On May 28, the White House released its FY 22 budget, the first budget in a decade without federal sequestration or strict budget cap limits. This allowed the President the opportunity to significantly increase domestic discretionary spending, which he did by 16 percent. In contrast, Defense funding is increased by only 1.7 percent, a fact that is sure to create opposition among many members of Congress. With very tight vote margins in both chambers of Congress, and with several other costly plans released by the Administration over the past few months, it will be very challenging for the President to see passage of this budget before the current fiscal year ends on September 30.
This increase in discretionary domestic spending includes a proposed budget of $68.7 billion for HUD, an increase of $9 billion, or 15 percent, from FY 21 with significant increases for public housing and the voucher program. This is a remarkable investment in HUD programs.
Significant Increases to HUD Staffing Proposed
In conversations on the day the budget was released, senior HUD staff stated that they recognize the frustrations housing authorities (HAs) have with HUD field offices and are proposing a 10 percent increase ($25 million) in staffing for PIH. They further stated that HUD Secretary Fudge is serious about building capacity, that this is one of her highest priorities.
The Public Housing Fund
Under the Consolidated Appropriations Act of FY 21, the Public Housing Operating and Capital Funds were combined into one Public Housing Fund. Total funding is proposed at $8.575 billion, compared with just over $7.8 billion from last year, for a total increase of $769 million, or 9.9 percent.
The Capital Fund
For the first time in two decades, the budget for the Capital Fund begins with a three. A total of $3.2 billion has been proposed to address capital needs through the formula grant, representing a 15.7 percent increase from FY 21. President Biden’s infrastructure plan also includes $40 billion to address the national backlog of needs.
PHADA has advocated over many years and to the current Administration for a significant infusion of capital funds to address seriously deteriorating public housing, calling for $70 billion in funding to meet the national backlog. The $40 billion in capital funding is a significant and appreciated investment in the nation’s public housing supply, but PHADA will continue to advocate for full funding.
At the HUD budget hearing of the House T-HUD Subcommittee in April, Secretary Fudge said that she views the $40 billion as a down payment towards the total backlog of capital needs, that it was what Biden felt he could responsibly request. At PHADA’s annual convention in May, however, HUD General Deputy Assistant Secretary Dominique Blom characterized the $40 billion as a “game changer” and “a once in a lifetime opportunity to put public housing on strong footing.” She also said that to cover the national backlog, it’s going to mean leveraging other financing such as 4 percent and 9 percent tax credits, the Capital Fund and Operating Fund Financing Programs, and RAD to raise between $80-$100 billion. This leveraging, she said, would make it possible to address the entire public housing inventory and make it sustainable for decades to come.
In addition to the $3.2 billion for the Capital Fund to be distributed by formula, there is an additional $300 million to be distributed competitively to address what HUD calls “…targeted investments for public housing to further support energy efficient housing construction and environmentally sensitive and resilient design.” Of this amount, $245 million is intended for the Public Housing Rapid Return Utility Conservation and Climate Resilience Program and $55 million is for innovations to reduce energy and water consumption, including new approaches to the Energy Performance Contracts program.
The Operating Fund
A relatively modest increase of $23 million is proposed for the Operating Fund, from $4.864 billion in FY 21 to $4.887 billion in FY 22. HUD staff stated it was first believed that this figure would represent a 100 percent proration, but more recent data leads them to believe the proration is somewhere between 95 and 100 percent. Contributing to the uncertainty is the significant volatility in tenant contributions over the past year. HUD hopes to get better data in the coming months to improve projections.
White House Budget Will Help RAD Conversions
RAD allows HAs to convert their public housing to a Section 8 platform to leverage private financing that addresses capital needs. RAD conversions can only be undertaken by HAs when their Operating and Capital accounts (along with tenant rents) are adequate to result in rents (under the RAD formula) sufficient to cover operating costs and debt service for capital investment over at least a fifteen-year period for Project Based Vouchers and twenty years for Project Based Rental Assistance. The President’s budget, with near full funding for Operating and $3.2 billion in capital funding, will help to expand the Rental Assistance Demonstration (RAD) program.
There is also an additional $100 million being provided for RAD, which HUD states will be to further long-term financial stability and promote energy efficiency or climate resilience of [converting] properties.” Elimination of the sunset date on the RAD Demonstration is also proposed.
We know from RAD staff at HUD that RAD rents have increased due to past appropriations increases in the Capital and Operating Funds. This has made it possible for more HAs to participate in RAD. The Administration puts RAD in a favorable position by its investment in these accounts.
The Housing Choice Voucher Program
PHADA, along with other industry groups, has proposed expansion of the Housing Choice Voucher Program and appreciates President Biden’s proposal to increase overall funding for tenant based rental assistance by $5.4 billion from FY 21. The Administration proposes to assist 200,000 additional households, particularly those who are homeless or fleeing domestic violence, as well as to provide mobility-related supportive services to assist families with moves to higher-opportunity neighborhoods. At the HUD budget hearing (mentioned above), Secretary Fudge said that she anticipates 100,000 of these vouchers being used in FY 22 for the categories stated above, but that the other 100,000 would be used by FY 25 and uses could be expanded.
The Voucher Renewal account has a proposed increase of $1.92 billion, from $23.080 in FY 21 to $25 billion in FY 22, for an increase of over 8 percent. There is also $100 million provided for Tenant Protection Vouchers, $16 million less than last year.
In addition, $508 million is provided for Mainstream Vouchers, nearly $200 million more than last year, for contracts and administrative fees originally funded under Section 811 for persons with disabilities. PIH estimates that this funding will support over 51,000 Mainstream voucher holders. The requested funding also includes administrative fees for the renewed vouchers.
Section 8 Administrative Fees
Over the last year, HAs received significant funding for administrative fees to address the effects of the COVID-19 pandemic. This increase supports what PHADA has long stated, it takes people to help people. For many years, we have seen that Congress has been reluctant to fully fund this account, often stating that there is confusion amongst members of Congress as to how these funds are used.
The Biden administration has recognized the critical nature of administrative fees, proposing a significant 29 percent increase in this account, estimated to be a 100 percent proration. HUD staff stated that they recognized that HAs are being asked to do more, that with more vouchers come more responsibilities, particularly around increasing landlord participation in the voucher program.
There is an additional $491 million in fees for mobility related social services to areas of higher opportunity. Services may include mobility counseling, security deposits and landlord incentive payments, credit counseling and portability coordination. The fee structure will be modeled on the administrative fees provided in the Emergency Housing Voucher program; PHADA has advocated for this exact structure.
Project-Based Rental Assistance (PBRA)
The White House budget allocates $13.6 billion for the project-based rental account, a $135 million increase from FY 21, which is estimated to be adequate to renew all contracts for 12 months. HUD staff stated that this account allows a platform to allow elderly persons (who represent a significant portion of PBRA tenants) to age in place. In addition to this funding, there is $30 million provided for service coordinators.
Community Development Programs
The President’s budget proposes major increases for important community development programs such as CDBG, HOME and Choice Neighborhoods, with increases of $325 million (9.3 percent), $550 million (40.7 percent) and $50 million (25 percent), respectively. Funding for these programs often enhances public housing development, addresses infrastructure needs, funds housing rehabilitation, and provides a variety of services to low-income households. Many of these programs are widely supported on a bicameral, bipartisan basis.
The President’s budget is a blueprint from which Congress can work to negotiate its own numbers in the House and Senate. The priorities of this Administration have been laid out in the President’s budget and it is now on Congress to support or oppose these for the twelve Appropriations bills that will dictate FY 22 spending.
Members who support the significant and unprecedented increases proposed by the Biden administration should call your Representative and Senators and urge them to do the same. Members should also urge support for the $40 billion for capital funding as part of the infrastructure plan. PHADA will keep members apprised in the coming months as Congress goes through its own budget processes, which ultimately determine what appropriations will be for FY 22.