The Department of Housing and Urban Development: FY2007 Budget

Contents

• Most Recent Developments
• Introduction to the Department of Housing and Urban Development (HUD)
• FY2006 Appropriations
• FY2007 Budget Issues
• Budget Pressures
• Tenant-Based Rental Assistance (Section 8 Vouchers)
• Section 8 Project-Based Rental Assistance
• Housing Certificate Fund Rescission
• Public Housing
• Native American Block Grants
• Housing for Persons with AIDS (HOPWA)
• Rural Housing and Economic Development
• Community Development Fund/Block Grants
• CDBG Section 108 Loan Guarantees
• Brownfields Redevelopment
• The HOME Investment Partnership Program
• Self Help and Assisted Homeownership
• Homeless Programs
• Housing Programs for the Elderly and the Disabled
• Federal Housing Administration (FHA)
• Government National Mortgage Association (Ginnie Mae)
• Office of Federal Housing Enterprise Oversight (OFHEO)
• Fair Housing
• Lead-Based Paint Hazard Reduction
• Research and Technology

Summary

On February 6, 2006, the President submitted his FY2007 budget to the Congress. It proposed funding the Department of Housing and Urban Development (HUD) at $34.1 billion, just over the FY2006 level (not including FY2006 supplementals related to Hurricane Katrina). HUD's FY2007 budget summary stated that the budget intended to use "taxpayer money more wisely" and "reform programs in need of repair."

The President's budget would have increased funding for the Section 8 Housing Choice Voucher program from $15.4 billion in FY2006 to $15.9 billion in FY2007. It proposed to reduce funding to the Public Housing Capital Fund to $2.2 billion from the $2.4 billion that was appropriated for FY2006. The proposed budget also would have eliminated funding for public housing's HOPE VI program, which replaces distressed public housing units with new or rehabilitated mixed-income developments. Within the community development programs, the President's FY2007 budget proposed cutting funding to the Community Development Block Grant (CDBG) program by nearly 20% from the FY2006 level. CDBG provides grants to states and localities to use for housing and community development projects. The FY2007 budget proposal would have increased funding for the Housing Opportunities for Persons with AIDS (HOPWA) program from $286 million to $300 million and the HOME program from $1.7 billion to $1.9 billion. Additionally, it would have increased funding for the four Homeless Assistance Grants by $209 million, and provided funding for two new initiatives: the Samaritan Initiative for the chronically homeless and the Prisoner Re-entry Initiative. The President's budget proposed to cut in half funding for the Section 811 Housing for the Disabled program, as proposed in FY2006. The FY2007 budget would have provided $119 million for Section 811, down from $237 million in FY2006. Funding for the Section 202 Housing for the Elderly program would have been reduced from just under $735 million to $546 million, a drop of 25.7%.

The House passed its version of the HUD funding bill on June 14, 2006 (H.R. 5576). It funded most programs at or near the President's requested level, although it increased funding for the Section 8 voucher program, CDBG, and the Section 202 Housing for the Elderly and Section 811 Housing for the Disabled programs. The Senate Appropriations Committee passed its version of H.R. 5576 on July 20, 2006. It would have provided over $2 billion more for HUD than the President's request and the House bill, increased funding for Public Housing and restored funding for programs slated for elimination, including HOPE VI.

Since the majority of the FY2007 appropriations bills were not approved before the end of FY2006, Congress enacted a series of stop-gap funding measures, or continuing resolutions, to maintain government operations. On February 15, 2007, Congress approved a revised yearlong continuing resolution, funding most accounts at their FY2006 level (P.L. 110-5). Congress is also considering FY2007 supplemental appropriations that may make changes to HUD funding (H.R. 1591). This report will be updated to reflect legislative activity.

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The Department of Housing and Urban Development: FY2007 Budget

Most Recent Developments

FY2007 Supplemental Appropriations Acts

On May 1, 2007, the President vetoed the U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Act (H.R. 1591), a supplemental appropriations bill that included several housing-related provisions. When the House failed to override the President's veto, another supplemental appropriations bill with the same name (H.R. 2206) was introduced on May 8, 2007. The bill, which was in conference as of the date of this report, contains identical housing-related provisions. Specifically, the bill provides additional funding for HUD's Inspector General in order to oversee Hurricane Katrina funding, additional funding for the Office of Federal Housing Enterprise Oversight, language clarifying how the department should distribute FY2007 Section 8 voucher funding, language extending the availability of Katrina voucher funds, and language clarifying how HUD should treat the renewal of certain project-based voucher contracts.

FY2007 Appropriations Bill Enacted

On February 15, 2007, President Bush signed a revised yearlong continuing resolution into law (P.L. 110-5). With some exceptions, the act funds accounts at their FY2006 levels. Those exceptions include funding a number of HUD programs at levels higher than those enacted in FY2006:

• Tenant Based Rental Assistance: $15,920 million
• Project-Based Rental Assistance: $5,976 million
• Public Housing Operating Fund: $3,864 million
• Indian Housing Loan Guarantee: $6 million
• Homeless Assistance Grants: $1,442 million
• Salaries and Expenses: the FY2006 levels, plus such sums as necessary to meet 50% of the need for cost-of-living increases for federal employees

The act funds three HUD accounts below their FY2006 level:

• Self Help Homeownership: $49 million
• Research and Technology: $50 million
• Community Development Fund: $3,772 million

The decrease in funding for the Community Development Fund does not decrease funding for the primary program funded by the account, the Community Development Block Grant (CDBG) program. Instead, the decline can be attributed to the Congress's decision not to fund the Economic Development Initiatives (EDI) program that is also funded under that account. The EDI account has traditionally been a source of funding for congressionally driven projects, or earmarks.

Continuing Resolutions Enacted

Congress did not enact the majority of FY2007 appropriations bills before the end of the 2006 fiscal year. In order to fund government operations until final appropriations bills are enacted, Congress attached a continuing resolution (CR) to the FY2007 Defense Appropriations conference report (H.Rept. 109-676). It was adopted by Congress on September 26, 2006, and signed into law on September 29, 2006 (P.L. 109-289). It funded HUD programs—through November 17, 2006—at the lower of the House-passed or FY2006 enacted funding level. Programs that received funding in FY2006, but were not slated to receive any funding under the House-passed bill, were funded at the FY2006 level. A second CR, extending the previous CR through December 8, 2006, was approved by Congress on November 15, 2006 (P.L. 109-369). A third CR was enacted on December 8, 2006, just prior to adjournment of the 109^th Congress (P.L. 109-383). It extended the original CR through February 15, 2007. For more information, see CRS Report RL33681, FY2007 Regular Appropriations Acts: Procedures for End-of-Session Wrap-Up, by [author name scrubbed].

Senate Committee Passage

Two days after subcommittee passage, on July 20, 2006, the Senate Appropriations Committee approved its version of the FY2007 Transportation, Treasury, and Housing and Urban Development, the Judiciary and Independent Agencies Appropriations bill, providing $36.6 billion for HUD (H.R. 5576).

House Passage

On June 14, 2006, the House passed its version of the FY2007 Transportation, Treasury, and Housing and Urban Development, the Judiciary, District of Columbia and Independent Agencies Appropriations bill (H.R. 5576), providing $35.3 billion for HUD. Several floor amendments were adopted to the bill, which had been reported out of subcommittee on May 26, 2006, and out of full committee on June 6, 2006.

President's Budget Submitted

The President submitted his FY2007 budget to the Congress on February 6, 2006, requesting $34.1 billion for HUD. This represents an increase of just under 2% over the regular FY2006 appropriation (not including FY2006 supplementals related to Hurricane Katrina), and an increase of about 17% over the President's FY2006 request of $29.1 billion.

Introduction to the Department of Housing and Urban Development (HUD)

Most of the appropriations for the Department of Housing and Urban Development (HUD) are designed to address housing problems faced by households with very low incomes or other special housing needs. These include programs of rental assistance for the poor, elderly, or disabled, housing assistance for persons with AIDS, and shelter for those who are homeless. The two large HUD block grant programs, HOME and Community Development Block Grants (CDBG), also help communities finance a variety of activities to address the housing and community development needs of disadvantaged populations. In recent years, HUD has focused more attention on efforts to increase the homeownership rates for lower-income and minority households. HUD's Federal Housing Administration (FHA) insures mortgages made by lenders to lower-income home buyers, many with below-average credit records, and to developers of multifamily rental buildings containing relatively affordable units.

FY2006 Appropriations

On November 30, 2005, the President signed P.L. 109-115, the FY2006 Appropriations Act for the Departments of Transportation, Treasury, and HUD, the Judiciary, the District of Columbia and Related Agencies. The bill included just under $34 billion for HUD, a significant increase from the President's $29 billion request. The law rejected the President's proposal to eliminate the CDBG program and replace it with a new block grant program called "Strengthening America's Communities" in the Department of Commerce (for more information, see CRS Report RL32823, An Overview of the Administration's Strengthening America's Communities Initiative, by [author name scrubbed] et al.). Congress also rejected major cuts requested by the President for the Section 811 Housing for the Disabled program and the HOPE VI program. (For more information, see CRS Report RL32869, The Department of Housing and Urban Development (HUD): FY2006 Budget, by [author name scrubbed] et al.).

On December 30, 2005, the FY2006 Department of Defense Appropriations bill (P.L. 109-148) was enacted, including supplemental appropriations for Hurricane Katrina relief. The act provided almost $12 billion in supplemental funds for HUD, $11.5 billion of which was allocated for the CDBG program, and $390 million for HUD's Disaster Assistance Vouchers. To offset the cost of hurricane recovery, the act also included a 1% across-the-board rescission to all domestic discretionary programs, including all HUD programs. In total, the rescission reduced HUD's budget by $380 million. On June 15, 2006, the President signed a second supplemental appropriations, P.L. 109-234, that provided an additional $5.2 billion in CDBG assistance for Hurricane Katrina relief activities, bringing the total supplemental appropriations for CDBG-supported hurricane relief to $16.7 billion. (For more information, see CRS Report RL33298, FY2006 Supplemental Appropriations: Iraq and Other International Activities; Additional Hurricane Katrina Relief, by [author name scrubbed] et al., and CRS Report RL33330, Community Development Block Grant Funds in Disaster Relief and Recovery, by [author name scrubbed] and [author name scrubbed].)

FY2007 Budget Issues

Budget Pressures

The President's FY2007 request highlights growing pressures within the HUD budget between the discretionary programs that require appropriations and the rescissions and offsetting collections and receipts that subsidize—or offset—the cost of those appropriations. As can be seen in Table 2, while the President's overall funding request is a slight increase over the previous year (1.6%), the amount of appropriations requested is actually a slight decrease (less than 1%). This seeming contradiction results from the reality that the amount of offsetting collections and receipts has been decreasing as the Federal Housing Administration's mortgage insurance programs have produced a smaller amount in offsetting receipts. From FY2006 to FY2007, under the President's budget,¹ the amounts of offsetting receipts will drop by more than a billion dollars, from more than $1.6 billion to about $650 million. (For an expanded discussion, see "Federal Housing Administration (FHA)" and Table 16.) With less available to offset the cost of the budget, higher appropriations are required to maintain the same funding level. At the same time, many programs—such as the Section 8 voucher program—require increased appropriations to maintain current service levels. Also, the President has set a goal of restraining domestic discretionary spending increases to at or below the rate of inflation, and has encouraged the executive branch Secretaries to examine programs to ensure that they are using taxpayer dollars wisely. HUD's FY2007 budget summary states that the budget intends to use "taxpayer money more wisely," and "reform programs in need of repair." The combination of these factors has led to proposals for flat funding or cuts for many HUD programs.

Table 2, below, presents the President's FY2007 HUD budget request compared to the prior year's budget, and the Congressional response to date.

Tenant-Based Rental Assistance (Section 8 Vouchers)

The tenant-based rental assistance account funds the Section 8 Housing Choice Voucher program. (See CRS Report RL32284, An Overview of the Section 8 Housing Programs, by [author name scrubbed].) Section 8 vouchers are portable rent subsidies that low-income families use to reduce their housing costs in the private market. HUD currently funds more than two million Section 8 vouchers, which are administered at the local level by quasi-governmental Public Housing Authorities (PHAs). This account funds the cost of those vouchers and the cost of administering the program.

Voucher Renewals

The majority of tenant-based rental assistance funding is dedicated to voucher renewals. Congress has authorized the creation of more than 2 million vouchers over the history of the program, and the funding for virtually all of them expires every year. If a family is using a voucher to lease an apartment but funding is not sufficient to renew it, then the family will lose its assistance and likely lose its current housing. Prior to FY2004, HUD funded PHAs based on the number of vouchers they were using and the cost of those vouchers. If costs went up or PHAs were able to use more of their vouchers, they received additional funds to cover those costs. Since FY2004, Congress has moved away from funding PHAs based on their actual costs, and now provides agencies with a pro rata share of renewal funding based on what they received in the prior year. This formula change has provoked much controversy among low-income housing advocates and PHA advocacy groups, who argue that it does not reflect agencies' actual needs and results in some agencies receiving less funding than they need to maintain their programs, and others receiving more than they can use under the current law (for more information, see CRS Report RL33929, Recent Changes to the Section 8 Voucher Renewal Funding Formula, by [author name scrubbed]). The Administration's budget documents state that HUD supports the current budget-based funding formula, and that it complements the Administration's Section 8 voucher reform initiative, the Flexible Voucher Program proposal (for more information, see CRS Report RL34002, Section 8 Housing Choice Voucher Program: Issues and Reform Proposals, by [author name scrubbed]).

The President's FY2007 budget requested $14.4 billion for voucher renewals, an increase of 3.5% over FY2006. Most of these funds ($14.3 billion) would have been distributed to PHAs based on the amounts they were eligible to receive in FY2006, prior to prorations, plus the HUD-developed regional inflation factor (the annual adjustment factor, or AAF). The Secretary would have been permitted to adjust agency budgets to account for deposits to Family Self Sufficiency program escrow accounts or for the first-time renewal of tenant-protection vouchers. The amounts would then be reduced proportionally to fit within the amount appropriated. Agencies participating in the Moving to Work demonstration would be funded based on their contracts, but their budgets would be subject to proration. The President's budget request would have removed a clause included in the FY2006 appropriations law requiring that the entire amount of funding for renewals be obligated up front. It also would have lifted the ban on overleasing² that Congress enacted in FY2003. Presumably, lifting this ban would permit agencies with decreased costs to more fully utilize their funding.

The remaining $100 million would have been used by the Secretary to provide one-time adjustments to agency budgets for increased portability costs or additional rental subsidies in response to unforeseen exigencies. In FY2006, Congress provided the Secretary with a $45 million set-aside to adjust agencies' budgets under a number of circumstances, including cost increases due to portability.

The House-passed bill provided $70 million more than the President requested for voucher renewals, and would have distributed the funds following the President's request (including the $100 million set-aside). The additional $70 million was not included in the bill reported by the Appropriations Committee, but was added in a floor amendment, and its cost was offset by a $100 million reduction in HUD's Working Capital Fund.

The Senate Appropriations Committee-passed version of the FY2007 HUD funding bill would have funded voucher renewals at the President's request, but adopted a different formula for allocating the funds. The Secretary would have been directed to fund agencies based on their leasing and costs for the most recent 12 consecutive months for which data are available, adjusted by the Annual Adjustment Factor (AAF), deposits to tenant escrow accounts, first-time renewal of tenant protection vouchers, and vouchers set aside for project-based commitments. Budgets would have then been prorated to fit within the amount appropriated. Moving to Work agencies would have been funded according to their agreements. Up to $100 million would have been made available to adjust agency budgets for significant increases in renewal costs resulting from unforseen exigencies or from portability vouchers.³ Agencies would have continued to be prohibited from overleasing.

The final FY2007 yearlong CR (P.L. 110-5) funded Section 8 voucher renewals at the President's request ($14,436 million) and adopted a funding formula similar to the formula proposed in the Senate bill. Agencies are to be funded based on their most recent, verifiable, 12 months of leasing and cost data, adjusted for the AAF, for the first-time renewal of tenant protection and HOPE VI vouchers and the cost of project-based commitments, and prorated to fit within the amount appropriated. Moving to Work agencies are to be funded based on their agreements. The law set aside up to $100 million for adjustments for PHAs experiencing a significant increase in renewal costs resulting from unforeseen circumstances or portability, and adjustments for PHAs facing a significant decrease in funding due to the formula change. The prohibition on overleasing was continued.

Administrative Fees

Prior to FY2004, PHAs were paid a fixed fee per voucher administered. Beginning in FY2004, at Congress's direction, HUD changed the way it distributed administrative fees, providing agencies with a pro-rata share of the amount appropriated for administrative fees, based on what they had received in the previous year. The change was designed to contain the cost of administrative fees, which were estimated to have grown to account for 10% of the cost of a voucher. For FY2007, the Administration requested $1.3 billion for administrative fees, $30 million of which would have been available to the Secretary to use for special purposes. The request represents a 4% increase over the amount provided in FY2006; however, since more would have been set aside for special fees in FY2007 (only $10 million was set aside in FY2006), the base administrative fees would have only increased by 2%.

The House-passed version of the HUD funding bill would have cut administrative fees by 8% from the FY2006 enacted level, providing just over $1.1 billion. Like the President's request, the House bill would have set aside $30 million for the Secretary to distribute for special fees. With the set-aside, the base amount for administrative fees to be allocated across agencies would have been reduced by almost 10%.

The Senate Appropriations Committee-passed version of the bill would have provided just under $1.3 billion for administrative fees. The funds would have been allocated to PHAs based on the formula that was in effect prior to FY2004 and prorated to fit within the amount appropriated. Of the amount, $30 million would have been set aside for the Secretary to allocate to PHAs needing extra funds to administer their programs. Under the Senate bill, base administrative fees would have been increased about 1% over the FY2006 level.

The FY2007 yearlong CR did not specify an amount for administrative fees. Presumably, they will be funded at the FY2006 enacted level ($1,238 million), with $10 million set aside for special fees. This amount is $43 million below the President's FY2007 request. The FY2007 supplemental funding bill under consideration (H.R. 2206) would amend the CR to specify that administrative fees be funded at the President's requested level, rather than the FY2006 level.

Tenant Protection Vouchers

Tenant protection vouchers are provided to families in a variety of circumstances, including families who are threatened with displacement because the contract on their assisted unit is ending (project-based Section 8, for example), families who are displaced from public housing (due to demolition or disposition), families in the witness protection program, and families in the child welfare system (through the Family Unification Program).

In FY2006, Congress provided $178 million for tenant protection vouchers. The President's FY2007 budget requested $149 million for tenant protection vouchers and also requested the authority to supplement the amount provided with amounts recaptured from unobligated Section 8 balances. Beginning in FY2006, the President announced a new policy in which tenant protection vouchers will be issued to replace only those units that were under lease at the time they were demolished or disposed, rather than all units. While this policy has been adopted administratively, the President requested that the FY2007 appropriations language specify that tenant protection vouchers be proved only for units under lease. The House bill adopted the President's requested funding level and language for tenant protection vouchers. The Senate committee-passed bill would have funded tenant protection vouchers at the President's requested level; however, it did not contain the language limiting them to units under lease, as requested by the President.

The CR did not specify an amount for tenant protection vouchers, so, presumably, they will be funded at the FY2006 level ($178 million). This amount is $29 million more than the President requested. The FY2007 supplemental funding bill (H.R. 2206) proposes to amend the CR to specify that tenant protection vouchers be funded at $149 million.

Incremental Vouchers

Congress has not funded any new vouchers—called incremental vouchers—since FY2002 (outside of tenant protection vouchers). The Senate Appropriations Committee-passed FY2007 HUD funding bill contained $10 million for new incremental vouchers targeted to the Family Unification Program (FUP). FUP vouchers are given to families involved in the child welfare system for whom housing is a major barrier to reunification. They are also provided to youths aging out of foster care. The CR did not provide funding for incremental vouchers.

Section 8 Project-Based Rental Assistance

This account provides funding to administer and renew existing project-based Section 8 rental assistance contracts between HUD and private landlords. Under those contracts, HUD provides subsidies to units owned by private landlords that allow eligible low-income families to live in the units but pay only 30% of their incomes toward rent. No new contracts have been entered into under this program since the early 1980s; the funding provided is used only to renew existing contracts and pay administrative costs.

Contract Renewals

The President's budget included a request for a 13% increase in project-based renewal funding for FY2007. The level of funding requested was based on an assumption that recaptured funds will be available to supplement the account as necessary, although budget documents do not provide an estimate of how much the Administration believes may be necessary. The House-passed version of the HUD funding bill would have provided $200 million less than the President's request for contract renewals. The committee report accompanying the bill notes that the Secretary can use recaptured funds to supplement the amount appropriated. The Senate committee version would have funded the President's request. The CR provided over $300 million more than the President's request for contract renewals.

Contract Administrators

Contract administrators are subcontracted by HUD to manage the contracts between landlords and the Department. HUD formerly administered all of the contracts directly, but has set a goal to transfer all contract administration to subcontractors. The amount requested by the Administration was a decrease from the FY2006 enacted level, but the Administration asked for the authority to supplement the appropriated amount with amounts recaptured from Section 8 unobligated balances. The Administration states in its budget documents that full transition over to contract administrators depends on whether sufficient funds can be obtained from unobligated balances, although an estimate of the full amount required is not provided. The House-passed and Senate committee-passed bills would have funded the President's request for contract administrators, and the CR funds contract administrators at the FY2006 level, which is the same as the President's request.

Housing Certificate Fund Rescission

The two Section 8 programs—tenant-based rental assistance and project-based rental assistance—were previously funded under a joint account called the Housing Certificate Fund (HCF). The HCF was split by the FY2005 appropriations law, although the account still retains funding from prior years' appropriations. Each year, the Administration makes available for rescission an amount it estimates will be available from unobligated or recaptured Section 8 funds within the HCF. In FY2006, the President requested that Congress rescind $2.5 billion from the HCF, and that Congress provide the Secretary with the authority to use funds from other accounts to meet the rescission if the HCF had insufficient funds. Out of concern that the full amount may not be available from within the HCF, Congress rescinded about half a billion less than the Administration requested, and directed the Secretary to inform the committee before taking funds from other accounts.

For FY2007, the Administration requested that Congress rescind $2 billion from the HCF, and again requested the authority to meet the rescission from other sources if sufficient funds are not available within the HCF. The House bill matched the President's request. The Senate committee-passed version would also have rescinded $2 billion; however, the bill included language directing the Secretary to take $10 million each from HUD and the Office of Management and Budget's (OMB) salaries and expenses account before taking funds from other HUD programs. The report language indicated that the committee felt that the Administration provided insufficient evidence that $2 billion would be available in the Housing Certificate Fund. Similar language was included in the Senate-passed version of the FY2006 funding bill, but was not included in the final version. The CR rescinded $1.65 billion in unobligated balances.

Public Housing

The public housing program provides publicly owned and subsidized rental units for very low-income families. While no new public housing developments have been built for many years, Congress continues to provide funds to the more than 3,100 public housing authorities (PHAs) that maintain the existing stock of more than 1.2 million units. Through the Operating Fund, HUD provides funds to PHAs to help fill the gap between tenants' contributions toward rent and the cost of ongoing maintenance, utilities, and administration. Through the Capital Fund, HUD provides funding to PHAs for large capital projects and modernization needs. HOPE VI is a competitive grant program that provides funds to help demolish and/or redevelop severely distressed public housing developments, with a focus on building mixed-income communities.

Operating Fund

Calendar year 2007 is first year that a new operating subsidy formula will be used to distribute funds to PHAs. Under the new rule, some agencies qualify for a significant increase in funding, while others are eligible for less funds. The President's budget asked for a set-aside of $6 million to help agencies transition to asset-based management, which can serve as a stop-loss option for agencies facing major funding decreases in their operating subsidies. Even for those that will benefit under the formula, the amount the President requested for operating subsidies was not enough to fund agencies at 100% of their eligibility. Rather, HUD estimated that agencies would receive only 85% of their eligible budget, compared to just under 89% in FY2005. Some advocates contend that the final proration would be even lower than the President's estimate because of factors such as increasing utility costs.⁴ Because of the proration, some agencies that will qualify for an increase under the new formula may face a decrease from their prior year's funding, and those facing a decrease will likely face an even deeper reduction. The President's budget also requested a new set-aside for "housing self sufficiency" funds, which would be provided to agencies, presumably on a competitive basis, to fund economic self-sufficiency and financial management skills training for residents. This appears to replace the Graduation Bonus initiative that was funded in FY2005, but not in FY2006.

The House-passed bill would have funded the account at the President's request. The Senate committee-passed bill would have provided a $100 million increase in funding for formula grants, but would not have funded the self-sufficiency initiative. The Senate bill provided $30 million to aid small PHAs in adjusting to the new operating fund formula. Language in the administrative provisions portion of the bill would have delayed for one year the phase-in of increases and decreases under the new formula and the requirements for converting to asset-based management, although it specified that agencies facing a decrease would still face a 5% reduction in FY2007.

The CR provided $300 million more than the President requested (and provided in FY2006) for the Operating Fund. It did not provide any transition or self-sufficiency funding as requested by the President. The CR amount should be sufficient to fund agencies at around 83% of their formula eligibility. For more information, see CRS Report RS22557, Public Housing: Fact Sheet on the New Operating Fund Formula, by [author name scrubbed].

Capital Fund

The President's FY2007 budget proposed an 11% reduction for the public housing Capital Fund. The largest numeric decrease came from an 11% decrease in funding for formula grants. The Administration claims that the funding requested is sufficient to meet the estimated $2 billion in annual accrual of capital needs, and that the backlog in unmet capital needs—which is estimated to be between $18 and $20 billion—is decreasing as units are rehabilitated, either through HOPE VI or capital funds, or demolished. The President's budget notes that 85% of public housing units now meet HUD physical standards, compared to 82% in 2001. The Department's budget documents also highlight the use of private financing to meet capital needs, noting that PHAs have used their stream of capital funds to secure more than $2.5 billion in approved private capital funds, and that requests for another $88 million are pending.

The President's budget included a 37% decrease in Resident Opportunities for Self Sufficiency (ROSS) program funding. This follows a 29% decrease enacted in FY2006. ROSS is a competitive grant program that funds job training and supportive services to help residents of public housing transition to work, and provides funding to provide independent living services to elderly and disabled residents. Budget documents note that the Administration changed the structure of the grants to expand eligible activities. As in FY2006, the President's budget also proposed to eliminate funding for Neighborhood Networks, which provides funds to PHAs to establish, expand, and update community technology centers.

The version of the House bill that was reported by the Appropriations Committee funded the Capital Fund at the President's request. A floor amendment offered by Representative Artur Davis added $30 million to the Capital Fund, although his floor statements indicated it was intended for the HOPE VI program. Language was not added to the bill directing the funds to be used for HOPE VI, so it is unclear whether the additional $30 million would be distributed via the Capital Fund formula or though the competitive HOPE VI program.

The Senate committee-passed bill would have increased the Capital Fund to just above the FY2006 level. Formula grants were increased slightly over the FY2006 level, which was almost $300 million more than the President's request and the House-passed level. The bill would have funded ROSS at $30 million, $6 million more than the President requested, but $8 million less than FY2006.

The CR did not contain a specific funding level for the public housing Capital Fund, so the account is funded at the FY2006 level.

HOPE VI

Each year since FY2003, the President has requested no new funding for HOPE VI, although each year Congress has continued to fund the program. The Administration notes that in 2003, the Office of Management and Budget's Program Assessment and Rating Tool (PART) rated the program as ineffective due to slow expenditure of funds as well as the costs of development. Furthermore, the Department argues that the program has largely met its goal of eliminating the worst public housing. For FY2007, as in FY2006, the President asked Congress to provide no new money for the HOPE VI program, and to rescind the funding that Congress provided in the previous year before the Department awarded it to grantees. The House version of the FY2007 funding bill as reported out of committee did not rescind FY2006 HOPE VI funds, but did not provide FY2007 funds for the program. As noted in the previous "Capital Fund" section, an amendment adopted during floor consideration of the bill added $30 million to the Capital Fund. Floor statements by the amendment's sponsor indicated that the funds were intended for the HOPE VI program, although legislative language directing the funds to HOPE VI was not included in the bill, making it unclear whether the funds would be used for the competitive HOPE VI program or distributed through the capital fund formula. The Senate committee-passed version of the bill would have funded HOPE VI at $100 million, nearly level with FY2006 funding. It did not rescind FY2006 funding. The CR did not specify an amount for the HOPE VI program, so it is funded at the FY2006 level ($99 million).

Native American Block Grants

The Native American Housing Assistance and Self-Determination Act of 1996 (NAHASDA) reorganized the system of federal housing assistance to Native Americans by eliminating several separate programs of assistance and replacing them with a single block grant program. In addition to simplifying the process of providing housing assistance, the purpose of NAHASDA was to provide federal assistance for Indian tribes in a manner that recognizes the right of Indian self-determination and tribal self-governance. NAHASDA provides block grants to Indian tribes or their tribally designated housing entities (TDHE) for affordable housing activities. Affordable housing activities include any programs currently authorized in law, as well as model activities as approved by HUD.

For FY2007, the Administration requested an increase in formula grants and a decrease in technical assistance from the amounts provided for these purposes in FY2006. No funding was proposed for the National American Indian Housing Council.

Both the House-passed version of H.R. 5576 and the version passed by the Senate Appropriations Committee would have funded NAHASDA at just under $626 million as requested by the budget. In determining the amount to be allocated to each tribe, both versions of H.R. 5576 required HUD to make the two calculations. One calculation would be based on single-race Census data, and the other calculation would be based on multi-race Census data.⁵ The greater result would be the tribe's allocation. The Senate Appropriations Committee noted its concern that HUD did not use notice and comment rulemaking when changing the allocation formula. The committee directed HUD to reassess the decision through notice and comment rulemaking.

The Senate Appropriations Committee noted its concern that HUD has attempted to micro-manage many of the activities of NAIHC "to the detriment of NAHIC, the tribes, and the program." The committee provided $2 million to NAHIC to provide training and technical assistance in support of NAHASDA. An administrative provision in both versions of the bill would have required that NAHASDA funds made available to Native Alaskans must be allocated to the same Native Alaskan recipients who received funds in FY2005. P.L. 110-5 funded the Native American Block Grant program at the FY2006 level ($624 million).

Housing for Persons with AIDS (HOPWA)

HOPWA provides housing assistance and related supportive services for low-income persons with HIV/AIDS and their families. Funding is distributed both by formula allocation and competitive grants to states, localities, and nonprofit organizations.

The President's budget for FY2007 proposed to increase funding for HOPWA to just over $300 million. This would have been an increase of nearly 5% over FY2006, and more than $30 million over the Administration's budget request for FY2006. According to HUD, the President's FY2007 requested funding level would have been sufficient to continue to serve the same number of households as in FY2006, plus 3,500 additional households. The House version of the HUD funding bill (H.R. 5576), passed on June 14, 2006, would have funded the HOPWA program at the same level as that proposed by the President. The Senate Appropriations Committee, which reported H.R. 5576 to the Senate on July 26, 2006, would have provided $295 million for HOPWA, an increase of $9 million over FY2006, but $5 million less than the President's budget request and House proposal. The FY2007 yearlong CR (P.L. 110-5) did not specify funding for HOPWA, so the FY2006 funding level of $286 million applies for FY2007.

Rural Housing and Economic Development

This program provides competitive grants to states and localities to fund capacity building and innovative housing and economic development activities in rural areas.

The Administration proposed no funding for the Rural Housing and Economic Development program, and none was proposed in the House-passed version of H.R. 5576. The Administration argued that the program's efforts can be continued through the HOME and CDBG programs of HUD, and through the rural housing programs of the U.S. Department of Agriculture. The House-passed version of H.R. 5576 did not contain funds for the Rural Housing and Economic Development program, while the Senate version would have funded the program at $20 million. The CR funded the program at the FY2006 level.

Community Development Fund/Block Grants

The CDBG program is the largest source of federal assistance in support of the housing, community, and economic development activities of states and local governments. For the second consecutive year, the Administration included in its budget request a proposal that would eliminate a number of federal economic and community development programs. Last year, the Administration's FY2006 budget recommendations included a proposal that would have consolidated the activities of at least 18 existing community and economic development programs into a two-part grant proposal called the "Strengthening America's Communities Initiative" (SACI). Seven of the programs that would have been eliminated are administered by HUD. Under the Administration's FY2006 proposal, the Department of Commerce would have administered a core program and a bonus program. The bonus program would have awarded additional funds to communities that demonstrated efforts to improve economic conditions. Congress rejected the proposal and appropriated $4.2 billion for the seven HUD programs that would have been eliminated, including $3.7 billion in CDBG funding.

The President's FY2007 budget also contained an outline of some general elements of a SACI proposal, although no formal legislative proposal was introduced when the budget was first released on February 6, 2006. Under the FY2007 version, two of the 18 existing community and economic development programs would be funded and retooled—HUD's CDBG and a new Regional Development Account (RDA) to be administered by the Economic Development Administration (EDA). As initially outlined in Administration budget documents, the proposal would likely to call for the following:

• the development of a new CDBG allocation formula targeted to the neediest communities;
• the development of a bonus fund component for the CDBG program;
• reforms that would address the CDBG program's shortcoming as outlined in the Program Assessment Rating Tool;
• the creation of a new Regional Development Account (RDA) that would be administered by EDA, replacing the agency's current budget categories of public works, economic adjustment assistance, technical assistance, and research and evaluation.
• the continued funding of planning grants to EDA-designated Economic Development Districts and university programs; and
• the development of a common set of goals and performance measures for CDBG and EDA programs.

The FY2007 budget proposed a funding level of $3.360 billion—nearly $2 billion less than the aggregate FY2006 appropriation for the 18 programs included in the Administration's original proposal. The CDBG would have been funded at just under $3 billion in FY2007. The budget also requested $327.2 million for EDA assistance, including $257 million for RDA assistance.

On May 25, 2006, the Secretary of HUD unveiled its reform proposal for the CDBG—The Community Development Block Grant Reform Act of 2006. The legislative proposal, which was not formally introduced because of a lack of congressional sponsor, would have

• eliminated the dual CDBG formula and replaced it with a single weighted formula that targets assistance based on a community or state's relative share of households living in poverty (excluding college students); female-headed households with minor children; overcrowded housing; housing 50 years or older occupied by low-income families; and per capita income;
• no longer allocated funds to entitlement communities and states using a 70%/30% formula allocation split; instead, states and entitlement community allocations would have been drawn from a single pool of funds;
• required entitlement communities to meet a minimum grant threshold in order to receive a direct annual allocation—communities that fail to meet the minimum grant amount could join with their urban county, creating a new combined entitlement community, or could have had their data included in the state totals;
• established a two-year transition for communities that no longer meet the minimum grant threshold amount;
• directed HUD to establish a set of performance measures and accountability standards; and
• created a $200 million bonus grant program dubbed the Economic Development and Revitalization Challenge Grant, which would have rewarded entitlement communities that had programs resulting in improved living conditions in distressed neighborhoods.

On June 14, 2006, the House approved the HUD funding bill, H.R. 5576. It included $4.2 billion for the Community Development Fund, which was $1.2 billion more than requested by the Administration. The $4.2 billion funding level recommended by the House included $3.9 billion for the CDBG formula program, which was $898 million more than requested by the President; $57 million for Indian tribes, $250 million for EDI assistance; $20 million for Neighborhood Initiative (NI) funding and $15 million for HUD's Brownfields Redevelopment Program. Funding for brownfields was approved as an amendment (H.Amdt. 1013) during floor consideration of the bill.

On July 26, 2006, the Senate Appropriations Committee reported its version of H.R. 5576 (S.Rept. 109-293). The bill recommended an appropriation of $4.2 billion for CDF activities, including $3.9 billion for CDBG formula grants and $58 million for Indian tribes, $250 million for EDI assistance, and $30 million for NI funding.

On February 15, 2007, the President signed the Revised Continuing Appropriations Resolution, P.L. 110-5, which established a $3.772 billion appropriations level for the Community Development Fund account activities. This included $3.711 billion for CDBG formula grants. The act specifically stated that none of the funds appropriated under the CDF account could be used to fund EDI, NI, and YouthBuild activities. The act did not identify a specific funding amount for the Indian Tribes CDBG activities.

Economic Development Initiatives (EDIs) and Neighborhood Initiatives (NIs)

During the past few budget cycles, Congress used both the EDI and NI accounts to fund hundreds of congressionally earmarked projects. For FY2006, Congress approved $307 million in EDI funds for 1,126 earmarked projects and $49 million in NI funds for 50 projects identified in the conference report (H.Rept. 109-307) accompanying the FY2006 TTHUD Appropriations Act, P.L. 109-115. The Administration's FY2007 budget proposal would have rescinded any unobligated balances remaining from EDI and NI funds appropriated in FY2006. The House-passed version of H.R. 5576 would have appropriated $250 million for EDI earmarks and $20 million for NI projects. In addition, recipients of EDI and NI funding would have been required to provide 40% in matching funds, which would have been a new requirement for the programs. The Senate Appropriations Committee also recommended $250 million in EDI funding, but recommended $30 million in NI assistance, which was $10 million more than recommended by the House. P.L. 110-5 included language specifying that none of the funds appropriated under the CDF account were to be used to fund EDI or NI activities for FY2007.

CDBG Section 108 Loan Guarantees

The Section 108 loan guarantee program allows states and entitlement communities to leverage their annual CDBG allocation in order to help finance brownfield redevelopment, large scale economic development, and housing projects. CDBG entitlement communities and states are allowed to borrow up to five times their annual CDBG allocation for qualifying activities. As security against default, states and entitlement communities must pledge their current and future CDBG allocation.

Consistent with the Administration's budget request, the bill as reported by the House Appropriations Committee did not include funding for the program. During floor consideration of the measure, the full House approved an amendment (H.Amdt. 1023) sponsored by Representative Maxine Waters that would have appropriated more than $2.9 million for the program for FY2007. Funding for the program would have been offset by a reduction in HUD's management and administration account. Inclusion of funding for Section 108 loan guarantee activities is an important element in the effort to restore funding for HUD's Brownfield Redevelopment program. (See the discussion of HUD's brownfields program). The Senate Appropriations Committee bill recommended $3 million for loan guarantee activities. The FY2007 CR did not specify an amount for Section 108 loan guarantees, so it is funded at the FY2006 level.

Brownfields Redevelopment

The Brownfields Redevelopment program is a competitive grant program that provides funds to assist cities with the redevelopment of abandoned, idled, and underused industrial and commercial facilities where expansion and redevelopment are burdened by real or potential environmental contamination.

The Administration requested no funding for this program for FY2007. Its budget documents note that this program activity would be eligible for CDBG funding. The House bill as reported out of committee did not include funding for the program for FY2007. During floor consideration of the measure, the House approved an amendment (H.Amdt. 1013), offered by Representative Gary Miller, that would have appropriated $15 million for the program for FY2007. Funding for the brownfield program would have been offset by reducing funding for IRS business systems modernization program by $15 million.

The availability of Section 108 loan guarantees for FY2007 makes it possible to fund HUD's brownfield program as it is presently authorized. The statutory authority governing the HUD program (42 U.S.C. §5308) restricts the use of brownfield funds to projects that also include Section 108 loan guarantees. Although a community can receive CDBG Section 108 loan guarantees without receiving HUD brownfield funds, it can not receive brownfield funds without procuring Section 108 loan guarantee authority. This peculiar arrangement has proven troublesome for some communities, particularly small nonentitlement jurisdictions, which must have the cooperation of the state government agency that controls the state CDBG program in order to access the loan guarantee program. In 2006, the House approved H.R. 280, which was introduced by Representative Gary Miller. The bill would have decoupled the brownfield program from the Section 108 loan guarantee program, thus allowing small communities direct access to the program and relieving entitlement communities and states of the requirement of pledging their CDBG allocation as security against defaulting on the Section 108 loan guarantee. The Senate version of the bill did not include funding for the brownfield program. P.L. 110-5 does not include a specific appropriation for Brownfield activities; however, the program was funded at just under $10 million in FY2006.

The HOME Investment Partnership Program

Created in 1990, the HOME Investment Partnership Program provides formula-based block grant funding to states, units of local government, Indian tribes, and insular areas to fund affordable housing initiatives. Eligible activities include acquisition, rehabilitation, and new construction of affordable housing, as well as rental assistance for eligible families. The HOME program account has also been used to fund related programs. The American Dream Downpayment Initiative (ADDI), created in 2003 (P.L. 108-186), funds HOME grantees to provide downpayment, closing cost, and rehabilitation assistance to first-time home buyers. Housing counseling assistance is authorized under Section 106 of the Housing and Urban Development Act of 1968 (P.L. 90-448). HUD provides competitive grants to local housing counseling agencies, intermediaries, and state Housing Finance Agencies to provide several categories of housing counseling, including comprehensive counseling, counseling services that address predatory lending, counseling in conjunction with HUD's Homeownership Voucher Program, counseling services that specifically target colonias (rural communities on the U.S.-Mexico border), and Home Equity Conversion Mortgage counseling.

Formula Grants

The President proposed an increase of 7% in funding for HOME formula grants. This increase followed a decrease of 6% from FY2005 to FY2006. The FY2007 requested level was less than a 1% increase over the FY2005 enacted level ($1,789 million). The House-passed bill would have funded formula grants at $1,837 million, an increase of 2% over the President's request, 9% over the FY2006 enacted level, and 3% over the FY2005 level. The Senate committee-passed bill included a larger increase for formula grants than did the House bill. The Senate committee-bill would have provided a 3% increase over the President's request, an 11% increase over the FY2006 level, and a 4% increase over the FY2005 level. The CR did not specify an amount for formula grants, but the entire account was funded at the FY2006 level.

American Dream Downpayment Initiative

From FY2002-FY2006, the President requested funding for the ADDI at an annual level of $200 million; each year, Congress funded it below the President's request. At its highest, ADDI was funded at $87 million (FY2004); at its lowest, ADDI was funded at $25 million (FY2006). For FY2007, the President requested that Congress fund the program at $100 million, half of what he has requested in the past but four times as much as Congress provided in FY2006. The House-passed and Senate committee-passed bills would have funded ADDI at $25 million. The CR funds the ADDI account at the FY2006 level ($25 million).

Housing Counseling Assistance

Since FY2003, the President has requested that Congress provide funding for housing counseling assistance in a separate account, rather than as a set-aside within the HOME program. Each year, Congress has rejected that proposal and funded the program as a set-aside within HOME. While the FY2007 budget does not explain the desire to move the program, one factor may be that the HOME program is within the jurisdiction of the Assistant Secretary for Community Planning and Development at HUD, while housing counseling assistance is currently administered by the Assistant Secretary for Housing at HUD. If it were funded in a separate account, the account would be within the jurisdiction of the Assistant Secretary for Housing. The House-passed and Senate committee-passed bills would have continued funding for housing counseling assistance within the HOME account. Each would have provided $42 million for FY2007, even with the FY2006 enacted level and $3 million less than the President's request. The CR funds housing counseling assistance at the FY2006 level ($42 million).

Self Help and Assisted Homeownership

This account was created in FY2006 to fund a number of programs and set-asides that were formerly funded under the CDBG program. Under the Self-Help Homeownership Opportunity Program (SHOP), HUD makes grants to national and regional organizations and consortia that have experience in providing or facilitating self-help homeownership opportunities, including Habitat for Humanity. Prospective home buyers and volunteers provide "sweat equity" by contributing labor toward the construction of their homes. Section 4 Capacity Building grants are designed to develop the capacity and ability of community development corporations and community housing development organizations to undertake community development and affordable housing projects and programs. They are typically awarded to nonprofit intermediaries including LISC, the Enterprise Foundation, Habitat for Humanity, and YouthBuild USA.

For FY2007, the Administration requested a $19.9 million increase in SHOP funding, but proposed no funding for Section 4 capacity building grants or for several nonprofit organizations that received funding in FY2006. The House bill would have funded the Self Help and Assisted Homeownership account at the same overall level as FY2006, although the funds would be distributed differently. The Senate bill appropriated $66 million for account activities. This is just under $6 million more than appropriated in FY2006 or recommended by the House, and would have been used to fund several initiatives proposed for elimination in the President's budget and the House bill.

The FY2007 CR funded the Self-Help and Assisted Homeownership account at $49 million, just under $20 million of which was directed to SHOP and just under $30 million of which was to be allocated for capacity building using competitive grants. The CR did not provide funding for several nonprofit organizations that had received direct funding in FY2006.

Homeless Programs

Homeless Assistance Grants is the blanket title given to the four homeless programs authorized by the McKinney-Vento Homeless Assistance Act (P.L. 100-77) and administered by HUD. Three of the four programs are competitive grant programs: the Supportive Housing Program (SHP), the Shelter Plus Care program (S+C), and the Section 8 Moderate Rehabilitation Assistance for Single Room Occupancy program (SRO). Funding for the fourth HUD program, the Emergency Shelter Grants program (ESG), is distributed via a formula allocation to states and local communities.

On June 14, 2006, the House of Representatives passed the FY2007 HUD funding bill (H.R. 5576), which would have allocated $1.5 billion to the Homeless Assistance Grants, the same amount proposed by the Administration, and an increase of just under $210 million over FY2006. However, while the Administration's budget proposal contained funding for two new programs—the Samaritan Initiative and the Prisoner Re-Entry Initiative—the House version of the HUD funding bill did not contain funding for these two programs. The Senate Appropriations Committee's version of H.R. 5576, which was reported to the Senate on July 26, 2006, would have allocated approximately $25 million less to the Homeless Assistance Grants than the President's request and the House proposal, but would have still increased total funding over FY2006 by nearly $185 million. Like the House version of H.R. 5576, the Senate Appropriations Committee version did not fund the Samaritan Initiative and the Prisoner Re-Entry Initiative. On February 15, 2007, the yearlong CR (P.L. 110-5) was enacted. It specified that the Homeless Assistance Grants be funded at $1.442 billion for FY2007, an increase of $115 million over FY2006, but less than the amounts proposed by the President, House, and Senate Appropriations Committee.

Housing Programs for the Elderly and the Disabled

Formerly known together as Housing for Special Populations, the Section 202 housing for the elderly program and the Section 811 housing for the disabled program provide capital grants and ongoing project rental assistance contracts (PRAC) to developers of new subsidized housing for these populations. In addition, the Section 811 program provides vouchers for tenants with disabilities to use in the private housing market.

The Administration's budget proposed to reduce FY2007 funding for the housing for the elderly program from $735 million in FY2006 to $545 million in FY2007, a cut of almost 26%. However, the House-passed version of the HUD funding bill (H.R. 5576) would have funded the program at approximately $747 million, about $12 million more than FY2006. Before the bill went to the House floor, it contained $735 million for housing for the elderly, but an amendment (H.Amdt. 1020), passed by a vote of 335 to 90, added $12 million to the Section 202 program. Both the President's budget and the House-passed version of H.R. 5576 would have increased funding for service coordinators, from $51 million to $59 million, while grants for conversion to assisted living facilities would have remained approximately the same at just under $25 million. The Senate Appropriations Committee's version of H.R. 5576 would have increased funding above the House-approved amount by just under $3.5 million, to $750 million, and would have provided identical amounts for service coordinators and the assisted living conversion program. The yearlong CR for FY2007 (P.L. 110-5) did not specify a funding level for elderly housing, which is therefore funded at the FY2006 amount of $734.58 million. However, P.L. 110-5 did state that none of the FY2007 appropriation could be used for the Intergenerational Housing Demonstration project, which was funded at $3.96 million in the FY2006 Appropriations Act.

In FY2007, for the second year in a row, the Administration's budget proposed to cut in half funding for the Section 811 program, to $119 million from $237 million in FY2006. However, H.R. 5576, as passed by the House, would have increased funding by approximately $120 million more than the President's proposal, and $3 million more than the FY2006 appropriation, to nearly $240 million. The House added $3 million more to the Section 811 program than was originally contained in H.R. 5576 before it went to the floor through H.Amdt. 1020. Unlike funding for FY2006, though, the House version of H.R. 5576 did not provide any funding for new Section 811 vouchers, down from approximately $5 million in FY2006. The Senate Appropriations Committee's version of H.R. 5576 would have slightly increased funding over the House-passed version, and would have provided $5 million for new vouchers. Under the yearlong CR (P.L. 110-5), Section 811 is funded at the FY2006 level of $236.6 million.

Federal Housing Administration (FHA)

The FHA administers a variety of mortgage insurance programs that insure lenders against loss from loan defaults by borrowers. Through FHA insurance, lenders make loans that otherwise may not be available, and enable borrowers to obtain loans for home purchase and home improvement, as well as for the purchase, repair, or construction of apartments, hospitals, and nursing homes. The programs are administered through two program accounts—the Mutual Mortgage Insurance/Cooperative Management Housing Insurance fund account (MMI/CMHI) and the General Insurance/Special Risk Insurance fund account (GI/SRI). The MMI/CMHI fund provides insurance for home mortgages. The GI/SRI fund provides insurance for more risky home mortgages, for multifamily rental housing, and for an assortment of special-purpose loans such as hospitals and nursing homes.

The President's FY2007 budget proposed comprehensive reform of the FHA single family insurance program to enable FHA to be more flexible in responding to changes in the mortgage market, and to provide a lower cost alternative to borrowers who might otherwise choose subprime mortgage products or even become the victims of predatory lending. The budget assumed budget savings from transferring several single-family housing programs from the GI/SRI fund to the MMI fund. Neither version of H.R. 5576 assumed the transfer of these programs.

Many of the Administration's reform proposals were included in H.R. 5121, as passed by the House. An administrative provision in the House-passed version of H.R. 5576 included language from H.R. 5121. It would have amended the National Housing Act (12 U.S.C. 1709(b)(2)) to limit FHA-insured home loans to the lesser of the median price for the area or the Federal Home Loan Mortgage Corporation (Freddie Mac) conforming loan limit.⁶ The loan limit for low-cost areas would have been raised from 48% to 65% of the Freddie Mac limit. FHA would have had authority to insure 100% mortgages, and HUD would have been permitted to determine what, if any, down payment would be required based upon the likelihood of borrower default. The borrower's mortgage insurance premium would have been based upon the risk that the borrower poses to the mortgage insurance fund.

The Senate committee did not include these provisions because the committee stated that it did not believe that the proposal included the necessary reforms to allow HUD to compete in the private market without increased financial risk to the FHA insurance fund and without subjecting the program to significant risk of fraud and abuse. The committee noted its concern that the proposals would move FHA closer to becoming the lender of last resort.

The budget and both versions of H.R. 5576 would have limited FHA mortgage insurance to $220 billion in FY2007. The total includes $185 billion in commitments under the MMI/CHMI account and $35 billion under the GI/SRI account. In addition, both funds would have been able to make up to $50 million in direct loans to facilitate the sale of HUD-owned properties for occupancy or ownership by low- and moderate-income families. An appropriation of $8.6 million was requested for the credit subsidies associated with the GI/SRI account.

No FHA reforms were enacted before the close of the 109^th Congress or included in the CR. Although no funding amounts were specified for the FHA account in the CR, the FY2007 funding level is not the FY2006 funding level. The estimates of offsetting receipts from the GI/SRI and MMI funds are lower for FY2007 than the amount collected for FY2006. Also, the total expenses amounts differ from the FY2006 amounts as a result of a scoring difference between FY2006 and FY2007. Each year, the Congressional Budget Office (CBO) makes an estimate of how much additional authorized contract authority FHA will use. In FY2006, CBO estimated HUD would use $5 million in additional contract authority. The House Appropriations Committee's estimates of the CR did not include that $5 million in additional contract expenses.

Government National Mortgage Association (Ginnie Mae)

Ginnie Mae is the entity within HUD that guarantees the timely payment of principal and interest on securities backed by mortgages insured or guaranteed by FHA, the Department of Veterans Affairs (VA), or the Rural Housing Service.

For FY2007, the President's budget requested $10.6 million for the administrative expenses of carrying out the mortgage-backed securities program as well as legislative change that would have converted a portion of the GNMA administrative fees that currently receive mandatory funding to discretionary funding. The budget also proposed that issuers of Ginnie Mae securities be charged an up-front fee to offset the administrative expense of the program. None of these reforms was enacted. The CR funded the discretionary administrative fees at the FY2006 level; however, the estimates of offsetting receipts for FY2007 differ from the actual offsetting receipts collected in FY2006, which is why the account totals differ.

Office of Federal Housing Enterprise Oversight (OFHEO)

OFHEO is the office within HUD that is responsible for regulating the safety and soundness of Fannie Mae's and Freddie Mac's operations. The appropriations for OFHEO are completely offset by fees collected from Fannie Mae and Freddie Mac. In recent years, OFHEO has been criticized as ineffective in its role. The Administration's budget expected OFHEO to be transferred to a new, strengthened regulator. H.R. 1461 (109^th Congress), as passed by the House, would have combined OFHEO and HUD's regulatory division into a new independent agency called the Federal Housing Finance Agency. It was not enacted before the end of the 109^th Congress.

The House-passed bill would have appropriated $62 million for OFHEO, while the Senate Appropriations Committee recommended $67.6 million. No amount was specified for OFHEO in the CR, so it is funded at the FY2006 enacted level.

Fair Housing

The Office of Fair Housing and Equal Opportunity enforces the Fair Housing Act and other civil rights laws that make it illegal to discriminate in the sale, rental, or financing of housing based on race, color, religion, sex, national origin, disability, or family status. This is accomplished through the Fair Housing Assistance Program (FHAP) and the Fair Housing Initiatives Program (FHIP). FHAP provides grants to state and local agencies to enforce laws that are substantially equivalent to the federal Fair Housing Act. It provides grants on a non-competitive basis. FHIP provides funds for public and private fair housing groups, as well as state and local agencies, for activities that educate the public and housing industry about the fair housing laws.

As requested by the budget, both versions of H.R. 5576 would have funded the Fair Housing and Equal Opportunity program at $44.55 million. The budget requested more than $24 million for the Fair Housing Assistance program, a decrease of just under $1 million from the FY2006 level. The House-passed version of H.R. 5576 would have funded the program at the President's requested level, while the version passed by the Senate committee would have funded the program at just under $20 million. The budget requested $19.8 million for the Fair Housing Initiatives program, even with the FY2006 level. The House bill would have decreased the funding to $18.8 million. The Senate committee would have funded the program at more than $24 million. The budget assumed that legislation would be introduced and enacted that would enable HUD to collect tuition fees from participants in the National Fair Housing Training Academy. In response, the House bill provided that HUD may assess and collect fees to cover the cost of the Fair Housing Training Academy. Such legislation was not enacted before the end of the 109^th Congress. The FY2007 CR funded fair housing programs at their FY2006 level.

Lead-Based Paint Hazard Reduction

The Office of Lead Hazard Control at HUD administers both the Lead-Based Paint Hazard Control Grant Program and the Healthy Homes Initiative (HHI), designed to reduce the hazards of lead-based paint in homes.

For FY2007, the budget requested $114.8 million for the program, the House-passed bill would have appropriated $114.8 million, and the Senate committee would have appropriated $152 million. The FY2007 CR funded the account at the FY2006 level.

Research and Technology

The Office of Policy Development and Research (PD&R) at HUD is responsible for maintaining current information on housing needs, market conditions, and existing programs, as well as conducting research on priority housing and community development issues. The Research and Technology account funds PD&R's core research. Beginning in FY2006, the account was expanded to fund the Section 107 University Partnerships, which were previously funded as set-asides within the CDF account. Section 107 grants are awarded to institutions of higher education to assist them in building partnerships with the communities in which they are located to foster and achieve neighborhood development and revitalization. The funds are also used to support a work study program for disadvantaged and minority students in graduate-level community building curricula. The Administration request did not set aside funding for the PATH (Partnership in Advancing Technology in Housing) program, but requested that it remain an eligible activity under the Research and Technology account. The House and Senate bills included $5 million for PATH. The CR provided just over $50 million for the Research and Technology account, specifying that none of the funds may be used for PATH.