CARH’s BROADCAST EMAIL—Legislative Alert
December 28, 2022
Last week, the Senate, by a vote of 68-29, and the House of Representatives, by a vote of 225-201, passed a full-year omnibus appropriations bill for Fiscal Year (FY) 2023. President Biden signed the bill into law on December 27. The $1.7 Trillion bill will fund the government, including the United States Department of Agriculture’s (USDA) Rural Development (RD) housing programs and Department of Housing and Urban Development’s (HUD) programs, through September 30, 2023.
The FY 2023 budget, as proposed by the Administration earlier in the year would have made significant investments in RD and HUD affordable housing programs. The final bill, while increasing some of RD’s programs, essentially keeps funding levels for both RD and HUD at or near FY 2022 levels. CARH had advocated for funding closer to the budget requests because of rising costs associated with preservation of the existing portfolio, continued supply-chain issues in the construction arena, and continued increases in operational costs that are dependent on realistic budgets for properties, thus the need for higher funding for the Section 521 Rental Assistance (RA) account.
As CARH members can see from the RD chart outlining RD funding, the Section 538 Rural Rental Guaranteed Housing Loan program will see significant increases from FY 2022 level of $250 million to $400 million in FY 2023. Along with the regulatory changes made to the program over the past year, this increase in budget authority will have a significant impact and increase transactions which are aimed at providing more work-force housing while at the same time providing more financing for preservation. The Section 515 program would see an increase to $70 million from the FY 2022 level of $50 million. The bill directs that of this $70 million, $13,377 million should be allocated for new construction. The Multifamily Preservation and Revitalization (MPR) Demonstration program would receive $36 million, a small increase from the FY 2022 enacted level of $ 34 million. Rental housing vouchers would receive $48 million.
The Section 521 Rental Assistance (RA) program would only receive $1,488 billion. The Administration’s budget had proposed $1,602 billion which, at the time, assumed that RD needed $100 million to continue funding units that had received funds from the American Rescue Plan Act (ARPA). CARH weighed in extensively on this issue by sending several letters and briefs to members of Congress and the Administration. In addition, when CARH’s board of directors met in September, members went to Capitol Hill and educated staff and specific members of Congress on the need to ensure these units were funded by the RA program. RD has now indicated that they can continue to fund these units within the confines of the budget provided in the year-long appropriations bill. CARH applauds RD for working within the confines of what is now the budget for RA. However, CARH would ask members to keep close tabs on your properties’ RA accounts as the year progresses. Over the past several years, the RA budget has included an amount, usually $40 million, to be available to prevent gaps at the end of the federal fiscal year or start of the following federal fiscal year. In at least some years, that money was not used but it was provided because gaps had occurred in prior years. Since then, RD has shifted to a January to December RA budgeting year and made other improvements. Still, CARH is concerned that this amount was removed without public explanation. Should shortfalls begin to develop, CARH will need to work with RD and Capitol Hill on a solution.
The bill does not provide for a decoupling of the Section 521 program from the Section 515 program. Under current law, when a Section 515 mortgage expires the Section 521 RA also expires. The FY 2023 budget would have “decoupled” the two programs. However, such language would have needed to be renewed every year. CARH very much supports decoupling because this would help in preservation of the portfolio. Several stand-alone bills were introduced which would have allowed for permanent decoupling. While these bills did not pass the House or the Senate, there was bipartisan support. Allowing for this type of decoupling will be a priority for CARH during the 118th Congress. On another item, language continues to be included which provides for 20-year contracts subject to appropriations. (This is similar to language that has been included for HUD’s Section 8 program.) This is language that has been included in the last several funding bills and again is supported by CARH but has not been implemented by RD. The 20-year reference is important for properties, also using the Housing Credit and Bond programs. Investors in these properties have confidence that the government supports the RA program.
The FY 2023 funding bill will provide $58.2 billion for HUD, a $4.5 billion increase from FY 2022 enacted funding levels. However, nearly $3 billion of this increase is for special projects funded in the form of Economic Development Initiative (EDI) items resulting from Congressionally Directed Spending (CDS) requests. The HUD chart outlines funding levels for HUD programs of interest to CARH members include the following: $30.3 billion for Tenant-Based Rental Assistance (TBRA) Section 8 activities, including $27.6 billion under the regular TBRA account and an additional $2.7 billion designated as emergency funding. This includes a total of $26.4 billion for renewal of tenant-based vouchers. $14.9 billion for Project-Based Rental Assistance (PBRA), including $13.9 billion under the regular PBRA account and an additional $1 billion designated as emergency funding; $8.5 billion for the public housing fund, including $5.1 billion for the public housing operating fund and $3.2 billion through the capital fund formula; $3.6 billion for Homeless Assistance Grants, an increase of $420 million above FY 2022, including $75 million for new construction, acquisition, or rehabilitation of new permanent supportive housing; $1.5 billion for the HOME Investment Partnerships Program, the same as in FY 2022, but $450 million less than was requested in the President’s Budget and $175 and $225 million less, respectively, than in the House and Senate FY 2023 proposed appropriations bills; $225 million under a new Preservation and Reinvestment Initiative for Community Enhancement (PRICE) program to support resiliency and preservation of manufactured housing and manufactured housing communities and $85 million for a new so-called “Yes in My Backyard” competitive grant program to encourage communities to improve inclusionary zoning practices and land use policies. This bill also includes a fix to the HUD Mark to Market program. About 2,000 apartment complexes went through what HUD calls Full Mark Down to Market, with a formal loan restructuring and capping rent increases at operating cost adjustment factor (OCAF). In many cases OCAF has fallen well behind both market and project needs. This legislation allows for a budget-based rent increase for operating costs or rehabilitation. The Institute for Responsible Housing Preservation (IRHP) and National Leased Housing Association (NLHA) led the way on this provision which was a multi-year effort.
Unfortunately, none of the Housing Credit and Housing Bond provisions that CARH and others from the ACTION campaign actively supported were included in the legislation. There had been thoughts that at the last minute, our Congressional supporters would have been able to convince the leadership in both the House and Senate to include these provisions. They were not able to bridge the divide on adding tax provisions to the legislation. CARH will continue to advocate for the enhancements to the programs as envisioned in the Affordable Housing Credit Improvement Act (H.R.2573 and S. 1136) during the next Congress. (For more information on this issue – including the sponsors of the legislation in the 117th Congress, read CARH’s Issue Brief, Housing Credit and Housing Bond Programs and Rural Housing.)
Attendees at CARH’s 2023 Midyear Meeting will hear from speakers throughout the meeting that will discuss these and other issues – including an in-depth discussion with our Washington DC experts during a session entitled “Breaking News from Our Nation’s Capital.” Additionally, Joaquin Altoro, RHS Administrator, and Ethan Handelman, HUD’s Deputy Assistant Secretary for Multifamily Housing, will discuss their agency’s respective funding issues during the “Breakfast with the Regulators” session. If you have not yet registered for the CARH Midyear Meeting, please click for the Meeting Brochure and Registration Form.
For other news and information affecting the affordable rural housing industry, please visit the Newsroom on CARH’s website, www.carh.org.