Administration Releases Fiscal Year 2015 Budget
The Administration yesterday sent Congress its FY 2015 Budget, proposing funding for federal programs, including HUD and the Department of Agriculture’s (USDA) housing programs. NCSHA has posted its preliminary analysis of the Budget’s housing proposals and a chart comparing the Budget’s proposed FY 2015 HUD and USDA housing program funding levels with recent fiscal year funding levels. NCSHA will provide a more comprehensive analysis soon.
In addition to funding proposals, the Budget also contains the Administration’s tax proposals, including a slightly modified version of last year’s proposal to allow states to convert private activity bond (PAB) volume cap authority into Housing Credit authority. The FY 2015 proposal differs from last year’s by increasing the maximum amount of PAB volume cap that can be converted by each state from 7 percent to 8 percent and by providing an alternative method of qualifying for 4 percent Housing Credits without tax-exempt bond financing.
The Budget repeats last year’s tax proposals to repeal the Mortgage Revenue Bond (MRB) program purchase price limit and refinancing restriction; to create a new permanent America Fast Forward (AFF) Bond program, which would be an optional alternative to traditional tax-exempt bonds; and to cap the value of itemized deductions and other tax preferences, including the income-exclusion of interest on tax-exempt bonds, to 28 percent.
The Administration proposes, after accounting for offsetting receipts from the Federal Housing Administration (FHA) mortgage insurance program and other accounts, to spend $46.7 billion on HUD programs, a 2.6 percent increase over the FY 2014 funding level provided in the appropriations bill the President signed January 17, 2014. HUD’s Budget documents state that for FY 2015, 84 percent of HUD’s proposed budget would be used to renew existing rental assistance and operating subsidies, fund capital needs in public housing, and renew existing homeless assistance grants.
The Budget proposes to increase funding for Housing Choice Vouchers by 5 percent and HUD’s Housing Counseling program by 33 percent. It would cut funding for project-based rental assistance by 2 percent and funding for the HOME Investment Partnerships (HOME) program by 5 percent. It again proposes $1 billion in new mandatory spending to launch the Housing Trust Fund.
The Budget again includes NCSHA’s legislative proposal to allow Ginnie Mae to securitize FHA-HFA Risk-Sharing program loans. HUD’s Budgets for FY 2013 and FY 2014 also included this proposal.
The Budget estimates that FHA’s Mutual Mortgage Insurance Fund (MMIF), which supports FHA’s single-family and home equity conversion mortgage (HECM) programs, will generate a surplus by the end of FY 2014 and will not require funding from the Treasury to cover losses. At the end of FY 2013, due largely to losses from its HECM programs, FHA had to draw down $1.7 billion from Treasury, the first time in the agency’s history that it required an infusion of federal funding.
For USDA’s rural housing programs, compared to FY 2014 funding levels,the Budget recommends level funding for the Section 502 unsubsidized guaranteed loan and Section 538 multifamily loan guarantee programs. The Budget proposes to cut the Section 502 single-family subsidized direct loan program by 60 percent and the rental assistance program by 2 percent.
The Administration proposes again to create a new permanent America Fast Forward (AFF) Bond program, which would be an optional alternative to traditional tax-exempt bonds. The AFF program would expand on the expired Build America Bonds (BAB) program, under which Treasury made direct subsidy payments (called “refundable tax credits”) to state and local governmental issuers of taxable bonds. AFF bonds could be issued for all PAB-eligible activities, including housing, subject to applicable state bond volume cap authority for PABs.
To help states finance more developments than they currently can within existing Housing Credit authority caps, the Budget again proposes allowing states to convert annual private activity bond (PAB) volume cap into Credit authority. For every $1,000 of PAB volume cap converted, a state would receive 9 percent Credit authority equal to $1,000 times the 30 percent present value (4 percent) Credit percentage for the previous December times two. This proposal was included in the FY 2014 Budget but was not enacted. The FY 2015 proposal differs from last year’s by increasing the maximum amount of PAB volume cap that can be converted by each state from 7 percent to 8 percent. It also repeats prior year proposals to provide an alternative method of qualifying for 4 percent Housing Credits without financing at least 50 percent of a building with tax-exempt private activity bonds by reducing a state’s PAB volume cap as if the tax-exempt bonds had been issued.