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February 3, 2004
President submits budget to Congress
Major changes proposed to voucher program
President Bush submitted his new budget proposal to Congress yesterday, February 2. This promises to be a difficult budget year for a Congress that faces the electorate in about nine months as the Bush Administration's budget assumes a record federal deficit of $521 billion, up from about $370 billion this year. The spiraling deficits will also make it very difficult for housing advocates to ensure that programs are adequately funded in FY 2005, which starts October 1. Below is a brief synopsis of some of the major HUD-related sections.
The most significant proposal in the budget would reconfigure and reduce funding by almost $1 billion for the Section 8 Housing Choice Voucher (HCV) program. Last year, the administration proposed the Housing Assistance for Needy Families (HANF) plan, which would have block-granted HCV funds to the states. HANF would have also permitted major deregulation. This year, the administration is proposing similar statutory and regulatory relief, but not block grants to the states. Instead, local HAs would continue to receive HCV funds. Some of the major features of the new plan include:
- HCV would be changed from a program that is funded under a unit-based methodology to dollar-based system. HAs would basically be given a flexible allocation and then have to make it work in their communities. There are questions whether the plan includes any adjustments for inflation, raising concerns that fewer families might ultimately be served.
- There would be no federal targeting requirements. HAs would be required to make sure that all assisted families are "low income," i.e. 80 percent or less of the local median income.
- Similarly, HAs would be given flexibility as to how they set rents. They might elect to use Fair Market Rents and payment standards but would not be obligated to under the proposed changes. Based on recent history, this proposal and the targeting changes will be particularly controversial on Capitol Hill.
- Some type of Section 8 Management Assessment program (SEMAP) will remain in effect but it would be changed significantly.
- To save funding, less frequent inspections would be required. In addition, voucher holders would be permitted to move into apartments pending inspections. Also, HAs could use local codes in lieu of Housing Quality Standards.
- Recertifications would only be required every other year.
- The administrative fee would be set at 7 percent of an agency's total subsidy allocation. Like the inflation factor and funding reductions referenced above, this raises concerns that HAs will not have sufficient funds to run the program.
As far as the public housing portions of the budget, the plan would set the Operating Fund at $3.57 billion, which PHADA estimates is too low to meet funding needs in FY '05. In contrast, PHADA and other industry groups project a need of $3.8 billion. The budget also contains a 50-housing authority demonstration similar to the experimental Moving to Work initiative. Under the plan, HAs would be given total flexibility as to how to the run their programs.
The Capital Fund would receive $2.67 billion under the Bush budget. PHADA's request for FY '05 is $3.5 billion. Similar to last year, HOPE VI is not funded in the proposal, but PHADA and other industry groups are supporting funding at $625 million.
PHADA members can access the full budget and other pertinent information through this link. Forthcoming editions of the Advocate will also cover the budget in more detail and report on expected congressional hearings that begin soon.
PHADA FRONT
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