House Appropriations Subcommittee Approves $73 Billion FY 2023 HUD Spending Bill, Faces Uncertain Path in the Senate

Published by Peter Lawrence on Wednesday, July 13, 2022 - 12:00am

The House Appropriations Transportation, Housing and Urban Development (THUD) Subcommittee approved its $90.9 billion fiscal year (FY) 2023 spending bill June 23, followed by the full committee June 30. According to the committee release, the proposed funding level for the full bill represents $9.9 billion (more than 12%) more than FY 2022. The Committee report accompanying bill text was also released. The full House is expected to consider the committee-reported bill next week.

For the U.S. Department of Housing and Urban Development (HUD), the bill provides gross appropriations of $73.0 billion, a $7.3 billion (11.2%) increase from FY 2022, and $1.1 billion (1.6%) more than the FY 2023 request. Receipts from the Federal Housing Administration and Ginnie Mae along with other collections and rescissions are projected to be $10.4 billion, $1.7 billion (13.8%) less than in FY 2022, so Congress had less funding available to allocate to HUD programs and increased the need for new appropriations. The bill provides HUD net appropriations of $62.7 billion, a $9.0 billion (16.7%) increase from FY 2022, and $1.1 billion (1.8%) more than the FY 2022 request.

It bears reiterating that the “regular” annual HUD appropriations in the bill will be considered separately from the proposed one-time supplemental $156 billion in HUD and related housing funding proposed as part of the House-passed Build Back Better reconciliation bill. While negotiations between Senate Majority Leader Chuck Schumer, D-New York, and Sen. Joe Manchin, D-West Virginia on the pending reconciliation bill appear to be gaining momentum recently, the fate of spending in the pending reconciliation is very uncertain and will likely be significantly reduced from the House-passed bill. It is not clear how much, if any, of the $156 billion in one-time housing and community development spending will be retained in a revised reconciliation bill.

Like the FY 2022 THUD bill, the bill includes nearly $2 billion of economic development initiatives, otherwise known housing and community development “earmarks,” an increase of $458 million (30.2%) from FY 2022. While earmarks were controversial, congressional leadership brought them back in FY 2022 with reforms to help facilitate the passage of large spending bills. When members of Congress can cite specific funding for their district they secured, it makes it easier for them to vote for the bill.

Highlights of the HUD program funding levels follow.

Blog Graphic: Key Programs of the U.S. Department of Housing and Urban Development Budget
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Public and Assisted Rental Housing

Project-Based Rental Assistance (PBRA)

The House bill provides $14.9 billion for PBRA, which is $955 million (6.8%) more than FY 2022 but $60 million (0.4%) less than the FY 2022 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 $31.0 billion, a $3.67 billion (13.4%) increase from FY 2022 but a $1.09 billion (3.4%) decrease from the request. Of that overall TBRA amount, $26.2 billion is for Section 8 Housing Choice Voucher contract renewals, which is $2.09 billion (8.7%) more than FY 2022 but $50 million (3.4%) less than the request.

Following the lead of the FY 2022 and FY 2023 requests, the bill proposes a $1.1 billion increase for about 140,000 new incremental vouchers, which is 60,000 (30%) fewer vouchers and $450 million (29%) less than the request, but if enacted, would represent the largest increase in the number of incremental vouchers since the Quality Housing and Work Responsibility Act of 1998. However, the proposed increase in new incremental vouchers faces challenges in the Senate.

For the HUD-Veteran Affairs Supportive Housing program, the bill provides $55 million, the same as FY 2022, and $50 million more than the request, and $5 million of such funding is reserved for Native American veterans. The bill also provides $230 million for Tenant Protection Vouchers, $130 million (130%) more than FY 2022 and $10 million (4.5%) more than the request. The relatively newly authorized housing mobility services demonstration program designed to facilitate voucher holders to obtain housing in high opportunity communities would receive $25 million, the same as FY 2022 (and FY 2021), but $420 million (94.4%) less than 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 2023 bill provides $8.73 billion for the public housing fund, which is $282 million (3.3%) more than FY 2022 but $47 million (0.5%) less than the request. For formula capital subsidies (excluding emergency, disaster and lead paint hazard-related capital grants), it provides $3.4 billion, which is $200 million (6.3%) more than FY 2022 and the request. For formula operating subsidies, it provides $5.04 billion, level with FY 2022 and $3.5 million (0.1%) more 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, nor does it extend the program authorization nor authorize it as a permanent program. 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, but the pending sunset date of Sept. 30, 2024 is an obstacle to transactions being closed. The Senate may be more amenable to including a program authorization extension when it considers its FY 2023 THUD spending bill.

Choice Neighborhoods Initiative

The bill provides $450 million 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, $100 million (28.6%) more than FY 2022 and $200 million (80%) more than the request.

Community Planning and Development Programs

The bill provides $1.68 billion for HOME Investment Partnerships Program (HOME), a $175 million (11.7%) increase from FY 2022 but $275 million (14.1%) the request. For the community development fund (the account funding Community Development Block Grants or CDBG), the bill provides $5.30 billion for an increase of $458 million (9.5%) from FY 2022 and $1.53 billion (40.6%) more than the request. However, as mentioned above, $1.97 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 and $250 million (7.0%) decrease from the request. Because funding for these programs 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 $3.6 billion, $391 million (12.2%) more than FY 2022 and $28 million (0.8%) more than the request. This amount includes a $3.2 billion set-aside for the continuum of care and rural housing stability assistance programs, and $290 million for Emergency Solutions Grants.

The bill provides $1.2 billion for the Housing for the Elderly (Section 202) program, a $167 million (16.2%) increase from FY 2022 and $234 million (24.2%) more than the request. Within this account, the bill provides $323 million for new capital advances, which the committee estimates will finance about 3,500 new affordable rental homes for seniors. The bill also provides $125 million in renewal funding for service coordinators, which the committee estimates will fully fund 1,600 existing service coordinators.

The Housing for Persons with Disabilities (Section 811) program is proposed to be funded at $400 million, a $48 million (13.6%) increase from FY 2022, and a $112 million (39.0%) increase from the request.

The bill would provide $600 million for the Housing Opportunities for Persons with AIDS (HOPWA) program to provide housing and supportive services, $150 million (33.3%) more than FY 2022 and $145 million (31.9%) more than the request.

Housing Supply Fund

The bill does not include the $40 billion proposed in mandatory spending in the request for new Housing Supply Funds, one to be administered by HUD and the other by the Treasury’s Community Development Financial Institutions (CDFI) Fund. (A related $10 billion proposal, later refined to $7.9 billion, to fund a basis boost proposal for low income housing tax credit properties financed by tax-exempt private activity bonds that finance new construction or substantial rehabilitation that result in a net increase of affordable rental homes is not in the jurisdiction of the House Appropriations Committee.)

Timeline and Factors that May Affect Spending Negotiations

The full House is expected to consider the FY 2022 THUD bill packaged together with the FY 2022 Financial Services and General Government spending bill funding Treasury and four other annual spending bills the week of July 18. It is unclear when the Senate Appropriations THUD Subcommittee to mark up its FY 2022 bill, and the timing is complicated by the fact that the Senate has not yet agreed to a top-line FY 2023 discretionary spending amount from which each subcommittee would get an allocation and the Senate Appropriations Committee chair Patrick Leahy, D-Vermont, is recovering from hip surgery. While the recess may be delayed to consider the pending reconciliation bill and other priorities, it appears likely that the Senate Appropriations Committee won’t consider some or all of the FY 2022 spending bills until after the August recess.

The House and Senate leadership have conducted preliminary negotiations on a top-line FY 2023 discretionary spending amount, as well as allocations for defense and nondefense, but they are not expected to strike a deal after the midterm election. The results of the midterm election are likely to affect those negotiations. It should also be noted that both the House and Senate Armed Services Committees are proposing defense spending authorizations much more than the administration requests and the House Appropriations Committee has approved, likely leading to less non-defense spending and more defense spending in a final FY 2023 spending bill.

Given the limited time in September to pass the Senate and final versions of the FY 2022 spending bills (the House doesn’t plan to hold floor votes until Sept. 13), as well as the desire of many members of Congress to campaign for reelection in their home districts and states, most policy insiders expect Congress to consider a short-term continuing resolution to fund the government starting at the beginning of FY 2023 Oct. 1 and lasting through mid-November or early December after the midterm elections.

Before the end of the 2022 calendar year and during a postelection lame-duck session, Congress may consider a FY 2023 omnibus spending bill containing the annual spending bills. Such a bill could also serve as a vehicle for tax legislation, including tax extenders that expired at the end of 2021, such as the 12.5% increase in 9% LIHTC allocations originally enacted in 2018, and those scheduled to expire at the end of this year.

The midterm election results will likely influence the productivity of a lame-duck session. As of the time of this writing, Republicans are predicted to win a majority in the House and possibly the Senate as well. If Republicans exceed expectations, with a robust majority in the House and several seat margin in the Senate, it may lead to a less productive lame-duck session, with another continuing resolution funding the federal government into the new Congress next year and no tax legislation, as Republicans would want to wait until they are in a position of greater power to negotiate with President Biden on spending and tax legislation.

If Democrats exceed expectations with a lower-than-expected loss of seats in the House and holding onto the Senate, then such results may lead to the passage of an omnibus spending bill that includes a robust tax title in the lame duck. Such tax legislation would be affected by whether the pending reconciliation bill is passed, as the reconciliation bill is likely to include at least some extension of expiring tax provisions, such as the renewable energy production and investment tax credits.