Community Development Programs Outlook on Federal Housing & Community Development Programs Douglas Rice March 14, 2017

Overview Congress’s 2017 agenda: Major threats to safety net; a few small opportunities to strengthen housing programs HUD FY 2017 budget: How and when will Congress finalize it, and what’s at stake? HUD FY 2018 budget: What are the risks, and when will Congress make decisions? Tax reform, infrastructure & housing policy: risks and opportunities

Congress’s 2017 Agenda Repealing the Affordable Care Act (including Medicaid expansion); no clear consensus yet on replacement Possible deep cuts, harmful structural changes to Medicaid, SNAP Major tax cuts for the wealthy that could force deeper cuts elsewhere in budget FY 2017 & FY 2018 appropriations (spending) bills that will stick to, or cut below, the current austere budget caps for domestic programs

BCA Caps Have Forced Housing/CD Cuts Under the Budget Control Act of 2011 cap on nondefense discretionary (NDD) spending, annual funding for HUD & USDA housing and community development programs has declined $4.7 billion (8.6%) from 2010 to 2016 (adj. for inflation) Public housing and block grants have seen the deepest funding cuts Sequestration caused the loss of housing vouchers for more than 80,000 households in 2013 & 2014, but PHAs restored these vouchers in 2015 & 2016

Public Housing and Block Grants Have Seen Deepest Funding Cuts

HUD FY 2017 Budget Recap Budget Control Act of 2011 limits nondefense discretionary (NDD) funding to $518.5 billion in FY 2017, same as FY 2016 Despite limits, House/Senate appropriations committees approved bills last summer that increased HUD program funding by $1/$1.5 billion, respectively Both bills reflected strong — but in hindsight insufficient — commitments to renewing existing rental assistance “Continuing resolution” funds HUD and other agencies through April 28 at FY 2016 levels

House/Senate FY 2017 THUD Funding

Finalizing HUD’s FY 2017 Budget: What’s at Stake? Congress may try to break “parity” by increasing 2017 defense funding; would make it harder to raise NDD caps in future years Some Republicans may try to reduce 2017 NDD funding below BCA cap level to offset added defense or homeland security spending Continuing resolution v. full HUD funding title? Focus on program funding levels, not bill form Housing voucher renewal costs have grown to $18.86 billion, above House/Senate bill levels

HUD FY 2017 Budget Goals Sustain parity for defense & NDD; no defense relief without equal NDD cap relief Sufficient funding to fully renew housing vouchers & project-based Section 8 contracts CBPP paper explains HCV renewal need, state-by-state impact of inadequate funding Fund public housing, homeless assistance grants, other areas, consistent with highest levels in respective House/Senate bills

HUD & USDA Budgets Will Tighten Further in 2018, Unless Congress Raises Caps For FY 2018, BCA cap for NDD programs is $14 billion (3%) below the FY 2017 limit, $96 billion (16 %) below the FY 2010 level (adj. for inflation) Veterans’ health care funding will rise in FY 2018, deepening the cuts in other NDD programs Rental assistance renewals will require more funding, too, to avoid cuts in the number of assisted families, tightening the squeeze Trump Administration has proposed deep further cuts in NDD program funding

Trump Proposes Big NDD Cuts Pres. Trump proposes to increase defense funding $54 billion in FY 2018 & cut NDD programs by an equal amount This lowers the 2018 NDD cap by 11%; after protecting vets’ health increase & homeland security, other NDD cuts would be 15% No HUD proposal yet, but a 15% ($7.1 billion) cut would have devastating consequences: 15% cut would eliminate 625,000 housing vouchers & Section 8 PBRA units, more units in other programs If protected rental assistance families, would have to eliminate remainder of HUD budget to absorb 15% cut

  Image/Chart/Graph

Strong Effort Needed to Lift BCA Caps, Protect Housing/CD Programs Pres. Trump’s proposal is only the start of the 2018 appropriations process — Ds & Rs who support NDD programs have leverage because of Senate filibuster rules, Republican divisions Lawmakers must use leverage to raise the caps & sustain parity in defense and NDD funding — or to prevent NDD cuts below BCA cap at least Whatever the NDD cap level, HUD & USDA should receive priority in funding to sustain current rental assistance, avoid deepening cuts in other housing/community development programs

FY2018 Budget Timeline Action Timing (target) Comments Trump FY 2018 budget brief March 16 Probably “topline” numbers, including for non-defense discretionary funding; may include details on a few individual programs fY 2018 budget resolution or “deeming resolutionS” By April    Set the overall discretionary funding limits for defense and non-defense programs that the House and Senate appropriations committees will use in drafting FY 2018 funding bills FY 2018 Transportation-HUD and other appropriations committee markups May/June/July House and Senate committees set priorities, approve legislation with specific program funding levels Final fY 2018 TRANSPORTATION-hud bill September - December Likely “continuing resolution” by September 30; THUD and most funding bills will likely be finalized later in fall. Set HUD and USDA program funding levels for FY 2018

Tax Reform and Housing Policy Tax reform a high priority for Trump/Congress, but dynamics fluid – and effort may fail To achieve Republican goal of big rate cuts, without adding to the deficit, requires cutting or modifying many current tax expenditures & could risk deep cuts in safety net programs Tax cuts + safety net cuts in a reconciliation bill probably = Republican-only Even then, LIHTC cut unlikely. Bill may include changes to retain value of credits despite cut in corporate rate If tax reform bipartisan, could provide opportunity to increase LIHTC and possibly add renters’ credit

Potential Infrastructure Investment Trump priority; Congressional Rs lukewarm Vehicle and timing unclear, though likely part of or after tax reform (if enacted) Senate Democrats’ proposal includes substantial resources for housing Democratic support likely contingent on substantial new funding beyond tax credits If bipartisan, potential opportunity to add funds for public housing repair and other housing Secretary Carson indicated support for including funding for housing in an infrastructure bill

Possible Housing-Related Activity by Authorizing Committees GSE reform Priority for House Financial Services and Senate Banking chairs, and Treasury Secretary Mnuchin, though approaches likely to differ If happens, unclear outcome for Housing Trust Fund Possible interest in variety of program “improvements” More efficient administration; cost savings More access to areas with greater opportunities Less regulatory requirements; more flexibility Encourage self-sufficiency; possible work requirements Bipartisan agreement and busy Congressional calendar challenging

CBPP Resources Substantial Funding Boost Needed to Renew Housing Vouchers in 2017, report with state data: http://www.cbpp.org/research/housing/substantial-funding-boost-needed- to-renew-housing-vouchers-in-2017 Chart Book: Cuts in Federal Assistance Have Exacerbated Families’ Struggles to Afford Housing: http://www.cbpp.org/research/housing/chart-book-cuts-in-federal- assistance-have-exacerbated-families-struggles-to-afford Chart Book: Rental Assistance Reduces Hardship, Promotes Children’s Long-Term Success: http://www.cbpp.org/research/housing/chart-book-rental-assistance- reduces-hardship-promotes-childrens-long-term-success National and State Housing Fact Sheets & Data: http://www.cbpp.org/research/housing/national-and-state-housing-fact- sheets-data Trump Plans Big Cut in Domestic Programs: http://www.cbpp.org/blog/trump-plans-big-cut-in-domestic-programs

Keep Up-to-Date Subscribe to periodic Housing Policy Updates: http://cbpp.us10.list- manage1.com/subscribe?u=fcb519d4a06d032e8e2bb f63f&id=8fdffd50b8 Housing publications: http://www.cbpp.org/topics/housing

Douglas Rice rice@cbpp.org www.cbpp.org 202.408.1080