CARH’s Broadcast Email—Legislative and Regulatory Alert
On Friday, May 29th the Biden Administration released its proposed budget for Fiscal Year (FY) 2022. The blueprint would tie together three major spending proposals already announced by the President: the $2.3 trillion American Jobs Plan (AJP), the $1.8 trillion American Families Plan, and $1.5 trillion in discretionary spending for FY 2022. Combined with mandatory spending programs, the FY 2022 budget would total $6 trillion, approximately $300 billion more than the current FY 2021 levels for programs. Nondefense spending would be increased by 16 percent over current levels, with defense spending expanding by 1.7 percent. In order to pay in part for this spending, there would be several changes to the Trump Administration tax overhaul, increasing rates for high income wage owners and corporations.
The Department of Housing and Urban Development (HUD) would see a historic increase in funding under the proposed budget. Unfortunately, the programs administered by the United States Department of Agriculture’s (USDA) Rural Development (RD) would not see these increases. In fact, funding would essentially be flat lined to current spending. The attached charts (HUD chart and RD chart) demonstrate the disparity between the two agencies and funding and initiatives for FY 2022.
RD’s Section 521 Rental Assistance (RA) program would be funded at $1.450 billion. While the proposed budget shows $1.495 billion, that is due to rural housing vouchers that would be funded at $45 million being moved from the Multifamily Preservation and Revitalization (MPR) account to the RA account. This was a recommendation from the previous Administration for the past two years. Congress in the FY 2020 and 2021 Appropriations bills rejected that move. Of the proposal, $40 million in RA funds would remain available until September 2023, a procedure that the agency has been using for the last several years in order to fund RA contracts that expire at the beginning of the fiscal year. Using this forward funding mechanism, funding for RA appears higher than actual funding provided in that fiscal year. This leaves the funding flat, or with inflation slightly down for FY 2022.
The proposed budget also eliminates language that would make the terms of the RA contracts 20 years subject to annual appropriations. This 20-year contract language has been in the last two appropriations bills. RD has not implemented this provision. CARH has supported this language and has continued to urge the House and Senate authorizing committees to include this language so that 20 years would be permanent versus having to annually include in the annual appropriations bills. We assume this is tied to the current effort to reintroduce legislation for making MPR permanent combined with a new advisory board that would, eventually, provide for 20-year RA renewals for properties with expiring mortgage loans that agree to long-term affordability restrictions.
The MPR program would be funded at $32 million, an increase of $4 million over FY 2021 program levels. However, the MPR account would be moved under the Rural Housing Insurance Account, with language that raises concern as to properties that would be eligible to apply for MPR funding. The budget provides in part that transitioning to this account will facilitate the modification of post credit reform (originated after November 5, 1990) Section 515 multi-family loans going forward. Section 515 program funding would total $40 million, the same level as FY 2021. The Section 538 program level would be $230 million, again the same level as FY 2021. The budget also indicates that there will be $2 billion in the AJP for rural housing programs, with no details on how that $2 billion would be allocated throughout the Rural Housing Service portfolio. However, the White House Fact Sheet on the AJP indicates this funding will be mainly for Section 502 single family loans and Section 504 energy efficiency funding to homeowners.
HUD on the other hand would see significant increases in funding for all of its programs. The FY 2022 budget would provide the agency with a 15% increase from FY 2021 funding levels. The Tenant Based Rental Assistance program would provide funding for an additional 200,000 households, focusing on those experiencing homelessness and survivors escaping domestic violence, dating violence, sexual assault, stalking, or human trafficking. If enacted, this provision would be the single largest expansion of vouchers in the program’s history. Also proposed are the following: an increase in funding for Homeless Assistance Grants by $500 million to $3.5 billion; expansion of the tribal housing resources from $747 million to $1 billion; expansion of the HOME Investment Partnerships program by $500 million to $1.85 billion; investment of $180 million to support 2,000 new homes for seniors and people with disabilities; increase fair housing activities by $12 million to $85 million; provide $800 million across HUD programs to rehabilitate public and affordable housing and provide energy-efficient upgrades, on top of $3.5 billion for public housing capital repairs and climate-resilient upgrades to the public housing stock. The proposal would also increase Community Development Block Grants by $295 million, with additional funds targeted to historically underfunded and marginalized communities facing persistent poverty. The AJP would provide an additional $211 billion for HUD programs, $12 billion for the Capital Magnet Fund, and $45 billion for the Housing Trust Fund.
The proposed budget also expands Ginnie Mae authority to securitize affordable multifamily loans made by Housing Finance Agencies (HFAs) and insured under the FHA’s 542(c) Risk-Sharing program. The budget also reinstates the HUD-Treasury Federal Financing Bank (FFB) Initiative to provide “Ginnie-like” financing for HFA Risk-Sharing loans as an interim measure that will sunset three years after implementation. The proposed Ginnie Mae securitization authority would provide a permanent source of low-cost capital for these affordable housing loans once FFB financing expires.
The AJP seeks $55 billion investment in the Housing Credit. The AJP and the budget would also seek an increase in the corporate tax rate to 28% and capital gains rate to $39.65 for top earners as well as a $3.8% Medicare surtax. It would also limit tax free exchanges from Section 1031 like-kind exchanges to $500,000.
While it is important to shore up the aging portfolio in urban areas, it is unreasonable for USDA to only receive 1% of the funding envisioned by the Administration in its infrastructure plan and to not receive additional funding for FY 2022. It is vitally important for CARH members to engage your members of Congress both on the FY 2022 budget and infrastructure plan, and to press them to allocate additional monies for RD. For instance, for the MPR program, the latest report shows that the portfolio needs close to $5.6 billion in funding for preservation and recapitalization. Rather than $32 million as proposed in FY 2022, the MPR program should receive close to $2 billion and then an additional $3 billion in infrastructure spending. The RA program should not only fund existing contracts, but also preservation RA and RA that can be used for emergency instances such as COVID-19. So rather than $1.495 billion, the program should be funded at $2 billion.
Submission of the budget by the Administration is one step in the process. Congress in the past has rejected many proposed budgets by a variety of Administrations. We would also hope that should the Administration and Congress come together on infrastructure, that the needed funding be allocated to RD.
All this and more will be discussed during CARH’s hybrid meeting at the end of the month. You will not want to miss being part of that discussion. Click here for the meeting brochure/agenda and click here to register.
Please contact the CARH national office at carh@carh.org or 703-837-9001 should you have questions or concerns.