HUD Secretary Requests $41.6 Billion 2011 Budget. Five Goals in Focus

Stating that the nation's housing market has made significant progress toward stability during the past year, Secretary of Housing and Urban Development Shaun  Donovan presented the Department's 2011 budget request of $41.6 billion to the House Appropriations Subcommittee on Transportation, Housing and Urban Development, and Related Agencies.

The requested funds do not include a projected 6.9 billion in FHA and Ginnie Mae receipts and represents a 5 percent reduction from the $43.72 billion (net of FHA and Ginnie Mae funds) requested for Fiscal 2010.

Secretary Donovan said that the budget reduction confronted his department with difficult choices and it chose to prioritize core rental and community development programs; fully funding Section 8 Rental Assistance, the Public Housing Operating Fund, and Community Development Block Grants. 

Cuts will be made in funding for a number of programs including the public housing capital fund, HOME Investment Partnerships, Native American Housing Block Grants, the 2002 Supportive Housing Program for the Elderly, and the Section 811 Supportive Housing Program for Persons with Disabilities.  He said that in some instances these programs had received substantial funding from the American Recovery and Reinvestment Act (ARRA), reducing the need for funds in the upcoming fiscal year.

The Secretary called the budget "bold," saying that it will "enable HUD programs to: house over 2.4 million families in public and assisted housing (over 58 percent elderly or disabled); provide tenant based vouchers to more than 2.1 million households (over 47 percent elderly or disabled), an increase of 28,000 over 2009; more than double the annual rate at which HUD assistance creates new permanent supportive housing for the homeless; and create and retain over 112,000 jobs through HUD's housing and economic development investments in communities across the country.

In total, by the end of fiscal year 2011, HUD expects its direct housing assistance programs to reach nearly 5.5 million households, over 200,000 more than at the end of fiscal year 2009.

The Secretary said that the circumstances the country found itself in one  year earlier left his department with little choice other than to take the proposed budget and programs "as is" in order to pump assistance quickly into the economy.  With HUDs programs now stabilized, the administration will move toward transforming housing and community development programs and the infrastructure that oversees them into entities that are more streamlined, efficient, and accountable. 

The budget is a major step in that direction, he said, and specifically it seeks to achieve five goals.

Goal 1: Strengthen the Nation's Housing Market to Bolster the Economy and Protect Consumers.

Housing, he said, plays such a central role in the U.S. economy that it is incumbent on federal agencies to rethink and restructure programs and policies to support housing as a stable component of the economy rather than as a vehicle for over-exuberant and risky investment. 

He cited a number of ways in which HUD plans to accomplish this goal, including the changes previously announced to FHA including higher FICO scores and raising premiums and continuation of the Home Equity Conversion Mortgage (reverse mortgages) for senior citizens.

The department will continue to provide several programs for homeowners in distress including preventive refinancing and various loss mitigation efforts, fighting mortgage fraud, and providing housing counseling assistance.    

Goal 2: Meet the Need for Quality Affordable Rental Homes

The housing market is very stressed with vacancy rates on the rise and homes moving from owner occupied to rentals.  Spreads between asking and effective rents are the largest in the last four years but gains from lower rents are being offset by renters' lower incomes because of un-or under-employment. 8.7 million renter households paid 50% or more of their income on housing in 2007 and over 654,000 are homeless on any given night. To help lower these figures the FY 2011 budget includes $1 billion to capitalize the National Housing Trust Fund to increase development of affordable housing and an increase of over $2.2 billion from 2010 figures for core rental housing programs such as Tenant-based and Project Based Rental Assistance Programs and the public housing Operating Fund.  In addition to continued funding, the Secretary pledged to work to streamline and simplify the programs so as to make them less costly to operate and easier to use at the local level and to shift the funding structure to one that leverages capital from other than federal sources.

Goal 3: Utilize Housing as a Platform for Improving Quality of Life

Absent a safe, affordable place to live, it is next to impossible to achieve good health, positive educational outcomes, or reach one's full economic potential. At the same time, stable housing provides an ideal launching pad for the delivery of healthcare and other social services focused on improving life outcomes for individuals and families. Capitalizing on these insights, HUD is launching efforts to connect housing to services that improve the quality of life for people and communities. The fiscal year 2011 budget proposes to connect formerly homeless tenants of HUD-housing to mainstream supportive services programs.

Goal 4: Build Inclusive and Sustainable communities free from Discrimination

The Department's approach to this objective is informed by the Administration's government-wide review of "place-based" policies.  The Department is renewing our focus on place with the result that that proposed budget allows HUD to better nurture sustainable, inclusive neighborhoods and communities.  To this end we will look at making communities sustainable for the long run including improving energy efficiency and taking advantage of transit-oriented development and other "locational" efficiencies.  There will also be an emphasis on creating places that effectively connect people to jobs, quality schools and other amenities rather than sticking HUD-assisted families in neighborhoods of concentrated poverty.

Goal 5:  Transform the Way HUD Does Business

The Secretary said that the 2001 Budget makes the following vital reforms:

• (a) Develops a basic data infrastructure and delivers on Presidential research and evaluation priorities.
• (b) Develops and maintains the Department's existing technology infrastructure.
• (c) Provides flexibility and resources needed to fuel agency transformation.

HERE is the prepared text of Donovan's testimony.