Trump Administration FY 2021 Budget Proposes $8.6 Billion Cut to HUD, Eliminates CDFI Fund Grant Funding

Published by Peter Lawrence on Tuesday, February 11, 2020 - 12:00am

The Trump administration this week released its $4.8 trillion fiscal year (FY) 2021 budget request, which includes $741 billion in defense spending including overseas contingency operations and other adjustments and $590 billion for nondefense spending including adjustments, a cut of $37 billion or nearly 6 percent from the current law FY 2021 spending cap.

See below for summary chart:

 

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Of the nondefense discretionary budget, the administration requested $47.9 billion in gross U.S. Department of Housing and Urban Development (HUD) spending, an $8.6 billion (15.2 percent) cut from the amount appropriated in FY 2020, but $3.8 billion (8.7 percent) more than the FY 2020 request.

Given that the current law nondefense spending cap for FY 2021 is only $5 billion more than FY 2020, and the cost of veterans health care is expected to increase substantially, it will be very difficult for HUD to receive a substantial increase in funding.  Furthermore, just to maintain the current households in HUD rental assistance programs will require an increase of about $2 to 3 billion.

Highlights of the FY 2019 HUD budget request follow.

 

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Public and Assisted Rental Housing

Project-Based Rental Assistance (PBRA)

The request provides $12.6 billion for Project-Based Rental Assistance (PBRA), which is $72 million (0.5 percent) more than FY 2020 and $621 million (5.2 percent) more than the FY 2020 request. The budget notes that their proposed Making Affordable Housing Work Act reform legislation would achieve savings in rental assistance programs, including PBRA, which would increase tenant contribution toward rent from 30 percent of adjusted income to 35 percent of gross income and institute a minimum monthly rent of $50, among other proposals. Without the enactment of these rent reform proposals, the proposed funding amount would not be sufficient to provide a full 12 months of renewal funding when contracts expire.

Tenant-Based Rental Assistance (TBRA)

Tenant-Based Rental Assistance (TBRA) is proposed to be funded at $18.8 billion, a $5 billion (21.1 percent) cut from FY 2020 and $3.4 billion (15.3 percent) less than the FY 2020 request. Of that amount, nearly $17 billion is for Section 8 Housing Choice Voucher contract renewals, which is a $4.5 billion (21.1 percent) cut from FY 2020, and $3.2 billion (15.7 percent) more than FY 2020 request. As noted for project-based rental assistance, the budget also proposes to establish mandatory minimum rents, require increased tenant contributions toward rent–reportedly from 30 percent of adjusted income to 35 percent of gross income–and institute other policies to achieve savings from HUD’s rental assistance programs.

In addition to the rent reforms, the budget proposes to transfer the amount of TBRA funding that Moving To Work (MTW) agencies receive into a new account explained below.

For the HUD-Veteran Affairs Supportive Housing (HUD-VASH) program, the request provides $4 million, which is $37 million (90.2 percent) less than FY 2020 and the same as the FY 2020 request. The HUD-VASH funding is reserved entirely for Native American veterans. The request also provides $100 million for Tenant Protection Vouchers, a $25 million (33.3 percent) increase from FY 2020, but $30 million (23.1 percent) less than the FY 2020 request.

Public Housing Capital and Operating Funds

The budget proposes yet again fairly dramatic cuts to public housing. It provides no funding for the Public Housing Capital Fund, a cut of $2.9 billion from FY 2020; and $3.6 billion for the Public Housing Operating Fund, a $977 billion (21.5 percent) cut from FY 2020, but $709 million (15 percent) more than the FY 2020 request.

As with TBRA, the budget proposes to transfer the amount of public housing capital and operating funding that Moving To Work (MTW) agencies receive into a new account explained below.

Rental Assistance Demonstration (RAD)

As in previous requests, the budget proposes to eliminate the public housing cap on the RAD program. FY 2018 appropriations increased authorization from 225,000 public housing units to 455,000 public housing units. Furthermore, as in previous requests, the budget requests $100 million in incremental funding to facilitate RAD conversions, and opens eligibility to properties with senior preservation rental assistance contracts and Section 811 supportive housing for people with disabilities.  Furthermore, the budget requests authority to exempt Section 202 properties with project-based rental assistance contracts from the requirement that RAD conversion be done on a budget-neutral basis.

Moving To Work (MTW)

Currently 39 public housing authorities (PHAs) are participating as agencies operating under the MTW program demonstration, meaning they are given certain regulatory flexibility and may combine their TBRA, Public Housing Capital and Operating Fund resources to design and test nontraditional policies and programs.  In 2016, Congress authorized HUD to allow up to 100 more PHAs to be designated as MTW agencies. The FY 2021 request is the first to establish a separate account for funding MTW agencies.  It proposes a total of $5.2 billion, which the administration says will serve more than 450,000 families in public housing and with vouchers.  Of this amount, $4.1 billion would be for contract renewals, $672 million for formula grants, and $340 million for contract administration.

Community Planning and Development (CPD) Programs

As in previous budget requests, the budget proposes to eliminate Community Development Block Grant (CDBG) formula grants and the HOME Investment Partnerships Program (HOME), a cut of $3.4 billion and $1.35 million, respectively. It should be noted that Congress rejected the administration’s proposed cuts to CDBG and HOME several times, and both programs have bipartisan support. It is unlikely Congress will go along with repealing such programs. However, given that funding for these programs isn’t directly tied to specific families (indeed, they represent funding for future housing and community development activities), they are much more vulnerable than rental assistance funding.  Given the funding increase to maintain current households in HUD rental assistance programs and the very tight nondefense spending cap for FY 2021, it is very likely CDBG and HOME will receive a cut in funding.

Homeless and Supportive Housing Programs

McKinney-Vento Homeless Assistance Grants are proposed to be funded at $2.77 billion, $4 million (0.1 percent) less than FY 2020, but $174 million (6.7 percent) more than the FY 2020 request. This amount includes a $2.49 billion set-aside for the continuum of care and rural housing stability assistance programs, an increase of $136 million from FY 2020, and $280 million for Emergency Solutions Grants, a cut of $10 million from FY 2020.

In a change from previous requests, the budget provides $853 million for the Housing for the Elderly (Section 202) program, a $60 million (12.1 percent) increase from FY 2020 and $53 million (10.4 percent) more than the FY 2020 request. Within this amount, the request includes $100 million for new Section 202 homes, the first time the Trump Administration has requested such funding, and $10 million more than FY 2020.

The Housing for Persons with Disabilities (Section 811) program is funded at $252 million, a $50 million (25 percent) increase from FY 2020, and $95 million (61 percent) more than the FY 2020 request. The budget would provide $330 million for the Housing Opportunities for Persons with AIDS (HOPWA) program to provide housing and supportive services, a $80 million (20 percent) cut from FY 2020, but level with the FY 2020 request.

Choice Neighborhoods Initiative

Again, as included in the FY 2020 request, the budget proposes to eliminate the Choice Neighborhoods Initiative, which is designed to comprehensively revitalize high-poverty public and assisted housing communities. It received $175 million in FY 2020.

Housing Trust and the Capital Magnet Funds

Like previous requests, the FY 2021 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 17, 2019, HUD announced $248 million for the 2019 Housing Trust Fund (HTF) allocations, and if the Federal Housing Finance Agency (FHFA) allows it, HUD is expected to announce 2020 HTF allocations in May. The U.S. Treasury’s Community Development Financial Institutions (CDFI) Fund announced Feb. 13, 2019 more than $142 million in awards for the 2018 round of the Capital Magnet Fund (CMF), and is expect to make the 2019 round announcement later this month.  For the 2020 rounds, Novogradac is projecting about $255 million for the Housing Trust Fund and about $148 million for the Capital Magnet Fund.

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. Senate Finance Committee Chairman Mike Crapo, R-Id., released an outline in February 2019 of his housing finance reform proposal, which if enacted would increase funding for them.  However, such legislation is not expected to advance this year.

Mark Calabria, the FHFA director, 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.

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

The FY 2021 budget, as with previous requests, proposes to eliminate all discretionary grant funding for the CDFI Fund, leaving $14 million only for administrative expenses of running the non-discretionary grant funding programs, such as the New Markets Tax Credit (NMTC) and the CDFI Bond Guarantee programs. The CDFI Fund received $262 million in FY 2020. The budget does not include an explicit request to extend the NMTC, which expires at the end of 2020.

Treasury Tax Proposals

Treasury did not release a “Greenbook” of tax proposals for FY 2021, but the budget documents include savings from the elimination of the energy investment tax credit, accelerated depreciation option for renewable energy property, exclusion of utility conservation subsidies, and the credit for residential energy efficient property.

Next Steps

The next step in the budget and appropriations process submitted normally would be for Congress to consider a FY 2021 budget resolution. However, it is unlikely that the Democrat-controlled House and the Republican-controlled Senate will agree on a budget resolution.  Nevertheless, Congress is expected to use the defense and nondefense spending caps as authorized in the Bipartisan Budget Act of 2019 to draft the FY 2021 spending bills.

Given the fact it is a presidential election year, Congress is not expected to enact all of the 12 spending bills before Oct. 1 when FY 2021 begins.  Instead, Congress is likely to consider a continuing resolution to fund the government past Sept. 30 and after the November election. The fate of final FY 2021 appropriations turns, as it often does, on the results of that election.  Stay tuned.