Federal Budget Outlook for Low-Income Housing Douglas Rice February 24, 2012

Center on Budget and Policy Priorities cbpp.org HUD’s FY 2013 Budget Principles Bring Private Capital Back into the Mortgage Market Prioritize Renewals to Protect Current HUD Families Continue Progress on Signature Initiatives Reduce Regulatory Burdens and Increase Efficiency [and Cut Costs]

Center on Budget and Policy Priorities cbpp.org Who receives HUD rental assistance? Half of HUD-assisted households are headed by seniors or people with disabilities; 4 out of 10 include children Average income for these households is just over $10,000, well below the federal poverty line. About 1 out of 7 HUD-assisted households are in rural or other non-metro areas Of the non-elderly, non-disabled households in the Housing Choice (Section 8) voucher program, ¾ are working or subject to work requirements

Center on Budget and Policy Priorities cbpp.org Housing Choice Vouchers HUD requests $17.2B for renewals, level w/ 2012 Rent/utility inflation will add $200-$400M to renewal costs in 2013; new “tenant protection” and veterans’ vouchers issued in 2011/2012 could increase costs by another $200-$250M HUD assumes that agency reserves and policy- related cost savings will fill renewal funding gap But savings estimates are unrealistic and agency reserves will already be low by end of 2012 – leaving thousands of vouchers unfunded in 2013 Shortfall of $350M in funding for program administration; 3 rd straight year of deep cuts

Center on Budget and Policy Priorities cbpp.org Public Housing HUD requests $4.52B for public housing operating fund, about $500M below full funding level; would be 2 nd consecutive year of deep shortfalls $2.02B for capital fund, well below the $3.4B for new repairs/renovations that HUD study says will accrue in 2013, adding to $26B backlog Policy-related cost savings will close only small portion of gap in operating funding

Center on Budget and Policy Priorities cbpp.org Section 8 Project-Based Rental Assistance HUD requests $8.7B for PBRA, including $8.4B for renewals, $610M below the 2012 level and at least $1B below amount needed to provide 12 months of renewal funding for all contracts HUD proposes to (1) narrow renewal gap by implementing cost-saving measures and (2) “short fund” renewals, i.e., shift some costs into FY 2014 “Short funding” could make it more difficult or expensive for owners to secure capital, and discourage owners from continuing to participate “Short funding” creates hole in HUD budget that must be filled eventually to prevent cuts in units

Center on Budget and Policy Priorities cbpp.org HUD Request Relies on Unrealistic Savings Estimates and Unwise Policy Choices Mandatory $75/month minimum rent in all programs; approximately 500,000 of the poorest HUD-assisted residents would face rent hikes Increase in medical deduction threshold from 3% to 10% of income would raise rents on more than 600,000 elderly and disabled households Proposed change in income targeting and “ceiling rents” are sound policy HUD estimates of cost savings in 2013 are unrealistic, e.g., assume full implementation at the first of the year

Center on Budget and Policy Priorities cbpp.org Strong “302(b)” Critical, But Other Decisions Will Also Have Big Impact on HUD Outlook Deficit reduction: several trillion $ in additional deficit reduction beyond BCA needed to achieve fiscal balance over next decade Sequestration: BCA-mandated across-the-board cuts in January 2013 Taxes: Deep tax cuts enacted in 2001/2003, and later expanded/extended, expire end of 2012 Debt limit: will be reached in early 2013 Only a balanced approach to deficit reduction that includes substantial revenues will avoid further deep cuts in low-income programs, including housing

Center on Budget and Policy Priorities cbpp.org CBPP Resources Background/analysis of low-income housing policy Fact sheets on federal rental assistance programs Timely updates on housing policy issues Sign up for CBPP housing updates httphttp:// Primer on federal budget process Background/analysis of federal budget issues