The Department of Housing and Urban Development: FY2004 Budget

The Department of Housing and Urban Development: FY2004 Budget

Order Code RL31962
CRS Report for Congress
Received through the CRS Web
The Department of Housing and
Urban Development:
FY2004 Budget
Updated September 22, 2003
Richard Bourdon, Coordinator
Domestic Social Policy Division
Congressional Research Service ˜ The Library of Congress

The Department of Housing and Urban Development:
FY2004 Budget
Summary
The Administration’s proposed FY2004 budget for the Department of Housing
and Urban Development (HUD) requests $31.7 billion (not including an “advance
appropriation”of $4.2 billion that cannot be spent until FY2005), an increase of about
$700 million above FY2003 (P.L. 108-7). The House-approved bill, H.R. 2861,
which recommends a net appropriation of $31.8 billion, and the Senate Committee
bill, S. 1584, at $31.9 billion, are marginally higher than the budget request.
The budget proposal requests $18.4 billion for the Section 8 Housing Certificate
Fund (HCF); the House bill recommends slightly more at close to $18.6 billion, and
the Senate bill would provide $18.4 billion. Although HUD claims its request will
allow renewal of all housing vouchers currently in use, low-income housing
advocates maintain the budget will be insufficient to do this. The Senate
Appropriations Committee acknowledges that $18.4 billion may not be adequate to
cover all renewals because the Administration may have under-estimated the per-unit
costs of vouchers or the voucher utilization rate, and thus, it expects the
Administration to address any budget shortfall in a FY2004 supplemental
appropriations bill.
Neither the House nor the Senate bills accept the
Administration’s proposed Housing Assistance for Needy Families (HANF) program
initiative (H.R. 1841/S. 947) that would convert the existing Section 8 Housing
Choice Voucher program into a block grant to states.
In the sharpest reduction proposed for any HUD program, the Administration
requested no new funding for the HOPE VI program, which received $570 million
in FY2003 to rehabilitate public housing. It cited large amounts of unspent money
in the pipeline. The House bill would provide $50 million in FY2004 and the Senate
bill, $195 million.
The Senate Committee expressed disappointment that the
Administration has sought to eliminate the program without proper review and
without providing alternative authority and funding – and has included bill language
to extend the expiring program through September 30, 2006.
The President’s budget requests $2.2 billion for the HOME program, with a
$200 million set-aside for a Downpayment Assistance Initiative. Under the House
bill, HOME would receive $2.1 billion, with $125 million for the Downpayment
Initiative. The Senate bill would provide $1.975 billion for HOME, with $50 million
for the homeownership initiative. The House bill would increase HUD’s Homeless
Assistance Grants programs by $25 million above the FY2003 level and the Senate
bill, by $108 million. Both the House and Senate bills would fund the Community
Development Block Grant program at close to $5 billion, more than $230 million
above the budget request of $4.716 billion. Under the Administration’s proposed
budget, the Office of Lead Hazard Control would be cut by $39 million to $136
million, and Brownfields Redevelopment and Rural Housing Development would
receive no funding. H.R. 2861 provides $130 million for Lead Hazard Control; S.
1584 provides $175 million. Both the House and Senate bills provide $25 million
for Brownfields Redevelopment and $25 million for Rural Housing. This report will
be updated to reflect further action on HUD appropriations.

Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Highlights of the Proposed HUD Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
House (H.R. 2861) and Senate (S. 1584) Response to Proposed Budget . . . 2
The Major Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
FY2003 Appropriations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Public and Indian Housing Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Project-based and Tenant-based Rental Assistance . . . . . . . . . . . . . . . . 8
Public Housing Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Public Housing Operating Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Public Housing Capital Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
HOPE VI Revitalization of Distressed Public Housing . . . . . . . . . . . . 20
Native American Block Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Community Planning and Development . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Housing for Persons with AIDS (HOPWA) . . . . . . . . . . . . . . . . . . . . 21
Rural Housing and Economic Development . . . . . . . . . . . . . . . . . . . . 21
Empowerment Zones and Enterprise Communities . . . . . . . . . . . . . . 22
Community Development Block Grants . . . . . . . . . . . . . . . . . . . . . . . 23
Brownfields Redevelopment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
The HOME Investment Partnership Program . . . . . . . . . . . . . . . . . . . 28
Homeless Assistance Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Housing Program Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Housing for Special Populations (Elderly and Disabled) . . . . . . . . . . 31
Federal Housing Administration (FHA) . . . . . . . . . . . . . . . . . . . . . . . 32
Office of Federal Housing Enterprise Oversight (OFHEO) . . . . . . . . . 34
Fair Housing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Lead-Based Paint Hazard Reduction . . . . . . . . . . . . . . . . . . . . . . . . . . 36
List of Tables
Table 1. Department of Housing and Urban Development Appropriations,
FY1999 to FY2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Table 2. Appropriations: Housing and Urban Development, FY2003-FY2004 . 6
Table 3. Comparison of Existing Housing Voucher Program and HANF
Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Table 4. FY2003 and FY2004 Appropriation Levels for Vouchers and
Project-based Rental Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Table 5. Community Development Fund Appropriations,CDBG and Related
Set Asides: FY2003-FY2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

The Department of Housing and Urban
Development: FY2004 Budget
Introduction
Most of the appropriations for the Department of Housing and Urban
Development (HUD) address the housing problems faced by households with very
low incomes or other special housing needs. Programs of rental assistance for the
poor, elderly or disabled, housing assistance for persons with AIDS, varying types
of shelter for those who are homeless — all deal with the issue of the availability of
low-cost housing.
The two large HUD block grant programs, HOME and
Community Development Block Grants, also help communities finance a variety of
activities to address housing needs of disadvantaged populations. Since 1994, when
the Clinton Administration started its homeowner initiative in partnership with the
housing industry, HUD has focused more attention than previously on efforts to
increase homeownership opportunities for lower-income and minority households.
This report on the FY2004 HUD budget first summarizes the major issues in the
proposed budget, and then examines individual programs, comparing enacted levels
for FY2003 with Administration proposals for FY2004 and the congressional
response, highlighting significant changes in funding levels and associated issues.
Key Policy Staff
CRS
Name
Area of Expertise
Telephone and E-Mail
Division
Housing: Housing
issues and legislation,
7-7806
Richard Bourdon
homeownership, tax-
DSP
rbourdon@crs.loc.gov
based housing
programs
Community
7-8689
Eugene Boyd
G&F
Development
eboyd@crs.loc.gov
Housing: FHA,
Bruce Foote
7-7805
HOME, Predatory
DSP
bfoote@crs.loc.gov
Lending, RESPA
Housing: Section 8,
Public Housing,
7-2163
Maggie McCarty
DSP
homeless, AIDS,
mmccarty@crs.loc.gov
elderly/disabled
Division abbreviations: DSP=Domestic Social Policy; G&F=Government and Finance.

CRS-2
Highlights of the Proposed HUD Budget
! FY2004 budget request of $31.73 billion, up by about $719 million
over the $31.01 billion enacted for FY2003 (including a 0.65%
“across-the-board” rescission enacted in FY2003);
! New Housing Assistance for Needy Families (HANF) block grants
to states, funded at $13.6 billion (including the use of recaptured
funds) to replace current Section 8 housing choice vouchers;
! Approximately 5,600 incremental housing vouchers, targeted to non-
elderly disabled families;
! No new funding for the HOPE VI public housing program,
Brownfields
Redevelopment,
Rural
Housing
Economic
Development, and Empowerment Zone/Enterprise Communities
(EZ/ECs) programs;
! A new Public Housing Reinvestment Initiative to encourage private
capital for the rehabilitation of public housing;
! New Downpayment Assistance Initiative as a $200 million set-aside
within HOME program (H.R. 1276), $45 million for counseling, and
new FHA insurance products to help lower income and minority
households (an effort to combat predatory lending);
! Increased funding for homeless assistance, with new $50 million
Samaritan Initiative; and
! Community Development Block Grants requested at $4.716 billion,
$189 million below FY2003 level, with no funding for Economic
Development Initiatives (congressionally earmarked projects).
House (H.R. 2861) and Senate (S. 1584) Response to
Proposed Budget
! Recommends HUD budget of $31.8 billion (H.R. 2861) and $31.9
billion (S. 1584), not significantly different from the budget request;
! Housing Certificate Fund funded at $18.6 billion (H.R. 2861) and
$18.4 billion (S. 1584), with no incremental vouchers funded and
some doubt that either amount will be sufficient to renew all
vouchers;
! Both House and Senate bills reject HANF, Public Housing
Reinvestment, Samaritan and Colonias Initiatives;
! HOME recommended at near $2.1 billion, including $125 million
for Administration’s Downpayment Assistance Initiative (H.R.
2861) and near $2.0 billion, with $50 million for Downpayment
Initiative (S. 1584);
! Large reduction recommended for HOPE VI at $50 million (H.R.
2861) and $195 million (S. 1584) compared to $570 million in
FY2003;
! Near level funding for Public Housing Capital and Operating
programs, together at about $6.2-$6.3 billion;
! Homeless programs increased by $25 million over FY2003 (H.R.
2861) and $108 million (S. 1584);
! Proposed anti-predatory lending FHA product not adopted;

CRS-3
! Brownfields funded at $25 million and Rural Housing, $25 million;
and
! Community Development Block Grants recommended at about $5
billion, near level funding with FY2003, but about $230 million
above the budget request.
The Major Issues
There are a number of basic themes in the FY2004 budget proposal: devolution,
deregulation, more private capital involvement in solutions to housing problems, and
efforts to increase homeownership for lower income and minority households (to
increase their net worth and financial independence). Of particular controversy are
major changes in the way the agency would operate and fund its two largest housing
programs, Section 8 tenant-based vouchers (about 2 million vouchers) and public
housing (about 1.25 million units). On July 25, 2003, the House responded to the
HUD proposal with the passage of an amended version of H.R. 2861 (H.Rept. 108-
235) that was approved by the House Appropriations Committee on July 21, 2003.
The Senate Appropriations Committee passed S. 1584 (S.Rept. 108-143) on
September 8, 2003.
The Administration’s major initiative, the Housing Assistance for Needy
Families Act of 2003 (HANF), presented in the FY2004 budget proposal and
introduced on April 30, 2003 as H.R. 1841/S. 947, would convert the existing
Section 8 housing choice voucher program into a state-administered block grant
program.
Grants would be made to states to provide tenant-based rental and
homeownership housing assistance. Under the current program, there are thousands
of pages of federal regulations that are cited as inhibiting HUD from quickly
adjusting the program to meet local needs. HUD believes that by eliminating most
of these regulations (and limiting its involvement largely to oversight of performance
standards), each state would have the flexibility to be innovative in meeting its
unique housing problems. HUD believes this approach would make it more possible
to end the chronic problem of unspent monies in the housing voucher program.
Opponents worry that funding under the new HANF program would not keep pace
with rapidly rising housing costs, and that states might establish new requirements
such as time limits on receiving assistance for tenants, similar to those under welfare
reform programs. Opponents also question whether a block grant to states would
merely add another layer of bureaucracy if states were to reroute federal funds back
to the same local public housing authorities. The House Appropriations Committee
report recommends continued funding of the Housing Certificate Fund account rather
than through the HANF proposal, noting that “this proposal is currently under
consideration by the relevant authorization committees and therefore [the committee]
defers any changes to the funding structure until further congressional action on the
legislative proposal.” The House-approved bill concurs with this view. The Senate
bill, S. 1584, also rejects the HANF proposal, with the Committee report stating that
“Until there is reliable data on the current per-unit costs and utilization rates of
vouchers as well as assurances that the block grant funding will meet all voucher
needs, the Committee is not inclined to consider fully the administration’s block
grant proposal.”

CRS-4
The Administration’s FY2004 budget does not request funding for the HOPE
VI program for the revitalization of distressed public housing.
This program
received $570 million in FY2003. HUD Secretary Martinez argues that there are
sufficient unspent funds in the pipeline to keep this program operating, and in the
meantime, he seeks a dialogue with Congress on how the program might be
improved. During a number of congressional hearings on the proposed budget in
February, March, and April, 2003, considerable bipartisan support was expressed for
continued funding of the program. Others made the case that in a tight budget period,
this was the most reasonable program to cut. On June 19, 2003, the House Financial
Services Committee reported out H.R.1614 (H.Rept. 108-165) that would reauthorize
HOPE VI through FY2005. The House-approved bill, H.R. 2861, recommends $50
million in funding for HOPE VI and the Senate bill, S. 1584, would provide $195
million for FY2004.
The Administration proposed its Public Housing Reinvestment Initiative to
encourage Public Housing Authorities (PHAs) to convert some public housing units
to Section 8 project-based assistance again this year. Under this initiative, PHAs
would turn to the private sector for rehabilitation loans, pledging the project-based
revenues as collateral. Congress rejected this reinvestment initiative last year,
directing HUD to report to the Appropriations Committees about PHAs that have
already obtained private financing for their capital needs. HUD would like to move
public housing towards private ownership, with more market-based decisions about
the operations and maintenance of projects. HUD also believes that the large backlog
of modernization needs faced by PHAs may be more quickly addressed if annual
capital fund appropriations are supplemented by an infusion of private capital.
Opponents believe the $90 billion public housing stock is a national asset that
provides a social safety net for the most disadvantaged and poorest of households —
and that it should not be mortgaged or sold off.
The House Appropriations
Committee report says it understands that “under existing statutory authorities, a
number of PHAs have in fact successfully pursued approximately $1 billion in
public-private financing partnerships ... [and] the Committee believes that such
proposals need to be more fully examined before significant statutory and funding
changes are made.” (Baltimore, Chicago, and Philadelphia are examples of cities that
have obtained such private financing.)
The House-approved bill rejects the
initiative. The Senate bill also rejects the proposal, with the Committee report stating
that it “could result in a loss of public housing units, and would not benefit public
housing units with the greatest capital needs.”
Under the President’s FY2004 budget, the HOME housing block grant program
would be increased by $210 million to $2.2 billion, with $200 million of the increase
set-aside for the Administration’s American Dream Downpayment Initiative. HUD
estimates that this program would provide an average grant of $5,000 for
downpayment and closing cost assistance for 40,000 low-income households each
year. Few are opposed to increasing homeownership opportunities for lower income
households unless it means less funding for rental assistance. But some urge caution
in putting lower income households into their first home if they have a high risk of
failure because of inadequate savings or the inability to protect themselves from a
variety of financial predators. On June 19, 2003, the House Financial Services
Committee reported H.R. 1276 (H.Rept. 108-164), the Administration’s
Downpayment Assistance Initiative. The House-approved budget bill, H.R. 2861,

CRS-5
would provide $125 million for the Downpayment Initiative and the Senate would
provide $50 million.
FY2003 Appropriations
President Bush signed P.L. 108-7, the consolidated appropriations bill for
FY2003, on February 20, 2003, nearly 5 months into the fiscal year. The law
provided HUD with $31.01 billion (after application of a 0.65% across-the-board
rescission included in the law). HUD’s largest program, the Housing Certificate
Fund (frequently referred to as “Section 8"), received $17.1 billion, almost $1.5
billion more than enacted in FY2002. Despite the increase, no incremental housing
vouchers were funded — that is, there was no increase in the number of low-income
renters assisted. The FY2003 appropriations law included some reforms to address
the chronic underutilization of housing voucher funds, directing that HUD only
renew contracts with PHAs for the number of vouchers they had under lease, not
those simply authorized in the previous year.
Table 1. Department of Housing and Urban Development
Appropriations, FY1999 to FY2003
(net budget authority in billions)
FY1999
FY2000
FY2001
FY2002
FY2003
$24.08
$25.92
$28.48
$30.15
$31.01
Source: Figures for FY1999-FY2002 are from Administration budget submissions of subsequent
years. The FY2002 number does not include $2 billion in emergency supplemental funds for the
Community Development Fund for assistance to New York City following the terrorist attacks of
September 11, 2001, a one time anomaly. FY2003 figures are from preliminary numbers provided
by the House Appropriations Committee’s Subcommittee on the VA, HUD, and Independent Agencies
and includes an across-the-board rescission of 0.65% enacted in FY2003. Final spending levels
remain uncertain until all program experience has been recorded, and any supplemental appropriations
or rescissions have been included.
The conferees approved $2.7 billion in FY2003 for the Public Housing Capital
Fund, $113 million below the FY2002 funding level. The Administration’s Public
Housing Reinvestment Initiative, designed to encourage PHAs to convert some
public housing units to Section 8 project-based assistance, was rejected. Under this
initiative, PHAs would pledge the project-based revenue as collateral for
rehabilitation loans. The conferees directed HUD to report to the Appropriations
Committees about PHAs that have already obtained private financing for their capital
needs.
P.L. 108-7 increased the Public Housing Operating Fund to $3.58 billion, $82
million above the FY2002 level. The conferees agreed to allow HUD to use this
appropriation to cover a controversial $250 million shortfall for FY2002 that the
agency blamed on flaws in its accounting system. This transfer effectively reduced
the FY2003 appropriation by $250 million.
The HOPE VI program, which is used to rehabilitate or tear down the worst
public housing units, received $570 million, level with the prior year’s funding.

CRS-6
Almost $5 billion was approved for the Community Development Block Grant
program, nearly the same as in FY2002, while the HOME block grant received an
increase of about $141 million to a total of just under $2 billion. There was a $75
million set-aside within the HOME program for the Administration’s Downpayment
Assistance Initiative, which was less than the Agency’s $200 million request.
Housing for the elderly was funded at $776 million, down by $7 million from
FY2002, and housing for the disabled received $251 million, up by about $10
million. Housing opportunities for persons with AIDS was funded at $290 million,
an increase of about $13 million.
The Administration has made ending chronic homelessness in the next 10 years
a top priority. The conferees agreed to $1.22 billion, $93 million more than enacted
in F2002.
For more details, see CRS Report RL31304, Appropriations for FY2003: VA,
HUD, and Independent Agencies.
Table 2. Appropriations: Housing and Urban Development,
FY2003-FY2004
(budget authority in billions)
FY2004 FY2004 FY2004 FY2004
Programs
FY2003 request House Senate Conf.
Housing Certificate Fund (HCF)
17.112
—
18.581
18.434
HCF appropriation
12.939
—
14.381
14.234
Advance approp. from prior FY
4.173
—
4.200
4.200
Housing Assistance for Needy
—
12.535
—
—
Families (HANF)a
HANF appropriation
—
8.335
—
—
advance approp. from prior FY
—
4.200
—
—
Advance approp. for following FY
(4.200)
(4.200)
(4.200)
(4.200)
Project-based Rental Assistance
0.000
4.823
0.000
0.000
Sec. 8 recaptures (rescission)
-1.600
-0.300
-1.372
-1.372
Public housing capital fund
2.712
2.641
2.712
2.641
Public housing operating fund
3.577
3.574
3.600
3.577
Revitalization of distressed public
0.570
0.000
0.050
0.195
housing (HOPE VI)
Native American housing block grants
0.645
0.647
0.662
0.647
Indian housing loan guarantee
0.005
0.001
0.005
0.005
Native Hawaiian Block Grant
0.000
0.010
0.000
0.000
Native Hawaiian loan guarantee
0.001
0.001
0.001
0.001
Subtotal: Public & Indian Hsg. (net)
23.022
23.932
24.089
24.127

CRS-7
FY2004 FY2004 FY2004 FY2004
Programs
FY2003 request House Senate Conf.
Housing, persons with AIDS
0.290
0.297
0.302
0.291
(HOPWA)
Rural Housing Economic
0.025
0.000
0.025
0.025
Development
Empowerment zones; enterprise
0.030
0.000
0.015
0.000
communities
Community Development Block Grant
4.905
4.716
4.959
4.950
Colonias Initiative
0.000
0.016
0.000
0.000
Urban Development Action Grants
—
-0.030
-0.030
-0.030
(rescission)
Sec.108 loan guarantee; subsidy
0.007
0.000
0.000
0.007
Brownfields redevelopment
0.025
0.000
0.025
0.025
HOME Investment Partnerships
1.987
2.197
2.064
1.975
Homeless Assistance Grants
1.217
1.325
1.242
1.325
Samaritan Initiative
—
0.050
0.000
0.000
Subtotal: Community Plan. & Dev.
8.486
8.571
8.602
8.568
Housing, special populations b
1.027
1.025
1.024
1.034
Housing for the elderly
0.776
0.774
0.773
0.783
Housing for the disabled
0.251
0.251
0.251
0.251
Housing Counseling Assistance
—
0.045
0.000
0.000
Rental housing assistance (rescission)
-0.100
-0.303
-0.303
-0.303
Federal Housing Administration
-2.212
-2.359
-2.359
-2.359
(net)c
GNMA (net)d
-0.348
-0.307
-0.307
-0.307
Research and technology
0.047
0.051
0.047
0.047
Fair housing activities
0.046
0.050
0.046
0.050
Office, lead hazard control
0.175
0.136
0.130
0.175
Salaries and expenses
0.527
0.536
0.547
0.536
Working capital fund
0.275
0.276
0.090
0.240
Inspector General
0.074
0.076
0.076
0.078
Office of Federal Housing Enterprise
0.000
0.000
0.000
0.000
Oversighte
Manufactured Housing Offsetse
0.000
0.000
0.000
0.000
Rescissions; legislative savings;
-0.008
—
—
—
supplemental
Subtotals:
31.009
31.729
31.831
31.886
Appropriations
(36.096) (35.876) (37.046) (37.100)

CRS-8
FY2004 FY2004 FY2004 FY2004
Programs
FY2003 request House Senate Conf.
Rescissions; total
(-1.708) (-0.633) (-1.705) (-1.705)
Negative subsidy
(-2.978) (-3.146) (-3.146) (-3.146)
Offsetting collections
(-.401)
(-.367)
(-.363)
(-.363)
Total; net (w/o advance from
previous FY)
31.009
31.729
31.831
31. 886
Source: H.Rept. 108-235, updated with floor amendments by CRS and S.Rept. 108-143.
Note: Totals may not add due to rounding. Levels for FY2003 include a 0.65% across-the-board
rescission.
a The Administration has requested a direct appropriation of $12.535 billion for FY2004; however,
they anticipate the availability of $1.072 billion in unobligated balances, leading to a total
program level of $13.607 billion.
b The Administration did not request a total amount for special populations, but requests separate
amounts for the elderly and the disabled. The House adopted the Administration’s proposal to
fund the programs separately. The Senate Appropriations Committee did not accept the
Administration’s proposal to split the account; instead, the Senate provides $1.034 billion for
the combined account.
c Net, interagency transfers and offsetting receipts against appropriations of the current year; included
in the totals are projected experience gains greater than premiums to the mortgage insurance
fund, which are now treated as offsetting receipts against discretionary funds. The effect is
estimated to be $-2.753 billion for FY2003 and $-2.921 billion for FY2004.
d Net, interagency transfers and offsetting receipts against appropriations of the current year.
e Amounts less than one million dollars do not appear in this table. In FY2003, $195 thousand in
surplus offsetting receipts was collected by HUD from the Office of Federal Housing Enterprise
Oversight and $85 thousand was collected from the Manufactured Housing Fees Trust Fund.
Public and Indian Housing Programs
Project-based and Tenant-based Rental Assistance. HUD’s low-
income rental assistance program, commonly referred to as Section 8, has two
components: vouchers (the Housing Choice Voucher (HCV) program); and project-
based rental assistance. Vouchers are rental subsidies that eligible families can use
to lower their rents in the housing units they choose to live in; project-based subsidies
are rental subsidies attached to specific housing developments that are under contract
with HUD. For several years, funding for these two programs has been provided in
one account, called the Housing Certificate Fund (HCF). In FY2003, Congress
provided $17.1 billion in direct appropriations for the HCF. For FY2004, the
Administration has proposed to abolish the HCF by splitting it into two separate
accounts, creating two separate programs:
the Housing Assistance for Needy
Families (HANF) block grant to states, which would provide vouchers; and the
project-based rental assistance program which would remain essentially unchanged.
For HANF, the Administration has requested a total funding level of $13.6 billion for
FY2004. This figure includes a direct appropriation of $12.5 billion and $1.1 billion
that the Administration estimates will be available from unobligated balances carried
over from previous years. For the project-based rental assistance program, the
Administration has requested $4.8 billion in new budget authority for FY2004 and
has indicated that $300 million is available for rescission. Combined, the President

CRS-9
requested $18.4 billion for the Section 8 programs (including the $1.1 billion in
unobligated balances).
The House appropriations bill, H.R. 2861, does not adopt the HANF proposal’s
funding structure. Instead, the House bill would provide $18.6 billion for the HCF
for FY2004, up $150 million from the President’s request. Of that amount, $4.7
billion would be provided for project-based rental assistance and $13.8 billion would
be provided in direct appropriations for vouchers. The House proposes to rescind the
$1.1 billion in carryover funds that the Administration highlighted for program use
as well as the $300 million the Administration highlighted for rescission.
The Senate Appropriations Committee bill also rejects the President’s HANF
proposal. The Committee did adopt the President’s funding level for Section 8,
providing $18.4 billion for FY2004, less than the $18.6 billion provided by the
House. The bill would also rescind $1.4 billion in unobligated balances.
What is HANF? The Housing Assistance for Needy Families (HANF) (H.R.
1841, S. 947) program would replace the existing voucher program, which is
currently administered by local PHAs, with a block grant provided to states. In the
Administration’s FY2004 congressional budget justification, HUD asserts that state
administration would increase the utilization of vouchers, eliminating the large
amounts of unobligated balances available for recapture every year. They argue that
states would have the flexibility to quickly adjust the program to meet local and
regional needs. Critics of the proposal fear that the value of the block grant will
erode over time, leaving the program underfunded. They also express concern that
states will not have the capacity, because of inexperience with the program and tight
budgets, to handle the program.
According to the Administration, FY2004 would be a transition year for the
HANF proposal, meaning that PHAs would continue to administer the program as
usual; the Administration anticipates that the program, if passed, would be fully
implemented in FY2005. The table below compares some of the proposed features
of HANF to existing features of the HCV program.
For more details on the Housing Choice Voucher Program and the HANF
proposal, see CRS Report RL31930, The Housing Choice Voucher Program:
Background, Funding and Issues in the 108th Congress.
Contract Renewals. Most vouchers and project-based rental assistance
subsidies are funded by Congress in 1-year increments. As a result, PHAs enter into
1-year contracts, which come up for renewal every year. The renewal of expiring
contracts accounts for the majority of the cost of the Section 8 programs. In FY2003,
$10.9 billion was appropriated for the renewal of approximately 2 million expiring
vouchers (not including administrative funds and central reserve funds) and $4.3
billion was appropriated to renew approximately 817,000 project-based units. These
renewal costs accounted for $15.24 billion (or 89%) of the HCF appropriation in
FY2003. For FY2004, the Administration requested $11.48 billion for the renewal
of expiring vouchers through the HANF program (not including administrative funds
or central reserve funds) and $4.72 billion to renew expiring project-based contracts.
The Administration estimated that its request for renewals, $16.2 billion, would

CRS-10
renew approximately 1.9 million vouchers and approximately 870,000 project-based
contracts.
Table 3. Comparison of Existing Housing Voucher Program
and HANF Proposal
Housing choice voucher program
HANF
Thirty-three states currently administer a
States would have the option to
portion of the HCV program, but most
administer the whole program, contract
funds are administered by local PHAs.
all or part to PHAs or not participate. If a
state chose not to participate, HUD could
administer the program itself or choose
another entity to administer the program.
At least 75% of vouchers must be
At least 75% of vouchers would be
targeted to extremely low income
targeted to extremely low income
families (30% or below area median
families (30% or below area median
income), although the Secretary can
income), although the Secretary would be
change the definition of extremely low
able to grant waivers to communities as
income for certain communities.
long as at least 55% of vouchers remain
targeted to extremely low income
families.
PHAs currently have the option of setting
A minimum rent of at least $50 per
a minimum rent of up to $50 per month.
month would be required for each family.
Initial eligibility for the program is set at
Initial eligibility for the program would
the very low income level (50% or below
be set at the low income level (80% or
area median income), although PHAs can
below area median income), although the
choose to expand eligibility to the low
Secretary could choose to expand
income level (80% or below area median
eligibility above the low income level for
income) for certain categories of families
elderly and disabled families.
they choose.
Families cannot pay more than 40% of
Families could not be required to pay
their incomes toward rent.
more than 30% of their incomes towards
rent, but could choose to pay more.
Housing units under voucher contracts
Housing units under voucher contracts
must be inspected annually.
would be required to be inspected every 3
years.
An estimated 2 million vouchers are up
States would be required to make every
for renewal in FY2004.
effort to assist the same number of
families under HANF as are currently
being assisted under the HCV program.
PHAs are evaluated annually through the
Each state would be required to make
Section 8 Management Assessment
performance evaluation reports to the
Protocol (SEMAP) which is a set of 14
Secretary on its progress in reaching the
criteria established by HUD. If PHAs
goals it has established in an annual plan.
perform poorly, they may face financial
If a state is not making sufficient
penalties until they improve or may come
progress, HUD can retake administration
under receivership.
of the program.
Source: Congressional Research Service, from CRS Report RL31930, The Housing Choice Voucher
Program, Funding, and Issues in the 108th Congress.

CRS-11
The House-passed appropriations bill would provide a total of $16.5 billion for
Section 8 renewals. Of that amount, $11.73 billion would be provided to renew
expiring vouchers (slightly more than the Administration requested) and $4.72 billion
would be provided to renew expiring project-based contracts.
The Senate Committee bill would provide $16.2 billion for renewals in
FY2004–$11.5 billion for voucher renewals and $4.7 billion for project-based
renewals.
In prior years, HUD had set aside funding for each PHA based on the number
of vouchers the PHA was authorized to lease, rather than the number of vouchers it
was actually using (leasing).
Every time a PHA would have less than 100%
utilization of vouchers, HUD would come in at the end of the year and recapture
unobligated balances. This system resulted in HUD recapturing over a billion dollars
in unobligated balances every year. In FY2003, Congress adopted a new funding
structure for voucher renewals. This structure provides funding to local PHAs only
for those vouchers that they are leasing, or can reasonably expect to lease, rather than
the full number that they are authorized to lease. This change provides HUD with
the flexibility to move money to where it is needed in a more timely manner and is
expected to reduce the size of unobligated balances available for recapture. Both
H.R. 2861 and S. 1584 continue this new funding structure.
The President’s FY2004 budget request has raised some funding concerns
among low-income housing advocates. Several are worried that there may not be
adequate funds under the Administration’s FY2004 budget request to renew all
currently authorized vouchers.1 Analyzing HUD data, the Center on Budget and
Policy Priorities (CBPP) has concluded that the Administration’s funding request for
vouchers could result in insufficient funding in 2004 to support as many as 90,000
housing vouchers now in use. HUD’s FY2004 funding request was based on data
from 2001 and 2002, which indicated that fewer vouchers were being used and that
voucher costs were lower than CBPP estimated using FY2003 data.
If the funding provided by Congress is insufficient to renew all existing
vouchers, then HUD has several options. It could dip into unspent funds from prior
years to cover any shortfall, although it is unclear how much is available from this
source. HUD could also direct PHAs not to reissue vouchers that become available,
which would cut down on costs without evicting anyone. Finally, if these other
strategies did not work, HUD could direct PHAs to take back subsidies from
families.
In recognition of a possible funding shortfall, H.R. 2861 increased the Housing
Certificate Fund (HCF) by $150 million (taking the money from HUD’s working
capital fund that is used to make improvements to computers and other information
technology systems). Some housing groups say this is still too little to pay for all
renewals and that, even with the increase, more than 60,000 vouchers would still be
at risk. The Senate Appropriations Committee acknowledges, in their committee
1 New HUD Data Show Families Will Likely Lose Housing Vouchers If Congress Approves
President’s Budget Request, Center on Budget and Policy Priorities, July 11, 2003.

CRS-12
report, that the funding level they provided might not be adequate to cover all
renewals and that they expect the Administration to address any budget shortfall
through a FY2004 supplemental appropriations request.
Central Reserve Fund. The Secretary can use central reserve funds to
supplement the voucher program if PHAs’ costs increase. Such cost increases can
result either from increases in the average cost per voucher or increases in the
average utilization of vouchers. The central reserve fund was created in FY2003 and
funded at $389 million. For FY2004, the Administration has requested $609 million
for the central reserve fund as a part of its HANF proposal. Of that amount, $100
million would be earmarked for states to use in preparation for full implementation
of HANF in FY2005. An additional $36 million from the central reserve fund would
be available for incremental vouchers targeted to non-elderly disabled families. The
authority to use central reserve funds for new incremental vouchers would be new;
currently, central reserve funds cannot be used for new vouchers.
H.R. 2861 proposes $569 million for the central reserve fund, up substantially
from FY2003, but down slightly from the Administration’s request. The House did
not include a $100 million set-aside for HANF costs, nor did it provide the Secretary
with the authority to use central reserve funds to create incremental vouchers.
S. 1584 would provide $461 million for the central reserve fund. Like the
Administration’s request, up to $36 million could be used to provide vouchers to
non-elderly, disabled families; however, unlike the Administration’s request, this bill
would not set aside any money for state HANF start-up costs.
Incremental Vouchers. The term “incremental” is used to describe new
vouchers. No new incremental vouchers were provided in FY2003; for FY2004, as
described above, the Administration requests the authority to use central reserve
funds for new incremental vouchers, including up to $36 million for non-elderly
disabled families.
The House appropriations bill, H.R. 2861, does not include any funding for new
incremental vouchers and does not permit the Secretary to use central reserve funds
for new incremental vouchers. S. 1584 would permit HUD to use up to $36 million
from the central reserve fund for incremental vouchers for non-elderly, disabled
families, if the Secretary determines that the funds are not needed to support existing
vouchers.
Tenant Protection Vouchers. Tenant protection vouchers are used to
relocate families whose subsidized housing units have been demolished, sold or
converted to market-rate. These vouchers are also used for families in the Family
Unification Program or in the Witness Protection Program. The Administration
requested $252 million for tenant protection vouchers as a part of its FY2004 HANF
request, which is an increase from the $232 million provided in FY2003. The
FY2004 request would fund the same number of vouchers funded in FY2003
(43,300). Funding for tenant protection vouchers, like other vouchers, does not
include administrative costs.

CRS-13
H.R. 2861 would provide $206 million for tenant protection vouchers, down
both from the FY2003 funding level as well as the Administration’s request. S. 1584
would provide $252 million for tenant protection vouchers, equal to the
Administration’s request.
Administrative Costs. The voucher program is managed at the local level
by quasi-governmental bodies called PHAs; the project-based program is managed
by state, local, and private entities called contract administrators. PHAs distribute
vouchers, help families find housing, and manage the program accounting; contract
administrators oversee the physical and financial health of projects that are under
contract with HUD.
Funding for contract administrators in the project-based
program is provided separately from funding for PHAs in the voucher program.
For the voucher program, HUD requested $1.19 billion for administrative costs
in FY2004, as a part of its overall HANF request. This request would provide an
increase from the $1.07 billion provided in FY2003. For the project-based program,
HUD requested $100 million for contract administrators in FY2004. This request is
a decrease from the $195 million provided in FY2003.
The House bill, H.R. 2861, would provide $1.21 billion for voucher
administrative costs in FY2004, which is up from the President’s request. The House
bill maintains provisions included in the FY2003 appropriations law that limited the
administrative fee reserves maintained by PHAs to 5% and prohibited the use of
administrative fees for programs other than the voucher program. In addition, the
House bill includes new provisions which direct the Secretary to distribute
administrative fees to PHAs, in a manner prescribed by the Secretary, in an amount
not to exceed the amount provided in the bill. Under current practice, the Secretary
uses a formula to determine administrative fees earned by PHAs. As a result, the
cumulative amount owed to PHAs can vary based on a number of factors, including
utilization rates and fair market rents, and therefore, could conceivably rise above the
amount provided in an appropriations bill. The provision in the House bill would
direct the Secretary to ensure that the amount of administrative fees paid to PHAs
stays at or below the appropriated amount, which may mean that the Secretary will
have to adopt a new formula for providing administrative fees, potentially resulting
in lower fees paid to PHAs.
S. 1584 would provide $1.3 billion for administrative fees for the voucher
program, greater than the amount requested and recommended by the House. The
Senate bill would maintain the 5% cap on administrative fee reserves introduced in
FY2003, however, the bill does not include the language from the House bill that
could potentially limit PHA administrative fee earnings.
For contract administrators, both the House and Senate bills provide funding at
the President’s requested level of $100 million.
Family Self Sufficiency Coordinators. Family Self Sufficiency (FSS)
coordinators help families obtain job training and employment. The FSS program’s
goal is to decrease families’ dependency on public assistance programs and move
them towards economic self sufficiency. In FY2003, $48 million was provided for
FSS coordinators; in FY2004, $72 million is requested for FSS coordinators.

CRS-14
The amount provided in H.R. 2861 for FSS coordinators in FY2004 would
match the amount provided in FY2003 ($48 million), but would be significantly less
than the amount requested by the Administration ($72 million). S. 1584 would fund
FSS coordinators at the President’s requested level.
Unobligated Balances. For several years, unspent funds have accumulated
within the HCF. These unspent funds, called unobligated balances, accrue when
local PHAs do not spend all of the funds, or use all of the vouchers, they were given
in a year. Congress has expressed great concern over this “chronic underutilization.”
In FY2003, HUD had $2.84 billion in unobligated balances in the Housing
Certificate Fund, according to the FY2004 Budget Appendix. Of that amount, HUD
expected Congress to rescind $1.1 billion in FY2003. Congress actually rescinded
$1.6 billion in FY2003 and required HUD to change the way that it obligated voucher
funds in the hopes of reducing future unobligated balances. The remaining $1.24
billion dollars was available for use in FY2003 or could be carried over into FY2004.
In its FY2004 request, the Administration stated that it expected to have $1.37
billion available in unobligated balances. Of that amount, the Administration
anticipates that $1.07 billion will be used for vouchers under HANF and $300
million will be rescinded by Congress from the project-based rental assistance
program. However, HUD’s estimate of unobligated balances available in FY2004
is no longer current. Since the Administration developed the FY2004 budget request
before the FY2003 funding level was enacted, they had to base their estimates on the
funding levels they had requested, rather than what they had received. Therefore, the
$1.37 billion was estimated using a smaller rescission level and a higher overall
appropriation level for the HCF than was actually enacted. Therefore, it is unclear
how much HUD will actually have available in unobligated balances in FY2004.
Both H.R. 2861 and S. 1584 accept the Administration’s estimate of unobligated
balances and both chose to rescind the full $1.37 billion that HUD claims to have
available.
Advance Appropriations. For the past several years, two types of
appropriations have been used to fund the Housing Certificate Fund:
an
appropriation available in the named fiscal year; and an advance appropriation of
$4.2 billion, which is not available until the next fiscal year. For example, funding
for the HCF in FY2003 included:
$12.9 billion in appropriations for use in FY2003; and
+ $ 4.2 billion in advance appropriations provided in FY2002 for use in FY2003
$17.1 billion in available appropriations (not including unobligated balances)
for the HCF in FY2003

CRS-15
Note that the $4.2 billion in advance appropriations that was provided in
FY2003 for FY2004 is not included in the total for the HCF in FY2003 shown above.
However, it is included in the Administration’s FY2004 anticipated budget for
HANF:
$ 4.8 billion in appropriations for use in FY2004 (for the project-based program);
$ 8.3 billion in appropriations for use in FY2004 (for HANF); and
+ $ 4.2 billion in advance appropriations provided in FY2003 for use in FY2004
$17.3 billion in available appropriations (not including unobligated balances) for
HANF and the project-based rental assistance program in FY2004
The advance appropriation structure was adopted again in the FY2004 budget
request.
For FY2004, the Administration requested $4.2 billion in advance
appropriations (to be spent in FY2005) for HANF. The House also proposes to
maintain the advance appropriation funding structure.
Table 4 shows a breakdown of funding for the vouchers and project-based
programs.
Table 4. FY2003 and FY2004 Appropriation Levels for Vouchers
and Project-based Rental Assistance
($ in billions)
FY2003 FY2004 FY2004 FY2004 FY2004
enacteda request
House
Senate
Conf.
Budget authority:
Vouchers/HANF
New appropriations
12.604
12.535
13.757
13.611
Advance appropriation
from prior year
(4.172)
(4.200)
(4.200)
(4.200)
Current-year appropriation
(8.431)
(8.335)
(9.557)
(9.411)
Budget authority available
from unobligated balances
2.838
1.072b
1.072b
1.072b
Budget authority rescinded or
not expected to be used in
specified FY
-2.838c
0
-1.072b
-1.072b
Subtotal
12.604d
13.607e
13.757e
13.611e
Breakdown:
Vouchers/HANF
Contract renewals
10.870
11.482
11.725
11.484
New incremental vouchers
0.000
0.036
0.000
0.036g
Tenant protection vouchers
0.232
0.252
0.206
0.252
Administrative fees
1.065
1.192
1.209
1.339
Central reserve fund
0.389
0.473
0.569
0.425h

CRS-16
FY2003 FY2004 FY2004 FY2004 FY2004
enacteda request
House
Senate
Conf.
Funds to states for HANF
start-up costs
0.000
0.100
0.000
0.000
Family self sufficiency
coordinators
0.048
0.072
0.048
0.072
Audit Costs
0.000
0.000
0.000
0.003i
Subtotal
12.604
13.607
13.757
13.611
Budget authority:
Project-based rental
assistance
New appropriations
4.507
4.823
4.823
4.823
Budget authority available
from unobligated balances
0
0.300f
0.300f
0.300f
Budget authority rescinded or
not expected to be used in
specified FY
0
-0.300
-0.300
-0.300
Subtotal
4.507
4.823
4.823
4.823
Breakdown:
Project-based rental
assistance
Project based vouchers
4.309
4.720
4.720
4.720
Contract administrators
0.195
0.100
0.100
0.100
Working capital fund
0.003
0.003
0.003
0.003
Subtotal
4.507
4.823
4.823
4.823
Tenant-based and project-
based combined funding
level
17.111
18.430
18.580
18.434
Source: This table was prepared by the Congressional Research Service using data from the FY2003
Consolidated Appropriations Conference Report (Rpt. 108-10), the HUD FY2004 Congressional
Justification, H.Rept. 108-235 and S.Rept. 108-143.
a The FY2003 numbers reflect an across the board rescission of .65% enacted in FY2003.
b The Administration assumes a recapture of $1.072 billion in unobligated funds from HANF and has,
therefore, requested an appropriation of $1.072 billion less than their actual needs; however,
Congress has historically considered the actual needs as the request for new budget authority
while rescinding unobligated balances. The Administration’s estimate of unobligated balances
may not be accurate (see earlier discussion of unobligated balances).
c In FY2003, $2.838 billion was available in unobligated balances, according to the FY2004 HUD
Budget Appendix.
Of this amount, Congress rescinded $1.6 billion.
The FY2003
appropriations bill conference report stated that any unobligated balances in excess of the $1.6
billion necessary to meet the rescission would be available to the Secretary. However, the
conferees provided more than the Secretary had requested for the HCF in FY2003, so one could
assume that the Secretary would not need to use any unobligated balances in FY2003. (See
earlier discussion of unobligated balances.)

CRS-17
d This amount does not include $4.2 billion in advance appropriations provided in FY2003 for use in
FY2004. The $4.2 billion provided in FY2003 for use in FY2004 is included in the next
column under “advance appropriations from previous year.”
e This amount does not include $4.2 billion in advance appropriations requested in FY2004 for use
in FY2005.
f Based on the FY2004 HUD budget justification, this table allocates $300 million of the unobligated
balances from the Housing Certificate Fund to the project-based rental assistance program. The
Administration’s estimate of unobligated balances may not be accurate (see earlier discussion
of unobligated balances).
g Amount available for set aside within the Central Reserve Fund to provide new, incremental
vouchers to non-elderly, disabled households.
h Amount reduced by $36 million, which is available, at the Secretary’s discretion, to provide new,
incremental vouchers to non-elderly, disabled households.
i S. 1584 proposes to set-aside $3 million within the HCF to fund an outside, independent audit
conducted by a major accounting firm to determine the status of all funds within the account,
obligated and unobligated for all programs for this fiscal year and prior and subsequent fiscal
years.
Public Housing Programs. The public housing program is designed to
provide safe, decent and affordable housing (HUD defines “affordable” housing as
having costs that require a family to pay no more than 30% of its adjusted income for
rent) to low-income families. While no new public housing developments have been
built for many years (except through the HOPE VI program, which is discussed
below), Congress continues to provide funds to maintain the existing stock of over
1.2 million units. (HUD defines “affordability” as requiring a family to pay no more
than 30% of its adjusted income for rent.)
Public Housing Operating Fund. The Public Housing Operating Fund
provides subsidies to local PHAs for public housing operating expenses, including
maintenance, utilities, and tenant and protective services. These subsidies allow
PHAs to keep rents affordable for very low-income families.
For FY2004, the Administration requested $3.57 billion for the Operating Fund,
which is less than the $3.58 billion provided in FY2003. Of the amount requested
for FY2004, $15 million would be set aside for the Resident Opportunities for Self
Sufficiency (ROSS) program. The ROSS program provides residents with supportive
services and assistance in becoming economically self-sufficient.
H.R. 2861would provide $3.6 billion for the Public Housing Operating Fund,
an increase over the FY2003 level and the President’s request. Of that amount, the
House bill would transfer $10 million to the Department of Justice to be used for
efforts to fight crime and drugs in public housing. This transfer was not proposed by
the Administration. The House bill does not adopt the President’s proposal to set-
aside Operating Fund dollars for the ROSS program. However, the House also
proposes to set aside Capital Fund dollars for the ROSS program, as has been done
in the past (see discussion below).
S. 1584 would provide $3.58 billion for the Operating Fund for FY2004, the
same level that was provided in FY2003. As in the House bill, $10 million would
be available for transfer to the Department of Justice.
A Note About the Operating Fund Shortfall From FY2002. In FY2002,
HUD did not have enough operating funds to provide full subsidies to all PHAs.

CRS-18
HUD was short $250 million because it had been miscalculating how much it needed
for the Operating Fund for several years. In past years, HUD would cover the
shortfall by automatically dipping into future years’ appropriations without
requesting advance approval from Congress.
However, HUD was unable to
automatically dip into its FY2003 appropriation to cover its FY2002 shortfall
because the agency was operating under a series of short-term continuing resolutions.
Instead, HUD had to ask Congress’ permission to use funds from FY2003 to cover
FY2002. Congress granted HUD that permission, but Congress did not increase
HUD’s FY2003 appropriation to compensate for the $250 million that was used for
FY2002. Since the FY2003 Operating Fund was effectively reduced, HUD had to
reduce PHAs’ operating budgets. HUD instructed PHAs to reduce their budget
requests by 30%, but informed them that their budgets may be adjusted again later
in the year (See HUD Notice PIH 2003-1, released in January 2003). HUD has since
adjusted PHA budgets to close to 90% (a final cut of approximately 10%).
A Note About Calculating Operating Subsidies. The Quality Housing
and Work Responsibility Act of 1998 (P.L. 105-276) directed HUD to develop a new
formula for allocating operating funds to the PHAs. However, developing this new
formula is proving difficult and controversial. An interim formula-based approach
for allocating operating funds was implemented in FY2001, following regulatory
negotiations required by the 1998 Act. The current formula takes into account size,
location, age of housing stock, occupancy and other factors intended to reflect the
cost of operating a well-managed public housing development.
The final report of the Public Housing Operating Cost Study was released in
June 2003 [http://www.gsd.harvard.edu/research/research_centers/phocs/]. The study
makes several recommendations including using FHA properties to bench-mark
future operating costs and converting the existing public housing system to a
property-based management structure. Since its release, the study has generated
much controversy, in particular its recommendations have received some resistance
from the advocacy groups who represent PHAs. HUD states that it has undertaken
rule making action based on the recommendations of the study; advocacy groups and
some Members of Congress are calling for the creation of a negotiated rule making
committee, including advocacy groups and industry representatives, to complete
work on the regulations. HUD has indicated that it would like to finalize a new
formula by the end of 2003.
Public Housing Capital Fund. The Public Housing Capital Fund provides
money to PHAs for the rehabilitation and modernization of public housing. Regular
physical maintenance ensures that these developments do not become unsafe for
residents or so obsolete that they must be demolished. HUD estimates that there is
a backlog of $20 billion in rehabilitation and modernization needs facing public
housing and that an additional $2.2 billion in capital needs accrue annually.
The HUD budget requests $2.64 billion for the capital fund in FY2004, less than
the $2.71 billion enacted in FY2003. The justification for this cut in the face of such
a large backlog is the introduction of what the Administration terms the Public
Housing Reinvestment Initiative (PHRI) and Loan Guarantee. Under this proposal,
HUD would consider requests from PHAs to participate in this initiative on a
property-by-property basis. The program would include leveraging of private capital

CRS-19
through a combination of loan guarantees and the conversion of public housing units
to project-based voucher assistance. For loan guarantees, this proposal would set
aside $131 million in public housing capital funds, which could partially guarantee
(up to 80%) $1.7 billion in loans to pay for capital improvements to public housing.
The conversion of public housing to project-based vouchers is designed to make
PHAs seem more credit-worthy. The Administration believes that lenders will view
project-based voucher funding as a more predictable stream of income than capital
fund appropriations. Furthermore, the Administration thinks that converting public
housing to project-based vouchers would benefit families. Families with project-
based vouchers have the ability to convert their project-based vouchers to portable
tenant-based vouchers after 1 year. Therefore, families who used to be tied to public
housing but who convert to project-based and then to tenant-based vouchers, would
be able to move to the housing of their choice. Legislation to enact this proposal has
not been introduced in the 108th Congress. A similar proposal was offered by the
Administration in FY2003, but was not adopted.
Critics of the Administration’s PHRI proposal argue that many PHAs already
successfully participate in private financing without converting public housing to
vouchers. They are concerned that converting public housing units to vouchers
would essentially privatize public housing and further deplete the nation’s stock of
low-cost housing.
In addition to the $131 million for the PHRI, the Administration has requested
the following set-asides in the Capital Fund for FY2004: $40 million for ROSS; $40
million for the emergency disaster reserve; $10 million for the working capital fund;
$50 million for technical assistance; and $30 million for the demolition of obsolete
public housing units.
The House appropriations bill, H.R. 2861, would provide $2.7 billion for the
Capital Fund for FY2004, an amount higher than the Administration’s request and
level with FY2003. The Committee rejected the Administration’s PHRI initiative,
stating that many PHAs have already pursued public-private financing partnerships
under existing statutory authority. The House provided for the following set-asides
in the Capital Fund for FY2004: $55 million for ROSS; $40 million for emergency
disaster reserve; $11 million for the working capital fund; and $51 million for
technical assistance. The House did not provide a set-aside for the demolition of
obsolete public housing units since they provided HOPE VI funding, which can be
used for that purpose (see below). However, the House did provide for $429 million
to be set aside from the funds available for formula allocation to be distributed to
those PHAs who had obligated all of the Capital Funds they had received for FY2001
and FY2002.
This “timely expenditure bonus” was included in the FY2003
appropriations bill and is designed to reward those housing authorities who are fully
utilizing their Capital Fund allocations.
S. 1584 would provide $2.6 billion for the Capital Fund for FY2004, an amount
less than the House-passed level and equal to the amount requested by the
Administration. While the committee did not adopt the Administration’s PHRI
initiative, the committee did voice support for PHAs seeking private financing. To
support their efforts, the committee bill would establish a new public housing
development loan guarantee program. The bill would allow the Secretary to make

CRS-20
$125 million of the Capital fund available for a loan loss reserve and other purposes
implementing the loan guarantee. In addition to the loan guarantee set-aside, the
Senate bill would set aside $400 million to provide timely expenditure bonuses.
HOPE VI Revitalization of Distressed Public Housing. The HOPE VI
program funds the demolition and revitalization of deteriorated and distressed public
housing. Since the inception of the HOPE VI program, HUD has approved the
demolition of approximately 115,000 units of distressed public housing and the
creation of over 66,000 rental and homeowner units. New housing created by HOPE
VI must have a mixed-income tenancy – the poor, the not quite so poor, and some
moderate-income households – in an effort to change the culture and eliminate the
stigma of public housing. Authorization for the program ended at the end of
FY2002; it was extended in FY2003 through the end of FY2004. The House
Financial Services Committee passed H.R. 1614 to revise and reauthorize the HOPE
VI program through FY2005.
For FY2004, the Administration requested no new funding for the HOPE VI
program, which was funded at $570 million in FY2003. The Administration argues
that the program does not need new funding for two reasons. First, the program’s
goals – namely the demolition of the nation’s worst public housing – have largely
been accomplished. Second, the program has some problem areas. One major
problem with the HOPE VI program is the amount of time it takes to complete a
project. Of the 195 projects funded since 1992, only 16 are completed and only half
of the obligated funds have been spent. Another problem with the HOPE VI program
is the displacement of former residents. Few families whose units have been
demolished under HOPE VI come back to live in the revitalized housing and little is
known about what happens to them.
Despite these concerns, the HOPE VI program is one of the most popular
programs under HUD’s jurisdiction. Many advocacy groups and Members of
Congress have spoken out on behalf of the program. They argue that need for the
program is still great and that instead of ending the program, HUD should work with
Congress to improve it so that it can continue to transform the most distressed public
housing in the nation.
H.R. 2861would provide $50 million for the HOPE VI program, $5 million of
which would be available for technical assistance. S. 1584 would provide $195
million for HOPE VI, $3 million of which would be available for technical
assistance.
Native American Block Grants. This block grant program provides tribes
or tribally designated housing entities with a flexible source of funding for low-cost
housing and related activities.
As provided in the Native American Housing
Assistance and Self-Determination Act (P.L. 104-330), block grant funds may be
used for a wide range of homeownership and rental activities. The Administration’s
FY2004 budget requests $646.6 million, about $2 million more than enacted in
FY2003.
With unemployment that often exceeds 80% in many Indian and Native
communities, the Senate Appropriations Committee report for FY2003 (S.Rept. 107-

CRS-21
222) directed HUD and its grantees to give primary consideration to qualified Native
owned firms in the design and construction of Indian housing. For FY2004, S. Rept,
108-143, repeats his directive and directs HUD to report on the use of Native owned
firms under this account by April 15, 2004.
The House-approved bill recommends $661.6 million for FY2004, an increase
of $15 million above HUD’s request and $16.8 million more than provided in
FY2003. The Senate bill approves $646.6 million, the same as the budget request.
Community Planning and Development
Housing for Persons with AIDS (HOPWA). The President requested $297
million for the HOPWA program for FY2004, up from the $290 million enacted in
FY2003. The House appropriations bill, H.R. 2861, would fund HOPWA at $302
million, $5 million above the President’s requested level. This increase was added
on the House floor and was offset by a reduction in National Science Foundation
funding. S. 1584 would provide $291 million, less than the President’s request and
the House-passed level.
HOPWA provides housing assistance and related supportive services for low-
income persons with HIV/AIDS and their families. Funding is distributed both by
formula allocation and competitive grants to states, localities and nonprofit
organizations. HOPWA funds may be used for housing information services,
resource identification to establish and coordinate housing assistance resources, to
acquire, rehabilitate or lease housing and services, to construct single room
occupancy dwelling and community residences, for rental assistance and for short-
term rental assistance. Funds may also be used for mortgage or utility payments to
prevent homelessness of a tenant or mortgagor and for supportive services including
health, mental health, drug and alcohol abuse treatment and counseling, day care,
nutritional services and assistance in gaining access to local, state and federal
government benefits.
For more information on HOPWA, see CRS Report RS20704, Housing
Opportunities for Persons with AIDS (HOPWA).
Rural Housing and Economic Development.
The FY1999 HUD
Appropriations Act (P.L. 105-276) established within HUD an Office of Rural
Housing and Economic Development to support housing and economic development
in rural areas. Congress provided $25 million in each of FY2001 and FY2002, and
just short of $25 million in FY2003. However, the Administration did not request
funds in FY2002 and FY2003, and does not do so for FY2004, arguing that many of
the agency’s core programs, such as CDBG, already serve rural communities, and
because other Departments like the U.S. Department of Agriculture have very large
and effective programs already in place to address rural housing and economic
development issues.
However, both the House and Senate Appropriations
Committees have continued to appropriate funds in recent years, believing that this
housing program is sufficiently different from Department of Agriculture programs
to merit separate appropriations.

CRS-22
H.R. 2861 proposes $25 million for the Rural Housing and Economic
Development program for FY2004, requiring that HUD award funds for this program
by June 30, 2004. The Senate bill, S. 1584, also recommends $25 million.
Empowerment Zones and Enterprise Communities. Spendouts have
been much slower than projected for these programs. The Administration proposed
no funding for Empowerment Zones/Enterprise Communities (EZs/ECs) for FY2003
(although Congress appropriated close to $30 million) and proposes no funding for
FY2004, concluding that this program has not been sufficiently effective.
This initiative is an interagency effort to promote economic development and
community revitalization in distressed areas, by directing tax relief and federal funds
to designated EZs and ECs. EZs and ECs are eligible for a variety of tax credits and
other incentives intended to stimulate investment, economic growth, and
revitalization activities. Grants are used for activities that assist residents and
businesses, including workforce preparation and job creation efforts linked to welfare
reform; neighborhood development; support for financing capital projects; financing
of projects in conjunction with Section 108 loans or other economic development
projects. Funds are also used for rental assistance and other housing assistance.
To date, there have been three rounds of EZ/EC designations. In the first round,
nine communities (six urban and three rural) were designated as Empowerment
Zones; and 95 communities were named as Enterprise Communities. Twenty new
Empowerment Zones — 15 urban and 5 rural — were designated in the Round II
competition, along with 20 new Enterprise Communities, all rural. The Community
Renewal Tax Relief Act of 2000 (P.L. 106-554) authorized the designation of 40
renewal communities (28 urban and 12 rural) and 9 new Round III Empowerment
Zones (seven urban, two rural) designated on December 21, 2001, which utilize only
tax incentive provisions.
In FY2002, $45 million was approved for urban EZs — $3 million each for the
15 Round II zones designated by HUD. The Administration’s FY2003 budget
proposed no funding for Round II Empowerment Zones because after 4 years of
funding, major balances of unused funds had been built up. To help develop the
economies of distressed urban and rural areas, HUD has recently designated 40
Renewal Communities (RZs) and seven additional Round II urban Empowerment
Zones. Private investors in both RZ and EZ areas are eligible for tax benefits over
the next 10 years tied to the expansion of job opportunities in these locations.
P.L. 108-7 included $30 million for Round II EZ-designated communities with
$2 million allocated to each of the 15 empowerment zone communities. Both the
Senate and House recommended an appropriation of $30 million for this program for
FY2003, $15 million less than enacted for FY2002 and $30 million more than the
President’s budget requested. The conference report argued that, consistent with
Round I empowerment zone funding, this program should be classified as mandatory
spending rather than an obligation of the VA-HUD appropriations bill. During its
consideration of the bill, the Senate Appropriations Committee also expressed
concern over accountability in this program and noted that the HUD Inspector
General has been critical about how communities have implemented this program
and used EZ funds.

CRS-23
The House-passed bill, H.R. 2861, recommends $15 million for FY2004 for
continued grant funding for the 15 urban Round II EZ/ECs. S. 1584, as reported on
September 15, 2003 by the Senate Appropriations Committee, does not include an
appropriation for the program for FY2004. The Committee report (S.Rept.108-143)
notes that “the Committee believes that this program was intended to be funded as
a mandatory program and not as an obligation of this bill,” and expects the Senate
Finance Committee to fund this program as mandatory. The report also notes that an
Inspector General was critical of the poor recording and misuse of funds found
during an audit of five selected EZ programs.2
Community Development Block Grants. The Community Development
Block Grant (CDBG) program is the largest source of federal financial assistance in
support of state and local governments’ community development and neighborhood
revitalization activities. The program was first authorized by Congress under Title
I of the Housing and Community Development Act of 1974, P.L. 93-383, and now
stands as the federal government’s longest running block grant.3 During its 29-year
history, the program has undergone some changes, but its structure and focus have
remained essentially unchanged. The program promotes local decision making in the
development of community development plans intended to principally benefit low-
or moderate- income persons, aid in preventing or eliminating slums and blight, or
meeting urgent needs threatening the health and safety of the public. CDBG funds
are allocated by formula to 1,082 entitlement communities, states, and the
Commonwealth of Puerto Rico. After funds are set aside to fund a number of related
categorical programs, 70% of the remaining funds appropriated are allocated by
formula to CDBG entitlement communities while states share the remaining 30%.
FY2004 Funding Proposal. The Bush Administration’s FY2004 budget
proposes $4.716 billion for the Community Development Fund (CDF), which
includes CDBG formula grants to states and entitlement communities and related
programs. The Bush Administration’s budget request includes $280 million for
program set-asides, and $4.436 billion in CDBG formula-based grants to entitlement
communities and states. The Administration’s budget request would increase the
formula-based portion of the program by $96.5 million for FY2004, and it would
convert Section 107 funding for insular areas into a formula-based allocation. The
Administration’s budget does not include funding for Neighborhood Initiative or
Economic Development Initiative grants, two categorical programs that recently have
been used exclusively to fund congressionally earmarked projects.
Within the context of HUD’s total budget request for FY2004, the
Administration proposes to allocate 15% ($4.7 billion) of the HUD proposed $31.1
billion budget to programs funded under the CDF account. Within the CDF account,
CDBG formula grants to the states and entitlement communities would account for
93.6% of the CDF budget request while set-asides and earmarks would account for
6.4% of the request.
2 The IG report is available on the web at [http://www.hud.gov/offices/oig/sar49.pdf.].
3 42 U.S.C. 5301.

CRS-24
The Administration is also requesting $16 million in funding for its Colonias
Gateway Initiative (CGI), a proposal that was first included in its FY2003 budget
request within the Community Development Fund but is proposed for FY2004 as a
separate program.
This southwest regional initiative would be targeted to
communities in Texas, New Mexico, Arizona, and California within 150 miles of the
border with Mexico. Funds would be used for housing, infrastructure, and economic
development projects in these distressed areas.
H.R. 2861, as passed by the House on July 25, 2003, recommends a total
appropriation of $4.959 billion, including $4.539 billion for the formula portion of
the CDBG program, and $420.4 million in set-asides and earmarks. The House bill
includes $137.5 million in earmarked funds under the Economic Development
Initiative, which represents 32.7% of the funds targeted for earmarks and set-asides.
In addition, the House would provide $26.5 million in university-based community
development programs intended to encourage collaborative efforts between
institutions of higher education and their surrounding neighborhoods and support
professional training of minority students in the fields community and economic
development.
As approved by the House, H.R. 2861 would appropriate $243 million more in
total CDF funds than the $4.716 billion requested by the Administration and $125.2
million more in set-asides and earmarks. Most notably, the House bill includes
$137.5 million in Economic Development Initiative (EDI) funded earmarks while the
Administration’s budget request does not include funding for the program.
The Senate appropriations bill, S. 1584, would appropriate $4.950 billion for the
program, including $4.546 billion for CDBG formula grants and $404.3 million in
various set-aside and earmarked programs and projects. The bill includes $140
million for $330 EDI earmarked projects and $21 million for 20 NI earmarked
projects. The bill would also appropriate $60 million for the Youth Build program
and $32.5 million in support university-based community development education and
revitalization efforts. The Committee report voiced concern about the lack of private
funding to support and supplement federal Youth Build appropriations.
The following table provides a breakdown of the actual FY2003 appropriations
and the Administration’s FY2004 proposed budget request for the CDF account and
the recommendations of the House as outlined in H.R. 2861 and the accompanying
H.Rept. 108-235, and the Senate, as outlined in S. 1584 and its accompanying report
(S.Rept. 108-143).

CRS-25
Table 5. Community Development Fund Appropriations,
CDBG and Related Set Asides: FY2003-FY2004
(funding in millions)
FY2004
FY2003
Programs and set-asides
enacted
Request
House
Senate
Subtotals:
Set-asides (see below for details)
565.4
280.0
420.4
404.3
Formula-based (entitlement communities)
3,037.6
3,100.3
3,177.0
3,182.0
Insular areas
0.0
7.0
0.0
0.0
Formula-based (state allocation)
1,301.9
1,328.7
1,361.6
1,363.7
Set-asides:
Indian Tribes
70.5
72.5
72.0
72.5
Housing Assistance Council
3.3
3.0
3.3
3.3
National American Indian Housing Council
2.4
2.2
2.4
2.6
National Housing Development
5.0
0.0
5.0
0.0
Corporation
Operating expenses
(2.0)
(0.0)
(2.0)
(0.0)
Nat. Council of La Raza HOPE Fund
5.0
0.0
5.0
0.0
Technical assistance
(0.5)
(0.0)
(0.5)
(0.0)
HOPE Fund, other activities
(4.5)
(0.0)
(4.5)
(0.0)
Section 107
48.8
37.9
43.0
52.5
Insular areas
(7.0)
(0.0a)
(7.0)
(7.0)
Prog. management and analysis
(0.0)
(3.0)
(0.0)
(3.0)
Native Hawaiian Housing Block Grant
(9.5)
(0.0)
(9.5)
(10.0)
Training and Technical assistance
0.0
0.0
0.0
(0.4)
University Programs
(32.3)
(31.9)
(26.5)
(32.5)
Historically Black Colleges & Univ.
(9.9)
(10.0)
(10.0)
(11.0)
HBCU technical assistance
0.0
(3.0)
(2.0)
(2.0)
Hispanic Serving Institutions
(6.4)
(5.5)
(6.5)
(7.5)
Community Development Work Study
(3.0)
(3.0)
(3.0)
(3.0)
Alaskan Native and Native Hawaiian
(3.0)
(2.4)
(0.0)
(4.0)
Serving Institutions
Tribal Colleges and Universities
(3.0)
(3.0)
(0.0)
(3.0)
Community Outreach Partnership
(7.0)
(8.0)
(7.0)
(4.0)
Working Capital Fund for the development
3.4
4.9
4.9
4.9
of information technology systems
Wellstone Center for Community Building
8.9
0.0
0.0
0.0
Self-Help Homeownership Opportunity
25.1
65.0
28.0
12.0
Capacity building
(0.0)
(3.0)
(0.0)
(0.0)
Capacity Building for Community
28.1
25.0
33.2
35.5
Development and Affordable Housing

CRS-26
FY2004
FY2003
Programs and set-asides
enacted
Request
House
Senate
National Community Development
Initiative (NCDI)b
(23.1)
(20.0)
(28.2)
(31.5)
Rural area and tribal landsc
(5.0)
(5.0)
(5.0)
(5.0)
Habitat for Humanity
4.2
4.5
5.0
(4.0)
Indian tribes SHOP
(0.0)
(0.0)
(0.7)
(0.0)
Neighborhood Initiative Demonstration
41.8
0.0
21.0
21.0
Youthbuild
59.6
65.0
65.0
60.0
Youthbuild in rural and underserved
(10.0)
(10.0)
(10.0)
(10.0)
areas
Youthbuild USA capacity building
(2.0)
(2.0)
(2.0)
(2.0)
Economic Development Initiative
259.3
0.0
137.5
140.0
Total: CDF, CDBG
4,904.9
4,716.0
4,959.0
4,950.0
Source: U. S. Dept. of Housing and Urban Development and House Appropriations Report (H.Rept.
108-235) and Senate Appropriations Report (S.Rept. 108-143).
Note: Totals may not add due to rounding. Italics indicates entries subsumed under CDBG line in
Table 2; parenthesis indicates entry subsumed in this table under summary line immediately above.
a Insular areas would be included in formula portion of the CDBG program and would not be included
as a set aside under Section 107 (Special Purpose Grants).
b Includes funding for the Enterprise Foundation and the Local Initiative Support Corporation in
support of local community development corporations.
c The $5 million for NCDI for rural areas and tribes is a set-aside within the program. HUD is
required to allocate $5 million of the $25 million to these areas.
Earmarks and Set-Asides. The Administration’s proposed increase in
entitlement funding and its Colonias Gateway Initiative are to be offset by
eliminating funding for two CDF-related set-asides, notably, the Neighborhood
Initiative (NI), which received $41.8 million for FY2003, and the Economic
Development Initiative (EDI), which received $259.3 million in FY2003. In the
recent past, both programs have routinely been used by some Members of Congress
to earmark funding for specific projects. Organizations representing entitlement
communities and states, along with this and previous Administrations, have objected
to these earmarks on the grounds that they are noncompetitive, and reduce the
amount of funds available under the formula portion of the CDBG program for
distribution to entitlement communities and states. For FY2003, EDI assistance was
earmarked for more than 850 specific projects identified in the conference report
accompanying the FY2003 VA-HUD, and Independent Agencies Appropriations Act,
P.L. 108-7.
The NI grants support projects intended to stimulate economic
diversification and investment in areas experiencing population out-migration,
improve conditions in blighted and distressed neighborhoods, or facilitate the
integration of housing assistance with welfare reform initiatives. For FY2003, the
$565.4 million used to fund CDBG-linked categorical programs represented 11.5%
of the $4.9 billion appropriated under the Community Development Fund account,
compared to 6% of the Administration’s CDF budget proposal for FY2004. The
$301.1 million in combined FY2003 appropriations for NI and EDI grants represent

CRS-27
more than half (53%) of the $565 million Congress appropriated for CDBG-linked
set-asides and earmarks. As noted earlier, the Administration has requested no
funding for these two programs for FY2004.
H.R. 2861 would appropriate $137.5 million for EDI projects and $21 million
for NI activities. Combined, these programs represent 37.7% of the $420.4 million
in CDF set-asides and earmarks recommended by the House for FY2004. The bill
does not include funding for the Administration’s Colonias Gateway Initiative. The
bill, as requested by the Administration in its FY2004 budget submission, does not
include additional loan commitments for the Section 108 loan guarantee program.
The report accompanying H.R. 2861 assumes that $6,000,000 in unobligated
balances from prior year credit subsidy appropriations and $189,344,000 in unused
loan commitment authority will be available in FY2004 for new Section 108 loan
commitments.
This assumption is based on current estimated usage of funds
appropriated in FY2003.
The Senate Committee bill recommends an appropriation of $140 million and
$21 million for NI activities. The two programs represent 40% of the $404.3 million
in CDF set-asides recommended by the Senate Appropriations Committee. Like the
House version of H.R. 2861, the Senate bill does not include funding for the
Administration’s Colonias Initiative. It would reduce funding for the SHOP program
to $12 million, $13 million less than appropriated in FY2003. Contrary to the
House-version of the bill and the Administration’s budget request, which provided
no new funding for the Section 108 loan guarantee program, the Senate
Appropriations Committee would appropriate $6.325 million in subsidy funding in
support of $275 million in Section 108 loan guarantees. It noted that while the
program has had an uneven history, it allows communities to leverage private capital
for large projects through a pledge of future CDBG funds.
Brownfields Redevelopment. The Administration does not request funding
for the Brownfields Redevelopment program in FY2004, citing ineffective
performance. In the past several years this program has been funded as a separate
line item in the budget at or close to $25 million. But because of lower than expected
interest in the program, slow expenditures of funding, and very lengthy time-frames
to produce actual results, the Administration recommends that the program be
transferred to the Environmental Protection Agency and combined with its
brownfield program. The Administration also points out that the redevelopment of
brownfields can occur through the use of Community Development Block Grant
funds.
Brownfields redevelopment funds are used to reclaim abandoned and
contaminated commercial and industrial sites. Administration estimates place the
number of eligible brownfield sites at 450,000 nationwide. Funds are used to finance
job creation activities that benefit low and moderate income persons, and funds have
been used in conjunction with Section 108 loan guarantees and with EPA
brownfields cleanup efforts. In HUD’s FY2003 budget, the agency supported
decoupling the brownfields program from the Section 108 loan guarantee program,
believing that this would attract more participants. During the 107th Congress, the
House approved legislation, the Brownfield Development Enhancement Act (H.R.
2941), that would no longer require that communities receive Section 108 loan

CRS-28
guarantees as a condition for the receipt of Brownfield Economic Development
Funds, believing that this would make it easier for communities to gain access to
brownfield funding. However, P.L. 108-7 included a $25 million appropriation for
brownfield projects, maintaining the program’s present structure – which requires
that funds must be used in coordination with CDBG Section 108 loan guarantees. In
addition, the Act requires that HUD award such funds on a competitive basis.
The House-passed H.R. 2861 recommends $25 million for Brownfields
Redevelopment, disagreeing with the Administration that the current program is
duplicative of brownfields activities funded through the Environmental Protection
Agency. To avoid duplication, the Committee report notes that it expects HUD to
closely coordinate its efforts with EPA.
The Senate version of the bill also
recommends an appropriation of $25 million. In an effort to support program
flexibility, the Senate report notes that Brownfield Redevelopment Grants are no
longer required to be linked to Section 108 loan guarantees.
The HOME Investment Partnership Program.
For FY2004, the
Administration requests $2.197 billion for the HOME Program, $210 million more
than enacted in FY2003. The House-approved bill, H.R. 2861, would provide $2.064
billion for the program. S. 1584, as passed by the Appropriations Committee, would
provide 1.975 billion for the program, $12 million less than the FY2003 enacted level
and $222 million less than the budget request.
The HOME block grant program makes funds available to participating
jurisdictions to increase the supply of low-cost rental housing and homeownership
opportunities for low-income families. Jurisdictions have considerable flexibility in
the use of these funds, but all households assisted must have incomes below 80% of
the area median; and 90% of renters receiving assistance must have incomes below
60% of the median. Funds can be used to help new homebuyers. Both homebuyers
and renters can be helped through the rehabilitation of substandard housing and new
construction. Funds may also be used for tenant-based rental vouchers. Some
HOME funds are used with the HOPE VI program and with the Low-Income
Housing Tax Credit. According to HUD budget documents, since its beginning in
1992, HOME funds have been used to construct or rehabilitate more than 250,000
rental units, and have provided direct rental assistance (vouchers) to more than
73,000 households.
The Administration requests a $200 million set-aside within HOME for the
“American Dream Downpayment Initiative” (H.R. 1276) to assist low-income
homebuyers with downpayments for the purchase of their first home. The same
amount was requested in the FY2003 budget, and $75 million was enacted. H.R.
2861 would provide $125 million for the program as a set-aside within HOME. S.
1584 would provide $50 million, and the Committee notes its objection to any
proposals by HUD which would tie the use of HOME funds for homeownership to
the allocation of funds under the American Dream Downpayment Fund.
The
Administration notes that the downpayment is often the most significant obstacle to
homeownership and that the program is expected to help 40,000 homebuyers with
assistance for their downpayments and closing costs.

CRS-29
The Administration requests that Housing Counseling Assistance be funded at
$45 million, an increase of $5 million over the FY2003 level. Instead of being
funded within the HOME program, the Administration is requesting that counseling
be funded in a new free-standing appropriation account under the Housing Programs
section of the HUD budget. The same program change was requested in the FY2003
Budget, but Congress voted to keep the counseling program within the HOME
program. H.R. 2861 and S. 1584 would fund the program at $40 million within the
HOME program. The Senate Committee urges HUD to use the program as a means
of educating homebuyers on the dangers of predatory lending in addition to the stated
purpose of expanding homeownership opportunities.
The Administration regards counseling as an important part of advancing its
goal of increasing homeownership and also notes the importance of rental
counseling. The Budget estimates that the proposed funding would provide 550,000
families with home purchase and homeownership counseling and provide 250,000
families with rental counseling.
An increased emphasis would be placed on
providing counseling through the funding of national and regional intermediary
organizations, and an increased percentage of funds would be awarded to such
organizations.
The Administration also is proposing a new Innovative Lead Hazard
Demonstration program as a $25 million set-aside within HOME to eliminate lead-
based hazards in homes of low-income children. This would be used to help develop
creative ways of identifying methods of eliminating lead-based paint hazards that
could serve as models for existing lead hazard control programs, such as replacing
old windows contaminated with high levels of lead paint dust with new energy-
efficient windows. H.R 2861 and S. 1564 do not include funding for the Lead
Hazard Demonstration program.
H.R. 2861 would provide that up to $2.1 million be transferred to the Working
Capital Fund for the development and modification of technology systems serving
community development programs and activities.
Homeless Assistance Grants. Homeless Assistance Grants is the blanket
title given to the four homeless programs authorized by the McKinney-Vento
Homeless Assistance Act (P.L. 100-77) and administered by HUD. Three of the four
programs are competitive grant programs: the Supportive Housing Program (SHP),
the Shelter Plus Care program (S+C) and the Single Room Occupancy program
(SRO).
Funding for the fourth HUD program, the Emergency Shelter Grants
program (ESG), is distributed via a formula allocation to states and local
communities.
For FY2004, the Administration has proposed combining the competitive
Homeless Assistance Grants into one consolidated competitive program; the ESG
program would remain a formula allocation. The Administration has requested $1.33
billion for homeless assistance in FY2004. This would be an increase over the $1.2
billion for homeless assistance grants provided in FY2003. The amount requested
for FY2004 would include: $150 million for the ESG program, $194 million for S+C
renewals, $12 million for technical assistance (including homeless management

CRS-30
information systems – HMIS), $2.6 million for the Working Capital Fund and $1.5
million for the Interagency Council on Homelessness.
The Administration has proposed that the Emergency Food and Shelter program
(EFSP), which is currently administered by the Federal Emergency Management
Agency (FEMA), be transferred from the Department of Homeland Security to HUD
in FY2004. This transfer was proposed in the FY2003 budget, but was not adopted.
For FY2004, $153 million was requested for the EFSP.
The Administration’s FY2004 budget also requests $50 million for a new
Samaritan Housing program.
This program, which would be conducted in
conjunction with the Departments of Health and Human Services and Veterans
Affairs, would focus on the chronic homeless population through aggressive
outreach. Both the Secretary of HUD and the President have made a commitment to
end chronic homelessness in 10 years. The Administration states it will submit
legislation to amend the McKinney-Vento Homeless Assistance Act of 1987 to
include the Samaritan Housing program.
The House appropriations bill, H.R. 2861, would provide $1.24 billion for the
existing Homeless Assistance Grants programs, about $9 million less than the
Administration’s request. Of this amount, 30% of the funds not dedicated to S+C
renewals must be used for permanent housing, under the House language. No
language in the House bill or report refers to the consolidation of the competitive
homeless programs; however the bill does direct the Secretary to fully renew all S+C
vouchers. This amount does not include funding for the President’s proposed
Samaritan Initiative, which the House chose not to adopt since the authorizing
legislation had not yet been introduced. The House does not adopt the President’s
request to transfer the EFSP program from FEMA to HUD.
The Senate Committee version of the HUD spending bill would provide $1.325
for Homeless Assistance Grants, slightly less than the Administration’s request, but
more than proposed by the House. Of that amount, 30% of the non-S+C dollars
would be required to be spent on permanent housing and $12 million would be set
aside to support the Homeless Management Information System (HMIS), which
HUD has been developing to collect nationwide data on the homeless, and other
technical assistance.
The homeless assistance programs are intended to help homeless persons and
families break the cycle of homelessness and move to permanent housing and self-
sufficiency. HUD’s Continuum of Care (CoC) process encourages the creation of
linkages to other housing and community development programs including public
housing, Section 8, Community Development Block Grants, HOME, Housing
Opportunities for Persons with AIDS, and state and local programs. In addition, the
strategy promotes direct links to mainstream social service programs critical to the
success of homeless assistance efforts, such as Medicaid, State Children’s Health
Insurance Program, Food Stamps, Temporary Assistance for Needy Families
(TANF), and services funded through the Mental Health and Substance Abuse Block
Grant, Workforce Investment Act, and the Welfare-to-Work grant program.

CRS-31
For more information on federal homeless programs, see CRS Report RL30442,
Homelessness:
Recent Statistics, Targeted Federal Programs and Recent
Legislation.
Housing Program Administration
Housing for Special Populations (Elderly and Disabled). The Housing
for Special Populations account is made up of two programs: the Section 202
program for the elderly and the Section 811 program for the disabled. They provide
capital grants for the development of additional new subsidized housing for these
populations. For FY2004, the Administration has proposed abolishing the Housing
for Special Populations account and replacing it with two separate accounts:
Housing for the Elderly (Section 202) and Housing for the Disabled (Section 811).
The President proposed a funding level of $774 million (for a total of $783
million, including the reprogramming of $9.7 million in unobligated funds from
previous years) for housing assistance for the elderly in FY2004, the same amount
as requested in the previous year. $776 million was provided as direct appropriations
in FY2003. HUD points out that an increasing number of the elderly living in
Section 202 apartments have become frail and less able to live in rental facilities
without some additional services. Therefore, the Administration has proposed that
$30 million of the appropriated amount be made available for construction grants to
convert existing Section 202 units to assisted living facilities. This would allow
individual elderly residents to remain in their units and maintain their independence
as they age. The President proposed that another $53 million of the appropriation be
used to fund service coordinators who help elderly residents obtain needed supportive
services from the community. Finally, the Administration proposes to transfer
$470,000 of the amount to the Working Capital Fund.
The Administration expressed concern in its FY2004 budget justification about
the length of time it takes to develop a Section 202 property and the high cost of
developing Section 202 units relative to private units. HUD stated that it would
examine the program and propose changes to improve its performance to address the
aforementioned concerns.
H.R. 2861, the House appropriations bill, agreed to split the Housing for Special
Populations account. For the Housing for the Elderly account, the bill would provide
$773 million, slightly less than the Administration’s request. However, the bill states
that an additional $16 million will be available for the account from excess funding
provided in FY2003. The bill would set aside $50 million for service coordinators,
$25 million to facilitate the conversion to assisted living.
S. 1584 would not split the Housing for Special Populations account, as
proposed by the Administration. Instead, it would provide $1.03 million, of which
$783 million would be designated to provide housing for the elderly. Of that $783
million, $30 million would be available to facilitate the conversion to assisted living
and $50 million would be available for service coordinators.
The Administration requested $251 million for the Housing for the Disabled
account (Section 811), which is the same level at which the program was funded in

CRS-32
FY2003. Like last year, up to 25% of the funds for the disabled could be used for
vouchers to give disabled individuals more flexibility and choice so they could live
in mainstream rental housing.
Like the Section 202 program, the Section 811 program was cited in the FY2004
budget justification as needing reform. Out of concern regarding how slowly
grantees spend Section 811 funds, the Administration included in its justification a
list of program reforms, which it intends to pursue in FY2004. They include:
coordinating Section 811 funded vouchers with the Administration’s HANF
proposal; expanding the eligible uses of Section 811 funds; giving preference to
applicants who leverage funds from other sources; providing a preference for
smaller-scale projects; requiring grantees to use funds in a timely manner or face
recapture; and allowing the Secretary the authority to waive regulatory and statutory
provisions in order to streamline the program.
The House appropriations bill, H.R. 2861, would provide $251 million for the
Section 811 Housing for the Disabled program. The bill notes that an additional $6
million is also available in this account from FY2003 excess funds. The bill
maintains the 25% voucher flexibility, but would not grant the Secretary the
requested waiver authority.
As noted earlier, S. 1584 would not split the Housing for Special Populations
account into two accounts, as proposed by the Administration. Of the $1.03 billion
the Senate would provide, $251 million would be available for housing for the
disabled. Like the House, the Senate would allow up to 25% of these funds to be
used to provide vouchers to the disabled.
Federal Housing Administration (FHA).
The FHA is an insurance
program that makes homeownership possible for individuals and families who lack
the savings, credit history, or income to qualify for a conventional home loan. HUD
reports that in 2003, FHA insured $120 billion of mortgages for 1.3 million
households, 700,000 of them first-time homebuyers. Thirty-seven percent (260,000)
were minority households. The insurance premiums (receipts) paid by homebuyers
(or those refinancing a mortgage) pay the cost of the principal program of the FHA
program, the Mutual Mortgage Insurance (MMI) account, although spending of these
receipts is subject to annual appropriations acts.
Since the early 1990s, the MMI program has contributed a substantial surplus
of funds to the federal government, and will add an estimated $2.9 billion in FY2004.
Since FY2002, the Office of Management and Budget (OMB) and the Congressional
Budget Office (CBO) have determined that FHA receipts under the MMI account
should be classified within the discretionary rather than the mandatory part of HUD’s
budget. According to CBO, the reclassification has no effect on the amount of
budgetary resources available to HUD, and the MMI program will continue operating
as it did prior to the reclassification. Mandatory spending must comply with the
pay-as-you-go rules of the Budget Enforcement Act (BEA) (P.L. 101-508), while
discretionary spending must comply with the BEA’s discretionary spending caps.
For FY2004, the Administration requests and H.R. 2861 and S. 1584 would
provide a commitment to insure up to $185 billion under the FHA Mutual Mortgage

CRS-33
Insurance and Cooperative Housing Mortgage Insurance (MMI/CHMI) fund, an
increase of $20 billion over the level approved for FY2003.
The Administration says it will propose legislation that would permit FHA to
insure loans to borrowers that, due to poor credit ratings, would not ordinarily qualify
for FHA-insured loans. Such borrowers would either be unable to obtain loans, or
would obtain loans at higher interest rates on the sub-prime mortgage market. Under
the proposed initiative, borrowers would also be able to obtain FHA-insured loans
to help them keep their present home or for home purchase. The proposal is
projected to generate loans for an additional 62,000 homes.
The Budget, H.R. 2861, and S. 1584 and would provide a loan limitation of $50
million for direct loans under the MMI/CHMI fund, a $50 million reduction from the
FY2003 level. The direct loans are made to nonprofit and governmental entities for
the purchase of HUD-owned single family properties which had been insured under
the fund.
The Budget, H.R. 2861, and S. 1584 would provide $15 million for the subsidy
cost of loan guarantees under the General Insurance and Special Risk Insurance
(GI/SRI) fund which would subsidize up to $25 billion in insurance commitments on
loans under the fund, an increase of $1 billion over the level approved for FY2003.
The credit subsidy is based on the net cost to the government, exclusive of
administrative expenses, of a direct loan or loan guarantee over its full term,
discounted to the present value at the Treasury’s borrowing cost.
The Budget, H.R. 2861, and S. 1584 propose a direct loan limitation of $50
million for the GI/SRI fund, the same limit as in FY2003. Up to $30 million would
be used to facilitate the sale of HUD-owned multifamily properties. Up to $20
million would used to facilitate the sale of HUD-owned single family properties to
non-profit and governmental agencies for the ultimate resale to low- and moderate-
income borrowers.
The Budget, H.R. 2861, and S. 1584 request administration expenses of $359
million for the MMI/CHMI accounts, an increase of $13 million over the FY2003
level. The Budget, H.R. 2861, and S. 1584 request administration expenses of $229
million for the GI/SRI accounts, an increase of about $7 million over the FY2003
level.
The Administration proposes to reduce the annual mortgage insurance from 57
basis points to 50 basis points on the Section 221(d)(4) multifamily rental housing
projects. HUD estimates that the program will produce 42,000 new rental housing
units annually, and that most of them will be affordable to moderate-income families.
The Senate Committee notes that it remains concerned that HUD has failed to
calculate adequately the amount of credit subsidy needed to support its multifamily
mortgage insurance programs. The Committee notes that it expects HUD to institute
a computer program that accurately identifies the risk of default and financial risk to
the insurance fund. The Committee also directs HUD to issue any changes in
insurance premiums through notice and comment rule making, as required by law.

CRS-34
The Senate Committee notes its disappointment in FHA’s failure to notify the
appropriate Congressional committees that FHA may not have had adequate authority
to cover loan commitments for its FHA Single Family Mortgage Insurance program
for the remainder of FY2003. The Committee notes its concern that Congress was
never notified regarding the potential risk of termination to this homeownership
program. To ensure proper notification in the future, the Committee directs HUD to
continue submitting reports required by section 3(b) of P.L. 99–289 as well as weekly
updates to the House and Senate Committees on Appropriations regarding FHA’s
commitment levels following notification that the FHA’s mortgage insurance
commitments have exceeded 75% of the authorized limit.
The Senate Committee notes that 83% of the portfolio of the FHA Section 242
Hospital Insurance program is in the state of New York.
The Committee is
concerned that this focus in a single state constitutes unacceptably high risk and that
the HUD should take steps to reduce that concentration in order to ensure the long-
term viability of the program and mitigate risks for the General Insurance Fund. The
Committee directs HUD to report to the Committee by June 30, 2004 on its efforts
to reduce geographic concentration of risk in the Section 242 program. The report
should also identify alternatives to HUD’s underwriting of hospitals, assess the
overall financial risk to HUD in underwriting hospital insurance, determine how risk
is assessed, find ways to mitigate and minimize this risk, assess the private and
public investment in hospitals and healthcare facilities, and determine how the
marketplace works in meeting the healthcare facility needs of rural and urban areas.
HUD is directed to consult with the Department of Health and Human Services on
these issues for the final report.
The Senate Committee urges HUD to take more proactive steps to prevent
foreclosures in its FHA single family programs. During the purchase of FHA-insured
houses in revitalization areas, FHA is directed to require one or more of the
following: an appraisal conducted by a state-certified appraiser, with experience in
the market and certified by the city; a home inspection; or the presence of someone
with a fiduciary responsibility to the buyer, such as a buyer’s realtor, or other agent
representing the buyer’s interest. HUD is also urged to reinstitute its policy which
required that new homes purchased with FHA insurance receive either an FHA-
certified inspection or a 10-year insurance-backed warranty.
In its administrative provisions, S. 1584 would require that within 90 days of
enactment of the bill, HUD would promulgate a regulation to institute a ‘‘good
neighbor’’ policy in the disposition of multi-family housing which had been acquired
by HUD through default and foreclosure.
The regulation would provide that
regardless of whether purchasing the property directly from HUD or through states
or localities, prospective purchasers of the properties would be certified as being in
compliance with state and local housing codes with regard to other properties owned
by such purchasers. The intent of the regulation would be to prevent the sale of
properties to parties demonstrating a pattern of owning housing with severe housing
code violations.
Office of Federal Housing Enterprise Oversight (OFHEO). HUD has
oversight responsibilities for establishing Fannie Mae’s and Freddie Mac’s affordable
housing goals and for monitoring their progress toward achieving those goals.

CRS-35
Within HUD, OFHEO is the “safety and soundness” regulator for the Government-
Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac. The FY2004 HUD
budget proposes $32.4 million in budget authority for the operation of OFHEO.
There has been increased criticism in recent months in the Congress and
elsewhere of OFHEO for what some see as inadequate oversight of Fannie Mae and
Freddie Mac. Legislation (H.R. 2575) has been introduced to move oversight from
HUD to the Treasury Department.
The HUD budget request for FY2004 says that OFHEO intends to expand and
be more aggressive in its oversight activities, including: reviewing GSE requests for
approval of new programs; ensuring that the GSEs are consistent in their adherence
to fair housing laws; providing an annual public use database on the GSEs’ mortgage
purchases — and reports and research on GSE activities; and the setting, monitoring
and enforcement of GSEs’ goals for the purchase of mortgages made to low- and
moderate-income families, and mortgages on properties located in underserved areas.
In FY2003, legislation was proposed to remove OFHEO from the annual
appropriations process and fund the organization directly. The idea was to place
OFHEO on a par with other safety and soundness regulators such as the Federal
Reserve Board, the Office of Thrift Supervision, and the Federal Housing Finance
Board. P.L. 107-8 provided close to $30 million for OFHEO, to be funded by fees
from Fannie Mae and Freddie Mac. HUD was directed to provide a detailed report
to the Committee on Appropriations by August 15, 2003, detailing OFHEO’s current
staffing levels and corresponding responsibilities, and whether this is adequate to
fully meet its regulatory mission.
The House bill, H.R. 2861, provides $32.4 million for FY2004, to be offset to
zero as fees are received from Fannie Mae and Freddie Mac during the fiscal year.
The Senate bill, S. 1584, also recommends $32.4 million, the same as the HUD
budget request. The Senate Committee remains very concerned regarding the
competency of the OFHEO office to provide the necessary financial oversight of
Fannie Mae and Freddie Mac.
Fair Housing. The Fair Housing Act makes it illegal to discriminate in the
sale, rental, or financing of housing based on race, color, religion, sex, national
origin, disability, or family status.
HUD’s FY2004 budget reiterates the
Administration’s commitment to fight against housing discrimination, and requests
$50 million for its two fair housing programs, nearly 10% above FY2003 funding of
$45.6 million.
The Fair Housing Assistance Program (FHAP) strengthens nationwide
enforcement efforts by providing grants to state and local agencies to enforce laws
that are substantially equivalent to the federal Fair Housing Act. It provides grants
awarded annually on a noncompetitive basis. For FY2004, HUD is requesting $29.7
million for FHAP.
The Fair Housing Initiatives Program (FHIP) provides funds for public and
private fair housing groups, as well as state and local agencies, for activities that
educate the public and housing industry about the fair housing laws, including

CRS-36
accessibility requirements; investigate allegations of discrimination; help to combat
predatory lending practices, and reduce barriers to minority homeownership. FHIP
would be funded at $20.3 million in FY2004.
The FHIP program for FY2004 is structured to respond to the findings of the 3-
year National Discrimination Study and related studies, and will continue to support
five special initiatives: Combating Predatory Lending includes support of programs
to increase financial literacy. Education Outreach includes a major education and
public awareness campaign to make individuals more aware of their rights and
responsibilities under the Fair Housing Act. Fair Housing in the Colonias is intended
to help residents in the Colonias (areas within 150 miles of the Texas/Mexican
border), many of whom are recent immigrants unaware of their rights under the Fair
Housing Act. Funds will be targeted to FHIP agencies that provide education and
enforcement efforts in these areas. Faith-Based and Community Partnerships
emphasize the participation of faith-based and community partners, recognizing the
significant impact they can have on the implementation of fair housing laws.
Accessibility for Persons with Disabilities is an important Departmental priority
within FHIP that promotes training for architects, builders, and others on how to
design and construct multifamily buildings in compliance with the accessibility
requirements of the Fair Housing Act.
H.R. 2861 would provide a total of $46 million for Fair Housing programs;
$25.75 million for FHAP and $20.25 million for FHIP. S. 1584 would provide $50
million for Fair Housing programs; $23 million for FHAP and $27 million for FHIP.
The Senate Committee report emphasizes that state and local agencies under FHAP
should have the primary responsibility for identifying and addressing discrimination
in the sale, rental, and financing of housing and in the provision of brokerage
services.
Lead-Based Paint Hazard Reduction. HUD is proposing $136 million for
the Lead-Based Paint Hazard Control Program for FY2004, $39.9 million less than
the $174.9 million enacted for FY2003. As noted above under the HOME program,
there also is a new Innovative Lead Hazard Demonstration program proposed as a
$25 million set-aside within HOME to eliminate lead-based hazards in homes of low-
income children.
Title X of the Housing and Community Development Act of 1992 (P.L. 102-
550), authorized HUD to establish the Lead-Based Paint Hazard Control Grant
program, to eliminate lead paint hazards in homes that are at risk of not being
modified through normal renovation or demolition activities. Before 1997, funding
for the lead hazard control grant program was provided under the Annual
Contributions for Assisted Housing Account. In 1997 and 1998, the program was
funded as a set-aside under the Community Development Block Grant account.
Since 1999, the program has received appropriations as a separate, stand-alone
program. Funds are distributed through competitive grants to entities that agree to
match those federal grants.
Over the past decade, HUD has worked with local governments and agencies
to increase the number of lead hazard control programs, and the Center for Disease
Control and Prevention reports that while 890,000 children have elevated blood

CRS-37
levels, this is down from1.7 million in the late 1980s. Despite this, the Senate
Appropriations Committee says that lead poisoning remains a serious childhood
environmental condition, with some 4.4% of all children aged 1 to 5 years having
elevated blood levels. This percentage, the Committee reports, is much higher for
low-income children living in older housing.
The House-approved bill, H.R. 2861, would provide $130 million for the Lead
Hazard Control program in FY2004, instead of the $136 million requested in the
budget and nearly $45 million less than appropriated for FY2003. Included in the
$130 million, $10 million is recommended for Operation LEAP (Lead Elimination
Action Program), a new initiative requested in the budget to leverage private sector
resources to eliminate lead-based paint hazards in low-income housing.
The Senate Committee bill, S. 1584, recommends $175 million for the lead
hazzard control program, $39 million more than the budget request, near level with
the FY2003 funded amount, and $45 million more than the House approved amount
of $130 million. The Senate Committee also recommends $50 million for the lead
hazzard reduction demonstration program which was established in FY2003 as a set
aside within the HOME program, to focus on major urban areas where children are
disproportionately at risk for lead poisoning. The House bill does not include
funding for this demonstration program.