March 12, 2010
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On March 11, HUD Secretary Shaun Donovan testified before the Senate Appropriations Subcommittee on Transportation, Housing and Urban Development, and Related Agencies on the Department’s FY 2011 Budget. Both Chairwoman Patty Murray (D-WA) and Ranking Member Christopher Bond (R-MO) voiced concerns about cuts to programs such as HOME, Housing for the Elderly (Section 202), and Housing for Persons with Disabilities (Section 811), among others, in their opening statements. They also voiced concerns regarding the solvency of the Federal Housing Administration (FHA) and the need for more details on new initiatives proposed in the budget.

Donovan testified that the Budget was produced in a difficult fiscal environment and that HUD had to make difficult decisions. He said they decided to target their resources primarily to rental and operating assistance and that caused them to cut capital programs.

Murray asked Donovan how the Budget would be impacted by the $4 billion discrepancy between HUD’s and the Congressional Budget Office’s (CBO) estimates of expected receipts from FHA. The CBO’s estimate suggests appropriators might need to provide $4 billion more in new budget authority than HUD requested to make up for the shortfall between HUD’s estimate and what the CBO predicts. Donovan replied that the impact would be substantial, but that HUD is still confident in its projection. He said HUD is working with CBO on the discrepancy, and that the Budget Committee is not required to use CBO’s estimate when advising the Appropriations Committee.

In response to Murray’s question about the Budget’s FHA reform proposal, Donovan said HUD is asking for authority to increase FHA’s annual single-family mortgage insurance premium to increase revenue for the FHA insurance fund and balance the annual and upfront premiums. HUD increased the upfront premium earlier this year and would like to decrease it if it can increase the annual premium. He also stated that in addition to bringing FHA’s capital reserve back to its congressionally mandated level of 2 percent by 2012 or 2013, FHA’s premium increases are spurring a return of the private mortgage insurance industry.

Murray also asked if the lack of vouchers would be a barrier to the HUD Transforming Rental Assistance (TRA) initiative’s goal of increasing tenant mobility. Donovan said HUD is still working on the TRA proposal and that they are trying to ensure the mobility feature does not create too much need for additional vouchers. Murray again emphasized the need for her Committee to see legislative language on the proposal. TRA proposes to regionalize the Housing Choice Voucher program and convert public housing and some assisted housing to project-based vouchers. The Budget requests $350 million for this initiative in FY 2011.

Murray stated, and Bond echoed, that the Committee was disappointed that there was no new funding requested for the HUD-VASH program, which provides supportive housing for homeless veterans. Murray acknowledged that there have been some problems in issuing all the vouchers already allotted.

Senator Patrick Leahy (D-VT) voiced concerns about a perceived shift away from rural priorities. He reminded the Secretary that a third of the population lives in rural areas and questioned what HUD is doing to address rural issues. Bond added his disappointment that all funding for the Rural Housing and Economic Development program had been cut. Donovan replied that HUD is not moving away from rural issues and that the Budget targets rural homelessness and includes a rural set-aside in the Catalytic Investment initiative.

The hearing webcast and a copy of Donovan’s testimony are available on the Appropriations Committee website.