree on final FY 2024 spending bills, and many Congressional insiders predict there will be a federal government shutdown after Sept. 30, when the federal fiscal year ends. It is unclear how long such a shutdown will last, but it will likely end only if House Republicans relent on cutting nondefense spending beyond what was agreed in the debt limit legislation or if House Republicans are able to force Senate Democrats to reduce nondefense spending. If the latter, Congress will likely need to pass a short-term continuing resolution to provide time to rewrite the annual spending bills. It should be noted that the debt limit legislation provided an incentive for Congress to finalize FY 2024 spending before Jan. 1, 2025. If Congress does not, any continuing resolution in effect past that date must reduce both defense and nondefense spending below FY 2023 levels, which according to the Congressional Budget Office, would reduce defense spending by $34.2 billion and nondefense spending by $79.3 billion as compared to FY 2023 annualized amounts.

Before the end of the 2023 calendar year, Congress may consider several FY 2023 “minibus” spending bills containing clusters of the 12 annual spending bills. A single “omnibus” spending bill containing all 12 annual spending bills appears unlikely, given the House leadership’s desire to avoid such a bill. One of the “minibus” bills could also serve as a vehicle for year-end tax legislation, including proposals to restore the 12.5% increase in 9% LIHTC allocations originally enacted in 2018 and further increase 9% allocations, lower the private activity bond financing threshold, create the neighborhood homes tax credit, make new markets tax credit permanent and possibly others. Stay tuned.

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