February 2008

Enterprise Urges Congress to Invest in Communities Hurt by Foreclosures
Enterprise Community Partners President and CEO Doris W. Koo urged Congress to invest in stabilizing low- and moderate-income communities disproportionately affected by rising numbers of foreclosures, while simultaneously stimulating the American economy.

Koo testified during the Jan. 31 hearing of the U.S. Senate Banking, Housing and Urban Affairs Committee on foreclosure prevention and neighborhood preservation. Koo underscored the need for assistance to individual homeowners at risk of losing their homes. She also emphasized the need for strategic federal intervention and resource deployment to prevent foreclosed properties from destabilizing communities, eroding tax bases and bringing down property values of neighboring homes.

Koo’s testimony proposed a Neighborhood Stabilization Fund jointly developed by Enterprise and the Center for American Progress. The fund would provide much-needed immediate and flexible capital to put troubled real estate-owned properties in the hands of local agencies, nonprofit entities, and responsible, socially motivated entrepreneurs committed to preserving neighborhood viability.


FY 09 Budget Request to Congress Proposes Cuts to Housing Programs
The Administration’s fiscal year 2009 budget proposes $38.5 billion in HUD discretionary funding – a 4.8 percent decrease from the amount allocated in FY 2008. Following are highlights of key housing and community development programs in the President’s $3.1 trillion spending plan, released February 4.

Some HUD Programs See Slight Increases:
A few HUD programs saw modest increases in the budget proposal. The HOME formula grant program would receive $1.85 billion, a 14 percent increase of $221 million from the FY 2008 appropriated level. The budget also includes $1.64 billion in McKinney-Vento Housing Assistance Grants, $50 million more than the FY 2008 level. And the budget proposes $40 million for the Self Help Homeownership Opportunity Program (SHOP), a $13.5 million increase from FY 2008.

Threats to Key Community Development Programs:
The budget proposal also slashes critical HUD funding, including a proposed 32 percent cut to the Section 811 Housing for People with Disabilities program and a 26 percent cut to the Section 202 Elderly Housing program, to just $160 million and $540 million, respectively. The Administration again proposed to eliminate the HOPE VI program, which Congress funded at $100 million in FY 2008. The Office of Lead Hazard Control saw a 20 percent cut of $29 million, down from $145 million in FY 2008.

The Administration has proposed just $3 billion in Community Development Block Grant funds – a cut of $866 million from FY 2008 – while reiterating its proposal to “consolidate” the program and simultaneously eliminate the Brownfields Economic Development Initiative, Section 108 Loan Guarantees and the Rural Housing and Economic Development program. Congress has rejected this proposal in recent years.

Rural Funds Hard Hit:
The Administration’s budget proposal would substantially cut many rural housing and community development programs. The budget would eliminate the Section 502 direct loan program, the Section 515 rural rental housing program, the Section 523 support for “sweat equity” organizations and Section 514 and 516 resources for developing farmworker housing. USDA’s Rural Housing Development Initiative is also slated for elimination. Meanwhile, the budget proposes a $3 million cut to the Native American Housing Block Grant program.

Inadequate Funding for HUD Rental Assistance Programs:
Despite what appears to be modest funding increases, the Administration’s FY 2009 HUD budget request for Section 8 tenant-based rental assistance (Housing Choice Vouchers) and project-based rental assistance is likely to be inadequate to renew all expiring contracts.

The Administration’s budget documents list $16 billion for total voucher funding and $14.3 billion for voucher renewals, which would be $400 million and $375 million greater than their 2008 funding levels. However, according to the Center on Budget and Policy Priorities (CBPP), $15.5 billion is required to renew all vouchers in use in 2009.  

Excluding the proposed recaptured $600 million in Public Housing Agency (PHA) reserves, the President’s FY 2009 budget includes $14.16 billion for voucher renewals in 2009, $534 million (or 3.6 percent) less than Congress provided in 2008, and about $1.3 billion – more than 9 percent – below the amount required to renew all vouchers in use. If Congress were to enact this proposed voucher funding level, funding for at least 100,000 housing vouchers would be cut.

Due to a recent change in HUD budget policy, the Section 8 Project-Based Rental Assistance program has been in crisis. In congressional testimony provided in late 2007, HUD conceded that its FY 2008 budget request of $5.5 billion was $2.6 billion shy of the amount needed to provide a full 12 months of funding for all expiring Section 8 project-based rental assistance contracts. However, instead of requesting supplemental funds from Congress, HUD broke with long-standing policy and began to require the private owners of Section 8 housing to accept funding for only a few months.

HUD’s new policy of short-funding Section 8 contracts has generated substantial concern and uncertainty among property owners, lenders, investors and tenants. Due to HUD’s chronically late disbursements of Section 8 assistance payments and the fact that the final FY 2009 appropriation likely will not be determined until late in the year, significant numbers of Section 8 property owners may choose to terminate their participation in the program. This could lead to a substantial loss of affordable housing for many low-income families.

According to CBPP’s estimates, an extra $2.1 billion will be needed in FY 2009 to provide full funding to Section 8 contracts that received less than 12 months of funding in FY 2008, and an additional $7 billion will be required to provide 12 months of funding for every contract renewal in FY 2009. The President’s FY 2009 budget provides $7.16 billion for renewals of Section 8 project-based rental assistance, including a $400 million advance of budget authority from FY 2010. Together, the funding requested is more than $1 billion above the FY 2008 funding level. The advance funding mechanism proposed by the Administration would be good policy, and would reduce the funding required in FY 2009 appropriations. However, the budget request still falls far short by about $1.9 billion of the amount needed to restore full funding and renew the confidence of the private owners on whom the program depends.

Rural Property Transfer Bill Passes U.S. House
On January 23, the House passed Section 515 Rural Housing Property Transfer Improvement Act of 2007 (H.R. 3873). The Section 515 program makes direct loans to developers of affordable, multifamily rental housing in rural areas. This bill would expedite transfers of ownership of rural rental properties financed under the Section 515 program by establishing new requirements for USDA approval of ownership transfers. It also requires USDA coordination with IRS and HUD, and establishes deadlines for processing transfer applications. The House agreed to this legislation, sponsored by Financial Services Housing Subcommittee Ranking Member Rep. Shelley Moore Capito (R-W.V.) and Rep. Paul Hodes (D-N.H.), on a voice vote. The bill now moves to the Senate for consideration. 

U.S. House Passes HOPE VI Reauthorization
On January 17, 2008, the House of Representatives passed a landmark green affordable housing bill by a wide bipartisan margin. The HOPE VI Improvement and Reauthorization Act of 2007 would provide $800 million annually from 2008-2013 for mixed-income communities that incorporate Green Communities Criteria. This is the first time the House has passed a bill authorizing holistic environmental principles in a major housing program. Leading House members praised the bill’s green-building provisions on the House floor. View segments of the floor debate.

The bill requires new HOPE VI revitalization projects to meet the Green Communities Criteria for residential construction. The bill also gives more points in the HOPE VI selection process for greater compliance with Green Communities or other green rating systems chosen by the Secretary of HUD. For non-residential buildings in a HOPE VI development, the bill requires the HUD Secretary to choose an appropriate green rating system. The bill provides technical assistance funding to ensure developments can meet the green requirements cost effectively.

House HUD Appropriations Subcommittee Chairman Olver (D-Mass.) championed the bill’s green building provisions. A broad-based coalition of governors, mayors, cities, trade associations, environmental organizations, public health groups, affordable housing advocates and green building leaders also actively advocated for the bill’s green provisions.

The bill also includes stronger rights for residents to return to revitalized HOPE VI communities and improved resident participation and services in the redevelopment process. The Senate now must consider its version of HOPE VI reauthorization legislation (S. 829), introduced by Sen. Barbara Mikulski (D-Md.).

New York State Budget
Enterprise's testimony on the FY 2009 New York State Division of Housing and Community Renewal before the New York State Senate Finance and Assembly Ways & Means Committee. Read testimony.

© 2008, Enterprise Community Partners, Inc.
Enterprise Community Partners is a national nonprofit that provides expertise for affordable housing and sustainable communities. We offer financing for affordable housing through our nonprofit, Enterprise Community Loan Fund, and through our for-profit subsidiary, Enterprise Community Investment, Inc.
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