The Department of Housing and Urban Development (HUD): FY2005 Budget

Order Code RL32443
CRS Report for Congress
Received through the CRS Web
The Department of Housing and
Urban Development (HUD): FY2005 Budget
Updated December 28, 2004
Richard Bourdon, Coordinator,
Bruce Foote
Analysts in Housing
Domestic Social Policy Division
Maggie McCarty
Analyst in Social Legislation
Domestic Social Policy Division
Eugene Boyd
Analyst in American National Government
Government and Finance Division
Congressional Research Service ˜ The Library of Congress

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The Department of Housing and Urban Development
(HUD): FY2005 Budget
Summary
The Administration presented its proposed budget for FY2005 to Congress on
February 2, 2004, requesting $31.5 billion for the Department of Housing and Urban
Development (HUD), an increase of about 1% above the $31.2 billion enacted for
FY2004. On November 20, 2004, the House and Senate passed the Consolidated
Appropriations Act, 2005 (H.Rept. 108-792, H.R. 4818) that provided HUD with
$32.0 billion, $838 million or 2.7% above the FY2004 enacted level. The President
signed the omnibus bill on December 8, 2004, as P.L.108-447. (Figures in this report
do not include an across-the-board cut of 0.80% that will reduce HUD appropriations
by approximately $256 million. With this reduction, the increase from FY2004 to
FY2005 would be about $582 million, or 1.9%.)
HUD’s largest program, the Housing Certificate Fund, contains the Section 8
rental voucher program. Central to the Administration’s proposed FY2005 budget
was a controversial initiative, the Flexible Voucher Program (FVP), that would have
significantly revised the Section 8 voucher program. Public Housing Authorities
(PHAs) would no longer be reimbursed based on their number and cost of in-use
vouchers, but would be given a lump sum of money (a “block grant”) to assist any
households with incomes up to 80% of the local area median. Low-income housing
advocates contended that this change and the level of proposed funding could require
PHAs either to reduce the number of families assisted, increase the average rent that
voucher holders pay, or shift assistance away from the poorest of the poor. HUD
countered that the FVP proposal would provide an incentive for PHAs to control the
rapidly rising costs of housing vouchers and PHAs that are good managers would be
rewarded with performance-based incentives. The Administration requested almost
$1 billion less for the FVP than provided in the previous year for vouchers.
Congress did not adopt the FVP but continued with dollar-based funding, a
practice first adopted in FY2004 that provides some constraint on spending.
However, the final funding law provided $1.6 billion more for Section 8 than the
requested level. To pay for this significant increase, all other HUD programs were
reduced below their FY2004 appropriation levels: for example, Community
Development Block Grants, down $225 million; HOME, down $91 million; housing
for the elderly, down $27 million; homeless assistance grants, down $9 million; and
housing opportunities for persons with AIDS, down $11 million. While the
Administration proposed no funding for the HOPE VI public housing rehabilitation
program, P.L. 108-447 appropriated $144 million, $5 million less than for FY2004.
The conferees provided $50 million for the Administration’s Downpayment
Assistance Initiative, a set-aside within the HOME program, which helps lower-
income families buy a first home, considerably less than the $200 million request.
Congress did not provide funding for the Administration’s Zero Downpayment
Homeownership Initiative (H.R. 3755).
This report will not be further updated.

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Contents
Most Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Introduction to the Department of Housing and Urban Development (HUD) . . . . 1
FY2004 Appropriations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
FY2005 Budget Issues In Brief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Budget Level . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 8 Vouchers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
HOPE VI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Homeownership Initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
The Samaritan and Faith-Based Prisoner Reentry Initiatives . . . . . . . . 4
Public and Indian Housing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
The Housing Certificate Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Public Housing Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Native American Block Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Community Planning and Development . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Housing for Persons with AIDS (HOPWA) . . . . . . . . . . . . . . . . . . . . 15
Rural Housing and Economic Development . . . . . . . . . . . . . . . . . . . . 15
Empowerment Zones (EZ) and Enterprise Communities (EC) . . . . . . 16
Community Development Fund/Block Grants . . . . . . . . . . . . . . . . . . 16
Administration Request and Congressional Response . . . . . . . . . . . . 19
Brownfields Redevelopment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
The HOME Investment Partnership Program . . . . . . . . . . . . . . . . . . . 21
Homeless Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Housing Programs and Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Housing for the Elderly and Housing for the Disabled . . . . . . . . . . . . 24
Federal Housing Administration (FHA) . . . . . . . . . . . . . . . . . . . . . . . 25
Office of Federal Housing Enterprise Oversight (OFHEO) . . . . . . . . . 27
Fair Housing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Lead-Based Paint Hazard Reduction . . . . . . . . . . . . . . . . . . . . . . . . . . 28
List of Tables
Table 1. Department of Housing and Urban Development Appropriations,
FY2001 to FY2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Table 2. Appropriations: Housing and Urban Development, FY2004 to
FY2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Table 3. Housing Certificate Fund, FY2004 to FY2005 . . . . . . . . . . . . . . . . . . . . 7
Table 4. Comparison of FVP Proposal to Existing Program . . . . . . . . . . . . . . . . 10
Table 5. Public Housing, FY2004 to FY2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Table 6. Native American Block Grants, FY2004 to FY2005 . . . . . . . . . . . . . . . 14
Table 7. HOPWA, FY2004 to FY2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Table 8. Rural Housing and Economic Development, FY2004 to FY2005 . . . . 15
Table 9. Empowerment Zones and Enterprise Communities, FY2004 to
FY2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Table 10. Community Development Fund, FY2004 to FY2005 . . . . . . . . . . . . 17

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Table 11. Community Development Block Grants (CDBG) and Related
Set-Asides, FY2004 to FY2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Table 12. Brownfields Redevelopment, FY2004 to FY2005 . . . . . . . . . . . . . . . 21
Table 13. The HOME Investment Program, FY2004 to FY2005 . . . . . . . . . . . . 22
Table 14. HUD Homeless Programs, FY2004 to FY2005 . . . . . . . . . . . . . . . . . 23
Table 15. Section 202 and 811, FY2004 to FY2005 . . . . . . . . . . . . . . . . . . . . . . 25
Table 16. Federal Housing Administration, FY2004 to FY2005 . . . . . . . . . . . . 26
Table 17. Fair Housing Programs, FY2004 to FY2005 . . . . . . . . . . . . . . . . . . . . 28
Table 18. Lead-Based Paint Hazard Reduction Program, FY2004
to FY2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

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The Department of Housing and Urban
Development (HUD): FY2005 Budget
Most Recent Developments
President Signs Omnibus Bill. On December 8, 2004, the President signed the
Consolidated Appropriations Act, 2005 (P.L. 108-447). The law provides for an
across-the-board reduction of 0.80% for most discretionary programs.
Conference Report Approved. The Consolidated Appropriations Act, 2005
(H.Rept. 108-792, H.R. 4818) was passed by the House and Senate on November 20,
2004. The Department of Housing and Urban Development would receive $32.0
billion, $838 million more than FY2004 appropriations.
Senate Appropriations Committee Approves S. 2825. On September 21, 2004,
the Senate Appropriations Committee approved S. 2825 (S.Rept. 108-353) calling
for $32.2 billion for HUD, slightly more than $1 billion above the FY2004 enacted
level and almost $700 million above the budget request.

House Appropriations Committee Approves H.R. 5041. On September 9,
2004, the House Appropriations Committee reported H.R. 5041 (H.Rept. 108-674),
recommending nearly $32.6 billion for HUD, close to $1.4 billion above the FY2004
enacted level and about $1.1 billion more than the budget request. The Committee
had approved the bill by voice vote on July 22, 2004.
President’s Budget Submitted. The President submitted his budget to the
Congress on February 2, 2004, requesting $31.5 billion for HUD, an increase of $317
million compared to the $31.2 billion enacted for FY2004.
Introduction to the Department of Housing and
Urban Development (HUD)
Most of the appropriations for the Department of Housing and Urban
Development (HUD) are designed to address housing problems faced by households
with very low incomes (for example, the typical recipient of a housing voucher has
an income of about $12,000) or other special housing needs. These include programs
of rental assistance for the poor, elderly, or disabled; housing assistance for persons
with AIDS; and shelter for those who are homeless. The two large HUD block grant
programs, HOME and Community Development Block Grants, also help
communities finance a variety of activities to address housing needs of disadvantaged
populations. In recent years, HUD has focused more attention on efforts to increase
the homeownership rates for lower-income and minority households. (At the end of

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the third quarter of 2004, the national homeownership rate stood at 69.0%, while the
rates for white, black, and Hispanic households stood at 76.1%, 48.4%, and 48.7%,
respectively.) HUD’s Federal Housing Administration (FHA) insures mortgages
made by lenders to lower- income homebuyers and those with less than sterling credit
records, and to developers of multifamily rental buildings containing relatively
affordable units.
Key Policy Staff
CRS
Name
Area of expertise
Division
Telephone and E-Mail
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.
Table 1. Department of Housing and Urban Development
Appropriations, FY2001 to FY2005
(net budget authority in billions)
FY2001
FY2002
FY2003
FY2004
FY2005
$28.92 $30.15 $31.01 $31.20 $32.04
Source: Figures are from the House Appropriations Committee estimate tables. Final spending levels
for any fiscal year include all supplemental appropriations or rescissions. Final totals remain uncertain
until all program experience has been recorded, a process that may not be completed for several
months after the end of the fiscal year. The FY2005 figure is from the House Appropriations
Committee’s funding table in H.Rept. 108-792, in the Congressional Record of Nov. 20, 2004
beginning at page H10178 and does not include the effects of the 0.80% across-the-board reduction
in most discretionary accounts, as called for in P.L. 108-447.
FY2004 Appropriations
The Consolidated Appropriations Act (P.L. 108-199) that was signed into law
by the President on January 23, 2004 provided HUD with $31.2 billion, an increase
of $192 million or 0.6% above FY2003 funding. The Housing Certificate Fund
received nearly $19.3 billion, a substantial increase over FY2003 appropriations of

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$17.3 billion. The HOPE VI program was funded at $149 million, a sharp reduction
from $570 million in FY2003. For more information, see CRS Report RL31804,
Appropriations for FY2004: VA, HUD, and Independent Agencies.
FY2005 Budget Issues In Brief
Budget Level. The Administration proposed a HUD budget for FY2005 of
$31.5 billion, an increase of about $317 million or about 1% above the FY2004
enacted budget of $31.2 billion. This follows an increase of about $192 million or
0.6% from FY2003 to FY2004. Affordable housing advocates who argue for larger
increases in the HUD budget point to the 2004 report, The State of the Nation’s
Housing, by Harvard University’s Joint Center For Housing Studies, which found
that “Although the overwhelming majority of Americans are well housed, nearly a
third of all households spend 30% or more of their income on housing and 13%
spend 50% or more. In addition to widespread affordability problems, crowding is
on the increase, some 2.5-3.5 million people are homeless at some point in a given
year, and nearly 2 million households still live in severely inadequate units.” HUD
Deputy Secretary Roy Bernardi acknowledged in a recent interview that “there is not
enough money right now in the country to provide housing for all the people who
need it,” but he cited current budget constraints caused by the demands of homeland
security, combating terrorism, and national defense.1
Section 8 Vouchers. HUD’s FY2005 budget proposed to eliminate the
Section 8 voucher program and replace it with a new grant program called the
Flexible Voucher Program (FVP). The funding requested for this new program was
about $1 billion less than the voucher program received last year and it was
estimated to be more than $1 billion less than what would be needed to maintain the
voucher program at its current level if the FVP proposal was not adopted.2
According to HUD, the FVP proposal would provide an incentive for Public Housing
Authorities (PHAs) to control the rapidly rising costs of housing vouchers. Under
FVP, PHAs would receive a fixed budget and would be subject to fewer regulations
compared to the current program under which PHAs are reimbursed based on their
estimated costs and are subject to a number of federal rules and regulations. Low-
income housing advocates contend that this change could require PHAs to either
reduce the number of families assisted, increase the average rent that voucher holders
pay, or shift assistance away from the poorest of the poor. A similar initiative was
rejected by Congress in FY2004. Neither H.R. 5041, S. 2825, nor the final
Consolidated Appropriations Act (P.L.108-447) adopts the FVP proposal and all
three increase funding for the Section 8 program above the FY2004 level.
HOPE VI. No funding was proposed for HOPE VI, a public housing
rehabilitation program that received $150 million in FY2004. The Administration
points to more than $2 billion of unspent funds in the pipeline that will keep the
program going for years. Advocates for the program, including many Members of
1 Interview with Roy Bernardi, The Post-Standard (Syracuse, N.Y.), June 20, 2004.
2 See Barbara Sard and Will Fischer, Administration Seeks Deep Cuts in Housing Vouchers
and Conversion of Program to a Block Grant, Center on Budget and Policy Priorities, May
24, 2004.

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Congress, contend that the program has been successful in replacing some of the
most dilapidated housing projects with new mixed-income housing, and that it needs
to be continued. The House recommended $143 million, the Senate recommended
$150 million, and the final Consolidated Appropriations Act (P.L. 108-447) provides
$144 million for HOPE VI in FY2005.
Homeownership Initiatives. The Administration’s Downpayment
Assistance Initiative program provides grants to participating jurisdictions to provide
help to lower-income families to purchase a home. The program received an $87-
million set-aside within the HOME program for FY2004, and the Administration’s
FY2005 budget requested $200 million. The conferees agreed to $50 million for
FY2005, with the funds to remain available until September 30, 2007. The House
Appropriations Committee had recommended $85 million, while the Senate
Committee recommended $50 million. (The Senate Committee report, S. Rept.108-
353, noted a Government Accountability Office (GAO) review that found a very slow
10% spend-out rate for this program during FY2003 and 2004.)
A second Administration homeownership initiative, the Zero Downpayment
program (H.R. 3755) was proposed to help an estimated 150,000 first-time
homebuyers annually purchase with no money down and finance all settlement costs.
On June 3, 2004, the House Financial Services Committee passed an amended H.R.
3755. The Administration says that homeownership for lower-income and minority
families helps create a stable living environment for children and allows these
families to accumulate wealth. Critics contend that the Administration’s focus on
homeownership is unbalanced and political; that too many lower-income families are
being enticed to purchase a home with little or no savings or financial knowledge
about budgets or home repair contracts, and that they are especially vulnerable to
layoffs and a variety of financial, and mortgage- and housing-related scams. They
point to very high FHA mortgage delinquency rates — currently above 12%. While
the Administration’s FY2005 budget projected no cost for the Zero Downpayment
program, assuming higher insurance premiums would cover costs, on June 21, 2004,
the Congressional Budget Office (CBO) issued a cost estimate of $562 million over
the 2006-2009 period. CBO estimates that defaults for the new program would
average about 1% each year and that the cumulative default rate over a 30-year period
would exceed 30%. Neither the House nor Senate Appropriations Committees, nor
the conferees included funding for the Zero Downpayment proposal for FY2005.
The Samaritan and Faith-Based Prisoner Reentry Initiatives. The
Administration’s FY2005 budget included $50 million for the Samaritan Initiative
to address the President’s goal of ending chronic homelessness. The goal of the new
program would be to provide new housing options and aggressive outreach and
services to homeless people. The $25 million Faith-Based Prisoner Reentry program
was also proposed in the President’s budget and would be an effort with the Labor
and Justice Departments to help 600,000 people who leave prison each year make the
transition to society. These initiatives were not funded for FY2005 in either the
House, Senate, or final bill.
Table 2 presents a summary of FY2004 appropriations for HUD, the FY2005
request, Appropriations Committees’ responses, and final bill passage. The balance
of this report provides additional details on each component of the HUD budget. For

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a broader discussion of housing-related issues, see CRS Report RL32062, Housing
Issues in the 108th Congress.
Table 2. Appropriations: Housing and Urban Development,
FY2004 to FY2005
(budget authority in billions)
FY2004
FY2005
FY2005
FY2005
FY2005
Program
enacted
request
House
Senate
Conf.
Housing Certificate Fund (Section
8) includes advance appropriations
$19.257
$18.466
$20.018a
$20.708
$20.226a
— Tenant-based vouchers
—
—
14.677
—
14.885
— Project-based rental assistance
—
—
5.341
—
5.341
Public housing capital fund
2.696
2.674
2.580
2.700
2.600
Public housing operating fund
3.579
3.573
3.425
2.610
2.458
HOPE VI
0.149
0.000
0.143
0.150
0.144
Native American housing block
grants
0.650
0.647
0.622
0.650
0.627
Native Hawaiian Block Grant
0.000
0.010
0.000
0.000
0.000
Housing, persons with AIDS
(HOPWA)
0.295
0.295
0.282
0.295
0.284
Rural Housing Economic
Development
0.025
0.000
0.024
0.025
0.024
Empowerment zones; enterprise
communities
0.015
0.000
0.014
0.000
0.010
Community Development Block
Grant (including supplemental)
4.934
4.618
4.711
4.950
4.709
Brownfields redevelopment
0.025
0.000
0.024
0.025
0.024
HOME Investment Partnerships
2.006
2.084
1.920
2.050
1.915
Homeless Assistance Grants
1.260
1.282
1.206
1.260
1.251
Samaritan Initiative
0.000
0.050
0.000
0.000
0.000
Housing for the elderly
0.774
0.773
0.741
0.774
0.747
Housing for the disabled
0.249
0.249
0.238
0.250
0.240
Housing Counseling Assistance
0.000
0.045
0.000
0.000
0.000
Research and technology
0.047
0.047
0.045
0.047
0.046
Fair housing activities
0.048
0.048
0.046
0.048
0.047
Office, lead hazard control
0.174
0.139
0.167
0.175
0.168
Salaries and expenses
0.544
0.592
0.544
0.591
0.547

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FY2004
FY2005
FY2005
FY2005
FY2005
Program
enacted
request
House
Senate
Conf.
Working capital fund
0.234
0.234
0.100
0.234
0.270
Inspector General
0.077
0.077
0.077
0.084
0.080
Loan Guarantees
0.014
0.002
0.013
0.009
0.013
Subtotal: Appropriations
37.049
35.904
36.940
37.633
36.429
Section 8 recaptures (rescission)
-2.844
-1.557
-1.557
-2.588
-1.557
Rental housing assistance
(rescission)
-0.303
-0.675
-0.675
-0.675
-0.675
Other rescissions
-0.030
-0.089
-0.089
-0.089
-0.089
Subtotal: Rescissions
-3.177
-2.321
-2.321
-3.352
-2.321
Federal Housing Administration
(net)
-2.364
-1.707
-1.682
-1.707
-1.710
GNMA (net)
-0.305
-0.357
-0.357
-0.357
-0.357
Subtotal: Offsets
-2.669
-2.064
-2.040
-2.064
-2.068
Total
$31.202
$31.519
$32.579
$32.218
$32.040
Sources: H.Rept. 108-674, H.R. 5041, S.Rept. 108-393, S. 2825, H.Rept. 108-792, P.L. 108-447.
Figures in this table do not include the effects of the 0.80% across-the-board reduction in most
discretionary accounts, as called for in P.L. 108-447.
a. The House Committee bill and the Consolidated Appropriations law split the Housing Certificate
Fund into two separate accounts: tenant-based rental assistance (vouchers) and project-based
rental assistance.
Public and Indian Housing
The Housing Certificate Fund. The Housing Certificate Fund is the
account that funds the Section 8 program. Section 8 is really two programs, project-
based Section 8 and Section 8 tenant-based vouchers. Project-based Section 8 is
privately owned, subsidized housing for low-income households; vouchers are
portable subsidies that low-income families use to reduce their housing costs in the
private market. The Section 8 program currently funds over 2 million vouchers and
over 1 million project-based Section 8 units. Note that $4.2 billion of the funds listed
below are provided in the form of an advance appropriation for the following year,
and each year $4.2 billion is available from the previous year. This advance funding
structure is used to provide funds to the Public Housing Authorities (PHAs) that
administer the program in the months between the beginning of their fiscal years and
the time the federal budget is enacted in final form, which, in recent years, has
generally lagged the federal fiscal year and often lagged the calendar year.

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Table 3. Housing Certificate Fund, FY2004 to FY2005
(in millions)
FY2004
FY2005
FY2005
FY2005
FY2005
enacted
request
House
Senate
Conf.
Housing Certificate Fund
$19,257
$18,466
$20,018
$20,708
$20,226
All Section 8 Renewalsa
17,531 16,920 18,520 19,034 18,700
Section 8 Vouchers
14,186
13,115
14,677
b
14,885
— Voucher Renewals
12,585
11,693
13,303
c
13,463
— Administrative Fees
1,210
1,156
1,162
1,256
1,210
— Central Reserve
136
100
0
100
0
— Family Self Sufficiency
48
0
46
48
46
— Tenant Protection
205
163
163
163
163
— Working Capital Fund
2
3
3
5d
3
Project-based Section 8
5,071
5,351
5,341
b
5,341
— Project-based Renewals
4,946
5,227
5,217
c
5,237f
— Contract Administrators
99
102
102
102
102
— Moderate rehabilitation
administrative fees
25
20
20
e
g
— Working Capital Fund
1
2
2
d
2
Source: H.Rept. 108-674, H.R. 5041, S.Rept. 108-353, S. 2825.
a. Does not include voucher renewals funded by the Central Reserve Fund.
b. No breakdown is provided in the Senate Committee report of the specific amounts provided for
either vouchers or project-based contracts.
c. Both voucher and project-based renewals are included in the total amount shown for “all renewals”
but no further breakdown is provided in Senate Committee documents.
d. The Senate Committee shows only a consolidated amount for the Working Capital Fund, with no
further breakdown between vouchers and project-based contracts.
e. Included in administrative fees account.
f. Includes renewal and administrative costs for moderate rehabilitation units and Section 441 units.
g. Included in renewals.
Advance Appropriations (included in above totals for indicated year):
FY2005: $4.2 billion (FY2004)
FY2006: $4.2 billion (FY2005)
Rescission of Unobligated Balances:
FY2004: $2.8 billion
FY2005: $1.6 billion (request, H.R. 5041, P.L. 108-447); $2.8 billion (S. 2825)

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CRS-8
Highlights:
Funding Level. The President’s FY2005 request for the Housing Certificate
Fund represented a $790 million cut from the FY2004 program level. The voucher
program faced the largest cut, over $1 billion from last year’s level; the project-based
Section 8 program would have received a modest increase in funding. The voucher
program has experienced rapid cost increases over the past several years, due to,
among other factors, increasing housing costs, increasing utilization rates, Congress’s
authorization of additional vouchers, and programmatic and policy changes designed
to increase utilization and deconcentrate poverty. The FY2005 proposed budget cut
coincides with the President’s initiative to reform the voucher program by converting
it into a new grant program, called the Flexible Voucher Program (described below).
The House Appropriations Committee would have funded the combined Section
8 program at almost $700 million above last year’s level and $1.6 billion above the
President’s requested level. The report language specified that the amount provided
in the bill for the voucher program would be the total funding available and that the
Secretary would be prohibited from augmenting the program budget with funds from
other sources. The Senate bill would have provided almost $2 billion more than the
President’s requested level and given the Secretary the discretion to use recaptured
funds to augment the program if necessary. The enacted funding bill (P.L. 108-447)
provides over $20 billion to the program, almost $1.8 billion more than the President
requested.
Budget-Based Funding and Splitting the HCF. The change from “unit-
based” funding to “dollar-based” funding began in the FY2004 appropriations law
and has caused some controversy among PHA groups and low-income housing
advocates. Prior to FY2004, PHAs received a budget based on a fixed number of
vouchers and they were funded based on the actual cost of those vouchers (unit-
based funding). In FY2004, agencies received a budget based on a fixed number of
vouchers and a fixed cost for those vouchers, as spelled out in the appropriations law
(dollar-based, or budget-based, funding). Voucher costs were fixed for FY2004 at
the August 1, 2003 level, plus an adjustment for inflation. For some agencies, whose
costs had increased significantly over the previous year, this budget change provided
them with less funding than they actually needed to maintain their programs at their
previous levels. As a result, many agencies had to make cost-saving adjustments in
their programs, such as not reissuing vouchers when families leave the program
and/or cutting the rent paid to landlords.
The House bill directed the Secretary to continue the practice of dollar-based
funding for PHAs in FY2005, but unlike FY2004, the bill did not spell out a formula
for distributing the funds. The House Appropriations Committee bill also proposed
to split the Housing Certificate Fund into two accounts: “Tenant-based Rental
Assistance” and “Project-based Rental Assistance.”
S. 2825 also proposed to continue the practice of budget-based funding in the
voucher program. The bill directed the Secretary to fund PHAs based on a fixed cost,
which would be established using PHAs’ costs as reported on their most recent end
of the year financial statements, adjusted for any additional information submitted
by the PHAs as of October 1, 2004, plus an inflation factor. The Senate bill’s

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CRS-9
proposed inflation factor was more broadly defined than the one adopted in FY2004.
The Senate bill did not propose to split the HCF into two accounts.
The final FY2005 Consolidated Appropriations Act (P.L. 108-447) also
continues the procedure of budget-based funding of PHAs. In the bill, the Secretary
of HUD is directed to fund PHAs based on their voucher costs and utilization rates
as of May-July 2004 plus the HUD published annual adjustment factor (AAF). If an
agency’s May-July data is not available, HUD is directed to fund PHAs based on
February-April 2004 data, or if that is not available, the agency’s most recently
submitted year-end financial statement, as of March 31, 2004. According to the
conference report (H.Rept. 108-792), PHAs are expected to manage their voucher
programs within their budgets for FY2005, regardless of their actual costs. The Act
also states that “HUD shall provide agencies with flexibility to adjust payment
standards and portability policies as necessary to manage within their 2005 budgets.”
HUD is directed to publish guidance implementing the new funding law within 30
days of its passage and notify PHAs of their budget levels within 45 days of passage.
Like the House bill, P.L. 108-447 splits the HCF into two accounts. The conference
report states that the reason for the split is to provide better transparency and
oversight of expenditures within the accounts.
Housing Certificate Fund Rescission. Each year, a portion of the cost of
the Housing Certificate Fund is offset by a recapture of unobligated balances from
previous years. For FY2004, the President’s budget indicated that just under $1.4
billion would be available in such balances for rescission. However, Congress
rescinded double that amount in FY2004, over $2.8 billion. The additional funds
were estimated to be available as the result of savings from a one-time accounting
change enacted in the program.
In FY2005, the President’s budget indicated that over $1.5 billion would be
available for rescission from prior years’ unobligated balances. The House
Appropriations Committee bill would have rescinded that amount. S. 2825 proposed
to rescind over $2.5 billion and directed the Comptroller General to audit and certify
all funds available for rescission within the account. The Senate bill further directed
that if sufficient funds to meet the rescission are not available within the HCF
account the difference must be met through a proportional rescission taken from each
discretionary account funded in the VA, HUD and Independent Agencies
appropriations bill, with the exception of the Medical Services account in VA. The
Consolidated Appropriations Act (P.L. 108-447) rescinds the amount proposed by
the Administration.
The Flexible Voucher Program. The President’s Flexible Voucher
Program (FVP) would amend statute to convert the existing voucher program into a
dollar-based formula grant. The PHAs that administer the current voucher program
receive from HUD a fixed number of vouchers that they can distribute to low-income
families. Under the FVP proposal, PHAs would instead receive a fixed number of
dollars, which they could use to serve as many families as they choose. The proposal
would make other significant changes to the program, which are illustrated in the
table below.

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CRS-10
Table 4. Comparison of FVP Proposal to Existing Program
Housing choice voucher program
FVP proposal
Eligibility
Families are generally eligible if their
Families would be eligible if their gross
adjusted gross incomes are 50% or
incomes were 80% or below area
below area median income. 75% of all
median income. The FVP would have
vouchers must be targeted to households
no targeting requirements. Income
with adjusted gross incomes at 30% or
would be reexamined every other year
below area median income. Income
and every three years for elderly or
must be reexamined annually.
disabled households.
Subsidy
A voucher is worth roughly the
PHAs could provide whatever subsidy
level
difference between 90-110% of the fair
level they chose. If the PHA provided
market rent minus 30% of a household’s
downpayment assistance, the maximum
adjusted gross income. In FY2004,
grant would be $10,000.
CBO estimates that the average voucher
is worth $6,483 per year.
Housing
Units must be inspected prior to a
Units would be required to be inspected
quality
family’s occupancy to ensure that they
within 60 days of a family’s occupancy
standards
meet federal HQS standards, or, if the
to ensure that they meet the local, state
PHA chooses, state or local HQS
or federal HQS standards, as chosen by
standards, if they are stricter. Each unit
the PHA. One-quarter of all units under
under contract must be reinspected
contract with the PHA would be
annually.
required to be reinspected annually.
Source: Prepared by the Congressional Research Service.
The FVP proposal could help increase administrative flexibility for PHAs as
well as contain the rapidly growing costs of the current voucher program. PHA
groups and low-income housing advocates have expressed concerns that adopting a
block grant funding structure could lead to large funding cuts for low-income
housing assistance in the future. They are also concerned that this proposal, with its
accompanying funding cut, could drastically change the character of the current
program by forcing PHAs to choose between serving higher-income families, forcing
families to pay more for their housing, or serving fewer families. HUD officials
stated during a hearing before the VA, HUD and Independent Agencies
Appropriations Subcommittee on March 4, 2004, that they did not intend to introduce
legislation to enact the FVP proposal; rather, they hoped that the Appropriations
Committees would include the proposal in the FY2005 appropriations bill. The
House Financial Services Committee, in their Views and Estimates of the President’s
FY2005 Budget, included a position that was critical of the President’s FVP
proposal. The Chairman of the Senate VA, HUD and Independent Agencies
Appropriations Subcommittee stated in a hearing on April 1, 2004 that the Flexible
Voucher Proposal is “a poor substitute for flaws in the program” and that the
Committee would not have the “luxury of time to consider fully” the proposal this
year.3 A similar voucher reform initiative was proposed by the Administration for
FY2004, however, no congressional action was taken on the proposal.
3 Statement of Senator Kit Bond, VA- HUD Appropriations Subcommittee FY2005 Budget
Hearing, Apr. 1 2004.

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CRS-11
The House Appropriations Committee bill did not adopt the FVP proposal and,
instead, continued to fund the existing Section 8 program. In rejecting the FVP
proposal, the report language accompanying the bill stated:
The Committee has taken this action without prejudice toward the merits of the
individual proposal but strictly because such changes fall outside the
Committee’s jurisdiction. However, the Committee strongly urges the
authorization committees to take the actions necessary to reform the program.
The Committee is concerned that absent such reform, the viability of all HUD
programs, including the Section 8 program, will be compromised.
The Senate Appropriations Committee bill also did not adopt the FVP proposal.
The Committee Report expressed skepticism about the Administration’s proposal:
Finally, the Committee does not agree with the administration’s belief that the
section 8 program is so flawed that it cannot be corrected without a conversion
of the program into a block grant to the States or to public housing agencies.
Without a commitment of adequate funding, the block grant approach will result
in a shrinking commitment to housing resources for those with the greatest needs.
The final Consolidated Appropriations Act (P.L. 108-447), like the House and
Senate versions, does not adopt the FVP. The conference report is silent on the
merits or weaknesses of the proposal.
For more information on the Section 8 program, see CRS Report RL32284, An
Overview of the Section 8 Housing Program.
Public Housing Programs. Public housing provides publicly owned and
subsidized rental units for very 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. The Operating Fund provides funds to PHAs
for the ongoing maintenance and administration of public housing. The Capital Fund
provides funding to PHAs for large capital projects and modernization needs.
Certain set-asides are made from both these funds, as shown in Table 5. HOPE VI
is a competitive grant program that provides funds to help demolish and/or redevelop
severely distressed public housing developments, with a focus on building mixed-
income communities.

---

CRS-12
Table 5. Public Housing, FY2004 to FY2005
(in millions)
FY2004
FY2005
FY2005
FY2005
FY2005
enacted
request
House
Senate
Conf.
Public Housing Operating Fund
$3,579
$3,573
$3,425
$2,610
$2,458
— Department of Justice crime
preventiona
10
0
10
0
8
— Graduation bonuses
—
15
0
15
10
— Transition costs
—
—
—
30
0
Public Housing Capital Fund
$2,696
$2,674
$2,580
$2,700
$2,600
— Technical assistance
50
35
38
35b
26c
— Troubled agency intervention
activities/Judicial receivership
0
10
5
15b
13c
— Existing judicial receivership
—
—
—
—
3

— Section 23 lease-adjustments
1
0
0
d
0
— Working Capital Fund
10
5
10
5
10


— Em
ergency repairs
40
50
38
50
30
— Service coordinators and
supportive services (ROSS)
55
55
53
55
54
— Neighborhood Networks
15
0
0
15
15
— Demolition of distressed
public housing
0
30
0
30
0
— Freedom to House
Demonstration Initiative
—
5
0
0
0
HOPE VI
$149
$0
$143
$150
$144
Source: See Table 2.
a. These funds are transferred to the Department of Justice for Weed and Seed Programs, which funds
crime prevention and community policing activities. For more information on Weed and Seed,
see [http://www.ojp.usdoj.gov/ccdo/whatsnew.htm].
b. The Senate bill specifies that $50 million is available for technical assistance, up to $15 million of
which can be used for troubled agency activities.
c. The Consolidated Appropriations law specifies that $38.7 million is available for technical
assistance, up to $12.5 million of which can be used for troubled agencies.
d. The Senate bill provides “such funds as may be necessary” for Section 23 lease adjustments.

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CRS-13
Highlights:
Voluntary Graduation Bonuses. This new Administration proposal would
provide bonus funds to PHAs who exceed a baseline number of families who have
exited public and assisted housing. The stated goal is to “move program participants
away from dependency on public housing assistance programs.”
The House Appropriations Committee did not adopt the President’s Voluntary
Graduation Bonus proposed set-aside. Instead, the Committee, in their report,
“strongly encourages the authorization committee of jurisdiction to examine this
proposal.”
The Senate Appropriations Committee bill proposed to set aside the full $15
million requested by the President for bonuses to be given by HUD to PHAs that
“assist program participants in moving away from dependence on housing assistance
programs.”
P.L. 108-447 sets aside $10 million for a program “to provide bonus funding for
PHAs that assist families moving away from dependency on housing assistance
programs.” The conferees state that they expect HUD to allocate the funds through
a Notice of Funding Availability (NOFA) “that provides clear eligibility criteria for
the program.”
Freedom to House Demonstration. This demonstration, according to the
Administration, would test reforms that would allow PHAs to operate on an asset-
based model, which they contend is more in line with market realities. An
“experimental” group of PHAs would be granted full fungibility between their
Operating and Capital funds as well as the flexibility to test local rent-setting
policies. Their reporting requirements would be streamlined and they would be
required to operate under an asset-based management and accounting system. The
financial and physical outcomes of these experimental PHAs would be compared to
similar PHAs who are not participating in the demonstration.
Neither the House, Senate, nor final versions of the FY2005 HUD funding bill
included the Freedom to House Demonstration.
Accounting Change in the Operating Fund. The Senate Appropriations
Committee bill proposed providing almost $1 billion less than the President
requested for the Public Housing Operating Fund. However, the report
accompanying S. 2825 (S.Rept. 108-353) directs the Secretary to convert all PHAs
administering Public Housing to a single fiscal year start date. According to the
Committee report, this accounting maneuver, adopted in FY2004 in the Housing
Certificate Fund, would reduce the amount needed to fund the Operating Fund in
FY2005 by over $1 billion. The Committee also set aside $30 million within the
Operating Fund to be used to help PHAs transition to the new accounting system.
P.L. 108-447 adopted the Senate’s proposed accounting change and therefore realized
the same savings. However, the final bill does not provide transition funds for PHAs.
HOPE VI Funding. FY2005 is the second year that the Administration has
proposed a zero-funding level for the HOPE VI program for revitalizing public

---

CRS-14
housing. In FY2004, Congress responded to the President’s request by funding the
program at $149 million, which was down from the over $570 million provided in
FY2003. HUD has stated in testimony before Congress that the HOPE VI program
has largely met its goal of eliminating the worst public housing in the nation.
Furthermore, they argue that the program is flawed because it has been plagued by
slow development and high per-unit costs. In its place, the Administration has
proposed that $30 million be provided within the Capital Fund for public housing
demolition purposes.
The HOPE VI program has been popular with many Members of Congress. For
example, the Chairman of the Senate Appropriations Committee, VA-HUD
Subcommittee stated at a hearing on April 1, 2004 that:
[He] continue[s] to be troubled by the Department’s decision to eliminate all
funding for the Public Housing HOPE VI program.... It largely has worked well
and deserves to be funded or replaced with a program that is better equipped to
address the remaining stock of distressed public housing.4
The House Appropriations Committee bill would have provided funding for
HOPE VI, at $143 million. The Senate Committee bill proposed to fund the program
at $150 million. The final funding act, P.L. 108-447, provides $144 million for
HOPE VI in FY2005.
For more information on the HOPE VI program, see CRS Report RL32236, HOPE
VI: Background, Funding, and Issues in the 108th Congress.
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 authorized 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.
Table 6. Native American Block Grants, FY2004 to FY2005
(in millions)
FY2004
FY2005
FY2005
FY2005
FY2005
enacted
request
House
Senate
Conf.
Native American
Block Grants
$650
$647
$622
$650
$627
Source: See Table 2.
Congressional Response. The conferees agreed to $627 million for
FY2005, $23 million less than enacted for FY2004.
4 Statement of Senator Kit Bond, VA-HUD Appropriations Subcommittee FY2005 Budget
Hearing, Apr. 1, 2004.

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CRS-15
Community Planning and Development
Housing for Persons with AIDS (HOPWA). HOPWA provides housing
assistance and related supportive services for low-income persons with HIV/AIDS
and their families. Funding is distributed both by formula allocation and competitive
grants to states, localities, and nonprofit organizations.
Table 7. HOPWA, FY2004 to FY2005
(in millions)
FY2004
FY2005
FY2005
FY2005
FY2005
enacted
request
House
Senate
Conf.
HOPWA
$295
$295
$282
$295
$284
— Training and
tech.assist.
—
3
2
3
3
Source: See Table 2.
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.
Table 8. Rural Housing and Economic Development,
FY2004 to FY2005
(in millions)
FY2004
FY2005
FY2005
FY2005
FY2005
enacted
request
House
Senate
Conf.
Rural Housing and
Economic Development
$25
$0
$24
$25
$24
Source: See Table 2.
Highlights:
Administration Request and Congressional Response. The
Administration did not request funds in FY2002, FY2003, FY2004, or FY2005,
arguing that many of HUD’s core programs, such as Community Development Block
Grants, already serve rural communities, and because other departments like the
Department of Agriculture have very large and effective programs for rural
communities. However, Congress has continued to appropriate funds, differentiating
this housing program from the Department of Agriculture’s programs and their

---

CRS-16
separate appropriations. The conferees agreed to $24 million for FY2005 and
requires HUD to competitively award funds no later than September 1, 2005.
Empowerment Zones (EZ) and Enterprise Communities (EC). This
federal 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.
Table 9. Empowerment Zones and Enterprise Communities,
FY2004 to FY2005
(in millions)
FY2004
FY2005
FY2005
FY2005
FY2005
enacted
request
House
Senate
Conf.
EZ/EC
$15
$0
$14
$0
$10
Source: See Table 2.
Highlights:
Administration Request and Congressional Response. The
Administration did not propose any new funding in support of the EZ/EC program.
The conferees provided $10 million for grants in connection with a second round of
empowerment zones and enterprise communities, to remain available until
September 30, 2005.
Community Development Fund/Block Grants. The 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.

---

CRS-17
Table 10. Community Development Fund, FY2004 to FY2005
(in millions)

FY2004
FY2005
FY2005
FY2005
FY2005
enacted
request
House
Senate
Conf.
Community
Development Fund
$4,934
$4,618
$4,711
$4,950
$4,709
Source: See Table 2.
During its 30-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. For FY2004, CDBG funds were allocated by formula to 1,165
entitlement communities, 50 states, and the Commonwealth of Puerto Rico. This is
71 more entitlement communities than the FY2003 total. 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%.
Table 11. Community Development Block Grants (CDBG)
and Related Set-Asides, FY2004 to FY2005
(in millions)
FY2004
FY2005
FY2005
FY2005
FY2005
Program
enacted
request
House
Senate
Conf.
Total: CDF, CDBG
4,933.73
4,618.09
4,711.00
4,950.00
4,709.00
Formula-based (entitlement
communities)
3,031.56
3,026.71
3,008.53
3,183.39
2,900.13
Formula-based
(state allocation)
1,299.24
1,297.16
1,289.37
1,364.31
1,242.91
Insular areas
0.00
6.96
7.00
0.00
7.00
P.L. 108-199 Sec. 165a
9.94
0.00
0.00
0.00
0.00
P.L. 108-199 Sec. 167b
2.99
0.00
0.00
0.00
0.00
Set-asides
(see below for details)
590.00c
287.26
406.10
402.30
558.97
Set-asides:
Indian Tribes
71.58
71.58
69.00
72.00
69.00
Emergencies
0.00
0.00
0.00
0.00
4.00
Housing Assistance Council
3.28
3.28
3.20
3.30
3.30
National American Indian
2.49
2.49
2.40
2.50
2.40

---

CRS-18
FY2004
FY2005
FY2005
FY2005
FY2005
Program
enacted
request
House
Senate
Conf.
Housing Council
National Housing
Development Corporation
4.97
0.00
4.80
0.00
4.80
National Council of La Raza
4.97
0.00
4.80
0.00
4.80
Section 107
51.69
35.29
36.70
51.00
43.70
Insular areas
6.96
0.00
0.00
7.00
0.00
Technical assistance
1.49
1.49
1.40
0.00
1.40
Hawaiian Homelands
Homeownership
9.44
0.00
9.00
10.00
9.00
Historically Black Colleges
and Universities
10.44
10.44
10.00
11.00
10.00
Hispanic-Serving
Institutions
6.96
6.96
6.70
7.00
6.70
Community Development
Work Study
2.98
2.98
2.90
3.00
2.90
Alaskan Native and Native
Hawaiian-Serving
Institutions
3.48
3.48
0.00
4.00
4.00
Tribal Colleges and
Universities
2.98
2.98
0.00
3.00
3.00
Community outreach
partnership 6.96
6.96
6.70
6.00
6.70
Working capital fund
4.87
0.50
3.46
0.50f
3.47
Self-Help homeownership
opportunity 26.84
65.00
26.00
25.00
25.00
Capacity building
34.59
29.50
33.50d
35.00
34.50g
Special Olympics
0.00
0.00
2.00
0.00
2.00
Youthbuild
64.62
64.62
62.00
65.00
62.00h
CDBG Development
Challenge Pilot
0.00
10.00
0.00
0.00
0.00
CDBG Faith-based pilot
0.00
5.00
0.00
0.00
0.00
Neighborhood initiative
demonstration
43.74
0.00
21.74
22.00
42.00
Economic development
initiatives 276.36
0.00
136.50
126.00
262.00i
Source: See Table 2. Also, from HUD Congressional Budget Justifications.
Note: Column totals may not add due to rounding.

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CRS-19
a. P.L. 108-199, Division H, Misc. Appropriations, Section 165 added $9.94 million for an Alaskan
Museum.
b. P.L. 108-199, Division H, Misc. Appropriations, Section 167 added $2.99 million in EDI grants.
c. P.L. 108-199, Division H, Misc. Appropriations, Section 168 provided approximately $600,000
for a grant to Shelter from the Storm. This is not included in figures from the House
Appropriations Committee data as of Sept. 9, 2004 and is not included in this table.
d. Includes $28.8 million for National Community Development Initiative and $4.8 million for
Habitat for Humanity.
e. Includes $31.5 million for National Community Development Initiative, which includes LISC and
Enterprise Foundation, and $3.5 million for Habitat for Humanity.
f. Transferred from $51 million allocated to Section 107 activities.
g. Includes $30 million for National Community Development Initiative, which includes LISC and
Enterprise Foundation, and $4.5 million for Habitat for Humanity.
h. Includes $9 million for underserved and rural areas.
i. In addition to the amounts shown in this table, P.L. 108-447 also appropriates $31 million to the
Community Development Fund for a grant to the Hudson River Park Trust (Division I, Title IV,
Section 424).
Highlights:
Administration Request and Congressional Response. The
Administration’s FY2005 budget proposed $4.62 billion for the Community
Development Fund, including $4.32 billion for Community Development Block
Grants (CDBG) to states and entitlement communities. For the formula portion of
the program, which allocates grants to states and entitlement communities, the House
bill, H.R. 5041, provided $26 million less than requested by the Administration.
However, the House bill provided $93 million more in total appropriations for
Community Development Fund programs (CDBG and related set-asides and
earmarks) than requested by the Administration. The Senate measure, S. 2825,
recommended $4,547.7 billion for the formula portion of the CDBG program. This
is $223.8 million more than requested by the Administration. Overall, the Senate bill
recommended an appropriation of $4.95 billion for CDF activities. This is $331.9
million more than requested by the Administration, with the majority of the funds
allocated to the formula portion of the CDBG program.
The final consolidated appropriations measure, H.R. 4818, which was signed
by the President on December 8, 2004, as P.L. 108-447, provided $4.709 billion for
the Community Development Fund. This includes $4.150 billion for the formula
portion of the Community Development Block Grant (CDBG) program and $559
million in CDBG-related set-asides.
New Entitlement Communities. The addition of 71 new CDBG entitlement
communities in FY2004, coupled with the Administration’s budget request of $4.618
billion for FY2005, down 2% then the FY2004 appropriation, may result in a
reduction in the FY2005 allocation of individual entitlement communities and states.
On average, entitlement communities and states experienced a 4% reduction in
CDBG funding from FY2003 to FY2004, due in part to an increase in the number
of CDBG entitlement communities coupled with a slight decrease in total CDBG
funding, from $4,339.5 million to $4,330.8 million. In FY2004, although entitlement
communities experienced a reduction in funding, state administered programs were
the most significantly impacted by the 6% increase in the number of entitlement
communities with Alaska and Nevada state-administered CDBG programs
experiencing funding reductions of 14.8 % and 13.3%, respectively.

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The FY2005 appropriations of $4.150 billion for CDBG entitlement
communities and states will also result in a small reduction of approximately 4% in
the formula allocation to some states and entitlement communities. The amount of
reduction will depend on such factors as the number of new entitlement communities
and changes in a community or state’s formula factors, including population, poverty,
age of the housing stock, and overcrowded housing conditions.
Earmarks and Set-Asides. In addition to CDBG formula grants, a number
of categorical programs are also funded in support of CDBG activities under the
heading Community Development Fund. These include competitive grant programs,
such as Youthbuild and the Administration’s proposed $5 million faith-based
initiative; set-asides for insular areas and college and university partnerships; and
earmarks, such as the Economic Development Initiative (EDI) and Neighborhood
Initiative (NI) programs. Although the Administration supports a number of these
categorical programs, it has consistently opposed the earmarking of EDI and NI
funding. The Administration’s FY2005 budget request included no funding for EDI
and NI projects, which is consistent with Administration budget recommendations
in previous years. Despite Bush Administration objections that these programs are
noncompetitive and siphon funds from CDBG and other programs, Congress has
traditionally provided funding for EDI and NI designated projects. In FY2004,
Congress awarded over $280 million to more than 900 congressionally designated
EDI projects. It also provided $43 million for NI projects. For FY2005, P.L. 108-
447 includes $559 million in funding for various CDF set-asides.
Because of competing budget demands and a desire to constrain spending,
neither the House or Senate Appropriations Committee versions of the VA-HUD-
Independent Agencies Appropriation Act for FY2005, or P.L. 108-447 provided
funding for two CDBG-related initiatives proposed by the Administration: a $5
million faith-based pilot program and a $10 million community challenge grant.
Further, H.R. 5041 proposed a reduction of $223 million in total funding for CDBG
and related activities. Although much of the proposed reduction in funds would have
been targeted to two earmarked funding accounts, namely, the Economic
Development Initiative and the Neighborhood Initiative, the formula portion of the
program would have also been reduced below the program’s FY2004 appropriation
level. Entitlement communities would have received $23 million less than the
amount appropriated for FY2004 and the formula allocation to states and
communities would have been reduced by almost $10 below the FY2004
appropriation level. The Senate Appropriations Committee’s bill, S. 2825 (S.Rept.
108-353), would have increased the CDBG formula program by $216.9 million
above the amount made available for FY2004. Total funding for CDF programs
under the Senate bill would have increased by only $16.27 million. This is because
the increase in funding for the CDBG formula-based program would have been offset
by a $200.6 million decrease in funding for CDBG-related set-aside and earmark
programs and activities.
The final version of the VA, HUD, and Independent Agencies Appropriations
Act for FY2005, as incorporated in P.L. 108-447, includes $44 million less in
earmarks and set-asides than the $603 million appropriated for such activities in
FY2004. The EDI program funding, which earmarks funds for specific projects,
was reduced by $17 million to $262 million, but the number of total EDI projects

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CRS-21
increased to 1,032 compared to more than 900 approved in FY2004. The NI
program, which earmarks funds to community development corporations, also
experienced a small reduction in funding of approximately $1.7 million. The Act
also shifts $7 million for insular areas previously included as a set-aside to the
formula portion of the program, and does not include $10 million in funding for an
Alaskan Museum that was included in the FY2004 appropriations. The Act does
include $31 million for the Hudson River Trail Park and Trust, located in New York
City, but funding for this specific earmark activity is included as Sec. 424 of the
General Provisions of Title IV of Division I, and is not included in the CDF total.
Brownfields Redevelopment. Brownfield redevelopment funds are used
to reclaim abandoned and contaminated commercial and industrial sites, often as part
of inner-city neighborhood redevelopment efforts. Some view these efforts as “smart
growth,” making use of the existing infrastructure.
Table 12. Brownfields Redevelopment, FY2004 to FY2005
(in millions)
FY2004
FY2005
FY2005
FY2005
FY2005
enacted
request
House
Senate
Conf.
Brownfields Redevelopment
$25
$0
$24
$25
$24
Source: See Table 2.
Highlights:
Administration Request and Congressional Response. In recent
years, the Administration has expressed the view that brownfields activities should
be turned over to the Environmental Protection Agency. Thus far, Congress has not
agreed. The House Appropriations Committee recommended $24 million for
FY2005 and “expected HUD to closely coordinate its brownfields efforts with the
Environmental Protection Agency....” The Senate Appropriations Committee
provided $25 million. The final funding act, P.L. 108-447, provides $24 million.
For more details, see CRS Issue Brief IB10114, Brownfields and Superfund Issues
in the 108th Congress and CRS Report RL30972, The Brownfields Program
Authorization: Cleanup of Contaminated Sites.
The HOME Investment Partnership Program. 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 program.

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CRS-22
Table 13. The HOME Investment Program, FY2004 to FY2005
(in millions)
FY2004
FY2005
FY2005
FY2005
FY2005
enacted
request
House
Senate
Conf.
HOME (total)
$2,006
$2,084
$1,920
$2,050
$1,915
— Formula grants
1,856
1,860
1,776
1,933
1,799
— American Dream
Downpayment Initiative
87
200
85
50
50
— Insular areas
4
4
4
4
4
— HOME/CHDO
Technical Assistance
18
18
17
18
18
— Housing counseling
40
a
38
45
42
— Working capital fund
transfer
2
b
2
b
2
PATH
c
2
c
c
c
Source: See Table 2.
a. Proposed that Housing Counseling be funded in a separate account.
b. Proposed $200,000 transfer.
c. Funded in the Policy Development and Research account.
Highlights:
For FY2005, the Administration requested $2.084 billion for the HOME
Program, $78.6 million more than enacted in FY2004. The proposal would provide
$1.86 billion in HOME formula grants, of which $1.116 billion would be allocated
to participating jurisdictions (PJs) and $744 million would be allocated to states.
Funding set aside for the American Dream Downpayment Initiative would be
increased to $200 million instead of the $87 million appropriated in FY2004. The
Administration requested that Housing Counseling Assistance be funded at $45
million, an increase of $5 million over the FY2004 level. Instead of being funded
within the HOME program, the Administration requested that counseling be funded
in a new free-standing appropriation account under the Housing Programs section of
the HUD budget. No new initiatives were proposed for the HOME program.
Congressional Response. The House Appropriations Committee
recommended $85 million for the American Dream Downpayment Initiative,
considerably less than the $200 million requested. The Committee noted that this
reduction “is taken without prejudice, and is due to other significant funding
pressures in this bill.” The Senate Appropriations Committee recommended only
$50 million for this initiative. It noted its concern that the “program may be helping
families with excessive credit risk and who may not be the best candidates for
homeownership.” The Committee requested that, by July 31, 2005, HUD submit a
report on default activity under the program. The Committee further noted a recent
GAO review of the program which suggests that HUD would be unlikely to be able

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CRS-23
to obligate more than $40 to $50 million for the Initiative during FY2005. The
conferees agreed to provide $50 million for the program. The House and Senate
Committees did not recommend creating a separate account for housing counseling.
On another matter, the House Committee expressed its concern that recent changes
to metropolitan statistical area (MSA) boundaries could significantly lower area
median incomes (AMI) in some communities with high housing costs, making
ineligible many families and individuals who are currently eligible for housing
subsidized through the HOME and Community Development Block Grant programs.
The Committee encouraged HUD to explore ways to address this matter, other than
through any adjustment of funding formulas.
Homeless Programs. Homeless Assistance Grants is the blanket title given
to the four homeless programs authorized by the McKinney-Vento Homeless
Assistance Act (P.L. 100-77) and administered by HUD. Three of the four programs
are competitive grant programs: the Supportive Housing Program (SHP), the Shelter
Plus Care program (S+C) and the 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. The Samaritan
Housing Initiative is a new Administration proposal that was first introduced in
FY2004.
Table 14. HUD Homeless Programs, FY2004 to FY2005
(in millions)
FY2004
FY2005
FY2005
FY2005
FY2005
enacted
request
House
Senate
Conf.
Homeless Assistance Grants
$1,260.0
$1,282.0
$1,206.0
$1,260.0
$1,250.5
— Homeless Management
Information Systems (HMIS)
12.0
11.9
11.5
12.0
11.5
— Prisoner Re-entry
—
25.0
0.0
0.0
0.0
— Working Capital Fund
2.6
0.5
2.5
0.5
2.5
Emergency Food and Sheltera
—
$153.0
—
—
—
Samaritan Housing Initiative
$0.0
$50.0
$0.0
$0.0
$0.0
Source: See Table 2.
a. EFSP has been funded in the Homeland Security budget, under the Federal Emergency
Management Agency (FEMA), including in FY2004, when it received $152 million. The
House, Senate, and final bills all continue funding EFSP through FEMA.
Highlights:
Prisoner Re-entry Initiative. This new Administration proposal would
provide money for a four-year initiative, to be jointly administered with the
Department of Justice, to help individuals exiting prison make a successful transition
to community life and long-term employment. This initiative was highlighted in
President Bush’s 2004 State of the Union address.

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CRS-24
Neither the House bill, the Senate bill, nor the final Consolidated Appropriations
Act (P.L. 108-447) provide funds for the Prisoner Reentry initiative.
Consolidation. As in FY2004, the Administration stated in its FY2005
budget proposal that it planned to submit legislation to Congress to consolidate the
three existing competitive homeless programs into a single program that will provide
added flexibility to grantees. No legislative language to consolidate the HUD
homeless programs was introduced in the 108th Congress.
Transfer of EFSP from FEMA to HUD. The Administration proposed in
its FY2005 budget 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. This transfer was
also proposed in the FY2003 and FY2004 budgets, but was not adopted.
Neither H.R. 5041, S. 2825, nor P.L. 108-447 includes the proposed transfer or
funds the EFSP program in the HUD bill.
Samaritan Housing Initiative and Permanent Supportive Housing.
FY2005 is the second year that the President has requested funding for the Samaritan
Housing Initiative. Funding was not provided in FY2004. This new competitive
grant program would provide supportive housing grants through HUD to be used in
coordination with Department of Health and Human Services and Department of
Veterans’ Affairs resources to support innovative local strategies to end chronic
homelessness. Bills to authorize the Samaritan Initiative have been introduced in
both the House and Senate (H.R. 4057 and S. 2829)
Like the House and Senate bills, P.L. 108-447 does not provide funding for the
Samaritan Initiative. The report accompanying the House bill noted that the
authorizing legislation for the program had not yet passed Congress. Although the
Samaritan Initiative was not funded, a set-aside of 30% of Homeless Assistance
Grants funds for permanent supportive housing was included in the President’s
budget request, the House and Senate versions and the final FY2005 appropriations
bill.
For more information on federal homeless programs, see CRS Report RL30442,
Homelessness: Recent Statistics, Targeted Federal Programs and Recent Legislation.
Housing Programs and Administration
Housing for the Elderly and Housing for the Disabled. Formerly
known as Housing for Special Populations, the Section 202 housing for the elderly
and the Section 811 housing for the disabled programs provide capital grants for the
development of additional new subsidized housing for these populations.

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CRS-25
Table 15. Section 202 and 811, FY2004 to FY2005
(in millions)
FY2004
FY2005
FY2005
FY2005
FY2005
enacted
request
House
Senate
Conf.
Housing for the Elderly (202)
$774.0
$773.0
$741.0
$774.0
$747.0
Service coordinators
30.0
53.0
48.0
53.0
50.0
Grants for conversion to
assisted living
25.0
30.0
20.0
30.0
25.0
Pre-development grants
30.0
0.0
15.0
20.0
18.0
Working Capital Fund
0.5
0.1
0.5
0.1
0.5
Housing for the Disabled (811)
$249.0
$249.0
$238.0
$250.0
$240.0
Working Capital Fund
0.5
0.1
0.5
0.1
0.1
Amount available for use as
tenant-based rental assistance a
25%
25%
10.0
25%
10.0
Tenant-based rental assistance
contract amendments
b
b
29.0
b
28.9
Source: See Table 2.
a. With the exception of H.R. 5041, all bills specify that up to 25% of Section 811 funds can be used
for tenant-based rental assistance. H.R. 5041 specifies a dollar amount.
b. With the exception of H.R. 5041, all bills specify contract amendments for tenant-based rental
assistance as an allowable use of grant dollars without specifying an amount for that use.
Highlights:
NORCs and the State of the Elderly Housing Stock. The conference
report accompanying P.L. 108-447 directs the Secretary of HUD to work with the
Department of Health and Human Services (HHS) to better meet the needs of
naturally occurring retirement communities (NORCs). The report also expressed
concern about the condition of the Section 202 (and Section 236) housing stock. The
report noted that HUD was directed in the FY2004 appropriations conference
agreement to report to Congress on the needs and conditions of this stock of housing
for the elderly by August 15, 2004. Since HUD did not submit that report, the
Committee directs the Secretary to submit it by December 15, 2004.
Federal Housing Administration (FHA). The FHA administers a variety
of mortgage insurance programs that insure lenders against loss from loan defaults
by borrowers. Through FHA insurance, lenders make loans that otherwise may not
be available, and enable borrowers to obtain loans for home purchase and home
improvement as well as for the purchase, repair, or construction of apartments,
hospitals, and nursing homes. The programs are administered through two program
accounts — the Mutual Mortgage Insurance/Cooperative Management Housing
Insurance fund account (MMI) and the General Insurance/Special Risk Insurance
fund account (GI/SRI). The MMI fund provides insurance for home mortgages. The

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CRS-26
GI/SRI fund provides insurance for more risky home mortgages, for multifamily
rental housing, and for an assortment of special purpose loans such as hospitals and
nursing homes.
As shown in Table 16 below, FHA has negative appropriations, which means
that the income to the program from insurance premiums exceeds the program
expenses. This suggests that, in FY2004, the FHA program contributed about $2.479
billion to the total HUD budget. Another way to look at it is that, because of the
surplus generated by FHA, HUD needed $2.479 billion less in appropriations in
FY2004.
As requested, the House and Senate Appropriations Committees recommend an
overall mortgage insurance commitment limitation of $220 billion in loan
commitments. The total includes $185 billion under the MMI/CMHI Fund and $35
billion under the GI/SRI Fund. A direct loan limitation of $50 million is
recommended for both the MMI/CMHI and GI/SRI funds. Direct loans facilitate the
purchase of HUD-owned properties acquired for resale to low- and moderate-income
families. A rescission of $30 million is proposed from the unobligated balance of
credit subsidy funding appropriated in prior years for the GI/SRI account.
For more information on FHA loan insurance programs, see CRS Report RS20530,
FHA Loan Insurance Programs: An Overview.
Table 16. Federal Housing Administration, FY2004 to FY2005
(in millions)
FY2004
FY2005
FY2005
FY2005
FY2005
enacted
request
House
Senate
Conf.
Total FHA Appropriations
($2,364)
($1,706)
($1,682)
($1,706)
($1,711)
Expenses - MMI
442
438
436
438
435
Offsetting Receipts - MMI
(2,921)
(2,234)
(2,206)
(2,234)
(2,234)
Net Appropriations - MMI
(2,479)
(1,796)
(1,770)
(1,796)
(1,799)
Expenses - GI/SRI
340
330
328
330
328
Offsetting Receipts - GI/SRI
(225)
(240)
(240)
(240)
(240)
Net Appropriations -
GI/SRI
115
90
88
90
88
Source: See Table 2.
Highlights:
New Legislative Proposals. Three legislative changes were proposed for
2005. The Budget proposed a new FHA Payment Incentives mortgage program (or
Sub-Prime loan product) which would permit prospective homebuyers to qualify for
FHA insurance even though the borrowers would not meet existing underwriting

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CRS-27
standards due to poor credit ratings. The borrowers would still be required to meet
the FHA standards regarding debt, income, and repayment ability. The increased risk
of default associated with these borrowers would be offset by requiring larger
downpayments, higher upfront insurance premiums, and higher annual insurance
premiums. After 60 months, the annual premiums would be reduced to 0.5% of the
loan balance, as would ordinarily be charged for FHA-insured home loans.
The Budget also proposed a new Zero Downpayment Initiative (H.R. 3755)
under which first-time homebuyers would be able to purchase a home with zero
downpayment loans and finance the settlement costs. Such borrowers would also be
charged higher insurance premiums to cover the increased risk involved in such
loans.
The Administration further would amend Section 203(c) of the National
Housing Act to restrict the payments of refunds of unearned upfront insurance
premiums to borrowers who refinance with a new FHA loan. Current law provides
that borrowers who prepay their loans may be due a refund of the prepaid insurance
which was not “earned” by FHA. Under the proposal, borrowers who refinance their
FHA loans with new FHA loans would be eligible for refunds of unearned premiums,
but borrowers who obtain non-FHA loans to refinance their FHA loans would not be
eligible for refunds of unearned premiums.
Under present rules, FHA considers the upfront insurance premium as earned
by FHA when the loan has been outstanding for five years. After that period none
of the prepaid insurance is refundable. The Administration plans to shorten the
period and provide that the insurance is considered as earned by FHA when the loan
has been outstanding for three years. This would be an administrative change.
Congressional Response. Neither the House or Senate Committee
included funding for the proposed Zero Downpayment Initiative. The Senate
Committee believes the proposal would pose “substantial financial risk” by making
homeowners of high-risk borrowers with no stake in their houses and no financial
cushion to pay for unexpected repairs. P.L. 108-447 amends Section 203(c) of the
National Housing Act to provide that refunds of unearned insurance premiums would
only be due to those borrowers who refinance their FHA-insured home loans with
new FHA-insured loans.
Office of Federal Housing Enterprise Oversight (OFHEO). Within
HUD, OFHEO is the “safety and soundness” regulator for the Government-
Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac. In recent years, there
has been criticism that OFHEO has been ineffective in its watchdog role of the GSEs.
For FY2004, nearly $40 million was appropriated for this office, offset by fees
collected from Fannie Mae and Freddie Mac. For FY2005, requested appropriations
are $59.2 million, with similar offsetting fees expected.
Congressional Response. The conferees agreed to $59.2 million, an
increase of $19.5 million over the FY2004 enacted level to allow for enhancements
to strengthen annual examinations, accounting treatment, and capital management
analyses.

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CRS-28
For more information on these programs, see CRS Report RL32069, Improving the
Effectiveness of GSE Oversight: Legislative Proposals.
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. The Fair Housing Assistance Program (FHAP)
strengthens national 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 on a non-competitive basis. 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.
Table 17. Fair Housing Programs, FY2004 to FY2005
(in millions)

FY2004
FY2005
FY2005
FY2005
FY2005
enacted
request
House
Senate
Conf.
Fair Housing
$48
$48
$46
$48
$46
Fair Housing Assistance
Program
28
27
26
$27
$26
Fair Housing Initiatives
Program
20
21
20
$21
$20
Source: See Table 2.
Congressional Response. The conference report provides $46.5 million
(rounded to $46 million in Table 17), about $1.5 million less than the FY2004
enacted level.
Lead-Based Paint Hazard Reduction. 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 paint hazards in
homes that are at risk of not being modified through normal renovation or demolition
activities. Despite the program, millions of housing units occupied by lower-income
households remain contaminated with lead-based paint.
Table 18. Lead-Based Paint Hazard Reduction Program,
FY2004 to FY2005
(in millions)
FY2004
FY2005
FY2005
FY2005
FY2005
enacted
request
House
Senate
Conf.
Lead-Based Paint
Hazard Reduction
$174
$139
$167
$175
$168
Source: See Table 2.

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CRS-29
Congressional Response. The conferees agreed to $168 million for the
Lead-Based Hazard Reduction program, $6 million less than the FY2004 enacted
level but $29 million above the Administration request. Of the total, $47 million is
to be made available on a competitive basis for areas with the highest lead paint
abatement needs, as identified by the HUD Secretary as having: (1) the highest
number of occupied pre-1940 units of rental housing; and (2) a disproportionately
high number of documented cases of lead-poisoned children.
For more information, see CRS Report RS21688, Lead-Based Paint Poisoning
Prevention: Summary of Federal Mandates and Financial Assistance for Reducing
Hazards in Housing.

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