CARH’S BROADCAST E-MAIL – Legislative & Regulatory Update

July 9, 2015

1) APPROPRIATIONS UPDATE

Congress has continued to grapple with Sequestration and its effects on the federal budget. The housing and community development area has been hit, though not as hard as some others. We have not seen Sequestration as an issue because for the past two fiscal years we have been operating on a bipartisan agreement that suspended Sequestration. That agreement will expire at the end of current fiscal year (September 30, 2015). Therefore, the new Fiscal Year (FY) 2016 numbers from Congress are intended to reflect Sequestration.

Department of Housing and Urban Development:

As was reported in a broadcast email dated June 23, 2015, the Senate Transportation and Department of Housing and Urban Development (THUD) Subcommittee of the Senate Appropriations Committee reported its version (S. Rept. 114-75) of the FY 2016 funding bill, H.R. 2577, for the agencies funded under its jurisdiction.  The full Senate Appropriations Committee on June 25, 2015 voted along party lines to report the bill to the full Senate.  CARH has reported that funding for the HOME program had been cut to $66 million a level that essentially eliminates the program. The House’s version of H.R. 2577 would fund the HOME program at $767 million, a decrease from the Administration’s requested level of $1.060 billion. We also reported that efforts would be undertaken by Senator Chris Coons (D-DE) to increase funding for the program. Senator Coons as well as Senator Jack Reed (D-RI) offered separate amendments during full Committee consideration.  However, efforts of both Senators were unsuccessful.

The cuts, including the severe cut to HOME can be attributed to the reintroduction of Sequestration and, along with it, the insufficient overall funding level provided by the budget resolution.  THUD bill adheres to the Subcommittee’s $55.65 billion 302(b) spending allocation, made pursuant to the Senate’s budget resolution in keeping with the caps imposed by the Budget Control Act (BCA) of 2011.  While this amount is $1.88 billion over FY 2015 levels, it actually represents a decrease of $1.9 billion below current levels due to lower Federal Housing Administration receipts and a $2.3 billion increase in the cost of maintaining existing rental assistance contracts. Click here for a link to the chart which will provide information on funding levels for other HUD programs.

According to HUD, if HOME were funded at the level proposed by the Senate Subcommittee, there would be a loss of an estimated 38,665 affordable housing units (16,045 homebuyer units, 15,099 new or rehabilitated rental units, and 7,521 owner-occupied homes rehabilitated for low income homeowners), and 8,813 fewer families would be assisted with HOME tenant based rental assistance. What is even more striking is the attached HUD-prepared chart that shows the potential impact on individual states and participating jurisdictions (PJ).

The House and Senate appropriations bills are being moved with different political considerations than two years ago. The last election gave House Republicans more seats and more conservative membership. Prior to the November election, the Senate was led by the Democratic Party, which flipped to the Republican Party. Major legislation requires a supermajority of 60 votes in the Senate as a rule so the Republican simple majority did not change everything. But it did create a climate where neither party has been moving on an overall agreement.

Indeed, it is not even clear when or if the THUD bill will be considered by the House and Senate prior to October 1, 2015, the beginning of the FY 2016. In addition to this bill, other bills such as funding for the Defense Department are meeting with resistance by various Senators because of the budget caps cited above. Many believe the draconian cuts made by individual subcommittees will spur movement by the Senate leadership to work with their counterparts in the House to increase the budget caps. Representatives and Senators are keenly aware that the President’s proposed budget laid out spending levels above Sequestration and the White House is telegraphing a Presidential veto if some further spending agreement is not reached. There is some sense that Congress will stick to Sequestration and possibly work towards an omnibus type agreement in the fall.

We continue to urge CARH members, and particularly those who use the HOME program, to continue to contact their Senators, urging that funding be restored, and the impact of the elimination of the program would be on rural transactions. Every Senator should know that his/her constituents believe that:

• HOME uniquely empowers state and localities to respond to the housing needs they judge most pressing, allowing them to serve the whole spectrum of need from homelessness to rental to disaster recovery assistance.
• HOME is flexible and can be used in rural or non-rural areas.
• The program is a vital piece in financing numerous affordable housing developments, many of which would not be able to go forward and many of which would not provide housing for low-income families with HOME assistance.
• HOME does not replace resources committed to rural areas, but is an important gap financing program.
• States and localities leverage HOME by generating almost four dollars of other public and private funding to HUD.
• CARH Members should also include specific transactions which show the usage of the HOME program in the states.

Again, it is uncertain when or if the THUD bill will be considered by the full House and Senate.  Therefore, CARH members still have the opportunity to reach out to Senators, Representatives and their staffs.  Indeed, inviting your member of Congress and their staffs to your properties is a great chance to showcase the great work you do.   You do not have to do any elaborate meeting. A very simple tour around the property with a sit-down to explain the financing used and why all sources are important will also help with continuing the program. Congress will be in recess during August, providing members with a host of opportunities to get your members of Congress to your complexes.

USDA Rural Development

On Wednesday, the full House Appropriations Committee reported to the full House, the bill that would fund Rural Development (RD) programs through FY 2016 (there is currently not a bill number, however, please click here for the Draft Bill and click here for the Draft Report).  Click here for a link to the chart that provides funding levels for other RD programs.  For the most part, most of RD’s programs would be closer to the FY 2015 levels of funding, versus the Administration’s budget which would have increased funding for most housing programs. While the Section 521 Rental Assistance (RA) program would receive $1.167 billion, the Committee did not agree to expand the rental housing voucher program to allow for residents living in complexes where the Section 515 mortgage expires. CARH has indicated that the authorizing committees (House Financial Services and Senate Banking Committees) need to review the issue of expiring Section 515 contracts and develop a long-term solution; vouchers are needed for FY 2016 for those residents who reside in complexes where mortgage expires during FY 2016.

The Committee retained the language originally recommended by the Administration last year and again this year that prohibits RA contracts from being renewed more than once in a fiscal year. A consortium of groups representing the non-profit community, residents and CARH are working to have this language deleted when the Senate begins considering its version of the USDA funding bill. (A letter was sent to the House Appropriations Committee, and a similar letter will soon be sent to the Senate.) Other language proposed by the Administration which would have impacted the RA program was not included by the Committee.  The Senate Agriculture Appropriations Subcommittee has not yet considered its version of the USDA funding bill.

CARH members are again urged to contact their members of Congress (click here to contact your Senators and click here to contact your Representatives) and ask for support for the use of vouchers for residents in complexes where the mortgage is due to expire and then for deletion of the re-renewal language. On this last point, CARH members should explain that the re-renewal language is not needed because of RD’s ability to better gauge at the beginning of the RA contract actual needs of the property and residents who reside in those properties.  Again, tours of properties are encouraged so that members of Congress and their staffs can see first-hand the impact of the budget on properties and residents.

The Committee did not increase budget authority for the Section 538 guaranteed loan program.  The Administration recommended a $200 million limit, but instead the $150 million cap was retained. We believed that the loan to cost change made earlier this year will help boost program usage and demonstrate that additional authority is warranted.

2)  TAX REFORM AND THE HOUSING CREDIT AND BOND ISSUES

On Wednesday, the Senate Finance Committee’s Tax Working Groups released reports (below) on their examination of the current tax code and what if any changes should take place regarding specific sections of the current tax code.

• The Business Income Tax Bipartisan Tax Working Group Report
• The Community Development & Infrastructure Bipartisan Tax Working Group Report
• The Individual Income Tax Bipartisan Tax Working Group Report
• The International Tax Bipartisan Tax Working Group Report
• The Savings & Investment Bipartisan Tax Working Group Report

As CARH members know from previous broadcast emails on the subject, the committee’s bipartisan tax working groups have spent the last several months examining various aspects of the code. CARH in April submitted written comments to the Community Development and Infrastructure group. This working group was charged with reviewing the Housing Credit and Bond programs. The report gives a review of these programs which appear to be descriptive and not specifically calling for any change in those programs, but makes recommendations in other, non-housing programs.  Now that the reports have been issued, it will be job of the Chairman, Orin Hatch (R-UT) and Ranking member, Ron Wyden (D-OR.) to review recommendations and then move a tax reform bill out the committee.

On another note, CARH, together with other members of the ACTION group, met last week with key staff members who work for members of the Ways and Means Committee and have cosponsored legislation which would create a permanent flat rate for the 9 percent and 4 percent Housing Credit programs. (See, H.R.1142, introduced by Representatives Pat Tiberi (R-OH) and Richard Neal (D-MA). Click here for current co-sponsors.) The purpose of these meetings was to garner support for efforts by Representatives Tiberi and Neal to urge Chairman Paul Ryan (R-WI) to bring H.R. 1142 for a vote before the full Ways and Means Committee, thus allowing a stand-alone Housing Credit permanent tax extender bill to be considered by the full House. Efforts will continue on the House side as will similar meetings take place in the Senate.  (Companion legislation, S. 1193, introduced by Senators Pat Roberts (R-KS) and Maria Cantwell (D-WS). Click here for current co-sponsors.)

3)  AFFIRMATIVELY FURTHERING FAIR HOUSING-FINAL RULE

HUD released its final Affirmatively Furthering Fair Housing (AFFH) rule on Wednesday.  The final rule runs to 377 pages, so it will take some time to digest, but it appears to adhere to the basic approach of the proposed rule, to impose additional duties on PHAs and other HUD grantees to more vigorously implement their affirmative fair housing obligations. The rule is widely viewed as responding to the ongoing litigation with Westchester County, NY, which was sued under the False Claims Act on the grounds that, in applying for Section 8 and other HUD funds, it had falsely certified it was meeting its statutory affirmatively furthering fair housing duties. Now, all PHAs will be required to implement policies that would overcome impediments to fair housing, like zoning restrictions on multifamily housing, etc. To alleviate some of the administrative burdens, HUD is apparently offering additional technical assistance and an extended timetable for compliance. Most of the impact will fall on PHAs and other public agencies, but conceivably this may provide additional opportunities for developing affordable/multifamily housing in non-minority areas, if it works as planned. Click here for additional background materials.

If you have any questions, please contact CARH at 703-837-9001 or carh@carh.org.