The President’s FY14 budget represents a balanced approach to investment and deficit reduction. It recognizes the unique role that funding and tax programs play in creating and maintaining a stable housing market.
While proposing to cut the deficit by $1.8 trillion, the budget makes smart investments in programs that will help sustain our nation’s existing rental housing stock, aims to reduce administrative inefficiencies to make programs run better for tenants and providers and promotes innovation to reduce energy consumption in assisted housing.
Of course, the President’s proposed budget is just a starting point. The budget must be adopted by a Congress willing to compromise on discretionary funding over the next fiscal year, starting October 1, 2013. Otherwise, we will continue to live with the damage wrought by sequestration. Let’s hope cooler heads prevail.
Most notably, the HUD budget proposes $10.3 billion for Project-Based Section 8, $1 billion more than proposed last year. This is welcome news for owners and tenants who rely on this funding for rental assistance. HUD estimates that this amount is adequate to provide 12 months of funding for all renewing contracts, but the budget does not address current short-funding caused by sequestration.
The National Housing Trust looks forward to working with the department and stakeholders to assure steady, reliable Section 8 assistance for the residents, owners and investors who rely on that funding to preserve and improve existing affordable housing. In an effort to modernize the multifamily programs and increase efficiencies for providers, HUD is proposing a Flexible Portfolio Demonstration that would reward high-performing owners with administrative flexibilities in exchange for long-term affordability commitments. Further, HUD’s budget includes reforms to the three largest rental assistance programs that would save money while simultaneously making it easier for communities to address their long-term housing goals.
The budget recognizes the unique tie between Low Income Housing Tax Credit (LIHTC) equity and housing preservation by proposing that states include preservation of existing federally supported affordable housing as part of the LIHTC allocation criteria. This suggestion would essentially codify existing practice. For the past 12 years, the National Housing Trust has been encouraging state housing finance agencies to include preservation in their Qualified Allocation Plans, resulting in a sharp increase in the amount of LIHTCs that are allocated to preservation projects.
Today, many states allocate over 50 percent of their competitive credits to preserving existing affordable housing. Many states prioritize preservation projects when allocating LIHTCs by awarding points to these projects during the competitive scoring process; some states even set aside a portion of their total LIHTCs specifically and solely for preservation projects. Annually, tens of thousands of HUD assisted apartments benefit from this allocation. The administration’s proposal to require state tax credit qualified allocation plans to include preservation simply completes the circle, urging private equity investment in housing developed with our tax dollars.
With a renewed focus on housing preservation, the budget recognizes that there are many opportunities to leverage energy resources to better protect our investment and sustain existing affordable apartment communities. HUD proposes to repay private investors who fund energy efficiency retrofits of HUD-assisted housing. In addition, the Dept. of Energy proposes investing $200 million on Race to the Top performance-based awards to support state governments that implement effective energy saving policies including modernizing utility regulations to encourage investments in efficiency.
The throw weight of energy efficiency in affordable housing is significant. Recently, the National Housing Trust demonstrated how utility funding can be deployed to improve the efficiency of multifamily housing through regulatory and programmatic changes. To view the Utility Action Guide, click here.
(This post is part of a series on the president's 2014 budget.)
(Photo By Justin Sloan CC BY-ND-NC)