The Budget of the Department of Housing and Urban Development (HUD) FY1999

The Budget of the Department of Housing and Urban Development (HUD) FY1999

98-345 E
CRS Report for Congress
Received through the CRS Web
The Budget of the Department of Housing and
Urban Development (HUD) FY1999
Updated August 3, 1998
Susan Vanhorenbeck and Bruce E. Foote
Analysts in Housing
Pauline Smale
Economic Analyst
Economics Division
Congressional Research Service ˜ The Library of Congress

ABSTRACT
This report provides an overview of FY1999 budget request for the Department of Housing
and Urban Development (HUD). Initially, the report is limited to the Administration’s
budget request for HUD. The report is updated periodically as legislative action occurs on
FY1999 appropriations for HUD and as action occurs on authorizing legislation to
implement the budget proposals.

The Budget of the Department of Housing and Urban
Development (HUD) FY1999
Summary
In his first submission of a budget for the Department of Housing and Urban
Development (HUD) in FY1999, President Clinton asked for $32.06 billion, an
increase of approximately $8 billion over the HUD appropriation for FY1998. The
Office of Management and Budget (OMB) in its “passback” response to the
President’s request, concluded that $23.76 billion would be a feasible amount for
HUD in FY1999, even though that amount would be a decrease of $325 million from
the FY1998 appropriation.
In his final budget submission to Congress, President Clinton requested $25.2
billion for HUD in FY1999, a $1.5 billion increase over FY1998 appropriations.
High points of the President’s budget request for HUD include: increases in
affordable housing; 103,000 new housing vouchers; increases in the Community
Development Block Grant (CDBG) and Community Empowerment funds; extensions
of the HOME program and the creation of a HOME “bank”; increases in housing
assistance for the homeless and persons with AIDS; and changes in the FHA
mortgage credit program.
S. 2168, as reported by the Senate Committee on Appropriations, recommended
a budget of $24.1 billion for HUD in FY1999. This amount is $1.1 billion less than
the President's request but $2.7 billion more than the FY1998 appropriation. In its
report (S.Rept. 105-216), the Committee expressed some concerns with the agency
(HUD) and the need for it to consolidate or reform existing programs rather than
undertake new initiatives. S. 2168 passed the Senate on July 17, 1998.
The House bill, H.R. 4194, as reported by the House Committee on
Appropriations, recommended a budget of $26.55 billion for HUD in FY1999. This
amount is $1.7 billion more than the President's request and $ 5.15 billion more than
the FY1998 appropriation. In its report (H.Rept. 105-610), the House Committee
expresses concerns with HUD's accounting of the Section 8 funds and unexpended
balances in other HUD subsidized programs.
Several amendments were added to the House bill before it was passed. Three
amendments that concern HUD are the attachment of H.R. 2 (the housing
authorization bill) to H.R. 4194; the transfer of $304 million recommended by the
House Committee for FHA to VA for medical care; and the transfer of $21 million
recommended by the House Committee for Housing for Persons with AIDS
(HOPWA) to VA for medical care. The amount of funding for HUD in FY1999 as
passed by the House on July 29, 1998, is $26.22 billion.
This report is updated as legislative action occurs on FY1999 appropriations for
HUD.

Contents
Section 8 Housing Vouchers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Welfare-To-Work Vouchers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Vouchers For the Elderly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Vouchers For the Homeless . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Vouchers For the Expansion and Preservation of the Section 8 Program . . 3
Homeownership Empowerment Vouchers . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 8 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 8 Contract Renewals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 8 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Housing Tenant Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Regional Opportunity Counseling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 8 Legislative Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Public Housing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Public Housing Operating Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Public Housing Capital Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Revitalization of Severely Distressed Public Housing (HOPE VI) . . . . . . . . 8
Drug Elimination Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Community Development and Empowerment . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Housing Needs of Special Persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Lead-based Paint Reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Youthbuild . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Housing Opportunities for Persons with AIDS (HOPWA) . . . . . . . . . . . . 10
HUD-Administered Homeless Assistance . . . . . . . . . . . . . . . . . . . . . . . . . 11
Housing for Special Populations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Growth in Homeownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Increasing FHA Loan Limits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
The HOME Investment Partnership Program . . . . . . . . . . . . . . . . . . . . . . 13
The HOME Loan Guarantee Program . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Homeownership Zones . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Other Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Native American Block Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Fair Housing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Office of Rural Housing and Economic Development . . . . . . . . . . . . . . . . 16
Program Reforms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

The Budget of the Department of Housing and
Urban Development (HUD) FY1999
In his submission of a budget for the Department of Housing and Urban
Development (HUD) in FY1999, President Clinton asked for $32.06 billion, an
increase of approximately $8 billion over the HUD appropriation for FY1998. The
Office of Management and Budget (OMB) suggested that $23.76 billion would be
feasible for HUD in FY1999. In his final budget submission to Congress, President
Clinton requested $25.2 billion for HUD in FY1999, a $1.5 billion increase over the
FY1998 appropriations.
In S. 2168, the Senate recommends a $24.1 billion budget for HUD in FY1999;
$1.1 billion below the President's recommendation, but $2.7 billion more than
appropriated for FY1998. S. 2168 passed the Senate on July 17, 1998.
In H.R. 4194, the House recommends $26.22 billion for HUD in FY1999, a $1.0
billion increase over the President's recommendation and a $4.77 billion increase
over the amount appropriated for FY1998. H.R. 4194 passed the House on July 29,
1998.
Section 8 Housing Vouchers
The President’s budget requests $585 million to fund 103,000 new rental
housing vouchers. If enacted, this would be the first time since 1994 that new
vouchers to help poor families pay for housing costs were funded. Of the 103,000
requested vouchers, 50,000 would be used for the Welfare-To-Work initiative,
34,000 would be provided to move homeless persons into permanent housing, 8,800
would be targeted for elderly persons, and approximately 10,600 additional Section
8 vouchers for low-income families would be provided.
The Senate bill does not agree with the President's request for the funding of
Section 8 vouchers in FY1999. The Senate is concerned with providing vouchers to
disabled families living in projects designated for occupancy by the elderly, and in
providing vouchers to residents who are being displaced in assisted housing. It
supports vouchers for Welfare-To-Work and self-sufficiency initiatives, but only to
a limited number of communities on a demonstration basis.
In H.R. 4194, the House agrees with the Senate in its concern for providing
vouchers for disabled tenants living in elderly-designated housing and for residents
who are being displaced. The bill also supports vouchers for welfare-to-work
initiatives.

CRS-2
Welfare-To-Work Vouchers
A top priority of the HUD budget this year is support for the creation of jobs and
economic opportunity. In an effort to aid families meet the transition from welfare-
to-work, $283 million would be provided to fund 50,000 vouchers reserved for
families participating in the Welfare-To-Work initiative. HUD believes that “in
many parts of the country, jobs are being created far from where many welfare
recipients live. Three quarters of welfare recipients live in cities or rural areas, and
the vast proportion of jobs are being created in suburban areas. Even when jobs are
available, long public transit commutes pose substantial barriers for welfare
recipients in finding and keeping jobs.”
1 The welfare-to-work vouchers would enable
families to live closer to their places of employment.
These 50,000 vouchers would be used to provide stable housing for families
initially eligible for, or currently receiving, Temporary Assistance for Needy Families
(TANF), or families that have received TANF within the past year, and are now
trying to enter the workforce and become self-sufficient. The vouchers would be
available on a competitive basis to local housing agencies, including Indian housing
authorities, which will develop plans to use the new vouchers to support families in
the transition from welfare to work. In developing the plan, the agency is to confer
with state, local, or Tribal welfare agencies. “The agencies will have great flexibility
to design and operate the welfare-to-work voucher program within broad national
guidelines.”2
The Senate recommends that $40 million be funded for incremental Welfare-
To-Work and self-sufficiency vouchers, but limits their use to eight communities
who would participate in a demonstration program. These vouchers would be
available to families that have agreed to participate in the programs, and are now on
public housing waiting lists.
The House bill recommends $100 million for incremental Welfare-To-Work and
self-sufficiency vouchers, and it does not limit the use of these vouchers to a
demonstration program.
Vouchers For the Elderly
The HUD budget request for FY1999 seeks funding for 8,800 incremental
vouchers for the elderly. The Administration is requesting $50 million to fund these
additional vouchers, which would be administered through the HOME program. The
Administration believes that by providing vouchers for the elderly, HUD would be
able to serve a greater number of households with less expense. The Senate bill does
not contain this proposal. The House does not agree with the President's request of

1 U.S. Department of Housing and Urban Development Fiscal Year 1999 Budget Summary:
Closing the Opportunity Gap. February, 1998. p. 9.

2 U.S. Department of Housing and Urban Development: Congressional Justifications for
1999 Estimates. February, 1998., p. Q-1

CRS-3
combining funding for the elderly with the HOME program, and H.R. 4194 does not
contain this proposal.
For further discussion on this issue please see the section of this report entitled
“Housing for Special Populations.”
Vouchers For the Homeless
In recent years, reducing homelessness has become one of the top priorities of
HUD. In his budget request for FY1999, the President is seeking $192 million for
34,000 vouchers for the homeless which would be available for homeless families
that have been in emergency and transitional housing; have received housing
counseling; and are now ready to move once again into permanent housing. This
proposal is not contained in S. 2168 or H.R. 4194.
For further information on the proposed vouchers for the homeless, please see
the section of this report entitled “HUD Administered Homeless Assistance.”
Vouchers For the Expansion and Preservation of the Section 8
Program
The Administration is requesting $60 million for approximately 10,655
incremental vouchers and certificates for various Section 8 programs in FY1999.
These programs include the HUD family unification program and the federal witness
relocation program. Some of the vouchers would also be used for the settlement of
housing litigation proceedings as needed.
The President’s request also included $373 million for the protection of housing
tenants where either their Section 8 contracts are not being renewed, or where the
management of the developments in which they live are opting-out of the program.
Some of this funding (a definite amount was not requested) will be used for an
estimated 17,000 vouchers for households affected by lack of contract renewals or
prepayment by owners.
S. 2168 recommends $40 million for incremental vouchers for the
demonstration Welfare-To-Work and self-sufficiency programs. It also recommends
a total of $433.5 million for Section 8 relocation assistance in FY1999. This funding
would be used to provide "sticky vouchers" for tenants who want to remain in
housing previously eligible under the Preservation program, or tenants who occupy
projects that are being prepaid. They may also be used for the family unification
program and the witness relocation program.
The House bill, H.R. 4194, provides $100 million for Welfare-To-Work
vouchers. It recommends that $433.5 million be provided for Section 8 relocation
assistance, the same amount as contained in the Senate bill.

CRS-4
Homeownership Empowerment Vouchers
In its quest to increase the availability of homeownership for all families, the
Administration is proposing the use of Section 8 vouchers for mortgage payment
assistance by certain households. The Administration believes that there are low-
income families that would be capable of becoming homeowners if they could use
their Section 8 subsidy to pay a mortgage rather than a landlord.
Under the proposed plan, in order for a family to qualify for the empowerment
vouchers, it must have a source of income from employment, and it must be able to
contribute to the downpayment of the home. HUD believes that by empowering
these households to become homeowners, HUD would help to promote self-
sufficiency and better communities.
Legislation would be required to permit the use of Section 8 vouchers for
homeownership. There is no provision in either the House or Senate bill for
homeownership empowerment vouchers.
Section 8 Contracts
Section 8 rental assistance is requested under the Housing Certificate Fund for
FY1999. The President has asked for a total of $8.98 billion to be used as follows:
$7.2 billion for Section 8 contract renewals; $1.3 billion for Section 8 amendments;
$60 million for 10,655 incremental rental units (vouchers described above); $373
million for the protection of housing tenants affected by non-renewals; and $20
million for regional opportunity counseling.
The President’s budget request for HUD also contains legislative initiatives
which the Department believes will provide additional savings under the Section 8
program.
The Senate bill, S. 2168, recommends $10.0 billion for Section 8 assistance in
FY1999: $9.54 billion for expiring contracts, and $433.5 million for Section 8
relocation assistance of which $40 million would be used for the Welfare-To-Work
demonstration program.
The House bill, H.R. 4194, provides $10.3 billion for Section 8 in FY1999: $9.6
billion for expiring contracts; $97 million for contract amendments; $433.5 million
for Section 8 relocation assistance, and $100 million for Welfare-To-Work vouchers.
Section 8 Contract Renewals
HUD is proposing to renew all Section 8 contracts that are due for expiration
in FY1999, assuming the cooperation of the project owners. The President’s request
of $7.2 billion for this purpose would be used to renew expiring contracts for
vouchers, certificates, new construction or substantial rehabilitation, moderate
rehabilitation, property disposition and preservation contracts. HUD would continue
to renew these contracts through the mark-to-market restructuring program

CRS-5
established in the VA-HUD FY1998 Appropriations Act. HUD had identified
approximately $3.7 billion in recaptured Section 8 reserve funds that it planned to use
to renew contracts in FY1999. These reserves would have brought the total funding
available for renewals to $10.9 billion, but P.L. 105-174, the Supplemental
Appropriations and Rescissions Act of FY1998, rescinded $2.3 billion of the Section
8 reserves.
The Senate bill recommends $9.54 billion for Section 8 contract renewals in
FY1999. The Senate Committee has stated that it believes this amount sufficient to
renew all Section 8 contracts up for renewal in FY1999.
The House bill provides $9.6 billion for Section 8 contract renewals in FY1999.
Section 8 Amendments
Originally, Section 8 contracts were made for new construction and substantial
rehabilitation and were written for 40-year terms. As a result, it was very difficult
to provide budget authority to adequately fund these contracts over time, and many
of them need further funding to continue in operation as affordable housing. Section
8 amendments to these contracts provide the housing owner with additional funding
needed to maintain the property.
The President has requested $1.37 billion in budget authority for contract
amendments in FY1999. An additional $463 million of recaptured Section 8 funds
would be added to the President’s request, bringing the total for contract amendments
to $1.8 billion in FY1999.
The Senate bill does not agree with the President's request for $1.37 billion for
Section 8 amendments for FY1999.
The House recommends $97 million for Section 8 contract amendments in
FY1999.
Housing Tenant Protection
The Administration realizes that not all owners of Section 8 assisted housing
may be willing to renew their contracts. The Housing Certificate Fund will provide
funding for those families that are affected if a contract renewal does not take place.
The President is requesting $373 million for the housing tenants’ protection in
FY1999. This funding would be used to provide tenants who are displaced or whose
rents will increase as a result of the restructuring of the Section 8 program. The
Administration estimates that this amount would be sufficient to aid approximately
32,000 families who may find themselves in this situation.
The Senate and House bills recommend $433.5 million for this program in
FY1999.

CRS-6
Regional Opportunity Counseling
The Administration is trying to reduce concentrations of poverty by increasing
the opportunities of affordable housing for low-income families. In his budget
request for HUD, the President is asking for $20 million in new funding in the
Housing Certificate Fund for the Regional Opportunity Counseling program (ROC).
ROC would award funds through a competitive process to public housing
authorities and non-profit organizations in a 10 to 20 metropolitan targeted area.
These authorities and organizations would counsel families in training in household
budgets, aid them with landlord outreach, payments to landlords, and assist them
with security and utility deposits, ultimately aiding them in moving to neighborhoods
that offer higher quality housing, education and employment opportunities.
The Senate bill does not contain this proposal; The House bill provides $10
million for regional counseling.
Section 8 Legislative Proposals
The President’s request contains several legislative proposals which the
Administration believes would bring about a savings in the Section 8 outlays. These
include: delaying the reissuance of vouchers for a 3-month period; eliminating the
preference rules for Section 8 assistance; reverting any subsidy saved through paying
a lower rent with voucher assistance back to HUD; setting minimum monthly rents
at $25; limiting one-person voucher or certificate holders to assistance for an
efficiency apartment where possible; carefully verifying the income of tenants as they
apply for housing to check for under-reporting; and, the assessment of Section 8
management for rent reasonableness.
The Senate bill agrees that the legislative proposals contained in the FY1998
appropriations should be continued in the FY1999 appropriations.
The House bill continues FY1998 legislative changes of minimum rents and 3-
month delay in issuance of Section 8 certificates and vouchers, and provides a lower
subsidy for one-person vouchers and efficiency apartments.
Public Housing
HUD began a serious transformation of the public housing system in FY1993,
and the FY1999 budget request continues this endeavor. HUD is pursuing this
transformation through various administrative, regulatory, and legislative changes
including advances in management reform, the demolition of the worst
developments, helping troubled projects to become viable once again, promoting
mixed-income projects, and aiding tenants in achieving self-sufficiency.

CRS-7
The FY1999 budget request proposes assistance for the public housing operating
fund, the public housing capital fund, the revitalization of severely distressed public
housing (HOPE VI), and drug elimination grants.
Public Housing Operating Fund
The President requested $2.818 billion for the public housing operating fund for
FY1999. This amount supplemented by a $113 million anticipated carryover would
provide $2.931 billion for the fund in FY1999, a $31.6 million increase over the
FY1998 level.
Both the Senate and House bills recommend $2.818 billion for the public
housing operating fund in FY1999.
Operating subsidies are needed by even the best managed housing authorities.
The amounts of these subsidies are calculated through the Performance Funding
System (PFS) of HUD for approximately 3,200 housing authorities nationwide. The
PFS sets the level of the subsidy necessary for the housing authority to provide
decent, safe and sanitary housing for lower-income households through the provision
of maintenance, utilities and protective services needed within the development. In
FY1999, HUD projects that housing authorities will receive enough funding to cover
60% of these operating expenses, and the remainder will be derived through rental
receipts.3
Public Housing Capital Fund
The President requested $2.55 billion for the public housing capital fund in
FY1999, an increase of $50 million over the FY1998 level. The $2.55 billion
includes $2.45 billion for the capital grants and $100 million set-aside for technical
assistance.
The Senate bill agrees with the President's request of $2.55 billion.
The House bill, H.R. 4194, provides $3.0 billion for the public housing capital
fund with a $100 million set-aside for technical assistance and a $5 million set-aside
for the Tenant Opportunity Program (TOP), rather than funding TOP in the
Community Development Block Grant (CDBG) program as done in the past.
The public housing capital fund consolidates public housing development,
public housing modernization, the major reconstruction of obsolete projects, public
housing amendments, and lease adjustments. Funding can be used to build
replacement units, upgrade the present housing stock, demolish obsolete units, and
provide assistance to displaced families.

3 U.S. Department of Housing and Urban Development: Congressional Justifications for
1999 Estimates., Part 1. February, 1998. p. S-1.

CRS-8
The funding set-aside for technical assistance would be used for contract
expertise, training, assistance to troubled authorities, and independent physical
inspections.

CRS-9
Revitalization of Severely Distressed Public Housing (HOPE VI)
The President is requesting $550 million for the revitalization of severely
distressed public housing in FY1999, the same amount as funded in FY1998. The
requested amount includes $457 million for grants to demolish 15,000 uninhabited
units and to replace them with 4,000 hard replacement (constructed) units and $93
million for the rental assistance of 10,000 tenant-based rental units. Public housing
families who are to be assisted with these rental housing certificates are usually large
families with children, and require two to four bedroom units. They also usually
receive some form of relocation counseling and assistance in finding suitable housing
as soon as possible.
The HOPE VI program is a principal effort by HUD to change to image of public
housing from one of poorly-managed high rise buildings and squalor, to one of good
design, sound management, and incentives for tenant self-sufficiency.
“HOPE VI grants are targeted towards public housing projects that require
demolition, replacement, major redesign or reconstruction to correct major
deficiencies, including high population density, deferred maintenance, physical
deterioration, or obsolescence. In addition, they are directed towards projects
predominantly occupied by families with children who are at risk ( due to
unemployment, teenage pregnancy, single-parent households, long-term dependency
on public assistance and minimal education) in areas with substantial crime activity
and high vacancy rates.”
4
HUD has approved the demolition of 62,175 obsolete or severely distressed units
from 1993 to 1997.
The Senate and House bills recommend $600 million for HOPE VI in FY1999,
a $50 million increase over the President's request.
Drug Elimination Grants
The President has requested $310 million for drug elimination grants in FY1999,
the same level as appropriated for FY1998. This request includes $243.8 million for
public and Indian housing authority grants for anti-drug and anti-crime efforts; $16.2
million for federally-assisted low-income housing grants (for Section 8, Section 236,
etc. projects); $20 million for operation Safe Home; $20 million for the New
Approach Anti-Drug program; and $10 million for technical assistance.
The Senate bill agrees with $310 million for drug elimination grants in FY1999
with the following set asides: $10 million for technical assistance, $20 million for
Operation Safe Home, and $20 million for the New Approach Anti-Drug program.
The House bill provides $290 million for drug elimination grants with $20
million set-aside for Operation Safe Home and $10 million for technical assistance.

4 U.S. Department of Housing and Urban Development: Congressional Justifications for
1999 Estimates., p.U-2.

CRS-10
Drug elimination grants are used to combat the concentration of crime in and
around public housing and low-income housing developments. This is usually done
through increased police coverage and heightened security measures, as well as
training residents for volunteer resident patrols. Many developments have also used
drug elimination grants to educate the youth in public housing developments on drug
prevention and how to deter gang activity.
Community Development and Empowerment
The President’s budget request is seeking an increase in funding to continue
efforts at community development and empowerment of communities. HUD has
stated that its goal is “not to tell cities what to do, but to help communities do what
they want to do”. Funding is provided
5
for the Community Development Block Grant
Program (CDBG) and other initiatives, to encourage cities and counties to work
together.
“CDBG funds are allocated to 900 communities, all states and urban counties
based on estimates of need and poverty rates. CDBG activities must meet one of three
broad national objectives: benefit low-income persons; aid in the prevention or
elimination of blight and slums; or, meet other particularly urgent community
development needs. At least 70 percent of all CDBG funds must be used for activities
that benefit persons of low-and moderate-income.”6
The President is requesting $4.725 billion for the CDBG program in FY1999, a
$50 million increase over the enacted FY1998 level. The Senate bill recommends
$4.75 billion for the CDBG program in FY1999, $50 million more than requested by
the President. The House bill recommends $4.725 billion for CDBG in FY1999.
Although the CDBG program may be the largest one in the HUD budget aimed
at aiding communities in meeting their development goals, it is not the only one.
There are also provisions for Empowerment Zones. Brownfields, and Regional
Connections Initiative. For further information on CDBGs and other community
development programs, please see CRS Report 96-503, Community Development
Block Grants: An Overview, by Eugene Boyd.
Housing Needs of Special Persons
Included in this section are the President’s requests for funding for five housing
programs: Lead-based Paint Reduction, Youthbuild, Housing Opportunities for
Persons with AIDS (HOPWA), HUD Administered Homeless Assistance, and
Housing for Special Populations (the elderly and disabled).

5 U.S. Department of Housing and Urban Development Fiscal Year 1999 Budget Summary:
Closing the Opportunity Gap., p. 2.

6 U.S. Department of Housing and Urban Development Fiscal Year 1999 Budget Summary:
Closing the Opportunity Gap., p. 10.

CRS-11
Lead-based Paint Reduction
The President is requesting $85 million for the Lead-based Paint Reduction
program in FY1999, $25 million more than the enacted FY1998 level. In the FY1998
budget the program was funded as a set-aside in the CDBG program.
The $85 million for the program in FY1999 is to be divided in the following
way: $50 million for grants to state and local governments to perform lead abatement
activities, particularly in housing occupied by young low-income children, $10 million
for technical assistance and technical studies, and $25 million for a new “Healthy
Homes Initiative” which will address housing-related childhood diseases and injuries.
The Senate bill recommends funding the Lead-based Paint Reduction program
as a $60 million set-aside under the CDBG program, not as a separate program in
FY1999. The program was a set-aside in CDBG in the FY1998 appropriations.
The House bill provides $80 million: $60 million for lead hazard reduction grants
and $20 million for the President's "Healthy Homes" initiatives program. These are
funded as a separate program, not as a CDBG set-aside.
Youthbuild
The Youthbuild program was funded as a $35 million set-aside of the CDBG
program in FY1998. This year, the President is requesting that Youthbuild be funded
as an independent program with $45 million. Youthbuild provides on-site
construction training and off-site academic and job skill development for youth
between the ages of 16 and 24 who are high school drop-outs, and who are
impoverished, from broken homes or on welfare.
HUD estimates that $45 million would be sufficient to train between 5,000 and
6,000 youth in FY1999. The Senate bill recommends retaining Youthbuild as a $40
million set-aside under the CDBG program in FY1999. The House bill would retain
Youthbuild as a $35 million set-aside under the CDBG program.
Housing Opportunities for Persons with AIDS (HOPWA)
This program provides help to states and localities to meet the housing needs of
individuals with HIV/AIDS and their families. As required by authorizing legislation,
90 percent of appropriated funds are to be distributed by formula to qualifying states
and metropolitan areas on the basis of the number of reported incidences of AIDS.
The remaining 10 percent is distributed through national competition for funds.7
Support is provided in the form of grants to states, local governments, and
nonprofit organizations. Eligible activities include: short-term supported housing and
services; community residences and services; single room occupancy dwellings; rental
assistance; program development, and administrative costs.

7 U.S. Department of Housing and Urban Development: Congressional Justifications for
1999 Estimates, p. L-2.

CRS-12
The President has requested that the HOPWA program be funded with an
appropriation of $225 million for FY1999. This would be an increase of 10 percent
over the FY1998 appropriation of $205 million.
S. 2168 would also provide $225 million for HOPWA in FY1999. The Senate
Committee requests HUD to submit a report on the HOPWA program, including a
review of all the component costs. The House bill, H.R. 4194, originally provided the
same amount as the Senate bill for HOPWA, but when the bill was brought up on the
floor, an amendment was made and adopted to fund it at $204 million and to transfer
the remaining $21 million to VA for veteran medical care.
HUD-Administered Homeless Assistance
The President’s budget request for homeless assistance includes funding for both
grants and Section 8 vouchers. The President proposes $958 million for Homeless
Assistance Grants in FY1999, an increase of 15 percent over the FY1998
appropriation of $823 million. These funds would be distributed through HUD’s
“Continuum of Care” strategy. This strategy consolidates HUD’s six McKinney Act
homeless assistance programs into a community-based approach providing housing
and services for the homeless. An additional $192 million is requested for 34,000
new Section 8 vouchers targeted to homeless families or individuals who are ready to
make the transition from temporary to permanent housing after counseling. One
percent of the voucher funding would be available for technical assistance.
The Senate bill recommends $1 billion for homeless assistance grants, and does
not provide Section 8 vouchers for the homeless. The Committee recommends that
30 percent of the funding for homeless assistance grants be used for permanent
housing for the homeless. The Committee also requests a HUD study on the costs of
HUD homeless programs, and an analysis on the "continuum of care" strategy.
The House bill recommends $975 million for homeless assistance grants and
does not provide Section 8 vouchers for the homeless. The House Committee
recommends allowing HUD to use up to 1% of appropriated funds for technical
assistance and systems support. In addition, the Committee encourages HUD to
conduct various studies to determine the efficiency and effectiveness of the program.
Housing for Special Populations
This program consolidates activity under Section 202 Housing for the Elderly
and Section 811 Housing for the Disabled. Through this program HUD provides
eligible nonprofit organizations with grants to finance the acquisition, rehabilitation,
or construction of housing for the elderly and disabled persons.
The President’s budget proposal for FY1999 would operate the housing for
special needs program as a component of the HOME Investments Partnership
Programs. This is part of an overall plan to consolidate HUD’s program structure.
However, such a proposal would require authorizing legislation to become reality.

CRS-13
The FY1999 request for housing assistance for the elderly includes funding for
grants and Section 8 vouchers. The budget requests $109 million for grant funding
and $50 million for elderly vouchers. The Administration expects voucher funding
to be more efficient, and therefore expand the number of elderly households to be
served. It is expected that the FY1999 combination of grant funding and vouchers
would increase the number of assisted units for the elderly from approximately 8,500
in 1998 to approximately 10,300 in 1999. The FY1998 appropriation for the elderly
grant program was $645 million.
The FY1999 budget request for the disabled is $174 million of which 25 percent
is to be used for Section 8 vouchers. The FY1998 appropriation for housing the
disabled was $194 million. The HUD appropriation for FY1998 also permitted 25
percent of the total Section 811 funding for voucher use.
Finally, the budget proposal for FY1999 requests a set-aside for supportive
services within the Community Block Grant account. The President has asked that $7
million be set aside for grants to service coordinators and congregate services for the
elderly and disabled.
The Senate bill rejects the proposal to merge Section 202 and Section 811 into
the HOME program. S. 2168 provides separate funding for both: $676 million for
Section 202, and $194 million for Section 811. The Senate's FY1999
recommendation for the elderly grant program is an increase of $31 million over the
FY1998 appropriation. The recommendation for the program for the disabled is the
same level as the FY1998 appropriation. The Senate also recommends that up to 25
percent of the appropriated funding for Section 811 housing for the disabled be
permitted to provide housing vouchers for the disabled.
The House bill recommends the same level of funding as in the FY1998
appropriations: $645 million for the Section 202 program and $194 million for
Section 811 housing for the disabled. The House Committee agrees with the Senate
to permit usage of 25% of appropriated Section 811 funds for vouchers for the
disabled. The Committee also agrees that Section 202 and Section 811 should not be
merged with the HOME program.
Growth in Homeownership
In 1995, President Clinton pledged to reach a homeownership rate of 67.5
percent by the year 2000. The Administration believes that “nothing manifests the
American dream more than owning a home.” The President’s budget request fo
8
r
FY1999 contains a number of initiatives geared to aiding American households in
becoming homeowners.

8 U.S. Department of Housing and Urban Development Fiscal Year 1999 Budget Summary:
Closing the Opportunity Gap., p. 14.

CRS-14
Increasing FHA Loan Limits
The President’s budget request is seeking to raise the home mortgage insurance
limits of the Federal Housing Administration (FHA). The Administration believes
that more middle-income families would be able to purchase homes if the insurance
limits were raised for FHA single-family mortgages.
Under present law, loan limits for FHA-insured loans are determined on an area-
by-area basis. In general, FHA-insured loans for one-family homes are limited to the
lesser of 95 percent of the median home price for an area, or 75 percent of the
conforming loan limit for the Federal Home Loan Mortgage Corporation (Freddie
Mac) and the Federal National Mortgage Association (Fannie Mae). But the loan
limit for an area may not be less than 38 percent of the Freddie Mac/Fannie Mae limit.
Alaska, Guam, Hawaii, and the Virgin Islands are designated as special high cost areas
in which FHA may the set loan limits up to 50 percent higher than the general loan
limits. Given the present Freddie Mac/Fannie Mae limit of $227,150 for one-family
properties, the general FHA limit may range between $86,317 and $170,362. If 95
percent of the median home price for an area is less than $170,362 but greater than
$86,317, then 95 percent of the median becomes the FHA loan limit for the area. If
95 percent of the median home price for an area is less than $86,317, then $86,317
becomes the FHA loan limit. If 95 percent of the median home price is greater than
$170,362, then $170,362 becomes the FHA loan limit for the area.
The Administration proposes to amend the law such that the FHA loan limit
would be the same as Freddie Mac/Fannie Mae limit. So, the proposal has two
components: (1) remove the language that limits the loans to 95 percent of the area’s
median home price and (2) raise the limit to 100 percent of the Freddie Mac/Fannie
Mae limit. Instead of having hundreds of loan limits that vary among communities,
the Administration would like FHA to set a nationwide limit of $227,150 for FY1999.
It estimates that this increased loan limit would also produce over $200 million
annually in increased insurance revenues.
The Senate bill and House bill recommends that the law be amended such that
FHA loans on one-family homes would be limited to the lesser of 95 percent of the
median home price for an area, or 87 percent of the Freddie Mac/Fannie Mae limit but
the limit would not be less than 48 percent of the Freddie Mac/Fannie Mae limit.
Under this proposal the FHA loans limits during 1998 would range between $109,000
and $197,000 compared to $86,317 to $170,361 under present law.
For further information on FHA mortgage limits, please see CRS Report 98-421,
Raising the FHA Mortgage Limit: Issues and Options, by Bruce E. Foote
The HOME Investment Partnership Program
The HOME program makes funds available to participating jurisdictions to
increase the supply and affordability of housing and homeownership for low-income

CRS-15
families. States and localities have the option of using HOME funds for a variety of
housing activities.9
The President’s budget requests $1.88 billion for the HOME program in FY1999
to be used as follows: $1.55 billion for HOME grants, $25 million for housing
counseling, and $333 million for housing the elderly and disabled. HUD estimates
that this amount of funding would be sufficient to produce approximately 78,000 units
of newly constructed, rehabilitated or acquired affordable housing for owners and
renters, and would also provide enough funding for 11,200 families to receive tenant-
based assistance.
The Senate bill recommends $1.55 billion for HOME grants in FY1999. It does
not agree with the President's request to combine housing for the elderly and disabled
with the HOME program, and does not agree with providing vouchers for the elderly.
The House bill provides $1.6 billion for HOME grants and does not agree with
the President's recommendation to combine housing for the elderly and disabled in the
HOME program.
The HOME Loan Guarantee Program
The President’s budget request includes funding for a new HOME Loan
Guarantee program, which would set up a HOME bank. Through this bank,
participating jurisdictions would be able to request and receive a federal loan
guarantee for up to five times their most recent allocation under the HOME program.
HUD believes that this “financing would enable the participating jurisdictions to
formulate and implement neighborhood strategies to build or rehabilitate large
numbers of units as a single undertaking within a relatively short period of time.”
10
The President’s budget request asks for a $100 million commitment level for the
HOME Loan Guarantee program at an estimated cost of $11 million in FY1999.
Neither the Senate nor the House bill contains this provision. This new HOME Loan
Guarantee program requires authorizing legislation to become a reality. For more
information on either of the HOME programs, please see CRS Report 97-352, The
HOME Program in the 105th Congress, by Eugene Boyd.
Homeownership Zones
The Homeownership Zone program helps inner-city redevelopment by funding
large-scale revitalization efforts that create neighborhoods of single-family homes.
The majority of the housing units are reserved under the program for low- and
moderate-income families, but some middle-income families also participate in the
program to promote more stable communities. Although increasing the supply of

9 U.S. Department of Housing and Urban Development: Congressional Justifications for
1999 Estimates., p. G-1.

10 U.S. Department of Housing and Urban Development: Congressional Justifications for
1999 Estimates., p. G-2.

CRS-16
affordable owner-occupied housing is the top priority of the program, it also supports
jobs in the construction industry, and the economic development of businesses needed
in a neighborhood, such as grocery store, cleaners, restaurants, etc. “HUD wants to
play a significant role in rebuilding these once vibrant neighborhoods by making
owning a home reality for thousands of hardworking families and using
homeownership as the groundwork for economic revitalization.”11
There was no funding provided for Homeownership Zones in the FY1998
budget. In FY1996 and FY1997, it was funded as a set-aside and through recaptured
funds of other programs. In his budget request for FY1999, the President has asked
that it be funded as a separate program with a $25 million appropriation.
There is no funding for the program in either the House or Senate bill for
FY1999.
Other Provisions
Native American Block Grants
Under the Native American Block Grant, eligible Indian tribes or their Tribally
Designated Housing Entities receive funds which can be used for a variety of activities
that would increase their supply of affordable housing. These include new
construction, rehabilitation, operating assistance, supportive and counseling services
and efforts at crime prevention.
In his budget request for FY1999, the President is asking for $600 million for the
Native American Housing Block Grant, the same level as funded in FY1998. He is
also asking for a new $6 million for a Native American Housing Loan Guarantee
program patterned after the Community Development Block Grant Section 108
program.
The Senate bill recommends that the program be funded at the requested level,
but the Committee notes its concern about the Administration's implementation of this
new block grant program and the potential risk of problems.
The House bill, H.R. 4194, provides $620 million for Native American Block
Grants, with $6 million set aside for Section 601 loan guarantees and $6 million set
aside for inspections, travel, and technical assistance.

11 U.S. Department of Housing and Urban Development: Congressional Justifications for
1999 Estimates., P. H-1.

CRS-17
Fair Housing
In an effort to end discrimination in housing, the president’s budget is requesting
an increase in funding for Fair Housing Initiatives and the Fair Housing Assistance
Program. For Fair Housing Initiatives, the President is requesting $29 million, a $14
million increase over FY1998 funding. For the Fair Housing Assistance program, he
is requesting $23 million, an $8 million increase over last year’s appropriated level.
The total requested for fair housing is $52 million, a $22 million increase over the
FY1998 level.
The Senate bill provides $20 million for the Fair Housing Assistance program,
and $15 million for the Fair Housing Initiatives program. The $35 million total is $5
million more than the FY1998 level.
The House bill provides a total of $40 million for Fair Housing: $16.5 million
for the Fair Housing Assistance Program, and $23.5 million for the Fair Housing
Initiatives Program.
Office of Rural Housing and Economic Development
As reported, S. 2168 would establish an Office of Rural Housing and Economic
Development to support housing and economic development in rural areas. During
FY1999, the office would be funded at $35 million. State housing finance agencies
would be awarded $20 to support innovative community development initiatives in
rural communities. The Senate committee intends that $10 million be used to
establish a clearinghouse of ideas for innovative strategies for rural housing and
economic development and revitalization, and that, of this amount, $8 million would
be provided directly to rural nonprofit and community development corporations to
support capacity building and technical assistance. The Committee directs that $5
million be used to provide seed support for rural nonprofit and community
development corporations. The Committee notes that this new office is not intended
to duplicate the activities performed by any agency or office of the Department of
Agriculture.
H.R. 4194, the House bill, contains no provision for an Office of rural housing
and economic development.
Program Reforms
HUD has indicated that it will be submitting legislation that repeals or
consolidates a number of programs. Some of these programs were demonstration
programs, while others are being consolidated in order to better accommodate the
reduction in the workforce at HUD.
HUD also proposes to reform the FHA single-family property disposition
program to provide the department with a cost-effective way of paying insurance
claims and disposing of HUD-owned mortgages. HUD expects this proposal to save
more than $525 million in budget authority.

CRS-18
Under current law, a simplified method is used to calculate downpayments for
FHA-insured home loans made in Hawaii and Alaska. The provision expires in
September 30, 1998. The Senate bill would extend the provision for two years and
apply it nationwide. The House bill does not contain this provision.