HUD's Donovan Outlines 2014 Budget; 90% to Support Existing Programs

By: Jann Swanson •

U.S. Housing and Urban Development (HUD) Secretary Shaun Donovan has released details of the Obama Administration's proposed Fiscal Year 2014 HUD Budget.  The HUD portion of the budget seeks $47.6 billion, an increase of $4.2 billion or 9.7 percent more than the 2012 enacted budget.   

Donovan explained at a press conference that the request represents the gross budget but increases in revenue from GNMA and FHA recoveries and premium increases reduce the net budget to $33.1 billion which represents a decrease from the previous fiscal year.

More than 90 percent of the increase in the gross budget is used to maintain current levels of rental and homelessness assistance for vulnerable families.  The budget requests $37.4 billion that will be used to assist 5.4 million families, the overwhelming majority of whom earn less than 30 percent of their area's median income  The budget also makes investments to revitalize high-poverty neighborhoods, reduce blight in communities hardest hit by the foreclosure crisis, and support sustainable economic development.

Donovan said HUD's portion of the FY2014 budget was developed with housing specific versions of the Presidents four priorities for the budget as a whole: 

  • Growing the Middle Class While Bringing Private Capital Bank to the Market - by reigniting economic growth by strengthening the housing market, speeding the nation's economic recovery, and building a stronger middle class
  • Prioritizing Renewals - by maintaining a core commitment to protect families currently receiving rental assistance by keeping them in their home
  • Creating Ladders of Opportunity for Millions of Americans - by creating Promise Zones in some of the nation's hardest-hit neighborhoods
  • Reducing Regulatory Burdens and Increasing Efficiency - by improving the efficiency and effectiveness of HUD programs

The budget proposes an increase of $20 million for both the 202 Supportive Housing for Seniors Program and the 811 Supportive Housing for Persons with Disabilities Program, bringing the total budget request for the two to $526 million.  Because HUD has opted to use these fund to operate existing units rather than build new ones they have been able to produce an estimated 4,100 new housing units.

Other highlights of the budget include:

  • Nearly $2.4 billion in homeless assistance grants through HUD's Continuum of Care and Emergency Solutions Grant (ESG)
  • $400 million for HUD's Choice Neighborhoods Initiative to transform 30 neighborhoods with extreme poverty into opportunity-rich, mixed-income neighborhoods - to date, the nine communities currently funded under this initiative leveraged $2 billion in other sources of capital, more than eight times their grant awards
  • Expands the Moving to Work Program to test innovative, locally driven policies to achieve positive outcomes for families, streamline program administration, and reduce Federal costs. To build evidence of what works, this expansion is accompanied by rigorous reporting and evaluation requirements.
  • $726 million to address the housing needs of Native American Tribes
  • $332 million for a modernized Housing Opportunities for Persons with AIDS (HOPWA) program that will target funds to areas with the highest need
  • Reduces funding for the HOME Investment Partnerships Program. The Budget mitigates this reduction by providing $1 billion to capitalize the Housing Trust Fund to expand the supply of housing targeted to extremely low income families
  • Reduces costs in HUD's core Rental Assistance programs by simplifying administration of the medical expense deduction, better targeting rental assistance to the working poor, and setting more equitable Public Housing rents.

The budget also includes a request to fund 10,000 new rental vouchers through the HUD-VA Supportive Housing (HUD-VASH) Program to provide permanent housing to homeless veterans.  Donovan said that while veterans' programs are exempted from Sequester cuts the spillover effect is going to affect veterans anyway.  Some 20 percent of recipients of non-VASH housing assistance are in other subsidized housing program that may be effected.  Cutbacks in funding have hit local housing authorities hard and that, even before the Sequester six authorities had turned down VASH vouchers because they lacked the funds and staff to administer the program.   Donovan said HUD was looking at ways they might increase funds to local authorities to help them administer the veterans program which has increased housing for homeless vets from 1200 units in 2009 to 48,000 and reduced the lease-up time for vouchers by 15 percent.  

Donovan declined to speculate about the likelihood FHA would need to draw on Treasury funds to correct the deficit in its Mortgage Insurance Fund but said that much progress had been made in plugging the hole.  The Independent Audit conducted last fall found a $16 billion deficit but if comparisons were made apples to apples it was actually more like $19 billion.  Changes FHA has made since then has reduced this to $943 million.  These changes have included concentrated efforts to increase recoveries from the 2007 and earlier loans through ramped up modifications and increased loan sales, suspending the bulk draw payment option of the reverse mortgage program, and substantially increasing premiums for both FHA and GNMA loans.  No decision will be made on the need for a Treasury draw until October 1, Donovan said.

Donovan said HUD believes strongly in the importance of the HECM reverse mortgage program in assisting seniors to use their home equity to responsibly manage health care and other needs but that more changes need to be made to the program and made quickly.  Because the types of reasonable changes HUD wants to make must go through notice and comment procedures it is necessary to get them done and enacted by Congress before the end of the fiscal year or more drastic and less reasonable solutions will be necessary.  HUD is proposing changes such as requiring insurance and tax escrow accounts and limiting draws to mandatory obligations.

Donovan spoke out strongly for reversing the Sequester.  He said it must be made absolutely clear that the effects of the Sequester on the most vulnerable cannot be reversed by increasing efficiencies.  Hundreds of thousands of families are going to be impacted, he said, if the Sequester is not ended.

"The President understands that in today's budget climate, we can't build ladders of opportunity on a mountain of debt," said Donovan.  "As we work to strengthen our nation's housing markets, we can't lose sight of our commitment to house and serve millions of extremely low-income families who live on the margins of our economy."