President Biden Releases FY22 Budget Request
On May 28, the White House released the President’s full Fiscal Year (FY) 2022 budget request, following its initial ‘skinny’ budget proposal in April. The full budget totals a historic $6 trillion and incorporates the President’s $1.7 trillion American Jobs Plan, $1.8 trillion American Families Plan, and $1.5 trillion proposal for non-defense discretionary spending to fund federal agencies in FY22. The President’s proposed discretionary spending level represents a 16 percent increase over the FY21 enacted levels.
“Our country is still working to heal from a devastating health crisis, compounded for many by generations of racial inequities,” said Priscilla Almodovar, president and chief executive officer, Enterprise Community Partners. “We know that safe, affordable housing is key to our recovery, and it’s the foundation upon which economic opportunity is built. The housing investments released today in the Biden-Harris Administration’s FY22 budget proposal are a bold commitment to our country’s future. They demonstrate that housing is central to the President’s vision for our country.”
Enterprise commends the Administration for its funding of critical affordable housing and community development programs in the FY22 budget, detailed below.
President’s FY22 Budget Request to Fund Federal Agencies
Funding for the Department of Housing and Urban Development (HUD)
Overall, the request calls for HUD to be funded at $68.7 billion, a $9 billion or 15 percent increase in funding from the FY21 enacted level.
Some highlights include:
- $3.8 billion for CDBG, $450 million above the FY21 enacted level (9.2% increase).
- $1.9 billion for HOME, $500 million above FY21 (46% increase).
- $30.4 billion for Tenant-Based Rental Assistance, $8 billion over FY21 (24% increase).
- $14 billion for Project-Based Rental Assistance, $595 million over FY21 (4.4% increase).
- $8.6 billion for the Public Housing Operating Fund, $769 million above the FY21 enacted level (10.2% increase).
- $41 million for the Section 4 Capacity Building for Community Development and Affordable Housing program, level funding relative to FY21.
- $250 million for the Choice Neighborhoods program, $50 million above the FY21 enacted level (25% increase).
- $928 million for Section 202, $73 million above FY21 enacted level (8.54% increase).
- $272 million for Section 811, $45 million above FY21 enacted level (19.82% increase).
- $723 million for Indian Housing Block Grant, $76 million above FY21 enacted level (11% increase).
- $3.5 billion for Homeless Assistance Grants, $500 million above FY21 enacted level (16.67% increase).
- $72.5 million for Fair Housing and Equal Opportunity, $12.5 million above FY21 enacted level (17.24% increase).
In all, these proposed funding levels would bring critical resources and increase significantly the capacity of federal, state, and local jurisdictions to provide affordable housing and community revitalization to communities in need. Many of these programs bring in essential capital from additional public and private sources, and all of them provide a crucial buffer against homelessness and extreme economic hardships for millions of low- and middle-income Americans.
Funding for the Department of the Treasury (Treasury)
The President’s budget request includes $14.9 billion for the Treasury, representing a $1.4 billion - or roughly 10 percent - increase for the FY21 enacted level. The proposal seeks to expand the role of Community Development Financial Institutions (CDFIs), by providing $330 million for the CDFI Fund, a $60 million or roughly 22 percent increase over the current funding level for the program.
This comes after a groundbreaking year for CDFI’s nationally, one in which they received significant funding through various recovery packages, including $3 billion from the Consolidated Appropriations Act of 2021. The White House stated in their budget request that the CDFI Fund is currently working on awarding $1.25 billion of this funding through their newly established CDFI Rapid Response Program. The budget also reported that the CDFI Fund will also begin the process of making $1.75 billion in funds available to support lending in minority communities and minority lending institutions through its Minority Lending program in 2022.
Funding for the Department of Agriculture (USDA)
The President’s 2022 discretionary request includes $27.8 billion for USDA, a $3.8 billion or 16-percent increase from the 2021 enacted level.
Some highlights for rural housing service programs include:
- $1.5 billion for Section 502 Single Family Housing Guaranteed Loan Program, $500 million above FY21 enacted level (50% increase).
- $40 million for Section 515 Rural Rental Housing Program, level-funded relative to FY21.
- $1.495 billion for Section 521 Rural Rental Assistance program, $85 million above FY21 enacted level (6.03% increase)
Additionally, the proposal would expand broadband access for rural Americans, who are more than 10 times as likely to lack access to quality broadband when compared to urban residents, with particular challenges for tribal communities. The proposal calls for building on investments made in the American Rescue Plan Act of 2021, by increasing the FY 21 enacted level for the Reconnect program by $65 million dollars. This will go a long way in helping bring broadband services and greater access to underserved rural areas and tribal lands.
Treasury’s Green Book
The Green Book, released by the Treasury in conjunction with the budget, outlines the President’s tax priorities and how the administration will pay for its spending. This detailed plan from the Treasury is notable, as it has been five years since the last release of a Green Book.
Low-Income Housing Tax Credit
Every year since its inception in 1986, the Low-Income Housing Tax Credit (Housing Credit) is made available to all 50 states, D.C., and U.S. territories, providing a finite pool of housing credit dollar amounts (HCDAs), adjusted for inflation. The HCDAs can include new or leftover amounts from previous years; however, the amount of Housing Credits available still do not meet the demand for affordable rental housing.
The proposal creates a new “Opportunity HCDA” (OHCDA) that would have a different ceiling from existing HCDA allocations. It aims to address the different average rent burdens and costs of rental housing across states, as opposed to population estimates, which determine HCDAs. This proposal does not change the allocation and ceilings for HCDAs under current law.
The majority of OHCDA allocations would be required to target projects in Census Tracts of Opportunity (CTOs), defined as tracts which are entirely in one or more difficult development areas (DDAs) or which has low poverty or other considerations, as determined by the Secretary of the Treasury in consultation with HUD. More specifically:
- From 2022 through 2026, proposes a separate Housing Credit allocation of $11 billion. The aggregate number of new OHCDAs would be 118 percent of the aggregate annual number of new HCDAs under current law. These additional OHCDAs would have no phase-in and be made available to all States on a per capita basis, but with a different per capita amount applied to each State. The per capita amount for a State would be determined by a formula established by the Secretary in consultation with HUD that provides higher amounts to States with higher costs of constructing and operating affordable housing, as demonstrated by, for example, larger populations living in DDAs or higher percentages of rent-burdened households.
- In addition, the proposal provides a basis boost of up to 50 percent for buildings in DDAs.
Additional details on the new OHCDAs and the basis boost are included in the Green Book on pages 24-25.
New Markets Tax Credit
At the close of 2020, the New Markets Tax Credit received a five-year extension, providing $5 billion in annual allocation authority from 2020 through 2025.
- The proposal provides a permanent $5 billion annual allocation for each year after 2025, indexed for inflation starting in 2026.
Neighborhood Homes Investment Credit
The Neighborhood Homes Investment Credit (NHIC) is a new tax credit that would help address the value gap between the cost of building or renovating homes and the price for which the house can be sold. The President’s outline notes that the credit would also assist homeowners rehabilitate their homes even if they do not intend to sell them.
- Provides $2 billion in authority for NHICs to be allocated to all 50 states, D.C. and U.S. territories in 2022, and indexes that amount from 2023 through 2031.
This new federal tax credit is the same as the program proposed in the Neighborhood Homes Investment Act, H.R. 2143 and S. 98. If enacted, this new federal tax credit would produce equity investment dollars for the development and renovation of 1-4 family housing in distressed urban, suburban, and rural neighborhoods, similar to the role the Housing Credit plays in closing development gaps for low-income, multi-family rental housing. As it is a new program, the rules and targeting would be established by the Secretary of the Treasury, with consultation between the agency and HUD on some criteria. States would also have to create a new agency or task an existing agency with creating a qualified allocation plan and managing the allocation of the credits to project sponsors.
More specific details on the implementation are outlined in the Green Book on pages 26-28.
Now that the White House has released its budget plan, Congressional leaders may begin the negotiation process, in earnest, over funding levels. The House began its appropriations process for FY22 in the early spring and is expected to begin marking up its bills in June. The Senate, as is often the case, is a couple of months later, with deadlines for Senators to submit their priorities to the Appropriations Committees in mid-to late-June.
It is important to note that the President’s request serves as a vehicle to communicate the Administration’s priorities for FY22 to Congress, and is non-binding. If Congress is unable to pass essential appropriations measures by the start of the next fiscal year, October 1, 2021, it will have to pass a Continuing Resolution (CR) to keep the government operational. In most of recent memory, Congress has passed one or more of these short-term spending bills. These CRs keep the federal government open and operating at the previous fiscal year’s enacted level of funding for the temporary time established by the CR, which can range from days to the remainder of the fiscal year.
The housing investments released today in the President’s FY22 budget proposal and “Green Book,” as well as the $318 billion proposed for housing in the American Jobs Plan, provide a historic investment in our nation’s affordable housing infrastructure. Expanding the Low-Income Housing Tax Credit and providing funding for critical resources like the HOME Investment Partnerships Program, the Housing Trust Fund, the Capital Magnet Fund, tenant- and project-based rental assistance, and other key programs will lead to meaningful change: relief and resiliency for the people and communities hardest-hit by COVID-19, investments in communities of color to dismantle the impacts of systemic racism, and the creation of more affordable rental homes nationwide that make upward mobility possible for millions of families.
Enterprise will be working closely with its national, state, and local partners, in addition to congressional champions to push for these policy priorities in both the annual appropriations and infrastructure processes. Stay tuned for more information in the months ahead as these legislative negotiations unfold.
Additional Contributing Authors: Finn Dobkin, Appropriations Policy Intern; Christophe Beaumier, Tax Policy Intern.