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A Review of FY 21 HUD Appropriations

A massive $2.3 trillion omnibus spending bill, including $1.4 trillion in Appropriations and $900 billion for COVID-19 funding, was passed by the House and Senate on December 21 and signed by the President on December 27. The Appropriations measure funds federal agencies through next September. The spending package includes $740.5 billion in defense spending and $664.5 billion for domestic programs.

 

Appropriations and HUD Budget

The $1.4 trillion approved includes $49.6 billion for HUD programs (https://bit.ly/3q0d1tQ) (HUD appropriations begin on page 1699), $561 million above the FY 20 enacted level, and $34.8 billion for the Office of Public and Indian Housing, $2.3 billion above the 2020 enacted level. This represents a seven percent increase for PIH from FY 20. A summary of selected accounts is provided in the table below.

Public Housing Fund

The bill provides $7.8 billion for what is now called the public housing fund, a consolidation of the operating and capital fund accounts into a single public housing fund. The congressional justification states that this account consolidation brings the funding of the public housing program in line with the other rental assistance programs of HUD, which are all funded through a single account. The agreement does not permit additional flexibility between operating and capital activities beyond those flexibilities that are already statutorily permitted.

 

Operating Fund

The Operating Fund was increased by $315 million, to $4.864 billion, a 6.9 percent increase from FY 20. Of this amount, $4.839 is allocated by operating fund formula and $25 million is provided to agencies that experience, or are at risk of, financial shortfalls, as determined by the Secretary. After shortfall needs are met, the Secretary may distribute any remaining funds to all public housing agencies on a pro rata basis pursuant to the operating fund formula. Congress directs that the allocation of these funds shall first be prioritized to PHAs with 249 or fewer public housing units that are determined to be experiencing shortfalls and have less than one-month of reserves before allocating funds to larger PHAs. The agreement recognizes that PHAs in special circumstances, such as those undergoing Rental Assistance Demonstration (RAD) conversions or utilizing flexibilities, are subject to temporary fluctuations in operating expenses and may not be experiencing true financial shortfall situations and directs HUD to take these special circumstances into account determining the allocation of funding.

 

Capital Fund

An allocation of $2.765 billion was provided for the Capital Fund for formula funding. Additional funds in the amount of $177 million are earmarked for the following activities:

  • $75 million for emergency capital needs, including safety and security measures
  • Of this amount, $45,000,000 shall be available for public housing agencies under administrative and judicial receiverships or under the control of a Federal monitor.
  • $35 million for the Healthy Homes initiative.
  • $25 million in competitive grants to address lead-based paint hazards.
  • $23 million for ongoing public housing financial and physical assessment activities.
  • $15 million for administrative and judicial receiverships.
  • $4 million for a new radon testing and mitigation safety demonstration program.

FY 21 formula funding combined with the above set-asides total $2.942 billion.

By comparison, the FY 20 total appropriation for the capital fund was $2.870 billion. However, the set asides last year totaled $125 million, leaving $2.745 billion for formula distribution. Therefore, the net increase in formula funding from last year is $20 million, or 0.7 percent.

This de minimis increase in capital funding is disappointing given the critical needs that exist across the country. PHADA has been advocating for the last two decades for funding that will fully address the serious backlog, now estimated at least $70 billion, that threatens the health and safety of residents across the country and results in a loss of approximately 10,000 units per year.

PHADA has advocated to the Biden transition team for some level of emergency funding during this period affected by COVID-19 and for the recovery period that will follow. This would be similar to the $4 billion provided under the American Reinvestment and Recovery Act of 2009. Many lawmakers and congressional staff have stated that they see a significant infusion of capital funding as part of an infrastructure bill, following the emergency funding to address COVID-19. It remains to be seen what appetite Congress will have for another huge funding bill.

 

Voucher Program

A total of $25.8 billion is allocated for Tenant-Based Rental Assistance, $1.9 billion above the 2020 enacted level and $2.4 billion above the President’s budget request. Of this amount, just over $23 billion is provided for voucher renewals, representing a 7.3 percent increase from FY 20. Administrative Fees received a $152 million increase, or 7.7 percent over FY 20. An additional $30 million is available to PHAs that need additional funds, including for administering Tenant Protection vouchers, disaster related vouchers, HUD–VASH vouchers, and other special purpose incremental vouchers.

 

Project Based Rental Assistance

The bill provides $13.465 billion for Project Based Rental Assistance contracts that provide the ongoing operating subsidy for HUD-assisted multifamily housing. This is an increase of $895 million over the FY 20 enacted funding level. It is estimated that this amount will be sufficient to renew all contracts.

 

Other Selected Programs

  • Choice Neighborhoods received $200 million, a $25 million increase, just over 14 percent, from last year. Congress directs HUD to give prior year planning grants priority consideration for implementation grant awards.
  • The Community Development Block Grant program received an allocation of $3.5 billion, a $50 million increase above the 2020 enacted amount.
  • HOME Investment Partnership Program was level funded at $1.35 billion.
  • Section 202, housing for the elderly, received $855 million, $62 million above the 2020 enacted level. This includes $52 million for new construction and $125 million for service coordinators.
  • Section 811, housing for persons with disabilities, received $227 million, $25 million above 2020. This includes $54 million for new construction.

 

Congressional Directives

ACC

For nearly two years, PHADA has led an industry effort to prevent HUD from implementing a new Annual Contributions Contract (ACC). The final Appropriations bill includes a provision, Section 232 that prevents HUD from using funds to require or enforce any changes to the terms and conditions of the ACC that were in effect as of December 31, 2017, unless such changes are mutually agreed upon by HUD and the PHA. Any such agreements must be in writing and the HUD Secretary may not withhold funds to compel such an agreement. This language is a major victory for PHADA, the industry groups and, most importantly, HAs across the country.

 

Self-Sufficiency Initiatives

Related to Family Self-Sufficiency (FSS), Section 233 of the bill states that none of the amounts made available in this Act may be used to consider Family Self-Sufficiency performance measures or performance scores in determining funding awards for programs receiving Family Self-Sufficiency program coordinator funding provided in this Act. PHADA has led the industry in advocating for over three years to address what it views as HUD’s overstepping of its statutory authority. It was PHADA, working with a key PHADA trustee that succeeded in having this language added to the last three appropriations bills. Prior to that, PHADA asked HUD to delay implementation for one year and look at scores on an advisory basis. PHADA’s efforts and comments also led HUD to look more closely at scoring under its measurement system and staff found anomalies from one year to the next that could not be explained, leading to a further delay in implementation.

HAs have authority under statute to create FSS Programs in accordance with local needs through a variety of social service and educational or job training pursuits. HUD intended to award FSS coordinator funding based on a system that essentially rewards agencies who move participants quickly to employment. Agencies with FSS participants who focus on longer term goals such as post-secondary education would not score as well and could have been in danger of losing funding.

The House directive to expand FSS grant eligibility to project-based Section 8 properties is not included, but HUD is directed to prioritize the renewal of all existing FSS coordinators. Congress also directs HUD to “…continue developing appropriate performance measures that will enable the Department to promote best practices across local programs and maximize the number of families that achieve self-sufficiency. These metrics should take into account factors… that include program size, geographic location, and the varied eligible activities of the FSS program.”

Funding for FSS increased from $80 million to $105 million this year, an increase also advocated for by PHADA. The bill also provides $25 million for Resident Opportunity and Self-Sufficiency program (ROSS) and $15 million for the Jobs Plus initiative.

 

Public Housing Agency Accreditation

In the bill report, Congress directs HUD to explore the feasibility of a partnership between HUD and one or more entities that provide accreditation services to PHAs. Such entities would be nonprofit organizations that have developed standards for, and are experienced with, accrediting affordable housing organizations, including PHAs, and promoting best practices to implement a national accreditation process for affordable housing organizations. Such accreditation would include an evaluation of a PHA’ s operations, policies, procedures, practices, communications, and relationships with residents and stakeholders. The agreement directs HUD to report to the House and Senate Committees on Appropriations within 240 days of enactment of this Act on the feasibility of such partnerships.

PHADA members, led by Vice President of Housing Josh Meehan (Executive Director of Keene Housing, NH) met with Congress and HUD to advocate for such a system, believing it has the potential to increase the visibility and public awareness of affordable housing, leading to greater public trust and increased credibility for affordable housing. After the House adopted accreditation language, PHADA urged the Senate to act similarly.

 

Low Income Housing Tax Credits (LIHTC)

Advocates for LIHTC expansion and improvement have achieved a great victory with the inclusion of one of the leading proposals from the Affordable Housing Credit Improvement Act (AHCIA, S. 1703, H.R. 3077) and Moving Forward Act (H.R. 2), namely, to establish a 4 percent minimum LIHTC rate. This permanent floor will make more projects feasible, many of which have stalled due to a rate that has decreased to as low as $3.07 recently. Novogradac estimates that a hard 4 percent tax credit rate will result in the creation of 126,000 more affordable housing units. The ACTION Campaign, of which PHADA is a member, has advocated for the last two sessions of Congress for this improvement. It mirrors the minimum 9 percent rate that evolved after the Great Recession.

The provision is effective for housing tax credits allocated after December 31 and for bond-financed properties placed in service and receiving allocations from private activity bonds issued after this date. According to Novogradac: “It is unclear whether properties that initially receive bond allocations or bond drawdowns before Dec. 31, but then receive subsequent allocations or drawdowns after December 31, are eligible to receive 4 percent rate on the entire LIHTC basis. Further guidance from IRS is likely needed.”

 

COVID-19 Supplemental Funding

After months of negotiations between Democrat and Republican leadership in Congress, a deal was finally reached on a $900 billion COVID-19 supplemental funding bill, which is part of this omnibus spending package. The bill includes $600 direct payments to Americans, enhanced unemployment benefits, and help for businesses. It does not include aid for city and state governments or corporate liability protections, both of which were at the heart of negotiation disagreements between the two parties.

The relief bill does not have any funding for HUD programs, but does include $25 billion for emergency rental assistance to be administered through the Coronavirus Relief Fund at the Treasury Department, with funding going directly to states, including state housing finance agencies, local governments, and Native American tribes. The funds would be available through September 30, 2022.

At least 90 percent of the funds must be used for payment of rent, rental arrears, utilities and home energy costs, utilities and home energy arrears, and other expenses related to housing for a period not to exceed 12 months. The other 10 percent can be used for housing stability services and administrative fees. Renter households earning up to 80 percent of area median income (AMI) would be eligible for assistance if at least one member of the household qualified for unemployment benefits or has experienced a reduction in income, incurred significant costs, or experienced other financial hardship due to or during the COVID-19 pandemic. Households must also document a risk of homelessness or housing instability through an eviction notice or past-due utility or rent notice. Households earning at or below 50 percent of AMI have preference. Landlords would be able to apply for funds on behalf of their tenants, and funds can be used to cover rent, rental arrears, utilities, utility arrears, and housing stability services.

The CDC Eviction Moratorium is extended until January 31, 2021.

 

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