proposed budget

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Reflecting overall budget cuts, HUD, which received $43.6billion in funding for fiscal year 2010, has requested $41.6billion for FY2011, a 5% decrease. That capital will besupplemented with an expected $6.9 billion in FHA and Ginnie Maereceipts, resulting in a total 2011 budget of $48.5 billion, up by$1.6 billion in FY2010.

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With a focus on fiscal discipline, reform and job creation, theHUD budget seeks to build on its goal of streamlining thedepartment's housing and community development programs. On themultifamily front, spending for some programs was reduced, whileothers were cut altogether. (See HUD's full Fiscal Year 2011 Proposed Budget.)

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"After a year of progress, we no longer confront an economy or adepartment in crisis," HUD Secretary Sean Donovan stated. "But muchwork remains, in much-changed fiscal circumstances. Now that theeconomic crisis has begun to recede, President Obama has committedto reducing the federal deficit. HUD's fiscal year 2011 budgetreflects that fiscal discipline."

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The main point Donovan stressed was HUD's primary mission ofmaking "targeted investments in people and places," rather thanprograms and policies. This, according to the department, willsupport its mission while holding it accountable to taxpayers."With the Recovery Act and fiscal year 2010 funding havingstabilized HUD's programs after years of slow starvation, the timehas come to begin transforming them," he said.

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Amid the terminated programs is the Multifamily HousingRevitalization Demonstration Program, part of the Department ofAgriculture's Rural Housing Service. While the department proposesto eliminate the program, it's planning to increase the multifamilyhousing direct loan program from $70 million to $95 million sohousing opportunities in rural areas can be met.

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Funding has been reduced (by 10% YOY to $1.65 billion) for theHOME Investment Partnerships Program, a formula block grant programwhose funds help increase the supply of affordable housing forlow-income families. Current fiscal constraints and the program'sscalability were the main reasons behind the decision. Additionalaffordable housing needs could be met through other programs,including the Neighborhood Stabilization Program through theHousing and Economic Recovery Act of 2008, American Recovery andReinvestment Act of 2009 and Affordable Housing Trust Fund.

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The Administration also proposes to reduce funding for theSection 202 Housing for the Elderly program and the Section 811Housing for Persons with Disabilities program, which funds the newconstruction of housing for those groups. These programs will bereassessed to make future projects more cost effective and welltargeted. Fiscal responsibility for the Section 811 program wouldbe shifted to the Tenant-Based Rental Assistance Program.

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Despite the spending cutbacks, the agency believes targetedinvestments will allow the department to provide housing andassistance to almost 5.5 million households, an increase of morethan 200,000 over last year, and create and retain over 112,000jobs through its community development investments.

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Among HUD's major goals relating to the multifamily sector areto increase funding for the Housing Choice Voucher Program. Assuch, it has allotted $19.6 billion, an 8% increase from FY2010,for the program to provide rental assistance to in excess of twomillion extremely low- to low-income households so they can live inneighborhoods of their choice. All existing mainstream voucherswould continue to receive funding, and the program would have theflexibility to support both new vouchers that were leased and $85million in special-purpose vouchers for homeless andat-risk-of-homelessness families with children and disabledpersons.

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Some $9.4 billion would go toward preserving affordable rentalhousing through the Section 8 Project-Based Rental Assistanceprogram, a 9% increase over the prior year's budget. Increasedfunding for contracts with private multifamily owners wouldpreserve 1.3 million affordable units.

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HUD has allocated $350 million to fund the first phase ofproposed "long-term fundamental reforms" that include a newinitiative, Transforming Rental Assistance, intended to modernizeits rental assistance program. Namely, the multi-year effort wouldconvert public housing to project-based vouchers and regionalizethe housing choice voucher program. The goals are to improve thephysical condition and management of public housing stock byenabling its owners to address the current and future capital needsof their properties and to streamline HUD oversight of its 13separate rental assistance programs. The allocation would helppreserve some 300,000 units of public and assisted housing.

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In one of the biggest funding increases, HUD would infuse theChoice Neighborhoods program with $250 million, up from a$65-million allocation in 2010. While its primary aim is to fundthe preservation, rehabilitation and transformation of public andHUD-assisted housing, the department also hopes to continue to makea variety of "transformative" investments, such as improvedtransportation, services and job opportunities, in distressedcommunities—high-poverty neighborhoods with concentrations ofpublic and assisted housing. The Choice Neighborhoods Initiativewould also replace the HOPE VI program, which was funded at $200million in FY2010. Entities that would receive grants includepublic housing authorities, local governments, nonprofits andfor-profit developers.

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HUD is maintaining its funding of the Community DevelopmentBlock Grant ($3.99 billion in FY2011), but as part of reformingsuch programs, it has proposed allocating an additional $150million to the new Catalytic Investment Competition Grants program.Under the auspices of the CDBG, the new program would providecapital to innovative economic development projects in targetedneighborhoods. The grants are meant to supplement the ChoiceNeighborhoods Initiative, Promise Neighborhoods, HOPE VI,Sustainable Communities or other place-based strategies.

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The budget proposal also calls for the extension of the HousingCredit Exchange program for another year. If approved by Congress,the program would allow states to exchange their unused 2009housing credit ceiling; credits returned in 2010; up to 40% of thestate's 2010 per-capita authority; and up to 40% of their share ofthe 2010 national pool allocation. The program applies only to 9%LIHTCs, not 4% or disaster credits. Assistance can come in the formof a grant or a loan, and projects can include non-tax-creditdevelopments that meet LIHTC income, rent and use requirements.

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For the second year of its Sustainable Communities Initiative (apartnership between HUD, the Department of Transportation and theEnvironmental Protection Agency), the department intends to use$150 million to encourage regional and community planning effortsaround transit-oriented, environmentally sound projects.

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The department also outlined some high-priority performancegoals for itself to achieve over the next two years, primarily toincrease efficiency and sustainability, and to meet theever-increasing need for affordable rental homes. The HUD budgetseeks $20 million in capital to be able to implement the proposedchanges. It once again requested that up to 1% of program fundingbe funneled into the Transformation Initiative Fund, for research,evaluation and program metrics; program demonstrations; informationand technology; and technical assistance and capacity building. HUDis also requesting $1 billion in mandatory spending to capitalizethe Housing Trust Fund.

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Congress has yet to approve these proposals, but already the HUDbudget has attracted some criticism. For one, the Administration isseeking to increase the Federal Housing Administration annualmortgage insurance premium for single-family housing, but no clueshave been given as to the potential implications for multifamily.And a major factor of note is the lack of attention given to theGSEs. Though the Administration has stated repeatedly that it wouldunveil a plan for Fannie Mae, Freddie Mac and other housing GSEswith its 2011 budget, any reform measures were conspicuouslyabsent. Government officials say they continue to monitor the GSEsituation, and Secretary Donovan indicated that reform proposalswill come soon, but no further information was provided.

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