Secretaries Fudge, Vilsack Outline Impact of Potential Budget Cuts
This week, House Appropriations Committee Ranking Member Rosa DeLauro (D-CT) received information from HUD and USDA in response to letters sent on January 19 regarding a proposal to cut fiscal year 2024 discretionary spending back to the fiscal year 2022 enacted level–resulting in a cut of at least 22 percent for essential programs.
HUD Secretary Fudge wrote that the reduced funding scenarios would represent the most devastating impacts in HUD’s history. She considered two scenarios, a reduction of funding to 2022 enacted levels and a 22 percent reduction to 2023 enacted levels. The Secretary described how most HUD programs received modest increases in 2023. Increases in the 2023 enacted budget levels relative to 2022 primarily serve to maintain existing programs, not to permit program expansions. Except for targeted funding increases for homeless assistance and tenant-based Housing Choice Vouchers (HCV), almost all of HUD’s programs remained at or near level funding with zero or minimal increases. Consequently, any cuts to the 2023 level do not eliminate “extra” funding added in 2023 but translate to direct cuts to the 2022 baseline. These cuts, in turn, would reduce existing services that families and communities rely on, including programs housing low-income families.
The PBRA program needed almost $1 billion above 2022 levels to just renew the existing owner contracts for 2023. These increases are statutory and reflect increased costs, and HUD cannot avoid them within the contracts. As a result, any cuts to the 2023 level would force HUD to short fund or cancel existing contracts between the federal government and private property owners. The termination of contracts with rental owners will likely lead the owners to convert their housing to market-rate, leaving currently supported tenants in units that are now unaffordable to them, likely resulting in evictions. This would represent an historically unprecedented loss of existing affordable housing, a breach of federal contracts, and a repudiation of decades of long-term bipartisan federal investment. Reverting to 2022 flat funding would eliminate assistance for approximately 87,000 families, while a 22% cut to 2023 levels would eliminate assistance for 286,000 families.
For the Housing Choice Voucher program, nearly the entire increase in voucher funding between 2022 and 2023 (aside from small amounts for homeless veterans and at-risk youth) supported renewal of existing assistance to families in their current units. Enacting 2022 flat funding would eliminate assistance for 350,000 families and a 22% cut to 2023 funding would eliminates assistance for 640,000 families.
For PHAs, HUD calculates an expected 78% proration for the Operating Fund. At this level, there would be significant impacts to PHA operations. All PHAs would need to drastically cut operations, including regular property maintenance, services to families, and likely staff layoffs to right-size operations to expected revenues. Deferred maintenance would decrease housing quality, potentially exposing families to unsafe living conditions such as mold and lead-based paint. Finally, there would be the likelihood of PHA insolvency or other program failures.
USDA Secretary Vilsack also described the impacts that reduced funding would have for rural housing. Secretary Vilsack reported that between 40,000 and 63,000 current recipients would lose rental assistance if the reductions in funding are enacted. Loss of this rent assistance may cause property owners to increase rents, making the units unaffordable to the very low-income residents who have few options for decent, affordable housing. With the loss of rental assistance, or higher vacancies resulting from very low-income Americans being unable to afford higher rents, many properties would be unable to pay all their operating costs. Owners may be unable to maintain the property and allow it to fall into despair, or the properties may become delinquent in their loan payments. Currently, the USDA has 160 multifamily properties in the foreclosure process, which may increase with reduction in rental assistance. Ongoing delinquencies will lead to defaults and foreclosure and may result in long-term loss of affordable housing in rural communities in future years.
The House of Representatives and the Senate are beginning to develop their own budget resolutions and appropriations packages in the coming weeks and months. NAHMA continues to advocate for increased investments in affordable housing and community development programs.
To read Secretary Fudge’s letter, click here. To read Secretary Vilsack’s letter, click here.