CARH’S BROADCAST EMAIL – Budget Update
On February 10, the Trump Administration formally unveiled its proposed $4.8 trillion Fiscal Year (FY) 2021 budget proposal. The proposed budget for FY 2021 mirrors the proposed budget for the last three fiscal years in that many domestic programs would be cut or eliminated. Despite Congress’ repeated rejections, the Administration proposed budget contains many of the same recommendations as was seen in previous budget submissions. While there are reductions within the United States Department of Agriculture’s Rural Development (RD) programs, the Administration is acknowledging the need for additional funds for preservation of the existing portfolio. CARH members know that in order for rural housing transactions to be successful, several sources of funding are vital. Therefore, it is going to be critical for CARH, our members, and the rural housing industry to fight for restoration of funding for the programs that have been targeted both at the United States Department of Agriculture (USDA) and at the Department of Housing and Urban Development (HUD).
As CARH members can see from the attached chart, the proposed budget would provide $1.410 billion for RD’s Section 521 Rental Assistance (RA) program. The Administration’s proposed level of funding appears larger than the FY 2020 level of $1.375 billion. However, this larger number is due to a proposal to put RD’s Section 524 voucher program under the RA account, a recommendation from FY 2020 that Congress rejected. Rural voucher funding has been under the Multifamily Housing Revitalization Program (MPR). When factoring in $40 million for vouchers, the proposed budget is only slightly higher than previous years approved levels of funding. The budget proposal also would eliminate a provision that was added to the final Omnibus Appropriations bill for FY 2020 (P.L. 116-94) that would allow, at the request of an owner, the Secretary of Agriculture to renew the Section 521 RA agreement up to 20 years or until the term of the Section 515 or Section 514 loan. Previously, the terms of RA contracts have been for only one year. CARH has advocated for many years for RA contracts to be 20 years.
Residents would be required to pay a minimum of $50.00 a month unless the Secretary determines a lower amount because the resident in the unit requires a hardship exemption. Again, this rent minimum was included in the last three budget proposals but was rejected by Congress.
Under the proposed budget, the MPR program would receive $40 million, an increase over the FY 2020 level of $28 million. This is a positive development in that the Administration has acknowledged that there is a need for additional money because of the backlog in commitments for the MPR program. As proposed in the FY 2020 proposed budget, the Section 515 program would be eliminated. The Administration proposed eliminating the program in FY 2020 budget, but P.L.116-94, provided $40 million.
The Section 538 Guaranteed Rural Rental Housing program would have $230 million in budget authority, the same level of funding as provided in FY 2020. As CARH members know, the Section 538 program does not cost the government money because of the fee structure that CARH, working with the department several years ago, was able to have approved. The only costs to the government for this program are the administrative expenses associated with the program.
In 2017, Secretary Perdue announced the reorganization of parts of USDA and the removal of the Under Secretary for Rural Development and related offices. CARH opposed the elimination of the Under Secretary’s office. In the Agriculture Improvement Act of 2018 (P.L.115-334), or more commonly known as the “Farm Bill,” the position of Under Secretary for Rural Development was re-authorized. The FY 2021 proposed budget provides funding for the Under Secretary position. Additional monies are being proposed for IT upgrades throughout RD. Specifically, the budget proposes $5 million for the Program Loan Accounting System and $5 million for the Automated Multi-family Accounting System (AMAS). CARH has been supportive of RDs efforts to obtain funds to upgrade its very outdated IT systems.
The budget proposes continuation of the business and industry guaranteed loans. These loans are made to public, private or cooperative organizations, Indian tribes or tribal groups, corporate entities, or individuals for the purpose of improving the economic climate in rural areas. The 2021 budget projections for loan guarantees are $1.5 billion. However, the budget would eliminate the business development grant program funded through the business and industry program account.
The proposed budget for HUD would decrease HUD’s funding from the FY 2020 level of $56.5 billion to $47.9 billion in FY 2021. (HUD’s Public Affairs Office has released a document entitled, “What You Need To Know,” summarizing HUD’s budget and a document entitled, “Budget in Brief,” which includes a breakdown of funding for the various program areas.) As CARH members can see from the attached chart, the Community Development Financial Institutions (CDFI) Fund, which plays an important role in generating economic growth in distressed communities throughout the country, would be eliminated, as would CDBG, HOME, the Housing Trust Fund, and the Capital Magnet Fund. There would be no funding for the Public Housing Capital Fund. Choice Neighborhoods would also be eliminated. Project Based Rental Assistance would see a very small increase in funding from $12.570 billion in FY 2020 to $12.642 billion in FY 2021. The budget proposes $18.8 billion for Housing Choice Vouchers and other tenant-based assistance, a decrease from the FY 2020 level of $23.874 billion. The Administration is again seeking substantial increases for healthy homes and lead-based paint inspections and enforcement, as well as other health issues such as carbon monoxide detection. The budget also emphasizes HUD’s role in coordinating efforts across the federal government to reduce regulatory barriers to creating affordable housing. (See CARH’s latest comments on this issue.)
The proposed budget provides $100 million for the Rental Assistance Demonstration program and expands its authority to convert additional properties to long-term, project-based Section 8 contracts that can leverage private financing for capital improvements. Under existing authorities, Public Housing Authorities (PHAs) and other owners of rental properties assisted under the Public Housing, Moderate Rehabilitation, Moderate Rehabilitation Single-Room Occupancy, Rent Supplement, Rental Assistance Payment, and Section 202 Housing for the Elderly Project Rental Assistance Contracts programs are offered the option to convert their properties to long-term Section 8 contracts.
As indicated earlier, the RD section of P.L. 116-94 law allows, at the request of an owner, for the Secretary of Agriculture to renew the Section 521 RA agreement up to 20 years or until the term of the Section 515 or Section 514 loan. The terms of RA contracts previously have been for only one year. Since this language is in a funding bill, it will need to be included every year. Therefore, we would like to see this language in a bill authorizing RD programs. H.R. 3620, Rural Housing Preservation Act of 2019, as passed by the House, would allow RA contracts in transactions that are preserved through the MPR program to be 20 years. CARH has also advocated for language that would cover all RA contracts. This legislation has been referred to the Senate Banking Committee. Passage of this bill is a CARH priority during the Second Session of the 116th Congress.
CARH is a member of the Steering Committee “A Call to Invest in Our Neighborhoods” (ACTION) Campaign promoting the Housing Credit and Housing Bond programs. The Steering Committee, which is composed of the leadership of housing industry stakeholders, plays an active role in advocating for the Housing Credit and Housing Bond programs by developing initiatives which demonstrate the strong need for both programs.
It will be a top priority of CARH and others that are part of the ACTION Coalition to continue to pursue passage of H.R. 3077 and S. 1703, the Affordable Housing Credit Improvement Act. Of particular interest to the industry would be a flat rate for the 4% Housing Credits and providing a 130% basis boost for rural transactions using the 4% Credits. Both provisions would be beneficial to rural housing preservation transactions. Click here to see an up-to-date list of cosponsors for both H.R. 3077 and S. 1703. If you do not see your member of Congress listed on this list, CARH members are urged to contact the Member and/or their staff and ask for them to cosponsor. If your member of Congress is a cosponsor, don’t forget to thank them and urge continued discussion and passage during this Second Session of the 116th Congress.
Also, do not forget to invite your members of Congress and their staff to your multifamily properties for them to see the work that you do and its importance to the residents and rural communities throughout America. It is also important that members of Congress and staff understand that the direct funding programs help the Housing Credit and Housing Bond programs work and vice versa.
CARH’s board of directors will be meeting in Washington, DC on March 5-6. Board members will be traveling to Capitol Hill to meet with key members of Congress and their staffs. The budget and the housing credit program will be a top discussion item in meetings. We will continue to keep our members informed as the FY 2021 appropriations process moves forward through Congress.
If you have any questions, please contact CARH at email@example.com or 703-837-9001.