Biden – Harris Administration Releases Additional Details on FY24 Budget Proposal

The Biden – Harris Administration has released supplementary materials for its Fiscal Year 2024 (FY24) budget request, including appendices and congressional justifications for relevant agencies. This blog post, which supplements NCSHA’s initial overview of the FY24 budget request, highlights several items that may be of particular interest for HFAs. NCSHA also has updated its budget chart, which may be found here.

New HUD Mandatory Affordable Housing Programs

The most significant new HUD investments for FY24 compared to previous budgets take the form of mandatory spending programs proposed over the 10-year budget window. In total, the administration proposes $60 billion in mandatory spending from 2024 – 2033, spread among programs intended to alleviate housing supply challenges, address affordable housing demand, and prevent evictions. A breakdown of these new programs is as follows:

• $13 billion to provide housing vouchers to all extremely low-income (ELI) veterans.
• $10 billion to help states and local jurisdictions expand supply and increase housing choice by reducing barriers to affordable housing development through planning and housing capital grants.
• $10 billion for a First-Generation Down Payment Assistance program.
• $9 billion to make housing vouchers available to all youth aging out of foster care.
• $7.5 billion in new Project-Based Rental Assistance for ELI households.
• $7.5 billion for preservation of distressed public housing through rehabilitation and redevelopment.
• $3 billion for competitive grants for initiatives intended to prevent evictions.

Tax Provisions

The FY24 budget makes a number of tax proposals relevant to the HFAs’ mission, including increasing the Housing Credit cap allocation; lowering the bond financing threshold; repealing the qualified contract provision and replacing the nonprofit right of first refusal with a purchase option; and establishing a new Neighborhood Homes Credit to promote new construction or substantial rehabilitation of affordable, owner-occupied housing located in distressed neighborhoods. The administration estimates the Housing Credit provisions would cost $28 billion over the 10-year budget window, while the new Neighborhood Homes Credit would cost $16 billion over the same period.

HOME Investment Partnerships Program

The FY24 budget requests $1.8 billion for the HOME program, which is $300 million more than the FY23 enacted level but less than the president’s request in FY23. The proposed FY24 total requests a $100 million set-aside for a down payment assistance pilot program, FirstHOME, for first-generation and/or low-wealth home buyers. The administration asks Congress for broad authority to waive certain HOME program requirements for the FirstHOME pilot.

HUD also envisions legislative and regulatory improvements to HOME. In its congressional justification, HUD says it is “drafting a proposed rule that will modernize and streamline the HOME regulations, subject to the constraints of the existing statute” and calls for statutory improvements to the HOME program “to make HOME funds easier for participating jurisdictions and other stakeholders to administer through more understandable language and streamlining of complex requirements, which could result in less potential misuse of funds.”

Tenant-Based Rental Assistance

Overall, the FY24 budget requests $32.7 billion for Tenant-Based Rental Assistance, approximately $2.5 billion more than the FY23 enacted level (which included, in addition to regular appropriations, emergency funding from the Disaster Relief Supplemental Appropriations Act of 2023, as well as funds carried over from the American Rescue Plan Act of 2021). Of this amount, the FY24 budget requests $27.8 billion for contract renewals; $3.2 billion for administrative fees; $385 million for tenant protection vouchers; $686 million for Section 811 mainstream vouchers; $565 million for incremental vouchers; and $25 million for mobility services. From the contract renewal account, the FY24 budget requests $50 million to support the conversion of public housing properties to Section 8 through the Rental Assistance Demonstration (RAD) program.

Project-Based Rental Assistance

Overall, the FY24 budget requests $15.9 billion for the Project-Based Rental Assistance program, approximately $1 billion more than the FY23 enacted level. Of this amount, the FY24 budget requests $15.3 billion for contract renewals; $62 million for RAD conversion subsidy; $28 million to support budget-based rent increases (BBRI) for certain at-risk post-mark-to-market Section 8 properties; $25 million for a distressed properties capital loan program; $31 million for BBRI to cover the cost of service coordinators to help elderly residents age in place; and $448 million for Performance-Based Contract Administration.

Performance-Based Contract Administration

HUD’s FY24 budget request seeks permanent resolution of the ongoing Performance-Based Contract Administration issue, requesting legislative language that would permit “the Department to use cooperative agreements to select State and local housing agencies through a Notice of Funding Opportunity as performance-based contract administrators (PBCAs) of Project-Based Rental Assistance contracts.” The legislative language requested by HUD is as follows:

SEC. 237. Notwithstanding sections 3(b) and 8 of the United States Housing Act of 1937 (the Act) and chapter 63 of title 31, United States Code, amounts made available to the Secretary in this or any prior Act under the headings “Project-Based Rental Assistance” or “Housing Certificate Fund” for performance-based contract administrators to carry out section 8 of the Act (42 U.S.C. 1437f), as implemented by the Secretary in chapter VIII of title 24, Code of Federal Regulations, may be awarded through a Notice of Funding Opportunity not subject to procurement laws or regulations: Provided, That such awards shall be deemed for all purposes to be cooperative agreements: Provided further, That for purposes of such Notice, eligible applicants are public housing agencies as defined by section 3(b)(6)(A) of the Act and nonprofits of such agencies when operating outside of the State or territory in which such agency is established: Provided further, That the Secretary shall award one cooperative agreement for each State or territory, except that the Secretary may award more than one cooperative agreement for a State or territory if the population of such State or territory exceeds 25,000,000: Provided further, That the Secretary may select the best qualified applicant regardless of whether it operates within the jurisdiction of the State or territory served: Provided further, That if the Secretary does not select a qualified applicant under such Notice, the Secretary may utilize a procurement contract subject to all procurement laws and regulations to assist in carrying out such section 8.

Public Housing

The FY24 budget requests $8.9 billion for the Public Housing Fund, $379 million more than the FY23 enacted level. Of this amount, $5.1 billion is to be distributed based on the Public Housing Operating Fund formula and $3.2 billion is to be distributed based on the Public Housing Capital Fund formula. In addition, the budget requests $300 million for a new Site-Based Public Housing Enhancement, Resilience, and Efficiency (SPHERE) Grants program to promote the preservation of public housing through targeted capital investments in properties with critical, extensive, and pervasive modernization needs that are not met through annual formula grants awarded through the Public Housing Fund. Of this amount, up to $20 million will be used to advance public housing utility benchmarking.

First-Generation Home Buyer Down Payment Assistance

The administration proposes the establishment of the First-Generation Down Payment Assistance Program, which would fund down payment assistance for first-time home buyers whose parents do not own a home and who have incomes at or below 120 percent of the area median (140 percent in high-cost areas). As described above, the budget requests $10 billion in mandatory funding over 10 years for the program.

The new initiative would be administered at the federal level by HUD, which would award nearly $8 billion in funding to states and other eligible Community Development Block Grant grantees through a formula. The remaining $2 billion would be awarded to eligible entities that have demonstrated the capacity to deliver down payment assistance. HUD estimates this program would help more than 400,000 home buyers in 10 years. HUD also expresses optimism that the initiative would help lead to the establishment of a common down payment assistance offering, which other down payment assistance programs could adopt and which could increase lender involvement in down payment assistance programs.

This proposal is substantially similar to the Down Payment Toward Equity Act, introduced last Congress by then-House Financial Services Committee Chair Maxine Waters (D-CA) and included in the House-passed version of the Build Back Better bill. NCSHA advocated in support of the legislation.

Housing Counseling

The FY24 budget proposes $66 million for housing counseling, an increase of $8.5 million from FY23. Of the total requested, $61.5 million is for grants to housing counseling agencies, HFAs, and housing counseling intermediaries, with $5 million being used to increase the participation of Historically Black Colleges and Universities and other institutions focused on serving minorities. The remaining $4.5 million is for administrative expenses. HUD estimates this funding will help more than 1,500 housing counseling agencies serve more than a million households.

Federal Housing Administration Single-Family Insurance Program

The FY24 budget requests $400 billion in loan authority for FHA’s Mutual Mortgage Insurance Fund (MMIF), which supports FHA’s single-family home purchase mortgages and home equity conversion mortgages (HECM). This is the same level of authority that MMIF received for FY3. The administration estimates FHA will insure $206.4 billion in home purchase mortgages in FY24 and $26.3 billion in HECMs.

The budget also requests $1 million in direct lending authority for FHA. This authority would be used to finance short-term purchase money mortgages for nonprofit and government agencies to help them sell foreclosed homes owned by HUD available to low- and moderate-income buyers.

The administration’s budget also requests $165 million for the MMIF Program account. This includes $150 million in administrative expenses to support a range of FHA functions, such as loan underwriting, claims processing, and risk monitoring and $15 million for a new pilot program to increase FHA support for small-dollar mortgage loans.

Ginnie Mae

The budget requests $550 billion in commitment authority for FY24 for Ginnie Mae, $350 billion less than the FY23 enacted level. The administration expects Ginnie Mae issuance to decline significantly in FY24 due to a slowing mortgage market. The budget also requests $61 million in spending authority from offsetting collections ($150 million) for Ginnie Mae salaries and expenses.

FHA-HFA Multifamily Loan Risk-Sharing Program

The budget proposes to maintain the FHA-HFA Risk-Sharing program in FY24 and requests new authority for Ginnie Mae to securitize affordable multifamily loans made by HFAs and insured under the FHA’s 542(c) Risk-Sharing program.

FHA Multifamily/Title I Manufactured Housing and Property Improvement Loan Programs

The FY24 budget requests a limitation of $35 billion on loan guarantees and $1 billion for direct loans from FHA’s General Insurance and Special Risk Insurance (GI/SRI) fund for financing FHA’s affordable multifamily activity, manufactured housing loans originated through FHA’s Title I program, and health care facility loan insurance programs. The requested limit on loan guarantees is identical to what the fund received in FY23.

FHA estimates the GI/SRI fund will insure more than $21 billion in loans in FY24, including $575 million for Federal Financing Bank Risk-Sharing Loans, $16.8 billion in loans to finance multifamily housing, $4.1 billion in financing for healthcare facilities, and $20 million for Title I manufactured housing and property improvement projects.

USDA Rural Housing Programs

The FY24 budget request for the U.S. Department of Agriculture (USDA) includes several legislative proposals aimed at improving USDA’s housing programs. Borrowers currently utilizing the Section 502 Single-Family Direct Loan program are required to repay subsidy costs in a process known as recapture. The budget calls for the elimination of the recapture requirement, potentially saving borrowers from a lump sum payment due after title transfer or they leave the property.

The budget also requests legislation that would make the Multifamily Housing Revitalization program permanent, which has been a demonstration program since 2006. The administration says permanent authorization of the program would allow USDA to make long-term plans about the health of USDA’s rental housing stock.

The administration also seeks to eliminate a requirement that causes unnecessary delays in USDA real estate owned (REO) portfolio property sales. The proposed provision would eliminate the need for USDA to distinguish between program and nonprogram REO properties, saving the agency time and reducing inefficiencies in the system.

The USDA budget says a key rationale for increasing proposed rural housing program funding is an additional requirement the administration is requesting for all USDA’s construction or rehabilitation programs. The administration is requesting USDA target “projects that improve energy or water efficiency, implement green features, including clean energy generation or building electrification, electric car charging station installations, or address climate resilience of properties” when granting funding for construction or rehabilitation.

Funding level highlights for some key Rural Housing Service programs are:

• $30 billion for the Section 502 Single-Family Guaranteed Loan program, equal to FY23.
• $1.69 billion for Section 521 Rural Rental Assistance, up from $1.49 billion in FY23.
• $1.5 billion for the Section 502 Single-Family Direct Loan program, an increase of $250 million over FY23.
• $400 million for the Section 538 Multifamily Loan Guarantee program, the same as in FY23.
• $200 million for the Section 515 Direct Rental Housing Program, up from $70 million in FY23.
• $75 million for the multifamily preservation demonstration program, an increase from $36 million in FY23.
• $60 million for Disaster Rural Housing Assistance Grants to repair rural homes damaged during presidentially declared disasters in calendar year 2022, funding not included in previous budgets.
• $48 million for the Section 542 Voucher program, equal to the funding level enacted in FY23.