Rural Development Officials Testify before Congress
Today, officials from the U.S. Department of Agriculture’s Rural Development (USDA-RD) appeared before the House Appropriations Subcommittee on Agriculture, Rural Development and the Food and Drug Administration to answer questions on the Obama Administration’s FY 2015 budget request for rural assistance programs. The Administrator for the Rural Housing Service (RHS), Tony Hernandez, was present to answer questions about the housing portion of the President’s budget.
Mr. Hernandez addressed the Agency’s legislative authority requests in the Section 521 Rental Assistance program, which include:
- The ability to renew contracts “at the discretion of the Secretary”;
- Rental assistance agreements entered into or renewed during the current fiscal shall be funded up to one year and will not be renewed within the 12 month contract period;
- A minimum of $50 in rent for tenants unless they qualify for a “hardship exemption”; and
- The ability to verify income through IRS and HHS databases.
He used his remarks to stress that these requests would grant the Agency flexibility in the RA program and help them manage funds during times of uncertain budget authority, such as during continuing resolutions or to mitigate funding cuts under sequestration. Mr. Hernandez explained that the first request is to prioritize payments when funding is uncertain – for example, properties in high poverty or extremely rural areas would take priority over others if the Agency believes it will not have enough funds for all contract renewals. NAHMA believes that this request language is far too broad. In its testimony submitted to the Subcommittee, NAHMA agreed that RD does need flexibility in extraordinary budget situations such as sequestration. However, we asserted that such authority should not substitute for the Agency requesting the necessary funding to renew all its RA contracts. Likewise, such flexibility should not absolve RD of its contractual obligations to owners.
Mr. Hernandez also highlighted the minimum rent proposal as a way to give the RA program additional security under tight budget constraints. However, Representative Rosa DeLauro (D-CT) was highly critical of this proposal. The minimum rent provision would include a “hardship exemption” for the tenants with incomes less than $2,000 a year, which Mr. Hernandez claims make up about 10% of the RA users. These tenants would be exempt from paying a minimum rent, but Hernandez did not fully explain the structure of this clause. Representative DeLauro noted that many families in these program could struggle affording a minimum rent. She encouraged Hernandez to rethink this proposal and finished by saying that the Agency’s focus should be on the tenants and not the program.
Unfortunately, the proposal to give the Agency authority to make less than 12 month contract periods was only mentioned in passing. Lawmakers asked more questions on single family programs and other RD initiatives like increased broadband internet access and utility infrastructure development.
To watch an archived webcast of this hearing, please
click here.
HUD Budget Hearing
On Wednesday, April 2, HUD Secretary Shaun Donovan appeared before the Senate Appropriations Subcommittee on Transportation, Housing and Urban Development (T-HUD) to discuss the Department’s requests in the Obama Administration’s FY 2015 budget.
In her opening statement, the Subcommittee Chair, Patty Murray (D-WA), stated her concerns with some of the President’s proposals, including the shift to a calendar year funding cycle for the Project-Based Section 8 program. “This may promise some savings in the short-term, but I do worry what this change may mean for the long-term stability of this program” she said. Senator Murray also used her opening statement to plug support for the Rental Assistance Demonstration (RAD) program.
Secretary Donovan began his testimony by citing HUD’s current priorities and the challenges the Department faced under sequestration. He cited the harm caused to several programs such as Housing Choice Vouchers, wherein 7,400 families with vouchers in hand or on waiting lists were unable to secure housing. No families were evicted due to the across-the-board cuts, but impacts remain significant.
Patty Murray asked the first question to the Secretary, and she focused on the proposal to shift PBS8 contract renewals to a “calendar year” schedule beginning on January 1 rather than the current cycle of contract renewals beginning on October 1 (the first day of the new fiscal year). If this proposal were adopted, HUD believes that it will minimize funding disruptions that occur during end-of-year budget delays and that it would lead to consistent 12 month funding in FY 2016 and beyond because of an increased predictability of funding needs.
Murray recognized that the Department is looking for some short-term cost savings, but she asked how the transition to all contracts expiring at the same time will impact the Department’s budget for FY 2016 and beyond if it were to be enacted. Secretary Donovan said the estimated cost to renew all contracts in 2016 will be approximately $10.8 billion. He added that if contracts renewals remain on the current schedule of funding at the time of renewal, the PBS8 program will still require $10.8 billion in funding. He also clarified that the contracts will not all be renewed at the same time on January 1st. The renewal dates would be “separated out, which will happen throughout the year” and the funding will be on a January 1 to January 1 schedule, he said. HUD believes this will provide more assurance to private lenders that these projects will receive predictable funding rather than the “rollercoaster” scenario O/As are facing wherein they are uncertain if full-funding will be provided for contracts. Senator Murray also asked if this proposal will increase risk in the program under a continuing resolution since funding will be necessary on a specific date. Donovan stated that the advanced appropriations given to the Department will eliminate this risk.
The Subcommittee’s Ranking Member, Susan Collins (R-ME), asked Secretary Donovan about the Department’s plans for updating its program requirement handbooks, many of which have not received an update since the 1990s. She specifically cited a Public Housing handbook which received its last comprehensive update in 1994. Donovan responded that the Department has made incremental updates, but that comprehensive revisions are underway.
Senator Mark Udall (D-NM) used his questioning time to support the low-income housing tax credit and asked how it can better serve rural areas. Donovan noted that LIHTCs are allocated by states and not by HUD, but that the Department must do more to address affordability concerns for tenants. He mentioned that the HOME Investment Partnerships program in addition to the Community Development Block Grant can assist in affordable housing development, and that the Obama Administration is highly supportive of the LIHTC.
Supportive Housing for the Elderly (Section 202) also received attention. Senator Collins asked about aging in place and how it saves money that would be spent on institutions, nursing homes, and Medicaid. Secretary Donovan replied that data sharing with the Department of Health and Human Service is showing that supportive housing for seniors is saving money for Medicaid. He said he has hopes to expand 202 in the future so that these cost savings can increase.
NAHMA agrees with Senator Murray that the proposal to transition to a calendar year funding model with decreased funding is concerning. In testimony we are submitting to both the House and Senate Appropriations Committees, we will urge lawmakers to reject cuts to affordable multifamily housing programs administered HUD and that the T-HUD Subcommittee provide the necessary appropriations to ensure that all of HUD’s rental assistance programs receive full-funding for their 12-month contact terms in FY 15.
To watch an archived webcast of this hearing, please
click here.
Tax Extenders Bill
On Thursday, April 3rd, the Senate Finance Committee held a markup hearing for a draft bill entitled the Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act. This is a “tax extenders” bill, a piece of legislation that continues current and temporary tax breaks in lieu of comprehensive reform legislation. It was passed by a voice vote. In this bill, the vast majority of more than 50 temporary tax breaks that expired at the end of 2013 would be extended through 2015. Additionally, the EXPIRE Act extends the LIHTC minimum 9% credit and includes a new minimum 4% credit as well.
The LIHTC provision extends the temporary minimum applicable percentage of 9% for newly constructed non-Federally subsidized buildings for credit allocations made before January 1, 2016. A 4% minimum credit rate would be established for acquisition of existing housing that is not federally subsidized. Any existing housing that is also financed with tax-exempt bonds is considered federally subsidized for this purpose and therefore is not eligible for the 4% minimum credit rate. The minimum credit rate applies to buildings placed in service after the date of enactment for credit allocations made before January 1, 2016. The 4% LIHTC provision was introduced as an amendment by senators Maria Cantwell (D-WA) and Pat Roberts (R-KS) and subsequently adopted in the markup as part of Wyden’s Chairman Modifications.
Congress has used extender bills consistently to preserve the U.S. tax code in its current form. However, The Senate Finance Committee’s new Chairman, Ron Wyden (D-OR) has expressed that he intends this to be the last tax extender bill, and that tax reform must happen soon. With the bill passing markup by this committee, it may be considered by the entire Senate soon.
To learn more about this markup, please
click here.
Paul Ryan Introduces a New Budget
House Budget Committee Chairman Paul Ryan (R-WI) introduced a new Congressional FY 2015 budget this week entitled the Path to Prosperity. Similar to Ryan’s previous budgets, this plan calls for major spending reductions, and his office estimates that it would shave another $5.1 trillion from federal spending over the next ten years.
Paul Ryan had recently worked with Senate Budget Committee Chairman Patty Murray on a bipartisan budget that delayed sequestration, and set higher discretionary spending caps for FY 2014 and 2015. NAHMA is currently reviewing the budget and its proposed funding levels.
