HUD Secretary and Inspector General Senate Hearing
On Thursday, March 10, HUD Secretary Julian Castro appeared before the Senate Appropriations Transportation, Housing and Urban Development (T-HUD) Subcommittee to provide testimony and answer questions on the Obama Administration’s fiscal year 2017 budget request. In a second panel, HUD Inspector General David Montoya delivered testimony on his office’s reviews of HUD programs and operations.
Secretary Castro’s hearing began with Senate T-HUD Subcommittee Chair Susan Collins (R-ME) highlighting the constraints that HUD faces an uphill battle in managing our nation’s housing needs: “This subcommittee, in particular, has to cope with the central truths about HUD’s budget that are present every year: the cost of renewing existing rental assistance, which consumes 84 percent of HUD’s overall budget, will increase.” She also applied criticism to the funding cuts requested for the Community Development Block Grant (CDBG) program. She noted that the CDBG program is one of the most important programs for local communities to manage local issue.
When asked about the proposed cut to CDBG, Secretary Castro noted that while the Administration and HUD are adamant supporters of its use, they wanted to prioritize funding to housing needs. CDBG funds may be used for a wide variety of items and is not limited to housing. Ranking Member of the T-HUD Subcommittee, Senator Jack Reed (D-RI), also expressed concern for the proposed cut but did praise the budget request for HUD in its balancing of addressing current rental assistance needs while laying the groundwork for the Department to manage future issues.
During the questioning period, Senator Collins asked about recent reports on the failure of HUD to properly oversee its portfolio. Specifically, she cited reports that of some properties in Jacksonville, FL and Cincinnati, OH which initially received passing inspection scores from HUD before it was revealed that there were serious deficiencies at these properties. She wanted to know why properties could receive passing grades only to be revealed to have violations. Secretary Castro responded that the vast majority of the HUD portfolio is inspected properly, that deficiencies are addressed swiftly by owners and that HUD has developed internal working groups to identify how its inspections protocols can be strengthened. He cited the request to charge owners who fail to address property issues in a timely manner as one initiative the Department would like to use in order to deliver more compliance.
T-HUD Subcommittee Member David Schatz (D-HI) then asked about the Housing Trust Fund (HTF) and when the public could expect the funds to be distributed. He noted the HTF’s objective of increasing housing availability for the extremely low-income (those earning less than 30 percent of the area median income). Secretary Castro responded that the HTF funds are set to be distributed this summer and that in April, states would be required to submit their allocation plan so that they could receive funds. HUD would review those plans and has 45 days to respond.
Senator Chris Murphy (D-CT) did raise questions on why the Administration did not request additional funding for the Section 811 Housing for Persons with Disabilities program. Secretary Castro responded that while the Administration had requested funding that would have produced 700 new units under Section 811 in its 2016 budget request, the program has not been forgotten and he hopes to work with the Senate in strengthening the funding during the FY 2017 appropriations process.
The Secretary also answered questions on veterans housing and the Department’s efforts in reducing homelessness, especially for the country’s youth. After the questions, the Secretary left the panel and Inspector (IG) General David Montoya began his testimony.
The IG started by noting that while HUD has taken steps to address some of the weaknesses in its financial management governance and internal controls over financial reporting, deficiencies continue to exist. He explained that one cause of this is the turnover of HUD employees. Between 2014 and 2015 there was a 15 percent turnover and a 9 percent reduction in fulltime employees. There was also a 40 percent turnover in CFO staff and an 11 percent reduction in full-time permanent CFO 8 employees between 2009 and 2014. He recommended that HUD needs to recruit and hire a CFO with the necessary accounting and technical financial management skills to provide stronger direction to program office accounting.
Furthermore, his written testimony outlines that based on recent audits and HUD’s on-site confirmatory reviews of the Housing Choice Voucher program, the self-assessments by Public Housing Authorities (PHAs) are not always accurate and the reliability of the information contained in HUD systems is questionable. His testimony states that HUD will continue to face challenges in monitoring this program until it has fully implemented a reliable, real-time, and all-inclusive monitoring tool for vouchers.
The issues of over income tenants living in assisted housing was also discussed. A recent audit by the IG showed that as many as 25,226 families, whose income exceeded HUD’s 2014 eligibility income limits, lived in public housing. The IG did note in his testimony that HUD’s challenge in addressing over income families living in public housing units is exacerbated by PHAs’ lack of desire to address these issues themselves. Subcommittee members asked questions about this issue, asking how HUD can reduce over income families inhabiting space that should be used for low-income families.
IG Montoya responded that PHAs have had the authority since 2014 to remove over income families, but that many have not adequately addressed the problem. He noted that Congress is moving towards a solution under legislation (such as H.R. 3700, the Housing Opportunities through Modernization Act) which will federally mandate that PHAs terminate assistance for households in public housing whose income exceeds 6 120 percent of the median for two consecutive years. Again, these issues were highlighted in the public housing portfolio, and Project-Based Rental Assistance properties were not shown to have the same over income tenant issues.
To view this hearing and to read the written testimony of the witnesses, please click here
Senate Budget Hearing for Department of Agriculture
On Wednesday, March 9, the Senate Appropriations Agriculture, Rural Development and Related Agencies Subcommittee held a hearing to analyze the Obama Administration’s budget request for the USDA in fiscal year 2017. The sole witness at this hearing was USDA Secretary Tom Vilsack.
The vast majority of time spent in this hearing was centered on USDA’s farming and food programs, but Senator Jeff Merkley (D-OR) did ask Secretary Vilsack about the Department’s response to the funding issues that plagued Rural Development’s (RD) Section 521 Rental Assistance program. “I want to ask if people across the country who are involved in providing project-based housing, can rest assured that we’ve got it covered this time” Senator Merkley asked.
Secretary Vilsack stated that he believes the issues has been fully addressed but did not talk much about the program. He did quickly change the conversation to the number of properties within the rural portfolio that are approaching the end of their mortgage terms. “We have, as you know, the other issue of maturing mortgages and loan payoffs which will result potentially, unless we deal with this, in a lot of these units coming out of the program — in which case you’re going to have a lot of families that are going to be looking for housing and not be able to afford it” he said.
Senator Merkley asked how RD plans to manage the issue, highlighting that it would be very hard to recover stock in the rural portfolio if these properties were to exit the rental assistance program. He noted that when the HUD portfolio faced similar issues in the early 1990s, Congress enacted the Low Income Housing Preservation and Resident Homeownership Act (LIHPRHA) to create incentives to owners to stay in HUD’s programs.
The Secretary responded that the mortgages on 75 percent of the properties in the portfolio are set to reach maturity in the next 10 years, and that RD is looking to extend these mortgages and refinancing properties so that improvements could be made to the property with the savings that result from extension and refinancing. He also mentioned that lawmakers should consider providing to vouchers to tenants in properties with expiring mortgages so that they do not lose housing. Summarizing, Secretary Vilsack that RD needs to be focused on this issue.
While the rest of the hearing focused on other USDA programs, a forthcoming hearing on March 15 before the House Appropriations Agriculture Subcommittee will focus on RD’s portion of the budget request.
Budget and Appropriations Update for FY 2017
Since the release of the Obama Administration’s budget request for fiscal year 2017, lawmakers in the House and Senate have been working to complete their Congressional budget, which will be used by members of the Appropriations Committees in designing the funding legislation for the upcoming fiscal year.
However, there has been disagreement over the top line funding figuring for discretionary programs and the release of the Senate and House budgets will now be delayed. Senate Budget Committee Mike Enzi (R-WY) announced this week that his committee will postpone action on the Senate budget for the rest of the month. The Senate will now miss its statutory April 1 deadline to report a budget resolution, but Enzi said the Senate can pass appropriations bills even without a budget resolution because top-line spending numbers were agreed upon in last year’s Bipartisan Budget Act.
The House is also having trouble in finalizing a budget agreement as well. There are disagreements within the Republican party on the discretionary amounts that the US should spend in FY 2017. Though the Bipartisan Budget Act allows for higher discretionary limits, some lawmakers would like to see the government spend a lesser amount. Still, Senate Majority Leader Mitch McConnell (R-KY) told reporters this week that the Senate will move forward with fiscal 2017 spending bills at agreed-upon levels despite calls from House conservatives. House appropriators have set a mid-April target to complete their subcommittee allocations and begin full committee markups of their FY 2017 spending bills.