Secretary Donovan Testifies Before House Appropriations HUD Subcommittee

On March 10, HUD Secretary Shaun Donovan testified on HUD's FY 2012 budget request before the House Appropriations Subcommittee on Transportation, Housing and Urban Development, and Related Agencies.

In his opening statement, Subcommittee Chairman Tom Latham (R-IA) stated that the entire FY 2008 discretionary budget for the Departments of Transportation and HUD was $48.8 billion and the FY 2012 request for HUD is $41.8 billion, not including receipts, which leaves little room to fund Transportation. He also expressed concern about the Federal Housing Administration's (FHA) continued large market share. Ranking Member John Olver (D-MA) voiced concern in his opening statement that the HUD budget request depends on almost $5.5 billion in receipts from FHA and that the Congressional Budget Office (CBO) did not agree with HUD's estimate in FY 2011, giving the Subcommittee a lower funding level to work with.

Similar to his testimony before the Senate Appropriations T-HUD Subcommittee, as described in NCSHA's March 18 blog, Donovan testified that HUD's budget was developed using three core principles: continuing to provide support for the housing market while bringing back private capital, protecting current residents, and proposing no new initiatives. He testified that in order to maintain a commitment to fiscal discipline and to continue serving existing residents HUD had to make the difficult choice to reduce funding for new units and projects, including cuts to the HOME Investment Partnerships program.

Latham told the Secretary that it is safe to assume that FY 2012 funding allocations will be around the same amount as FY 2008 and asked about the growth in certain HUD accounts such as Housing Choice Vouchers (vouchers) and project-based Section 8. Donovan said much of the growth is a result of renewals of new vouchers, such as HUD-VASH vouchers for homeless veterans, and from tenant protection vouchers. He added that HUD can look carefully at inflation adjustments and can work to remove overly burdensome requirements in the Section 8 programs.

Olver asked the Secretary about possible bond rating downgrades if the public housing capital fund was funded at the $1.4 billion level proposed in H.R. 1, compared to the FY 2010 funding level of $2.5 billion. Donovan responded that as the system to fund affordable housing moves to a public-private partnership, federal funding changes potentially have a greater impact. At the H.R. 1 funding level, outstanding bonds backed by capital funds would likely see an in increase in interest rates and this could be seen in a range of programs, including project-based Section 8.

Representative John Carter (R-TX) asked how HUD would operate at FY 2008 funding levels.  Donovan replied that the Department made difficult choices in the FY 2012 budget and that he believes if it had cut further it would have negatively impacted those served by HUD and the economy.

Latham asked about the 11,000 unused HUD-VASH vouchers and commented that the Department's FY 2011 budget did not request any additional HUD-VASH vouchers. Donovan said there were 18,000 unused vouchers when he became Secretary and HUD did not request any additional vouchers in FY 2011 for that reason. He said HUD was able to increase leasing and now has over 20,000 in use. Donovan said he now believes HUD could use additional vouchers. Latham asked if HUD had made a formal request for additional VASH vouchers for FY 2011 and Donovan answered he would be happy to. Appropriations Committee Ranking Member Norm Dicks (D-WA) attended the hearing just to voice his support for additional HUD-VASH vouchers and commented that he hopes they can find a way to keep the program going.

Representative Steve LaTourette (R-OH) asked about HUD's post mark-to-market strategies. He said he is getting feedback that the pay-down calculation is becoming non-consistent or non-uniform. Donovan said he is happy to look at it and that with the economic situation changing substantially, HUD should look at whether it needs to adjust its policies.

Representative Charles Dent (R-PA) expressed concern that Community Development Block Grant (CDBG) funding was not going to communities that have a greater need than some of the areas receiving funding. Donovan said there is a range of ways to improve targeting for CDBG and he has a set of reforms he would like to work on with the Subcommittee. Dent replied he wants to make the CDBG formula more equitable.