Trump Administration’s Drastic FY 2018 Request is Unlikely to Advance, But Housing and Community Development Funding Cuts are Likely

Published by Peter Lawrence on Tuesday, May 23, 2017 - 12:00am

The Trump administration released its $4.09 trillion FY 2018 budget request May 23, which includes $688 billion in defense discretionary spending and $479 billion for nondefense discretionary spending, a cut of $57 billion. Of the nondefense discretionary budget, the administration requested $40.7 billion in gross U.S. Department of Housing and Urban Development (HUD) spending, a $7.4 billion (15.3 percent) cut from the amount appropriated in FY 2017. Highlights of the HUD program funding requests follow.

 

Blog Chart Key Programs of the HUD Budget
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Public and Assisted Rental Housing

Project-Based Rental Assistance (PBRA)

The request provides $10.8 billion for Project-Based Rental Assistance, which is $65 million (0.6 percent) less than FY 2017. The budget notes that HUD will release proposals to achieve savings in rental assistance programs, but it is unclear how such proposals will affect project-based rental assistance funding.

Tenant-Based Rental Assistance (TBRA)

Tenant-Based Rental Assistance is proposed to be funded at $19.3 billion, a $974 million (4.8 percent) cut from FY 2017. Of that amount, $17.6 billion is for Section 8 Housing Choice Voucher contract renewals, which is a $771 million (4.2 percent) cut from FY 2017. 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 to 35 percent of adjusted family income, and institute other policies to achieve savings from HUD’s rental assistance programs. For the HUD-Veteran Affairs Supportive Housing (HUD-VASH) program, the request provides $7 million, which is $40 million (85 percent) less than FY 2017. The HUD-VASH funding is reserved entirely for Native American veterans, the same amount as FY 2017. The request also provides $60 million for Tenant Protection Vouchers, a $50 million (45.5 percent) decrease from FY 2017. It is unclear whether this level of funding would be sufficient to provide voucher assistance for all tenants in properties whose owners have terminated property-based assistance.

Public Housing Capital and Operating Funds

The budget proposes fairly dramatic cuts to public housing. It provides only $628 million for the Public Housing Capital Fund which is $1.3 billion (67.7 percent) less than FY 2017, and $3.9 billion for the Public Housing Operating Fund, which is a $500 million (11.4 percent) cut from FY 2017.

Rental Assistance Demonstration

The budget proposes to eliminate the cap on the Rental Assistance Demonstration (RAD) program and makes it a permanent program. The FY 2017 omnibus bill increased authorization from 185,000 public housing units to 225,000 public housing units and extended program authorization for public housing conversions to 2020. Furthermore, the request would authorize RAD conversions of Section 202 properties, but does not provide any incremental funding to facilitate such conversions, as proposed by the Senate in its FY 2017 HUD spending bill.

However, because the Public Housing Capital and Operating Fund subsidies are used to fund RAD conversions of public housing, and such funding is cut so dramatically, it’s unclear how many public housing units, if any, could be converted.

Community Planning and Development (CPD) Programs

As previously indicated in the budget request blueprint, the budget proposes to eliminate Community Development Block Grant (CDBG) formula grants and the HOME Investment Partnerships Program (HOME), a cut of $3 billion and $950 million, respectively. It should be noted that Congress rejected the administration’s proposed FY 2017 cut to CDBG and that both programs have bipartisan support. It is unlikely Congress will go along with repealing such programs. However, given that funding for these programs aren’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.

Homeless and Supportive Housing Programs

McKinney-Vento Homeless Assistance Grants are proposed to be funded at $2.25 billion, a $133 million (5.6 percent) cut from FY 2017 and equal funding from FY 2016. This amount includes a $1.988 billion set-aside for the continuum of care and rural housing stability assistance programs (a cut of $32 million or 1.6 percent), and $255 million for Emergency Solutions Grants (a cut of $55 million or 18 percent).

In one of the only proposed (albeit modest) increases, the budget provides $510 million for the Housing for the Elderly (Section 202) program, a $7.6 million (1.6 percent) increase from FY 2017. The Housing for Persons with Disabilities (Section 811) program is funded at $121 million, a $24.9 million (17 percent) cut from FY 2017 funding levels. The budget would provide $330 million for the Housing Opportunities for Persons with AIDS (HOPWA) program to provide housing and supportive services, a $26 million (7.3 percent) cut from FY 2017.

Choice Neighborhoods Initiative

Again, as previewed in the March blueprint, the budget proposes to eliminate the Choice Neighborhoods Initiative, which is designed to comprehensively revitalize high-poverty public and assisted housing communities. It received $138 million in FY 2017.

Housing Trust and the Capital Magnet Funds

The FY 2018 budget proposes to eliminate the Housing Trust and Capital Magnet Funds, and the Fannie Mae and Freddie Mac assessments that fund them. Although no formal announcement has been made, in 2017 we expect about $219 million to be available for the Housing Trust Fund and $118 million for the Capital Magnet Fund. Fannie Mae and Freddie Mac assessments are not discretionary appropriations, and housing finance reform legislation is expected to address whether Congress wants to continue them. Given the strong support of Senate Democrats for both funds, it is unlikely Congress will eliminate them.

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

The FY 2018 budget proposes to eliminate all discretionary grant funding for the CDFI Fund, leaving $14 million in funding for administrative expenses of running the non-discretionary grant funding programs, such as the new markets tax credit and the CDFI Bond Guarantee program. As it doesn’t require a subsidy, the budget proposes a $500 million authorization level for the CDFI Bond Guarantee program.

Treasury Tax Proposals (a.k.a. “Greenbook”)

Normally the Treasury Department releases a supplement to the budget request containing all of the administration’s tax proposals, also known as the “Greenbook.” Although the budget documents included a call for revenue-neutral tax reform, there was no “Greenbook” released and it is expected to be superseded by a more detailed tax reform plan that Treasury is planning to release later this year.

Next Steps

Normally the next step in the budget and appropriations process after the full budget request is submitted is for Congress to consider a FY 2018 budget resolution, but the passage of that resolution is complicated by legislation to repeal and replace the Affordable Care Act (ACA). The FY 2017 budget resolution contains reconciliation instructions on repealing and replacing the ACA, and passage of a FY 2018 budget resolution would supersede the FY 2017 resolution.

It is possible the House and Senate could prepare FY 2018 budget resolutions in anticipation of passing them shortly after the ACA repeal-and-replace legislation is passed, but given the demand of House fiscal conservatives to balance the budget and enact mandatory spending reductions, it could be very difficult to get the necessary votes to pass a FY 2018 budget resolution in both chambers of Congress.

While it is uncertain if and when Congress might consider the FY 2018 budget resolution, if it does consider one, the resolution is expected to include reconciliation instructions to facilitate passage of tax reform in the Senate.

Given the austere funding requests in the FY 2018 budget blueprint and the return of sequestration under tight overall discretionary spending caps, it will be very difficult for Congress to draft and pass all 12 annual spending bills, including those providing funding for HUD and Treasury. Many policy insiders expect Congress to consider a CR to fund the government past Sept. 30 and possibly for the entire fiscal year.