HUD's Assault on Low-Income Housing for 2003-2004

January 2003 — HUD issues a notice saying that public housing authorities will start the year with reimbursement for only 70% of their operating expenses, instead of the customary 100%, because of a $250 million shortfall in 2002 caused by its own inadequate information systems. HUD covers the shortfall by using funds from fiscal year (FY) 2003 instead of asking Congress for additional appropriations to make up the loss. The result: a 10% final cut in funds for FY03 operating expenses. 

February 2003 — HUD issues its budget proposal for FY04, which zeroes out funding for a number of crucial affordable housing programs:  

HOPE VI: This successful program provides $574 million yearly to revitalize distressed public housing and create mixed-income housing and homeownership. The House Financial Services Committee subsequently repudiates the agency’s proposal to end this program by approving bipartisan legislation to reauthorize and extend the program. 

Brownfields Redevelopment: A $25 million a year program to reclaim formerbrownfields sites to encourage productive land use and economic development. The House Financial Services Committee turns back HUD’s decision to kill this program and approves legislation for its to reauthorization and extension.

Affordable Housing Preservation: Affordable Housing Preservation grants are pulled from the pool of funds captured when owners of HUD-assisted multifamily projects prepay their mortgages. These funds are to be recycled as grants to rehabilitate older assisted housing units. HUD has never issued regulations to implement this provision enacted in 1997 and proposed retracting the $303 million in funds.

Empowerment Zones (EZ’s): HUD EZ funds supplement tax incentives localities receive that can be used to create jobs and spur economic development in low-income areas designated as EZ’s.

The Public Housing Drug Elimination Program (PHDEP): This program provides funds that local housing agencies use to combat drug-related crime in and around public housing communities. In 2001 HUD terminated this $310 million a year program and promised to make up for the cut by funding increases in the operating expense account. But, the agency did not keep this promise and the FY04 budget provides no additional operating funds for this purpose.

Rural Housing and Economic Development: This $25 million grant program promotes innovative housing and economic programs that benefit low-income families in rural areas.

Additional budget item: The Administration also proposes a mandatory minimum rent, which would increase rent payments by up to $600 yearly for the poorest individuals receiving public housing and Section 8 assistance. The proposal also takes away the flexibility local housing authorities have to create hardship exemptions from this requirement.

March 2003 — The HUD Secretary testifies before the House Financial Services Committee that he continues to oppose a national housing trust fund for the production of more affordable housing, saying, “the needs of affordability can only, ultimately, be solved at the local level.” This statement comes less than a year after HUD reportedly stepped in to kill a housing trust fund bill the Financial Services Committee had passed.

April 2003 — The Administration proposes to send the Section 8 voucher program to the states as block grants. The proposal would move this successful program away from the local agencies and force states to act as intermediaries that administer the program. Under HUD’s budget projections the transition would cause a loss of at least 80,000 vouchers. States would no longer receive a guaranteed number of vouchers and would get a pool of money for the program. The funds would have to cover the program’s administrative costs and an undefined number of rental units. Any change in rental rates would lead to a decrease in either the number of vouchers issued or the amount of the rent covered for each recipient.

May 2003 — HUD convenes a series of secret meetings allegedly to discuss alternatives to HOPE VI.  However, issues raised include privatizing public housing units, which would allow public housing units to be sold to private parties and would permit an end to long-term affordability commitments. Public housing advocates, tenant representatives, and public housing authorities were excluded from these discussions. 

June 2003 — HUD continues its empty rhetoric on homeownership, especially minority homeownership rates. Click here for more information.

July 2004 — HUD announces it will not reimburse public housing authorities for some $100 million in utility costs legally incurred in prior years. The agency also announces that FY 2003 public housing capital repair funds won’t be made available to housing authorities until September (the last month of the fiscal year), with $444 million being held back until “November or sometime later,” according to their statements. Finally, HUD announces it will not provide funds for certain housing authorities to replace housing units lost through demolition or other means.

In testimony before the Housing and Community Opportunity Subcommittee, HUD refuses to support bipartisan legislation that would increase Federal Housing Administration (FHA) loan limits for rental housing construction in high-cost areas. HUD had insured almost no loans in recent years in Massachusetts, California, and New York, areas where average construction costs exceeded FHA loan limits. Such high costs prevented development of affordable rental housing in already tight markets. The House later overwhelmingly passed this bill despite HUD’s position.

August 2003 — The public housing community service requirement is re-instated.  HUD supports this unfunded mandate on public housing authorities, which forces housing authorities to monitor tenants’ compliance with the requirement to perform at least eight hours of community service a month, and evict those tenants who do not comply.

September 2003 — The Bush Administration issues a final rule that allows religious organizations to receive HUD grants even if they practice employment discrimination. The rule applies to Community Development Block Grants (CDBG), HOME Investment Partnerships, various homeless programs, and programs that assist people with AIDS, among others.

October 2003 — Despite HUD’s repeated demands for expanded statutory authority to set affordable housing goals for Fannie Mae and Freddie Mac, the agency is forced to acknowledge it will not even use the authority it already has to raise existing housing goals for calendar year 2004. A careful reading of the Administration’s legislative proposals show they would let HUD replace existing low- and moderate-income affordable housing goals with goals that are less targeted by income and geography. Finally, HUD testifies in favor of an Administration plan to transfer new housing program approval from HUD to Treasury, a transfer broadly opposed by housing advocacy groups, which fear the move would diminish GSEs’ ability to innovate to meet housing needs. Click here for NAHB press release opposing this plan.

November 2003—HUD declares five public housing authorities in default of their HOPE VI revitalization grants.  The housing authorities were notified of HUD’s action as the press release was being issued, and did not receive letters outlining the agency’s specific concerns until the following day.  This action was taken amidst ongoing Congressional appropriations negotiations over the fate the HOPE VI public housing revitalization program, which HUD had targeted for extinction as part of its annual budget request. 

December 2003 — HUD issues a misleading press release touting its “record-level” award of fiscal year 2003 (FY03) homeless prevention funds as an example of the Administration’s commitment to the homeless. What the release left out was the fact that the Administration had not asked for this increase in its budget. Instead, the Administration’s request kept homeless funding stagnant—a contradiction to its publicly stated commitment to end chronic homelessness in a decade. These funds were only available because Congress had rejected the Administration’s budget request not to increase homeless funding that year.  

HUD finally allocates the remaining $444,000,000 of FY03 Public Housing Capital Funds –three months into FY04—after having dawdled until the last month of FY03 to release any FY03 funds. This delay followed two years of Administration complaints that housing authorities were not spending these funds, as well as HOPE VI and drug elimination funds, in a timely manner. 

January 2004 — The Administration finalizes its FY 2005 budget proposal to cut the Section 8 voucher program by $1.633 billion and to send the Section 8 voucher program to the states as block grants. This Administration proposal eliminates long-standing tenant protections instead creating incentives for housing authorities to raise rent payments for low-income families and even to take vouchers away from these families. Subsequent analyses show the proposal could reduce the number of families receiving vouchers by as much as 250,000 in the first year alone. 

In response to complaints that HUD was violating the law by disbanding the negotiated rulemaking process for the final rule on the Public Housing Operating Fund, HUD reactivates the process and names 27 members to the rulemaking committee. However, HUD names only one tenant organization to the committee and drops a number of prominent low-income housing organizations that were originally on it. [Subsequently, HUD adds one tenant, but the committee still remains unbalanced, including an ardent foe of public housing]. 

February 2004—The Administration releases its complete FY05 HUD budget.  In addition to deep cuts to Section 8, the budget terminates the HOPE VI public housing revitalization program, rolls back eligibility for refunds for homeowners who prepay their FHA loans, and eliminates funding for important HUD programs, such as brownfields redevelopment, empowerment zones, rural housing and economic development grants, and CDBG Section 108 loans. 

March 2004 — The National Council of State Housing Agencies issues an alert about potential imminent action by HUD to reinterpret its longstanding position on certain Section 8 properties.  Such reinterpretation would let owners prematurely end their commitment to keep the housing affordable. Rep. Barney Frank and Sen. Paul Sarbanes (D-MD) send a letter asking HUD to halt this plan, which could affect more than 100,000 housing units. 

April 2004 — HUD issues a notice interpreting the recently enacted FY 2004 appropriations bill in a way that denies reimbursements to housing authorities for valid and actual voucher costs which exceed a general inflation index.  HUD compounds the problem by imposing this cut retroactively (and without prior warning) back to January 2004.  As a result of HUD’s proposed action, many housing authorities that have depleted their reserves will not be paid for their actual costs leaving them with the option of either taking vouchers away from needy families or raising rents. In Massachusetts the impending change results in a hasty public hearing notifying the public that thousands of voucher holders could lose their vouchers by June 1st.

May 2004 — HUD Secretary Alphonso Jackson asserts that "being poor is not a condition, but is a state of mind" during an appearance before the House Financial Services Committee to testify on HUD's proposed FY05 budget. Jackson goes on to claim that an "extra" $150 million to replenish reserves of housing authorities will lessen the impact of the April notice that cuts Section 8 voucher reimbursements. However, scores of news stories across the nation show otherwise and report widespread cuts to the Section 8 programs as a result of the April 22 notice.

June 2004 — After taking administrative action in April to cut Section 8 voucher funding, HUD begins to pressure housing agencies to cut the subsidy they pay to voucher holders.  HUD even encourages agencies to cancel contracts with landlords in order to eliminate rules that protect existing voucher holders from precipitous rent increases.  Ultimately, HUD is forced to back down from this questionable tactic, in the face of a critical letter from Rep. Frank and unified housing industry opposition. (See Letter)

July 2004 — HUD steps up its campaign to dismantle the Section voucher program by sending all housing agencies a letter urging them to cut voucher costs – in spite of the fact that Congress had fully funded the voucher program.  The HUD letter emphasizes actions to cut rent subsidies and to establish or raise minimum rents on the poorest voucher holders.  The letter reads like a public relations document, concluding that “The voucher program is broken, and is in desperate need of repair” – and further laments the fact that Congress refuses to adopt its block grant proposal to cut funding by $1.6 billion.  Bi-partisan congressional opposition is unleashed upon the Department.

August 2004 — In late August, HUD restores an additional $155 million in voucher funds under an appeals process that was necessitated by HUD’s decision in April to hold back voucher funds and to refuse to fund actual voucher costs.  Release of these funds comes 2/3 into the year – after many housing agencies were already forced to cut vouchers and/or raise subsidies as a result of HUD’s actions. In many cases, the funds are not sufficient to forestall additional cuts to the program.   HUD also refuses to award voucher appeals funds to cover cost increases resulting from declining tenant incomes. By now, an avalanche of media criticism has ensued, resulting in dozens of news stories and editorials nationwide. Landlords threaten to leave the program.

September 2004 — In late September, HUD announces FY 2005 Fair Market Rents (FMRs) - after providing housing agencies with less than 60 days notice of significant changes reflecting 2000 census data.  Days before the decreases are scheduled to go into effect, and after more negative media and congressional backlash, HUD backs off its proposed arbitrary FMR boundary changes, which would have made huge voucher rent cuts in many high cost areas.  However, HUD does change the way it sets rents for larger apartments, resulting in steep rent increases for larger families in many communities.

October 2004 — The 108^th Congress adjourns until after the election – without taking any action on a housing production bill, which the Administration continues to oppose.  Sponsors of the National Affordable Housing Trust Fund (H.R. 1102, with 214 co-sponsors) are forced to file a discharge petition as a strategy to try to force a vote in the House.

Updated October 2004