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Department of Housing and Urban
Development (HUD): FY2012 Appropriations
Maggie McCarty, Coordinator
Specialist in Housing Policy
Libby Perl
Specialist in Housing Policy
Eugene Boyd
Analyst in Federalism and Economic Development Policy
Katie Jones
Analyst in Housing Policy
Bruce E. Foote
Analyst in Housing Policy
November 2, 2011
Congressional Research Service
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www.crs.gov
R41700
CRS Report for Congress
Pr
epared for Members and Committees of Congress
c11173008
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Department of Housing and Urban Development (HUD): FY2012 Appropriations
Summary
The President’s FY2012 budget was released on February 14, 2011. It included a request for
nearly $47.8 billion in gross new appropriations for HUD in FY2012. After accounting for
rescissions of prior-year unobligated balances and offsets available from the Federal Housing
Administration (FHA) mortgage insurance programs, the President’s request for net new budget
authority for HUD in FY2012 totals just over $41.7 billion. The President’s budget, which was
released prior to enactment of a final FY2011 appropriations law, included proposals for some
funding increases relative to FY2010 (Section 8 Tenant-Based Rental Assistance and Project-
Based Rental Assistance), and some funding decreases relative to FY2010 (public housing
operating fund, Community Development Block Grant program, HOME, and Section 202 and
811). However, in the case of almost all of the programs proposed for funding decreases relative
to FY2010, the President’s requested amount was higher than what was provided in the FY2011
appropriations law. In total, the President’s funding request for HUD would result in a nearly $2.5
billion increase in gross new appropriations in FY2012 relative to FY2011. However, because the
President’s budget estimates a substantial increase (nearly $2 billion) in the amount of offsetting
receipts available from the Federal Housing Administration (FHA) in FY2012 relative to FY2011,
the net budget authority requested in the President’s budget would represent an increase of only
about $600 million in FY2012 relative to FY2011.
While the House Appropriations Committee has not formally reported an FY2012 Transportation,
HUD, and Related Agencies (THUD) bill, on September 7, 2011, the THUD subcommittee
released a draft version, including, according to the committee’s press statements, about $3 billion
less for HUD than was provided in FY2011. It was approved by the subcommittee the next day.
On September 21, 2011, the Senate Appropriations Committee reported its FY2012 THUD
funding bill (S. 1596). It includes about $1.3 billion less in regular appropriations for HUD than
was provided in FY2011.
On November 1, 2011, the Senate approved S.Amdt. 738 to H.R. 2112, the so-called Senate
“Minibus.” It includes FY2011 appropriations for those agencies under the jurisdiction of the
THUD subcommittee (reflecting S. 1596) as well as two other subcommittees (Agriculture and
Commerce-Justice-Science). Several HUD-related amendments were considered and adopted.
Since final FY2012 appropriations were not enacted before the end of FY2011, Congress has
enacted a series of continuing resolutions to maintain funding for government activities. The
current CR, P.L. 112-36, funds most accounts, including all of HUD’s accounts, through
November 18, 2011, at FY2011 levels, reduced by 1.503%.
While not directly affecting HUD funding, the provisions in the Budget Control Act of 2011 (P.L.
112-25) relating to statutory discretionary budget caps and their enforcement through
sequestration could have implications for the amount of funding available for HUD in FY2012
(see the Appendix for more information).
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Contents
Introduction to the Department of Housing and Urban Development (HUD)................................. 1
Overview and Trends in HUD Funding........................................................................................... 2
FY2011 ............................................................................................................................................ 7
FY2012 ............................................................................................................................................ 8
Continuing Resolution............................................................................................................... 8
House Action ............................................................................................................................. 8
Senate Action............................................................................................................................. 8
President’s Budget Request ....................................................................................................... 9
Key Issues in the President’s Budget............................................................................................. 12
Community Development Block Grants (CDBG)................................................................... 12
HOME ..................................................................................................................................... 12
Housing Counseling ................................................................................................................ 13
Section 202 and Section 811.................................................................................................... 14
Public Housing ........................................................................................................................ 15
Brownfields ............................................................................................................................. 16
Section 8 Tenant-Based Rental Assistance .............................................................................. 17
Section 8 Project-Based Rental Assistance ............................................................................. 17
Administrative Reforms to Rental Assistance Programs......................................................... 18
Homelessness Assistance......................................................................................................... 18
Transforming Rental Assistance.............................................................................................. 19
Section 108: Restructuring ...................................................................................................... 19
Sustainable Communities ........................................................................................................ 20
The Status of FHA................................................................................................................... 20
Credit Subsidy and Offsetting Receipts ............................................................................ 21
Financial Status and FHA Reforms ................................................................................... 22
Figures
Figure 1. HUD (Non-emergency) Budget Authority, FY2002-FY2011 .......................................... 2
Figure 2. Components of HUD Funding, FY2002-FY2011 ............................................................ 4
Figure 3. Percent Change Since 2002 in Annual Appropriations for Section 8 Programs
Compared to All Other HUD Programs Combined...................................................................... 5
Figure 4. Section 8 Appropriations (TBRA and PBRA), FY2002-FY2011 .................................... 6
Figure 5. FHA Receipts, FY2002-FY2011 ...................................................................................... 7
Tables
Table 1. Department of Housing and Urban Development Appropriations,
FY2007-FY2011........................................................................................................................... 1
Table 2. Appropriations for HUD, FY2010, FY2011 CR, and President’s FY2012 Request........ 10
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Appendixes
Appendix. Related Legislation ...................................................................................................... 23
Contacts
Author Contact Information........................................................................................................... 25
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Department of Housing and Urban Development (HUD): FY2012 Appropriations
Introduction to the Department of Housing and
Urban Development (HUD)
Most of the funding for the activities of the Department of Housing and Urban Development
(HUD) comes from discretionary appropriations provided each year in the annual appropriations
acts enacted by Congress. HUD’s programs are primarily designed to address housing problems
faced by households with very low incomes or other special housing needs. These include several
programs of rental assistance for persons who are poor, elderly, and/or have disabilities. Three
rental assistance programs—Public Housing, Section 8 Vouchers, and Section 8 project-based
rental assistance—account for the majority of the department’s non-emergency funding (about
three-quarters of total funding in FY2010). Two flexible block grant programs—HOME and
Community Development Block Grants (CDBG)—help communities finance a variety of housing
and community development activities designed to serve low-income families. Other, more
specialized grant programs help communities meet the needs of homeless persons, including
those with AIDS. HUD’s Federal Housing Administration (FHA) insures mortgages made by
lenders to home buyers with low downpayments and to developers of multifamily rental buildings
containing relatively affordable units. FHA collects fees from insured borrowers, which are used
to sustain the insurance fund and offset its administrative costs. Surplus FHA funds have been
used to offset the cost of the HUD budget.
In recent years, the HUD budget has also received significant amounts of emergency
supplemental funding. Almost $20 billion was provided through HUD’s budget for recovery
assistance to communities affected by Hurricane Katrina and the other hurricanes of 2005. The
economic stimulus legislation enacted in 2009 (P.L. 111-5) provided over $13 billion to HUD’s
programs.
Table 1 presents total enacted appropriations for HUD over the past five years, including
emergency appropriations.
Table 1. Department of Housing and Urban Development Appropriations,
FY2007-FY2011
(net budget authority in billions of dollars)
FY2007 FY2008 FY2009 FY2010 FY2011
(est.)e
35.80a 47.66b 55.20c 46.16d 41.74e
Source: Figures are taken from tables produced by the House Appropriations Committee.
Note: Final appropriations levels for any fiscal year include all supplemental appropriations or rescissions. They
do not reflect revised estimates of offsetting receipts. They include advance appropriations provided in the fiscal
year, not advance appropriations available in the fiscal year.
a. Figure includes $7 million in emergency supplemental funding. Regular FY2007 appropriations totaled just
under $35.8 billion.
b. Figure includes $3.22 billion (P.L. 110-116 and P.L. 110-252) in emergency supplemental funding in response
to the hurricanes of 2005 and $6.8 billion (P.L. 110-252 and P.L. 110-329) in emergency supplemental
funding for the disasters of 2008. Regular FY2008 appropriations totaled $37.64 billion.
c. Figure includes $13.67 billion in emergency funding provided as fiscal stimulus by P.L. 111-5. Regular FY2009
appropriations totaled $41.5 billion.
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d. Figure includes $100 million in emergency funding provided by P.L. 111-212 for assistance in response to
disasters occurring in the spring and summer of 2010.
e. This figure is an estimate, which assumes the application of the 0.2% across-the-board rescission. This figure
may change.
Overview and Trends in HUD Funding
HUD’s budget authority (not including emergency supplemental funding, discussed later) has
increased by about 40% since 2002. As demonstrated by the line in Figure 1, the rate of growth
had increased in recent years. In FY2004 and FY2005, year-over-year growth was relatively flat
(under 2%), but, beginning in FY2006, HUD’s budget had year-over-year increases of 5% or
more each year, with growth of nearly 10% in FY2009 and nearly 12% in FY2010. The FY2011
appropriations act reversed the recent trend of increasing budget authority by decreasing HUD’s
budget authority by nearly 11% compared to FY2010.
Adjusting for inflation, the growth in “real” funding (shown by the gray bars in Figure 1) has
been less robust. Over the 10-year period, adjusting for inflation, HUD’s budget grew by about
15%. Through FY2008, the year-over-year growth never exceeded about 3.5%, and in two years
there were declines. Most of the growth over the previous 10 years came in two years: FY2009
and FY2010, although about half of that growth was eliminated with the reductions in FY2011.
Figure 1. HUD (Non-emergency) Budget Authority, FY2002-FY2011
In nominal dollars and in real (2011) dol ars
$50
$45
$40
$35
Real
(inflation-
$30
adjusted)
$25
llions
bi
Nominal
$20
$15
$10
$5
$0
FY2002
FY2003
FY2004
FY2005
FY2006
FY2007
FY2008
FY2009
FY2010
FY2011
Enacted
Source: CRS analysis of congressional funding data contained in annual appropriations acts. FY2011 figures are
CRS estimates based on congressional appropriations documents and information from HUD.
Notes: Real figures are presented in 2011 dollars, adjusted using the GDP chained index from the President’s
FY2012 budget request as well as the Congressional Budget Office’s estimate for FY2010, as presented in their
Budget and Economic Outlook: Fiscal Years 2011 to 2021. Figures are net budget authority figures, which include
appropriations, offsets, and rescissions.
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As shown in Figure 2, HUD’s funding is made up of several components. The components of
HUD’s annual funding, or budget authority, include regular annual appropriations, emergency
appropriations, rescissions, and offsets.1
HUD’s programs and activities are funded almost entirely through regular annual appropriations,
also referred to as discretionary appropriations.2 The amount provided in the annual
appropriations acts each year generally determines how much funding will be obligated and
eventually spent for each of HUD’s programs and activities.
In some years, Congress will also provide emergency appropriations, usually in response to
disasters, through one or more of HUD’s programs. These funds are generally provided outside of
the regular appropriations acts—often in emergency supplemental spending bills—and are
generally provided in addition to regular annual appropriations.
Congressional appropriators are generally subject to limits on the amount of new non-emergency
discretionary funding they can provide in a year. One way to stay within these limits is to provide
less in regular annual appropriations. Another way is to find offsets. A portion of the cost of
HUD’s regular annual appropriations acts is generally offset in two ways. The first is through
rescissions, or cancellations of unobligated or recaptured balances from previous years’ funding.
The second is through offsetting receipts and collections, generally derived from fees paid by
HUD partners or clients.
The interaction between new appropriations and offsets provided through rescissions, receipts,
and collections determines HUD’s total net budget authority. Net budget authority is also the
“cost” of the HUD budget, as estimated by the Congressional Budget Office (CBO) in its
scorekeeping process.3 The total amount of net budget authority provided to HUD each year,
while important for federal budgeting purposes, is not necessarily the best measure of the amount
of funding that is being provided for HUD’s programs and activities. Because of the role of
offsets, declining or increasing net budget authority does not necessarily mean declining or
increasing regular appropriations.
As shown by the line in Figure 2, which repeats the data shown by the line in Figure 1, net non-
emergency budget authority for HUD increased 40% between FY2002 and FY2011, from over
$29 billion to over $41 billion. However, the overall increase in net new non-emergency budget
authority masks several important trends.
1 For more information, see CRS Report RS20095, The Congressional Budget Process: A Brief Overview, by James V.
Saturno.
2 According to Congressional Quarterly’s American Congressional Dictionary, discretionary appropriations are
defined as appropriations not mandated by existing law and therefore made available annually in appropriation bills in
such amounts as Congress chooses. The Budget Enforcement Act of 1990 defines discretionary appropriations as
budget authority provided in annual appropriation acts and the outlays derived from that authority, but it excludes
appropriations for entitlements.
3 According to Congressional Quarterly’s American Congressional Dictionary, scorekeeping is defined as the process
of calculating the budgetary effects of pending and enacted legislation and assessing its impact on applicable budgetary
targets, as required by the Congressional Budget Act of 1974.
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Department of Housing and Urban Development (HUD): FY2012 Appropriations
Figure 2. Components of HUD Funding, FY2002-FY2011
$60
Emergency
Appropriations
$50
$40
Regular
Appropriations
(including
$30
advance from
prior year)
ons
Offsets
$20
billi
$10
Rescissions
$0
-$10
2
3
4
Net Non-
09
0
200
200
200
2005
2006
2007
2008
201
ted
Emergency
FY
FY
FY
FY
FY
FY
FY
FY20
FY
nac
1 E
Budget
201
Authority
FY
Source: CRS analysis of congressional funding data contained in annual appropriations acts. FY2011 figures are
CRS estimates based on congressional appropriations documents and information from HUD.
As noted earlier, between FY2002 and FY2010, HUD’s net non-emergency budget authority
increased by 57%. During that period, regular annual appropriations, which is the amount
provided by Congress to fund HUD’s programs and activities, grew by only 37% (shown by the
dark green bars in Figure 2). During the same period, the amount available in offsetting receipts
and collections and the amount rescinded, which Congress uses to reduce the cost of providing
new appropriations, declined by more than 70% and 96%, respectively (shown by the dark and
light red bars in Figure 2). In summary, from FY2002-FY2010, appropriations were increasing,
but the amount of offsets and rescissions available to offset the cost of those appropriations was
decreasing.
That trend was reversed in FY2011, when Congress cut the amount of appropriations relative to
FY2010 and, at the same time, the amount of available offsets increased. In terms of net budget
authority, HUD’s funding was cut by 11% in FY2011 compared to FY2010. However, regular
appropriations in FY2011 were only cut by about 4%. The difference between the cut in net
budget authority and appropriations is attributable to a 43% increase in offsets (discussed later in
this section).
The growth in regular appropriations during this period (shown by the dark green bars in Figure
2) is largely attributable to growth in HUD’s Section 8 tenant-based voucher and project-based
rental assistance programs, which combined are the largest component of the HUD budget. As
can be seen in Figure 3, from FY2002 to FY2011 appropriations for the combined Section 8
programs grew by 77%, while combined funding for all other HUD programs and activities
declined by about 6%. During this period, the Section 8 programs went from accounting for about
46% of HUD’s regular appropriations to accounting for over 60% of HUD’s regular
appropriations. As can be seen in the chart, for a number of years Section 8 funding grew while
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combined funding for all other HUD programs declined. In FY2008, FY2009, and FY2010,
combined funding for other HUD programs began to grow, but it declined sharply in FY2011.
Figure 3. Percent Change Since 2002 in Annual Appropriations for Section 8
Programs Compared to All Other HUD Programs Combined
90%
80%
70%
60%
2002.
Section 8
Y 50%
(PBRA and
F
m
TBRA)
ro 40%
All Other HUD
ange f 30%
h
Programs
t C
Combined
n 20%
erce
P 10%
0%
(10%)
(20%)
FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011
Source: CRS analysis of congressional appropriations documents. FY2011 figures are CRS estimates based on
congressional appropriations documents and information from HUD.
Notes: Figures for HUD represent gross appropriations, not reduced for rescissions or offsets and not including
emergency appropriations. Figures for Section 8 include both tenant-based and project-based rental assistance.
Section 8 figures include advance appropriations available in the fiscal year and are reduced for rescissions of
funding from advance appropriations, but not rescissions of prior-year unobligated balances. TBRA: tenant-based
rental assistance; PBRA: project-based rental assistance.
As noted earlier, there are two Section 8 programs: tenant-based rental assistance (vouchers) and
project-based rental assistance. They were funded in the same account for many years, but since
FY2005 they have been funded separately. As is shown in Figure 3, appropriations for the
Section 8 programs combined have grown by nearly 80% from FY2002 to FY2011. However, it
is important to note that the rates of growth have not been the same across the two Section 8
programs. As shown in Figure 4, appropriations for the Section 8 project-based rental assistance
(PBRA) program grew by 75% from FY2005 to FY2011; appropriations for the Section 8 tenant-
based rental assistance (TBRA) program, or Section 8 Housing Choice Voucher program, grew
only about one-third as much during that period, by about 24%. The growth in appropriations for
PBRA is largely attributable to the renewal of old project-based Section 8 contracts when they
expire. Those contracts were originally funded in the 1970s and 1980s with long-term
appropriations. The contracts typically require new annual appropriations in order to be renewed.
The vast majority of contracts are now funded with annual appropriations, but some expirations
continue to occur and require new appropriations each year.
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Figure 4. Section 8 Appropriations (TBRA and PBRA), FY2002-FY2011
FY2011
FY2010
FY2009
FY2008
FY2007
TBRA
PBRA
FY2006
Section 8 Total
FY2005
FY2004
FY2003
FY2002
$0
$5
$10
$15
$20
$25
$30
billions
Source: FY2011 figures are CRS estimates based on congressional appropriations documents and information
from HUD.
Notes: Section 8 figures include advance appropriations available in the fiscal year and are reduced for
rescissions of funding from advance appropriations, but not rescissions of prior-year unobligated balances.
As discussed earlier and shown in Figure 2, between FY2002 and FY2010 the amount of
offsetting receipts declined by about 70%. That decline was largely attributable to declines in
offsetting receipts available from the FHA mortgage insurance programs. The amount available
from FHA to offset the cost of new HUD appropriations had declined from a high of over $3.5
billion in FY2004 to well under $0.5 billion in FY2010. That trend completely reversed in
FY2011 when the amount of offsetting receipts from FHA increased to over $4 billion, the
highest level in a decade. The increase is attributable to FHA’s increasing market share following
the downturn in the economy, as well as to policy changes made by FHA that increased the fees
charged to new FHA-insured borrowers.4
4 See the discussion of the House budget resolution in the Appendix for more information about a proposal to change
the way FHA offsets are calculated, which would potentially result in much lower receipt estimates.
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Figure 5. FHA Receipts, FY2002-FY2011
$4.5
$4.0
$3.5
$3.0
s
n
$2.5
io
ill
$2.0
b
$1.5
$1.0
$0.5
$-
FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011
enacted
Source: CRS analysis of congressional appropriations documents.
FY2011
When no FY2011 appropriations legislation was enacted before the beginning of the fiscal year
(October 1, 2010), the 111th Congress enacted a series of continuing resolutions (CRs) that
continued funding at the FY2010 level for most accounts in the federal budget (including all of
the accounts in HUD’s budget). The final CR of the 111th Congress, P.L. 111-322, was slated to
expire at the earlier of March 4, 2011, or enactment of FY2011 appropriations legislation. In
addition to continuing funding for HUD programs, P.L. 111-322 also extended, through the end of
FY2011, FHA mortgage limit increases that would otherwise have expired in December 2010.
In the week before funding under P.L. 111-322 was scheduled to expire, the 112th Congress
approved a short-term CR (H.J.Res. 44, P.L. 112-4) to fund the government through March 18,
2011. This short-term CR continued funding for all HUD programs at their FY2010 levels except
for the Community Development Fund, which was reduced to eliminate funding for Economic
Development Initiative (EDI) and Neighborhood Initiative (NI) earmarks.
In the week before funding under P.L. 112-4 was scheduled to expire, Congress approved another
short-term CR, which continued funding through April 8, 2011 (H.J.Res. 48, P.L. 112-6). It
maintained funding at the FY2010 levels for most HUD programs, but, like H.J.Res. 44, it
provided no funding for EDIs and NIs. Further, P.L. 112-6 includes no funding for HUD’s
Brownfields Redevelopment program. Congress enacted one final short-term continuing
resolution (P.L. 112-8), before enacting a final FY2011 appropriations law.
On April 15, 2011, the Department of Defense and Full-Year Continuing Appropriations Act of
2011 was signed into law (P.L. 112-10). Division A provided year-long FY2011 appropriations for
the Department of Defense; Division B provided year-long FY2011 appropriations for the
remaining government agencies, including HUD. It funded some HUD programs at FY2010
levels, but it reduced funding for other programs and increased funding for the two Section 8
programs. The act also included an across-the-board 0.2% rescission from all non-defense
discretionary accounts, including those in HUD’s budget.
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The law provided an estimated $41.1 billion5 in net new budget authority for HUD, a decrease of
about 11% from the FY2010 enacted level. However, the decrease in net new budget authority
only represented a 4% decrease in appropriations for HUD programs in aggregate, due to a
substantial increase in offsetting collections and receipts from the FHA mortgage insurance
programs from FY2010 to FY2011.
FY2012
Continuing Resolution
Since final FY2012 appropriations were not enacted before the end of FY2011, Congress has
enacted a series of continuing resolutions to maintain funding for government activities. The
current CR, P.L. 112-36, funds most accounts, including all of HUD’s accounts, through
November 18, 2011, at FY2011 levels, reduced by 1.503%.
House Action
The House Appropriations Committee has not formally reported an FY2012 THUD bill; however,
on September 7, 2011, the THUD subcommittee released a draft version of its bill, which was
approved by the subcommittee the next day. According to the subcommittee’s press release, the
bill includes about $3 billion less for HUD than was provided in FY2011 and $4 billion less than
was requested by the President.
Senate Action
On September 21, 2011, the Senate Appropriations Committee reported an FY2012 THUD
funding bill (S. 1596). It included about $3 billion less in net budget authority (reflecting
increased offsetting receipts) and about $1.3 billion less in regular appropriations (not reflecting
rescissions) for HUD than was provided in FY2011. The bill funded most accounts within a few
percentage points of FY2011 levels. However, several accounts were decreased more
substantially, including the Public Housing operating fund (14%) and capital fund (8%) and the
HOME program (38%), among others. The bill included authority requested by the President to
offset reserves in the Public Housing operating fund and enact a rental assistance demonstration,
as well as legislative language designed to streamline the rent and income determination process
in assisted housing programs.
On October 20, 2011, the Senate began consideration of the provisions of S. 1596 as a part of the
so-called “Minibus.” The Minibus, S.Amdt. 738 to H.R. 2112, includes FY2011 appropriations
for those agencies under the jurisdiction of the THUD subcommittee (reflecting S. 1596) as well
as two other subcommittees (Agriculture and Commerce-Justice-Science). Several HUD-related
amendments were added during floor consideration, including:
• Amendment S.Amdt. 857 would increase GSE conforming loan limits and FHA
loan limits for some high cost communities through December 31, 2013. On
5 This estimate of total funding may change, depending on how the 0.2% across-the-board rescission is applied.
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October 1, 2011, the loan limits under these programs reverted from higher
temporary limits, which had been enacted and extended over the past several
years, to lower statutory limits. The changes to the GSE conforming loan limits
would be accompanied by a fee increase designed to offset the cost of the
increase.
• Amendment S.Amdt. 796 would prohibit the use of grants and other funding
provided in the bill to repay federal loans provided under the bill. It would
further prohibit the use of grants and other funding provided in the bill to repay
any federal loan.
• Amendment S.Amdt. 874 would increase funding for Fair Housing activities by
about $6.6 million and decrease funding for HUD’s Working Capital Fund by the
same amount.
• Amendment S.Amdt. 806 would make modifications to the eligible criteria for
new agencies to enter the Moving to Work demonstration.
The bill was approved by the full Senate on November 1, 2011.
Note to Reader
The remainder of this report is not yet updated to reflect House and Senate action.
President’s Budget Request
In February 2011, the President released his budget request for FY2012. It included a request for
nearly $47.8 billion in gross new appropriations for HUD in FY2012. After accounting for
rescissions of prior-year unobligated balances and offsets available from the Federal Housing
Administration (FHA) mortgage insurance programs, the President’s request for net new budget
authority for HUD in FY2012 totals over $41.7 billion. Table 2 includes an account-by-account
comparison of the President’s request and the final FY2011 CR.
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Table 2. Appropriations for HUD, FY2010, FY2011 CR, and
President’s FY2012 Request
(in billions of dollars)
FY2011
FY2012
Accounts
Enacteda
Request
Appropriations
Management and Administration
1.326
1.350
Tenant Based Rental Assistance (Section 8 vouchers)
18.379
19.223
Transforming Rental Assistance
0.000
0.200
Public housing capital fund
2.040
2.405
Public housing operating fund
4.617
3.962
Choice Neighborhoods
0.000
0.250
HOPE VI
0.100b 0.000
Native American housing block grants
0.649
0.700
Indian housing loan guarantee
0.007
0.007
Native Hawai an Block Grant
0.013
0.010
Native Hawai an loan guarantee
0.001
0.000c
Housing, persons with AIDS (HOPWA)
0.334
0.335
Community Development Fund (Including CDBG)
3.501
3.804
Energy Innovation Fund
0.000
0.000
Sustainable Communities
0.000
0.150
Section108 loan guarantee; subsidy
0.006
0.000c
Brownfields redevelopment
0.000
0.000
HOME Investment Partnerships
1.607
1.650
Self-Help Homeownership
0.082
0.050
Homeless Assistance Grants
1.901
2.372
Project Based Rental Assistance (Section 8)
9.264
9.429
Housing for the Elderly
0.399
0.757
Housing for Persons with Disabilities
0.150
0.196
Housing Counseling Assistance
0.000
0.088
Manufactured Housing Fees Trust Fund
0.016
0.014
Rental Housing Assistance
0.040
0.016
FHA Expenses
0.215
0.239
GNMA Expenses
0.000
-0.070
Research and technology
0.048
0.057
Fair housing activities
0.072
0.072
Office, lead hazard control
0.120
0.140
Working capital fund
0.200
0.243
Inspector General
0.125
0.126
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FY2011
FY2012
Accounts
Enacteda
Request
Transformation Initiative-Combating Mortgage Fraud
0.071
0.000
Appropriations Subtotal (Including advances provided in current year for
45.282 47.775
subsequent year)
Rescissions
HOPE VI Rescission
0.000
0.000
Sustainable Communities Rescission
0.000
0.000
Energy Innovation Fund Rescission
0.000
0.000
Brownfields Redevelopment Rescission
0.000
0.000
Rental housing assistance rescission
-0.041
-0.007
Rescissions Subtotal
-0.041
-0.007
Offsetting Collections and Receiptsd
Manufactured Housing Fees Trust Fund
-0.016
-0.007d
Federal Housing Administration (FHA)
-3.386e -5.494d
GNMA
-0.729e -0.528gd
Offsetts Subtotal
-4.131
-6.029d
Totals
Authorized Budget Authority
41.110
41.739
Available Budget Authority (adjusted for advances)
41.095
41.733
Source: Table prepared by CRS based on H.Rept. 111-564 and Congressional Budget Office estimates of
H.J.Res. 48, and the President’s FY2012 budget documents.
a. Figures for P.L. 112-10 are calculated by CRS to assume the application of the 0.2% across-the-board
rescission evenly across accounts, sub-accounts, and activities. The Administration has some flexibility in
applying the across-the-board rescission, so these estimates may change.
b. Includes a $65 million set-aside for a Choice Neighborhoods demonstration.
c. The President’s budget requested a new fee structure for this account, which would eliminate the need for
appropriations.
d. The estimates for FY2012 are based on the President’s estimates of offsetting receipts; the Congressional
Budget Office (CBO), when it releases its re-estimate of the President’s budget, may have a different
estimate of the amount of offsetting receipts. This table will be updated to reflect the CBO estimates when
they are released. Re-estimates may change the totals presented in this table.
e. Totals include CBO’s estimates of increased offsetting receipts resulting from increased loan limits
authorized in Section 145 of P.L. 111-242.
f.
Includes an additional $9 million payment to the manufactured housing fee trust fund.
g. The President’s budget proposes to move funding for GNMA expenses from the management and expenses
account to a separate GNMA account. The President’s budget requests $30 million for GNMA expenses,
but proposes that the expenses will be offset by $100 million in fees collected. This number may change
based on re-estimates of the President’s budget, as described in Table Note c.
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Department of Housing and Urban Development (HUD): FY2012 Appropriations
Key Issues in the President’s Budget
Community Development Block Grants (CDBG)
The CDBG program, which was first authorized under Title I of the Housing and Community
Development Act of 1974 (P.L. 93-383, 42 U.S.C. 5301 et seq.), is the largest source of federal
financial assistance in support of state and local neighborhood revitalization, housing
rehabilitation, and economic development activities. For FY2010, CDBG formula funds were
awarded to approximately 1,151 entitlement communities, the 50 states, the District of Columbia,
Puerto Rico, and the insular areas of Guam, the Virgin Islands, American Samoa, and the Mariana
Islands. CDBG assistance may be used to fund eligible activities that meet one of three national
objectives:
• to principally benefit low- and moderate-income persons,
• to aid in eliminating or preventing slums or blight, or
• to address an imminent threat to the health and safety of the public.
The Administration’s proposed budget for FY2012 recommends $3.691 billion for the formula
portion of the program awarded to entitlement communities ($2.579 billion), the states and Puerto
Rico ($1.105 billion), and insular areas ($7 million). The budget proposal would increase CDBG
formula grants by 11.8%, $388.5 million more than the $3.301 billion appropriated in FY2011.
The Administration’s budget also proposes to fund CDBG grants to Indian tribes at $65 million,
as required by the CDBG program’s authorizing statute. In addition, the Administration is
requesting $23 million for Guam to address community development needs arising from the
relocation of military facilities and personnel to the island.
As in previous years, the Administration’s budget does not include funding for Economic
Development Initiative and Neighborhood Initiative Grants, two programs subject to
congressional earmarks. The Administration states that it supports funding for these activities
through the regular CDBG formula program.
HOME
The HOME Investment Partnerships Program provides block grant funding to states and certain
localities (known as “participating jurisdictions”) to be used for a variety of affordable housing
activities. HOME funds can be used for either owner-occupied or rental housing activities, and
they must benefit households that are considered to be either low-income (i.e., incomes at or
below 80% of area median income) or very low-income (i.e., incomes at or below 60% of area
median income).6 Between the program’s inception in 1992 and the end of FY2010, the HOME
program has funded nearly 979,000 units of affordable housing and funded tenant-based rental
assistance for nearly 234,000 families.7
6 For more information about the HOME Investment Partnerships Program, see CRS Report R40118, An Overview of
the HOME Investment Partnerships Program, by Katie Jones.
7 U.S. Department of Housing and Urban Development, FY2012 HOME Investment Partnerships Program Budget
Justification, p. V-2, http://portal.hud.gov/hudportal/documents/huddoc?id=HOME_2012.pdf.
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Department of Housing and Urban Development (HUD): FY2012 Appropriations
The FY2012 proposed budget requests $1.65 billion for the HOME program. This represents an
increase of $43 million (or almost 2.7%) from the enacted FY2011 funding level of $1.607
billion, but a reduction of $175 million (or almost 9.6%) from the enacted FY2010 funding level
of $1.825 billion. The FY2012 proposed budget also proposes eliminating funding for the Self-
Help Homeownership Opportunity Program (SHOP), noting that the activities funded under
SHOP are also activities on which states and participating jurisdictions can choose to use their
HOME funds. SHOP provides funding to eligible nonprofits to use for acquisition and
infrastructure improvement costs related to sweat equity and volunteer-based homeownership
programs that benefit low-income families.
Housing Counseling
Through its Housing Counseling Assistance Program, HUD annually provides competitive grants
to HUD-approved housing counseling agencies. These housing counseling agencies provide a
range of housing counseling services, including pre-purchase homeownership counseling; post-
purchase homeownership counseling; mortgage delinquency counseling; and counseling for
renters, the homeless, or seniors seeking reverse mortgages. (Receiving housing counseling is a
requirement for obtaining a Home Equity Conversion Mortgage, or HECM, which is a reverse
mortgage insured by the Federal Housing Administration.)
In recent years, congressional appropriations for HUD’s housing counseling program had been
increasing, partly in response to increased mortgage default and foreclosure rates. In FY2010,
Congress provided $87.5 million for HUD’s housing counseling program. The President’s
FY2012 budget requests $88 million, an increase of $500,000 over the FY2010 level. However,
in FY2011 Congress did not provide any funding for HUD’s housing counseling program. The
elimination of HUD housing counseling funding reflected the fiscal environment at the time that
the FY2011 appropriations law was passed, as well as some concerns over the time it took HUD
to distribute prior years’ funds. Some policymakers also questioned whether the funding was
duplicative of foreclosure mitigation counseling funds that have been appropriated to the National
Foreclosure Mitigation Counseling Program, administered by NeighborWorks America, since
FY2008.8 However, proponents of HUD’s housing counseling program note that the HUD
funding can be used for a wider range of types of housing counseling than the NeighborWorks
funds, which are limited to foreclosure counseling. Congress did continue to fund the
NeighborWorks counseling program in FY2011 at its FY2010 level of $65 million.
Housing advocates and some Members of Congress have asked appropriators to restore funding
for HUD’s housing counseling program, arguing that the program is the only dedicated federal
source of funds for many types of counseling (including reverse mortgage counseling), and that
current economic conditions make the need for housing counseling services more acute.9
8 For example, see U.S. Congress, House Committee on Appropriations, Subcommittee on Transportation, Housing and
Urban Development, and Related Agencies, Budget Hearing—Housing Counseling with Neighborhood Reinvestment
Corporation—Deputy Assistant Secretary for Single Family Housing and NeighborWorks Acting CEO, 112th Cong., 1st
sess., March 29, 2011.
9 For example, see a letter signed by several housing advocacy organizations regarding the elimination of funding for
HUD’s housing counseling program in FY2011 on the Citizens’ Housing and Planning Association website at
http://chapa.org/pdf/HUDhousingcounselingcutletter041211.pdf. For details on a letter signed by 24 Senators
expressing support for restoring funding for housing counseling, see Senator Al Franken’s website, “Sen. Franken:
Restore Funding to Program that Helps Avoid Foreclosure,” press release, June 2, 2011, http://franken.senate.gov/?p=
(continued...)
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Department of Housing and Urban Development (HUD): FY2012 Appropriations
For more information on both HUD’s housing counseling program and the NeighborWorks
counseling funding, see CRS Report R41351, Housing Counseling: Background and Federal
Role, by Katie Jones.
Section 202 and Section 811
Through the Section 202 Supportive Housing for the Elderly program and the Section 811
Supportive Housing for Persons with Disabilities program, HUD provides capital grants and
rental assistance to nonprofit developers to build or rehabilitate housing units for elderly residents
and residents with disabilities.10 HUD capital grants have funded more than 106,000 units of
Section 202 housing and more than 30,000 units of Section 811 housing.11 In addition, the Section
811 program has historically provided funding for tenant-based vouchers for persons with
disabilities. Currently, approximately 14,811 vouchers are funded.12
The FY2012 proposed budget would increase funding for the Section 202 account (which
includes funds for Service Coordinators and the Assisted Living Conversion Program) compared
to the FY2011 level by $358 million, nearly 90%. However, this would be a reduction of about
8.2% compared to the amount appropriated in FY2010. The FY2011 appropriation reduced
Section 202 funding by more than half—from $825 million to $399 million. The President’s
request would increase funding to $747 million. Of this amount, $387 million would be allocated
for new capital grants and project rental assistance (referred to as PRAC), up from approximately
$100 million in FY2011 (the level was $510 million in FY2010). HUD estimates that the FY2012
funding would result in 2,235 new units of Section 202 housing (the FY2010 level is expected to
be 3,449).13 Estimates for FY2011 are not available.
Section 811 program funding would also be increased over FY2011 levels in the President’s
FY2012 budget proposal. In FY2011, Congress reduced funding for the Section 811 program
from $300 million in FY2010 to $150 million. In FY2012, the President proposed to fund the
program at $196 million. However, the overall funding number itself does not tell the full story,
and the amount available for the Section 811 program would actually be more than the FY2010
appropriation. A portion of the President’s proposed reduction from FY2010 levels would be due
to a shift of funds to renew Section 811 tenant-based vouchers from the Section 811 account to
the Section 8 tenant-based rental assistance account. This shift would be consistent with language
that was enacted in the Frank Melville Supportive Housing Investment Act (P.L. 111-374), which
(...continued)
press_release&id=1560.
10 For more information about the Section 202 program, see CRS Report RL33508, Section 202 and Other HUD Rental
Housing Programs for Low-Income Elderly Residents, by Libby Perl. For more information about the Section 811
program, see CRS Report RL34728, Section 811 and Other HUD Housing Programs for Persons with Disabilities, by
Libby Perl.
11 U.S. Department of Housing and Urban Development, FY2009 Performance and Accountability Report, November
16, 2009, p. 349, http://hud.gov/offices/cfo/reports/hudfy2009par.pdf. Note that prior to the capital grants, which were
instituted in 1992, the Section 202 program funded new units of housing through direct government loans.
Approximately 216,000 units of housing were funded during the loan phase of the Section 202 program. See U.S.
Department of Housing and Urban Development, Section 202 Supportive Housing for the Elderly: Program Status and
Performance Measure, June 2008, p. 22, http://www.huduser.org/Publications/pdf/sec_202_1.pdf.
12 U.S. Department of Housing and Urban Development, FY2009 Performance and Accountability Report, p. 349.
13 U.S. Department of Housing and Urban Development, FY2012 Budget Justifications, p. C-5, http://portal.hud.gov/
hudportal/documents/huddoc?id=Housing_Elderly_2012.pdf.
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Department of Housing and Urban Development (HUD): FY2012 Appropriations
authorized appropriations to Section 8 sufficient to support the conversion of existing Section 811
vouchers to the Section 8 account. In FY2010, $87 million from the Section 811 account was
allocated for voucher renewals, and in FY2011 a total of $67 million went toward voucher
renewals—$32 million from the Section 811 account and $35 million from the Section 8 account.
In FY2012, the President’s budget requests that $114 million be appropriated to the Section 8
account for Section 811 voucher renewals.
Also within the Section 811 account, the total amount of funding available for new capital grants
and PRAC contracts would be $111 million—this represents an increase from FY2011 levels ($50
million), but a reduction from the FY2010 level ($161 million). However, it is possible that
another change enacted as part of P.L. 111-374 could make the funding go further than it did in
FY2010. Specifically, as a result of a change to the Section 811 statute, Section 811 PRAC
assistance can now be used to assist tenants in multifamily housing units developed using other,
non-Section 811 sources of funding such as Low Income Housing Tax Credits and HOME funds.
Without the need for capital grants to construct the housing, it is possible that more funds would
be available to fund rental assistance. While this may occur, HUD’s budget justification estimates
that the total number of new units funded in FY2012 would be 577, down from 997 in FY2010.14
Estimates for FY2011 are not available.
Public Housing
The public housing program provides publicly owned and subsidized rental units for very low-
income families. Created in 1937, it is HUD’s oldest housing assistance program, and arguably
HUD’s most well-known assistance program. (For more information, see CRS Report R41654,
Introduction to Public Housing, by Maggie McCarty.) Although 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 own and maintain the existing stock of more
than 1 million units. Public housing receives federal funding under three accounts, which, when
combined, result in public housing being the third-largest funded program in HUD’s budget
(following the two Section 8 programs, discussed later in this report). Through the operating
fund, HUD provides funding to PHAs to help fill the gap between tenants’ contributions toward
rent and the cost of ongoing maintenance, utilities, and administration of public housing. 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 funding to help demolish and/or
redevelop severely distressed public housing developments, with a focus on building mixed-
income communities.
In terms of operating funding, the President’s budget requests a 14% reduction compared to the
final FY2011 funding law. The President’s budget proposes to supplement the requested funding
level by offsetting the funding allocations to PHAs with reserves above a certain level. This
proposal would effectively force certain PHAs to spend down their reserves. This proposal has
been opposed by PHA industry groups, who contend that the reserves are necessary and that the
proposal punishes PHAs who have managed their funding well.15 HUD contends that if funding is
14 Ibid., p. D-5, http://portal.hud.gov/hudportal/documents/huddoc?id=Housing_w_Disa_2012.pdf.
15 See Council of Large Public Housing Authorities (CLPHA) Issue Brief on Operating Reserves, available from
http://www.clpha.org/articledetail/?aid=233.
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Department of Housing and Urban Development (HUD): FY2012 Appropriations
limited, this strategy ensures that funding levels will be higher for agencies without large
reserves.16
In terms of capital funding, the President’s budget requests about a $100 million decrease
compared to FY2010 (a 4% decrease). However, the amount requested by the President is a
nearly 19% increase compared to the amount provided in FY2011. HUD’s budget documents note
that the department feels that capital funding alone will not be sufficient to meet the backlog of
unmet capital needs in public housing, and they note that the department is pursuing its
Transforming Rental Assistance initiative in order to help PHAs leverage private capital. (See
“Transforming Rental Assistance” later in this report.)
As in FY2010 and FY2011, the President’s budget requests no new funding for HOPE VI;
instead, it requests $250 million for the Choice Neighborhoods Initiative. Choice Neighborhoods
was a new Obama Administration proposal in the FY2010 budget. It is modeled after the HOPE
VI program, which provides competitive grants to PHAs to revitalize severely distressed public
housing. The Choice Neighborhoods Initiative would broaden the scope of HOPE VI by offering
competitive grants to revitalize severely distressed neighborhoods, not limited to public housing.
In addition to PHAs, local governments, nonprofits, and for-profit developers would be eligible to
compete for the funding. In FY2010, Congress provided $200 million to the HOPE VI account,
but set aside up to $65 million for a Choice Neighborhoods demonstration. The FY2011
appropriations law reduced the funding level for the HOPE VI account to $100 million, but
maintained the Choice Neighborhoods set-aside.
Brownfields
The term “brownfield” refers to abandoned or underused industrial or commercial development
sites, the redevelopment or reuse of which may be complicated by the presence of hazardous
waste and pollutants. Brownfield Economic Development Initiative (BEDI) grants are subject to
the same requirements as other activities eligible for assistance under the CDBG program,
including the requirement that BEDI activities must meet one of the three national objectives and
must be incorporated into the recipient’s consolidated and annual action plans. BEDI grants are
awarded on a competitive basis only in support of Section 108 loan guarantees (described later in
this report under “Section 108: Restructuring”), and may be used for such activities as debt
service, interest rate write downs, land write downs, site remediation costs, and loan loss reserves
of Section 108 guaranteed loans. Although communities may receive Section 108 loan guarantee
assistance without applying for BEDI funds, the awarding of BEDI must be accompanied by a
Section 108 loan guarantee. Funds can only be used to reclaim existing brownfield sites for
immediate redevelopment. Funds may not be used to allow current owners to address
contamination problems caused by their own negligence, nor can funds be used to fund projects
on sites included on the Environmental Protection Agency’s National Priorities List (Superfund).
The Administration’s budget proposal recommends terminating the program, contending that
program activities may continue to be supported under the regular CDBG program and that
projects are often stymied by delays, including the slow expenditure of funds. The program
received no funding in FY2011.
16 See Written Testimony of Sandra B. Henriquez, Assistant Secretary for the Office of Public and Indian Housing,
U.S. Department of Housing and Urban Development (HUD), Hearing before the House Appropriations Subcommittee
on Transportation, Housing and Urban Development, and Related Agencies, May 25, 2011.
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Department of Housing and Urban Development (HUD): FY2012 Appropriations
Section 8 Tenant-Based Rental Assistance
The Section 8 Housing Choice Voucher program is funded through the tenant-based rental
assistance account; it is both the largest assistance program administered by HUD and the largest
account in HUD’s budget. Most of the funding provided to the account each year funds the annual
renewal funding for the almost 2.3 million vouchers that are currently authorized and being used
by families to subsidize their housing. The account also provides funding for the administrative
costs incurred by the PHAs that administer the program. The account is funded using both
current-year appropriations and advance appropriations provided for use in the following fiscal
year.17 (For more information about the program, see CRS Report RL34002, Section 8 Housing
Choice Voucher Program: Issues and Reform Proposals, by Maggie McCarty.)
The President’s budget requests over $19.2 billion for Section 8 vouchers in FY2012, which is
over $800 million more than what was provided in FY2011. The President’s budget documents
indicate the amount requested would be sufficient to fund all existing vouchers expected to be in
use by families in FY2012. It also includes funding to create new vouchers to serve homeless
veterans, families involved in the child welfare system, and new interagency collaborative
demonstrations between HUD and other agencies for homeless and at-risk families with children
and persons with disabilities. (For more information on the President’s request for funding for
new vouchers to serve homeless veterans, homeless and at-risk families with children, and
homeless individuals with disabilities, see the “Homelessness Assistance” section later in this
report.)
Section 8 Project-Based Rental Assistance
The project-based rental assistance account provides funding to administer and renew existing
project-based Section 8 rental assistance contracts between HUD and private multifamily
property owners. Under those contracts, HUD provides subsidies to the owners to make up the
difference between what eligible low-income families pay to live in subsidized units (30% of
their incomes) and a previously agreed-upon rent for the unit. No new contracts have been
entered into under this program since the early 1980s. When the program was active, Congress
funded the contracts for 20- to 40-year periods, so the monthly payments for owners came from
old appropriations. However, once those contracts expire, they require new annual appropriations
if they are renewed. As more contracts expire, and assuming the owners choose to renew, more
new appropriations are needed to maintain the subsidies. Further, some old contracts do not have
sufficient funding to finish their existing terms, so new funding is needed to complete the contract
(referred to as amendment funding). As more contracts have shifted from long-term
appropriations to needing new appropriations, this account has grown and become the second-
largest account in HUD’s budget.
The President’s budget request includes a $165 million increase in funding for project-based
rental assistance. The amount requested includes funding to renew all contracts that are now in
need of new appropriations (approximately 83% of all contracts, according to HUD’s budget
documents).
17 For more information about advance appropriations, see CRS Report RS20441, Advance Appropriations, Forward
Funding, and Advance Funding, by Sandy Streeter.
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Department of Housing and Urban Development (HUD): FY2012 Appropriations
Administrative Reforms to Rental Assistance Programs
The President’s budget includes a request for several statutory changes that would affect HUD’s
rental assistance programs, including the public housing and Section 8 programs. Specifically,
HUD has asked for language that would
• broaden the definition of “extremely low-income” to reflect the higher of 30% of
area median income or the poverty thresholds published by the Department of
Health and Human Services (HHS);
• revise the deductions from income used to calculate rent for elderly or disabled
families by increasing the standard deduction and increasing the threshold for
deducting medical or related costs;
• permit the income of “fixed-income” families to be recertified every three years
instead of every year;
• allow higher voucher payment standards for persons with disabilities;
• permit HUD to make revisions to the way Fair Market Rent is calculated; and
• permit HUD to run a demonstration to test different models for setting rent in
rental assistance programs.
Versions of these provisions were included in Section 8 voucher reform legislation considered in
the 111th Congress.18 HUD estimates that these changes would result in an overall reduction in the
cost of HUD rental assistance programs.
Homelessness Assistance
The primary source of federal funding for housing for homeless individuals and families is HUD
Homeless Assistance Grants, which were most recently reauthorized in the 111th Congress as part
of the Helping Families Save Their Homes Act (P.L. 111-22). Prior to enactment of P.L. 111-22,
there were four Homeless Assistance Grants; the new law consolidated three of the grants, so two
grants remain: the Emergency Solutions Grants (ESG) program and the new Continuum of Care
(CoC) program. The ESG program funds the emergency needs of people who are homeless and
homelessness prevention activities. The CoC program focuses on the longer-term needs of
persons experiencing homelessness, including transitional and permanent housing and supportive
services. FY2011 is the first year in which the CoC program is to be implemented.
The President’s budget proposes increased funding for the Homeless Assistance Grants—
approximately $2.4 billion in FY2012 compared to $1.9 billion in FY2011. Funding for the ESG
program would increase from $225 million in FY2011 to $286 million in FY2012, and proposed
funding for the CoC program would be $2 billion in FY2012, compared to about $1.7 billion for
the three programs that are expected to be replaced by the CoC program when it is fully
implemented in FY2012.
18 For more information about Section 8 voucher reform legislation, see CRS Report RL34002, Section 8 Housing
Choice Voucher Program: Issues and Reform Proposals, by Maggie McCarty.
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Department of Housing and Urban Development (HUD): FY2012 Appropriations
Additional funding for homeless persons would also be provided through the Section 8 tenant-
based rental assistance account. Congress has funded Section 8 vouchers for homeless veterans
through the tenant-based account since FY2008, and the President’s budget proposes to provide
$75 million in the tenant-based rental assistance account to fund approximately 11,500 additional
vouchers in FY2012. This would bring the total number of vouchers available to serve homeless
veterans up to more than 40,000. In addition, for the second year in a row the President’s budget
would fund a demonstration program in which HUD would collaborate with the Department of
Health and Human Services (HHS) to fund vouchers for homeless individuals with physical and
mental health issues and with the Department of Education (ED) to fund vouchers for homeless
families with children. The budget proposes $57 million for this purpose in the tenant-based
rental assistance account, which would fund an estimated 7,500 vouchers.
Transforming Rental Assistance
President Obama’s FY2012 budget again requests funding for a new “Transforming Rental
Assistance” initiative, which was initially proposed in the FY2011 budget request. The initiative
is designed to streamline HUD’s multiple rental assistance programs in order to permit owners of
HUD-assisted properties to better leverage outside resources. Specifically, the $200 million
requested would be used to transfer a variety of HUD-assisted housing units with project-based
rental assistance from their existing subsidy types to a new form of project-based rental
assistance. For FY2012, HUD is proposing that TRA be treated as a demonstration, with a
rigorous assessment component, under which up to 236,000 units of public housing and other
rent-assisted units owned by private property owners could convert to long-term Section 8
contracts or project-based Section 8 vouchers. According to HUD’s budget documents, the
demonstration will test conversion under TRA as a tool for preserving public and other assisted
housing. Further, this new form of rental assistance will feature tenant mobility, meaning that
families living in units receiving this new form of project-based rental assistance would have the
option to take their subsidies with them if they choose to move to a new unit of private
market housing.
Section 108: Restructuring
The Section 108 loan guarantee program allows states and entitlement communities to pledge
their annual CDBG allocations as collateral in order to help finance redevelopment activities.
CDBG entitlement communities and states are allowed to borrow, for a term of up to 20 years, an
amount equal to as much as five times their annual CDBG allocations for qualifying activities. As
security against default, states and entitlement communities must pledge their current and future
CDBG allocations.
The Administration’s FY2012 budget proposes restructuring the program and doubling its loan
commitment ceiling from $250 million in FY2010 to $500 million in FY2012. The
Administration’s FY2012 budget justifications noted that given the continued difficulties in the
credit markets, the proposed increase in funding would help local governments finance large-
scale projects at a rate slightly above Treasury yields. In addition to an increase in the loan
commitment ceiling, the Administration proposes revamping the program by charging a fee-based
assessment to borrowers accessing the program, which would eliminate the need for an
appropriated credit subsidy. This proposal was first made by the Administration in its FY2010
budget, but it was rejected by Congress in FY2010 and FY2011 in favor of maintaining the status
quo.
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Department of Housing and Urban Development (HUD): FY2012 Appropriations
Sustainable Communities
The Administration is requesting $150 million to fund its multipronged Sustainable Communities
Initiative (SCI). This is the same amount requested by the Administration and approved by
Congress for FY2010, the first year of the SCI, but it is $51 million more than the amount
appropriated for FY2011. Unlike the FY2010 and FY2011 appropriations for SCI, which were
included as subaccounts under the Community Development Fund (CDF), the Administration is
proposing to fund the SCI as a separate appropriation. The Administration’s FY2012 request
would be used to fund the program’s three components:
• Regional Integrated Planning Grants. The Administration is requesting $100
million that would be competitively awarded to regional organizations in
metropolitan areas to support efforts to develop effective models that would
integrate the planning requirements of various disciplines critical to the
development of sustainable communities. This would be done in collaboration
with the Department of Transportation (DOT), the Environmental Protection
Agency (EPA), and other federal agencies.
• Community Challenge Grants (CCGs). The Administration is requesting $40
million for this component of SCI. Funds would be competitively awarded to
communities to reform existing building codes and zoning ordinances with the
goal of promoting sustainable growth and discouraging inefficient land use
patterns.
• Research and Evaluation. The Administration is requesting $10 million to
support research efforts focusing on quantifying and evaluating the benefits and
tradeoffs related to sustainable communities, including the long-term benefits of
Regional Integrated Planning Grants and Community Challenge Grants. In
addition, funds would be used to support efforts to improve the technical capacity
of entities involved in regional and community planning and development.
It should be noted that, as proposed by the Administration, these three initiatives are to be
administered through the recently created Office of Sustainable Housing and Communities
within HUD.
The Status of FHA
The Federal Housing Administration (FHA) insures mortgage loans made by private lenders to
eligible borrowers. The provision of FHA insurance helps to make mortgage credit more widely
available, and at a lower cost, than it might be in the absence of the insurance. Borrowers of
FHA-insured loans pay both upfront and monthly fees, or premiums, for the cost of the insurance.
The FHA insurance programs are administered primarily through two program accounts in the
HUD budget: the Mutual Mortgage Insurance/Cooperative Management Housing Insurance Fund
account (MMI/CMHI) and the General Insurance/Special Risk Insurance Fund account (GI/SRI).
The Mutual Mortgage Insurance (MMI) Fund is the largest of the FHA insurance funds, and when
there is public discussion of “FHA insurance” or “FHA loans,” it is usually related to the MMI
Fund and the single-family home loans insured under that fund. The Home Equity Conversion
Mortgage (HECM) program, FHA’s reverse mortgage program, is also included in the MMI
Fund, resulting in the establishment of two risk categories in the MMI Fund: the MMI Purchase
and Refinance risk category and the MMI HECM risk category. The GI/SRI Fund provides
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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 issues discussed in this section apply to the single-family mortgage loans insured under the
MMI Fund.19
Credit Subsidy and Offsetting Receipts
Historically, the MMI Fund has had a negative subsidy rate, which means that it generates
negative credit subsidy that can be used to offset the funding needs of other programs in the HUD
budget.20 In other words, the MMI Fund has generally made more money in fees than it has paid
out in claims, and therefore it has not historically needed an appropriation from Congress in order
to operate, although it does traditionally receive a congressional appropriation for administrative
expenses.
As described earlier, the MMI Fund is divided into the MMI Purchase and Refinance risk
category and the MMI HECM risk category.21 The Administration estimates that the Purchase and
Refinance risk category of the MMI Fund will have a negative subsidy rate of -2.16% for
FY2012. The Administration further estimates that this means the Purchase and Refinance risk
category of the MMI Fund will generate about $4.7 billion in negative credit subsidy, meaning
that it will make money for the government.22
19 For more information on the programs in the MMI Fund, see CRS Report RS20530, FHA-Insured Home Loans: An
Overview, by Bruce E. Foote and Katie Jones; and CRS Report RL33843, Reverse Mortgages: Background and Issues,
by Bruce E. Foote.
20 The Federal Credit Reform Act of 1990 (FCRA) provided that the cost of federal loan insurance in a given fiscal year
is the net present value of all expected cash flows from loans insured in that year. For the MMI fund, the cash inflows
are mainly the insurance premiums paid by borrowers, and the cash outflows are mainly the payments to lenders for the
cost of loan defaults. The net value of these cash flows is expressed as a percentage of the volume of insured loans and
is referred to as the subsidy rate. If the cash inflows exceed the cash outflows, the subsidy rate is expressed as a
negative number because net income from business type activities is shown in the budget as negative outlays. If the
cash outflows exceed the cash inflows, the subsidy rate is expressed as a positive number. When the subsidy rate is
applied to the expected loan volume in a given year, the result is the amount of credit subsidy that a federal credit
program needs over the life of the loans. The budget rules require an appropriation of this credit subsidy in the budget
year that the loans are originated. However, actual cash flows over the life of the loans are likely to differ from those
projected in the first year. Therefore, agencies are required to periodically revise the initial subsidy estimates to include
actual experience on the loans.
21 The MMI Fund also includes the FHA Refinance Program, a program that launched in September 2010. This
program is designed to allow certain borrowers of non-FHA-insured mortgages who are current on their mortgages, but
owe more than their homes are worth, to refinance into new FHA-insured mortgages, provided that the original lender
or investor agrees to write off a portion of the original principal balance. The FHA Short Refinance Program is its own
risk category in the MMI Fund. According to a HUD Economic Impact Analysis, the FHA Short Refinance Program is
expected to generate positive credit subsidy and therefore cost the government money. (See U.S. Department of
Housing and Urban Development, Economic Impact Analysis of the FHA Refinance Program for Borrowers in
Negative Equity Positions, http://www.hud.gov/offices/adm/hudclips/ia/ia-refinancenegativeequity.pdf.) However,
since Treasury has agreed to use up to $8 billion in TARP funds to help cover any losses sustained through this
program, the FHA Refinance risk category is estimated to have neither a positive nor negative credit subsidy rate for
HUD in FY2012. For more information on the FHA Refinance Program, see CRS Report R40210, Preserving
Homeownership: Foreclosure Prevention Initiatives, by Katie Jones.
22 The Congressional Budget Office’s estimates of credit subsidy may differ from the Administration’s estimates.
Furthermore, see the Appendix for a discussion of a proposal to direct CBO to use a different method to score FHA
receipts, and the implications of such a change for HUD’s budget.
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The Administration estimates that the MMI HECM risk category will have a negative credit
subsidy rate of -1.52% and will generate about $300 million in negative credit subsidy in
FY2012. The MMI Fund in total, then, is estimated to generate about $5 billion in negative credit
subsidy in FY2012 (the $4.7 billion in credit subsidy from the Purchase and Refinance risk
category plus the $300 million from the HECM risk category).
Financial Status and FHA Reforms
As is generally the case when the private market tightens its lending standards, the demand for
FHA-insured mortgages has been increasing in the past few years. FHA estimated that it insured
nearly 40% of home purchase loans in 2010, compared to 4.5% in FY2005.23 FHA’s higher loan
volume means a higher volume of mortgage insurance premiums paid into the MMI Fund, and
given that the proportion of loans to borrowers with higher credit scores has risen in recent years,
FHA believes that its newer mortgages are of a better credit quality than past mortgages.24
However, the default rate on FHA-insured loans remains high, particularly on loans originated in
earlier years, and this puts some strain on the MMI Fund.
In the Cranston-Gonzales National Affordable Housing Act of 1990 (P.L. 101-625), Congress
mandated that within 10 years after enactment the MMI Fund must have a capital reserve ratio of
at least 2%, and that it must maintain that ratio at all times going forward. The capital reserve
ratio is a measure of the resources that FHA has on hand to cover unexpected losses, in addition
to the amount FHA has set aside for expected losses based on its current book of business. During
FY2009, the capital reserve ratio was estimated to be 0.53%. This was the first time since the
requirement was put into effect that the capital reserve ratio had fallen below 2%.
In FY2010, FHA made a number of changes aimed at increasing its capital reserves. These
included both increasing the premiums that borrowers pay, and making changes to underwriting
criteria and lender enforcement designed to strengthen the credit quality of FHA-insured loans.
The FY2012 HUD Budget Justification indicated that HUD would pursue an additional increase
in the annual FHA insurance premium paid by borrowers; this increase went into effect in April
2011.25 The increased premium is expected to further strengthen FHA’s capital reserves.
23 U.S. Department of Housing and Urban Development, FHA-Insured Single-Family Mortgage Originations and
Market Share Report 2010 – Q3, p. 3, http://www.hud.gov/offices/hsg/rmra/oe/rpts/fhamktsh/fhamktq3_10.pdf.
24 U.S. Department of Housing and Urban Development, FHA MMIF Programs Quarterly Report to Congress for
FY2010 Q4, p. 5, http://www.hud.gov/offices/hsg/rmra/oe/rpts/rtc/fhartc_q4_2010.pdf.
25 U.S. Department of Housing and Urban Development, FHA Mortgagee Letter 11-10, February 14, 2011,
http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/11-10ml.pdf.
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Appendix. Related Legislation
The Budget Control Act of 2011
On August 2, 2011, President Obama signed the Budget Control Act of 2011 (BCA, P.L. 112-25)
into law following lengthy negotiations surrounding the national debt limit. The act included
provisions authorizing increases in the debt limit, as well as provisions designed to reduce the
federal deficit. One way the act attempts to reduce deficits is by establishing discretionary
spending caps, which limit the amount of money that can be spent through the annual
appropriations process over the next 10 years. These statutory budget caps are enforceable via a
process known as sequestration. If the caps are exceeded in any year, under sequestration the
executive branch is required to proportionally reduce funding for all agencies, accounts,
programs, projects, and activities by the amount necessary to reduce total budget authority to the
level authorized under the caps. Some programs are exempted from sequestration or receive
special treatment; none of HUD’s discretionary programs are exempted or receive special
treatment.
The total amount of discretionary funding available under the caps in FY2012 will be less than
the amount that was available in FY2011, but more than the amount that was approved under the
House budget resolution (discussed in the next section of this Appendix). How these caps will
affect the Transportation-HUD appropriations subcommittees is not yet known. It is reasonable to
expect, however, that the Transportation-HUD subcommittees will receive reduced funding in
FY2012 (see discussion in the next section of this Appendix). Further, if the budget caps are
violated in FY2012, then funding for HUD programs will be subject to sequestration.
The BCA included several other deficit reduction provisions that do not directly affect HUD but
could have implications for the department. The BCA created a deficit reduction “super
committee,” which is charged with finding at least an additional $1.2 trillion in deficit savings.
The Joint Select Committee on Deficit Reduction must report its recommendations by November
23, 2011; it is unknown whether changes to HUD programs or reductions in their funding levels
will be included in those recommendations. If Congress does not enact the recommendations by
January 2012, or the committee fails to meet the target of $1.2 trillion in savings, then an
automatic sequestration will take place in FY2013 and the discretionary budget caps for FY2014-
FY2021 will be reduced in order to achieve the desired $1.2 trillion in savings.26
FY2012 Budget Resolutions
The annual budget resolution acts as an agreement between the House and Senate establishing
parameters within which Congress can consider legislation dealing with spending and revenue. In
addition to setting forth enforceable levels of spending, revenue, and public debt, the budget
resolution provides spending allocations to House and Senate committees. Once the House and
the Senate Appropriations Committees receive a committee allocation in the budget resolution,
they divide their allocation of discretionary budget authority among their 12 subcommittees. Each
subcommittee is responsible for one of the 12 regular appropriations bills. The allocations to each
26 For more information about the BCA, see CRS Report R41965, The Budget Control Act of 2011, by Bill Heniff Jr.,
Elizabeth Rybicki, and Shannon M. Mahan.
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of the subcommittees are generally referred to as 302b allocations. While a budget resolution and
subcommittee allocations alone cannot be used to determine how much funding any individual
account or program will receive, they do set the parameters within which decisions about funding
for individual accounts and programs can be made.
The House and the Senate budget committees began their consideration of the FY2012 budget
resolution when they received the President’s budget. As part of the formulation process, the
committees receive information from executive branch officials, Members of Congress, and the
public, as well as “views and estimates” statements from authorizing committees with jurisdiction
over spending and revenues. The target date for completion of the budget resolution is April 15.
On April 6, 2011, the House Budget Committee reported its FY2012 budget resolution
(H.Con.Res. 34). It was agreed to by the House on April 15, 2011. On May 10, 2011, the House
Appropriations Committee released draft subcommittee allocations.27 The THUD subcommittee
received an allocation of $47.7 billion in FY2012, which is $8.7 billion (or 15%) lower than the
allocation it received in FY2011 ($56.4 billion). It will be up to the THUD subcommittee to
determine how to allocate the funding between HUD, DOT, and the other independent agencies
funded in the bill. However, HUD’s budget is made up almost entirely of discretionary funding,
whereas only about a quarter of DOT’s budget is discretionary. And, even though DOT’s budget
is larger than HUD’s, funding for HUD makes up the vast majority of discretionary funding
allocated by the THUD subcommittee (about 75% in FY2011). As a result, if THUD’s funding
allocation is reduced, HUD’s budget is likely to receive the largest dollar-amount reduction.
In addition to setting overall spending levels, H.Con.Res. 34 contains another provision that may
have implications for the THUD subcommittee and potentially for HUD’s budget in FY2012.
Section 408 directs the Congressional Budget Office, at the direction of the chairman of the
Budget Committee, to use a different method when scoring FHA receipts. According to CBO, if
this alternate scoring mechanism was used in FY2012, the FHA account would not produce the
$5 billion in offsetting receipts estimated in the President’s budget, but would instead require
appropriations.28
Given that the FY2012 discretionary spending cap enacted under the BCA (discussed in the prior
section of this Appendix) is higher than those adopted under H.Con.Res. 34, it is possible that the
House will issue revised subcommittee allocations, which may include an increase for
Transportation-HUD.
While the Senate Budget Committee has not yet considered an FY2012 budget resolution,29 the
FY2012 discretionary spending cap, combined with specific Senate procedural provisions enacted
under the BCA, serve as an alternate to a formal Senate budget resolution for FY2012.
Specifically, the procedural provisions of the BCA require the chair of the Senate Budget
Committee to establish committee spending allocations, subject to the discretionary spending
limit, and these levels are to have the same force and effect as if they were included and
associated with a budget resolution for FY2012 adopted by Congress.30
27 http://www.appropriations.house.gov/_files/51111FY2012SubcommitteeAllocations302bs.pdf.
28 Letter from the Congressional Budget Office to Representative Paul Ryan, May 18, 2011, available at
http://www.cbo.gov/ftpdocs/120xx/doc12054/05-18-FHA_Letter.pdf.
29 On May 25, 2011, the Senate rejected a motion to proceed to H.Con.Res. 34.
30 For more information about the BCA, see CRS Report R41965, The Budget Control Act of 2011, by Bill Heniff Jr.,
(continued...)
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Author Contact Information
Maggie McCarty, Coordinator
Katie Jones
Specialist in Housing Policy
Analyst in Housing Policy
mmccarty@crs.loc.gov, 7-2163
kmjones@crs.loc.gov, 7-4162
Libby Perl
Bruce E. Foote
Specialist in Housing Policy
Analyst in Housing Policy
eperl@crs.loc.gov, 7-7806
bfoote@crs.loc.gov, 7-7805
Eugene Boyd
Analyst in Federalism and Economic Development
Policy
eboyd@crs.loc.gov, 7-8689
(...continued)
Elizabeth Rybicki, and Shannon M. Mahan.
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