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A first look at the president’s proposed FY 2017 budget request for housing and community development

Under President Obama’s proposed FY 2017 budget, HUD would receive $48.9 billion in gross discretionary funding and $11.3 billion in new mandatory spending over 10 years. Emphasis is placed on supporting 4.5 million households through rental assistance, increasing homeless assistance, supporting tribal communities and providing opportunities to Native American youth and making targeted investments in communities to help revitalize high-poverty neighborhoods and improve housing affordability. The FY 2017 budget shows a historic investment in homelessness with the goal of ending family and youth homelessness by 2020 as laid out in “Opening Doors: The Federal Strategic Plan to Prevent and End Homelessness.”

After the Supreme Court’s decision in Texas Dept. of Housing and Community Affairs v. Inclusive Communities Project, Inc. and HUD’s Affirmatively Furthering Fair Housing proposed rule, HUD is placing an emphasis on ways to connect housing and opportunity. It would support mobility strategies with its new proposal for $15 million for a new mobility counseling demonstration. For place-based efforts, the $300 million proposal for local community efforts to reduce barriers to housing development and increase housing affordability would support the important role states and local communities play in ensuring affordable housing for all. Click the following links to view HUD’s budget announcementsummary and congressional justifications. The detailed HUD budget is available here.
Important funding and policy proposals for rural housing under the U.S. Department of Agriculture (USDA) are also included in President Obama’s budget request. Rural multifamily rental programs see funding increases under the president’s request, which would support more preservation and potentially even new construction.
The president’s request also provides support for community development programs within the Treasury Department budget. The budget proposes:
  • $300 million one-time mandatory appropriation for a new Pay for Success (PFS) program.
  • $245,923,000 for the Community Development Financial Institutions Fund Program.
Additionally, the Treasury Department lays out the following changes to the Low Income Housing Tax Credits (LIHTC) in their green book of revenue proposals for FY 2017:
  • Allow conversion of private activity bond volume cap into LIHTCs.
  • Encourage mixed-income occupancy by allowing LIHTC-supported projects to elect a criterion.
  • Employing a restriction on average income.
  • Add furthering fair housing and preservation of publicly assisted affordable housing to allocation criteria.
  • Remove the QCT population cap.
  • Implement a requirement that LIHTC-supported housing protect victims of domestic abuse.
The Capital Magnet Fund (CMF), which was established by the Housing and Economic Recovery Act of 2008 (HERA) and received a one-time discretionary appropriation of $80 million in 2010, should begin receiving assessments for the first time in 2016 from Fannie Mae and Freddie Mac. HERA directs Fannie Mae and Freddie Mac to set aside in each fiscal year 4.2 basis points of each dollar of the unpaid principal balance of new business purchases to be allocated to the CMF and the Housing Trust Fund.
Below are highlights from the president’s budget and a chart showing funding for selected HUD and USDA programs.
Highlights of the funding proposals:
  • $5 million for the ConnectHome initiative.
  • $200 million for the Choice Neighborhoods Program.
  • Fully funds public housing authorities’ administrative fees at $2.1 billion.
  • $50 million to support public housing conversions to project-based rental assistance through the Rental Assistance Demonstration, with a targeted expansion to include certain properties that provide housing for the elderly.
  • $35 million for the Jobs Plus program and $85 million for the Family Self-Sufficiency program.
  • The budget projection includes in its calculation additional revenue of approximately 9.5 billion dollars from 2017 FHA loan business.
Policy Proposals
  • Enhances local decision making, improves program accountability and provides more options for regional coordination and planning through a series of reforms to the Community Development Block Grant program.
  • Updates the formula of the Housing Opportunities for Persons with AIDS program by using HIV incidence rates and adjusting for fair market rents and poverty rates to better reflect the current nature and distribution of the epidemic.
  • Under the HOME Investment Partnership Program the budget proposes statutory changes that would eliminate the 24-month commitment requirement, eliminate the 15 percent Community Housing Development Organization (CHDO) set-aside, establish a single qualification threshold of $500,000 irrespective of the appropriation amount, revise the current “grandfathering” provision so that participating jurisdictions that fall below the threshold three years out of a five-year period are ineligible for direct formula funds and allow recaptured HOME CHDO technical assistance funds be reallocated as HOME technical assistance funds. When implemented, these changes will improve the targeting focus and effectiveness of the overall administration of the program.
The budget also proposes new initiatives:
  • $10.967 billion in mandatory spending to house homeless families over the next 10 years for:
  • 10,000 new housing vouchers for families with children experiencing homelessness.
  • 25,500 new units of permanent supportive housing to end chronic homelessness.
  • 8,000 new units of rapid rehousing.
  • $25 million to test innovative projects for youth experiencing homelessness.
  • $300 million for local community efforts to reduce barriers to housing development and increase housing affordability.
  • $15 million for a new mobility counseling demonstration that is designed to help HUD-assisted families move and stay in higher-opportunity neighborhoods.
  • Upward Mobility Project would allow 10 localities to combine funding from the Department of Health and Human Services’ Social Services Block Grant and Community Services Block Grant and HUD’s Community Development Block Grant and HOME Investment Partnership Program. Participating communities will also be eligible to receive HHS funding up to $300 million per year ($1.5 billion in new funding over five years), to combine with the added flexibility with currently provided resources.
For a more detailed analysis of President Obama’s budget request, please join NHC for our Annual Budget Forum on Thursday, Feb. 18 from 2-4 p.m. Register now for this free webinar.
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