HUD Funding Current and Future National Housing Conference Budget Forum Barbara Sard February 25, 2011

Deficits are a Real Problem 2

Economic Downturn, Financial Rescues, and Legacy of Past Policies Drive Current Record Deficits 33

Deficit in 2021 Would Be Cut Nearly in Half Simply By Letting Bush Tax Cuts Expire Source: Center on Budget and Policy Priorities based on data from the Congressional Budget Office. 4

5 Source: January 2010 CBPP projections based on CBO data But Rising Medicare, Medicaid and Interest Costs with Flat Revenues Will Cause Deficits to Continue to Increase

The largest long-term deficit driver is the rising cost of Medicare and Medicaid. Reflects rising costs in entire U.S. health care system Cutting costs in Medicare and Medicaid without system-wide reform would lead to draconian cuts Thus, the key to addressing the future implosion of the budget is to reform the U.S. health care system. The Big Enchilada: The U.S. Health Care System 6

7 Source: CBPP based on CBOs reestimate of the Presidents 2011 Budget. CBPP has adjusted domestic discretionary spending to include Pell grants (which the President proposed to reclassify as mandatory spending). Discretionary Spending, Particularly Non-Defense, Not the Problem

Non-Security Discretionary Programs Were15% of Total Spending in *Chart represents actual FY 2010 outlays

House Proposal for 2011: Deep Cuts in HUD Block Grants Overall, H.R. 1 cuts HUD funding by $5.4 billion below 2010, a 12 percent cut, and by $7 billion, or 15 percent, below the Presidents 2011 request. Block grants were cut the most sharply. CDBG is cut by $3 billion, or 66 percent. Native American block grant cut by $200M (29%) and Native Hawaiian block grant eliminated. Public Housing capital funding cut 43 percent, more than $1B. PH loses $1.6 overall. HOME block grant reduced by $175M, or nearly 10%. 9

House Proposal for 2011: Eliminates Expansions, New Initiatives Despite record increases in severe housing needs: No new vouchers for homeless veterans (VASH ) or families and individuals in need of services (proposed initiatives with HHS); no increase in Homeless funding. No funding for new units of supportive housing for the elderly and disabled (202/811), a cut of almost $800M. No funding for new Sustainable Communities grants, and $130M of already-awarded 2010 funds rescinded. No new funding for HOPE VI/Choice Neighborhoods grants; 2010 funding of $198M rescinded. 10

House Proposal for 2011: Protects Rental Assistance Renewals Renewal of ongoing rental assistance largely protected except for $1B+ cut in public housing capital funds. oProject-based Section 8 (PBRA) increased the full $731M over 2010 that had been incorporated in the end-of-year failed omnibus. oFor the Housing Choice Voucher program: $364M increase in renewal funding over 2010 appears to fully fund the renewal formula, but renewal funding for 811 Mainstream vouchers is largely omitted. oPublic housing operating formula close to full funding due to lower utility costs, despite cut of $149M. oBut sharp decrease in HCV administrative fees ($368M below 2010) and public housing capital fund cut could lead to fewer families served. oFull renewal of smaller rental assistance programs (202/elderly, 811 project-based/disabled, Shelter-Plus-Care, Supportive Housing, HOPWA). 11

2011 Outcome Uncertain There do not appear to be 60 votes in the Senate for the House bill, and President threatened a veto. Unclear what Senate can pass, but some cuts below 2010 funding levels seem likely. Final outcome for FY 2011 funding levels will have major impact on FY 2012 budget resolutions and final spending legislation. 12

Presidents 2012 HUD Budget Overall program gross discretionary budget authority (without offsets) would be $751M more than in 2010, but net new BA is reduced by $1,172M. How? –FHA and Ginnie Mae receipts increased by nearly $2 billion. Modest gross funding increase reflects priority decisions. 13

Priorities in 2012 HUD Budget Continues to prioritize renewal of existing rental assistance, but relies on tapping PHA reserves in public housing and HCV programs for full funding. Makes some modest progress against homelessness ($632M increase, including new vouchers). Funds Sustainable Communities, Choice Neighborhoods and TRA initiatives first proposed in 2010 or To fund these priorities, trims some HUD block grants: oCDBG formula: -$319M v. -$2.5B House oHOME: same -$175M as House 14

Minimal Progress on Unmet Needs More than 7 million very low-income renter households had worst case housing needs in 2009, an increase of 1.2 million from Yet the budget requests funding for fewer than 40,000 new deeply affordable units, including the estimated 10,500 units funded by the $1 billion in non-discretionary funding requested for the Housing Trust Fund. –LIHTC proposals may make some additional units available for poor households. 15

Multiyear Discretionary Caps Threaten Deep HUD Cuts Section 8 and other rental assistance costs will rise: –More units will need renewal funding –Private market rents are increasing –Current modest increases in operating costs unlikely to last. Secretary noted 1% increase in rental assistance costs requires 4% cut in other funding. Reliance on excess reserves to fill budget holes of limited future value. If housing market improves, FHA market share likely to decline, reducing HUD-generated revenue. 16

What is to be done? Defense alone on impacts will not avoid harmful cuts. Important to show value of programs: who is served, effectiveness etc. Time for policy changes that leverage additional funds, serve additional families or save costs without harming intended beneficiaries. E.g.: –Meet public housing capital backlog with private capital –SEVRA reforms included in 2012 budget would save more than $1 billion over 5 years –Administrative streamlining Engage in deficit reduction and budget debates 17

Principles for Deficit Reduction Deficit reduction should not place vulnerable families and individuals at risk or increase poverty and inequality. Deficit reduction should focus on the long term and not the short term, as immediate deep cuts in spending could undermine the fragile economic recovery. Savings should be achieved in the defense budget as well as in non-defense discretionary programs. A responsible deficit reduction plan must balance reduced spending in mandatory and discretionary programs with increased revenues over the long term. 18