Proposed Cost Savings Do Not Account for $1.8135 Billion Cut to Public Housing Program

Released on Tuesday, May 23, President Trump’s proposed budget includes significant cuts to the Public Housing Program, especially regarding the Operating and Capital Funds. Although the budget also proposes a set of policies aimed at reducing costs of operating the Public Housing program, these policies would not account for the combined $1.8135 billion cut proposed to the program by the administration. These cuts would only increase the challenges already faced by PHAs across the country in ensuring low-income seniors, families, veterans, and disabled individuals continue to have to access to safe, secure, affordable housing.

The President’s budget would provide only $3.9 billion to support the operation and management of public housing. This is $500 million below the FY 2017 funding level and would be sufficient to fund only 80.7 percent of PHAs’ anticipated formula eligibility for 2018, down from 92.9 percent in 2017 (with a few caveats). These cuts would force PHAs to forego critical maintenance functions, further jeopardizing the long term sustainability of many properties.

The President’s proposed funding level for the Capital Fund represents an especially dramatic decrease that would have considerable negative impacts on PHAs’ ability to ensure their families are housed in safe, secure units. The President proposes providing $628 million for the Capital Fund, $1.3135 billion less than FY 2017 funding. This would be a significant step in the wrong direction, considering the immense size of the capital needs backlog that exists and our inability to fund annually accruing capital needs at current funding levels. This chronic underfunding has a huge impact on the health and safety of residents who live in public housing. An additional investment, not cut, in our nation’s public housing infrastructure is needed to improve the health and safety of the 1.1 million public housing households in America.

In HUD’s Congressional Justification, HUD argues that PHAs must partner with the private sector to leverage outside public and private investments in addition to the Capital Fund through the Capital Fund Financing Program (CFFP). Unfortunately, using the CFFP can be challenging for PHAs as it is subject to the availability of appropriations. Under the CFFP, PHAs borrow money against future year Capital Funds to make debt service payments for either a bond or conventional bank loan transaction. The uncertainty of year-to-year Capital Fund appropriations, especially in light of the cuts proposed by the President’s budget, add far too much uncertainty to make this a feasible option for most PHAs.

HUD’s Congressional Justification also recommends that PHAs take advantage of the Rental Assistance Demonstration Program (RAD). The President’s budget would remove the deadline for applications for the first component, and remove the cap on the number of allowable RAD units entirely, allowing more PHAs to participate. However, HUD acknowledges that the “2018 Operating Fund level may slow the pace of conversions” for PHAs that are not already participating in the program. Although RAD has worked for numerous PHAs, it can be a complex and challenging process, especially for smaller PHAs with less capacity. The President’s proposed Operating Fund proration of 80.7 percent will only increase this challenge.

The budget proposes a set of policies to reduce the costs of operating the Public Housing program while continuing to assist residents, and the budget argues that these policies would make up for the dramatic decrease in the funding from 2017 to 2018. These policies include:

• Requiring a mandatory rent of $50 for all tenants consistent with any applicable hardship exemptions.
• Prohibiting tenants from receiving utility reimbursements,
• Allowing HUD to increase the amount of rent contributions from tenants from 30 percent to 35 percent.

The budget’s proposed rent increases would not be put into place for the Public Housing or Housing Choice Voucher Program in 2018. Rather, HUD plans to implement the provision as a pilot in the Project-Based Rental Assistance (PBRA), Section 202, and Section 811 programs. As a result, PHAs would not benefit from increased tenant rents as a result of this provision, leading to substantial decreases to their Operating Fund subsidy in 2018.

The policies proposed by the President’s budget would not cover the shortfall faced by PHAs due to the substantial proposed decrease in Operating and Capital Fund subsidies. Although these proposals would ultimately increase PHA’s formula income levels, it is hard to believe this would be enough additional income to cover the $500 million decrease to the Operating Fund the President is proposing. Although the budget would allow PHAs to move 100 percent of funds from their Operating to Capital Fund, and vice versa, the substantial shortfall in the Capital Fund makes this increasingly challenging. Although the increased flexibility is a welcomed provision, it does not account for a combined $1.8135 billion cut.

The President’s budget would also allow HUD to waive or specify alternative requirements for statutory or regulatory provisions related to PHA administrative, planning, and reporting requirements, energy audits, income recertifications, and program assessments, if waivers or alternative requirements would result in program cost reductions or increase efficiencies. Although NAHRO has long pushed for regulatory relief for PHAs, and would support the issuance of waivers or alternative requirements that reduce costs and inefficiencies for PHAs, we remain concerned that the potential regulatory relief would not be substantial enough to cover the significant and troubling cuts proposed to the Capital and Operating Funds by the President’s budget.

For more information, see NAHRO’s in-depth analysis on the budget’s impact on the Public Housing program (members only).