HUD Releases Proposed 2012 Budget
HUD recently unveiled its fiscal year 2012 budget proposal. Titled “Creating Strong, Sustainable, Inclusive Communities and Quality Affordable Homes,” the budget aims to lead the country out of the economic crisis, in part, by helping responsible families at risk of losing their homes and meeting the need for quality affordable housing.
- The proposed budget maintains HUD's commitment to its core rental assistance programs with investments to help extremely low- to low-income households obtain or retain decent, safe, and sanitary housing, specifically:
- The budget provides $9.4 billion for Project-Based Rental Assistance to preserve approximately 1.3 million affordable units through increased funding for contracts with private owners of multifamily properties. This critical investment will help extremely low- to low-income households to obtain or retain decent, safe, and sanitary housing. Similarly, full funding of the Public Housing Operating and Capital Fund will help to preserve the over 1 million units within that program's portfolio.
- A top priority is the preservation of critically needed rental housing, including putting HUD's stock of public housing on sound, rational financial and regulatory footing for the long term. HUD is also committed to the goals of preserving public and assisted housing, regulatory reform, and choice. To this end, the budget includes $200 million for a demonstration and rigorous process evaluation of the conversion of up to 255,000 public housing units to long-term project-based rental assistance contracts. Public housing authorities will then be able to leverage private capital to make repairs.
- Through similar conversions, the demonstration will preserve 7,600 privately owned, HUD-assisted units at risk of leaving the affordable housing stock.
- HUD's overall preservation agenda is complemented in the Department of Treasury's budget for fiscal year 2012, which proposes two reforms to the Low Income Housing Tax Credit program (LIHTC) that will:
1. Replace the current cap on household income at 60 percent of area median income (AMI) with the option that properties serve households whose average income is no greater than 60 percent of AMI and with no individual household above 80 percent of AMI. These changes to the Code's low-income occupancy threshold requirements will accomplish three things: (a) it will allow greater income-mixing at the site level, creating opportunities for workforce housing; (b) it will help align LIHTC with HUD's and the USDA's affordable housing programs (which define low income at 80 percent of AMI); and (c) it will lead to the creation of more units targeted to the lowest-income households.
This income-averaging proposal will increase HUD's ability to preserve HUD-assisted sites. Currently, 69,224 households living in public housing and 23,271 households in multifamily housing have incomes above 60 percent of AMI. This proposal allows these units to be counted in basis, increasing the equity flowing to these sites for preservation.
2. Make the 4 percent credit a more viable source of funding for the preservation of the federal affordable housing stock by giving qualifying sites a 30 percent basis boost in the context of preserving, recapitalizing, and rehabilitating existing affordable housing, particularly public housing targeted by the Transforming Rental Assistance (TRA) initiative, as well as Multifamily Housing, Section 236s, BMIRs (Below Market Interest Rate), Rental Assistance Program, Rent Supplement, Section 202, Section 811, HOME, McKinney, and CDBG-funded units, and USDA-RD (Section 515s). This means that a greater amount of equity could be raised per credit even at the higher yields required by investors for 4 percent investments, which, in turn, will generate more interest in LIHTC preservation deals within the investor and developer community.
- The budget also calls for funding of the National Housing Trust Fund (NHTF) at $1 billion. The recent “Worst Case Housing Needs” report (see the next news item below) underscores the difficulty faced by extremely low-income renters (those whose household incomes are below 30 percent of median). In addition to the report, the most recent data available from the American Housing Survey shows that, for renters below 50 percent of area mean income, the shortage of affordable and available units increased from 5.2 to 6 million from 2007 to 2009, with just 39 affordable and available units for every 100 renters in 2009, compared to 44 two years prior. Enacted in 2008, the NHTF was designed to provide capital resources to build and rehabilitate housing to fill this precise—and growing—gap in the nation's rental housing market.