FY 2018 Omnibus Spending Bill Includes Significant Victories for HOME, Housing Credit, and Other Affordable Housing Programs

The House today approved a $1.3 trillion omnibus spending bill to fund the federal government for the remainder of Fiscal Year (FY) 2018. The omnibus spending bill, based on spending caps negotiated as part of the recently passed Bipartisan Budget Act of 2018, provides significant funding increases for affordable housing programs, including the HOME Investment Partnerships (HOME) program, and includes provisions to expand and strengthen the Low Income Housing Tax Credit (Housing Credit) program. The Housing Credit program amendments were included among a small number of tax provisions, only six of which generated a cost estimate in the Joint Committee on Taxation report on the bill’s budget effects.

The House voted 256-167 in favor of the bill earlier today. Senate leaders have said they expect to take it up before the current stopgap spending measure expires at midnight tomorrow, March 23. If the Senate runs out of time to pass the omnibus due to procedural hurdles, they may need to pass a sixth stopgap spending measure to avoid a government shutdown.

Affordable housing program highlights from the bill are below. For updated information on specific program funding levels, please see NCSHA’s Appropriations Chart.

HUD Programs

The bill provides HUD a net total of $42.7 billion for FY 2018, an increase of $3.9 billion over its FY 2017 enacted level and more than $12 billion more than the President’s FY 2018 request. This allocation allowed the appropriations committees to fund many HUD programs at levels significantly above what was proposed in either the House or Senate FY 2018 draft bills. HUD highlights from the bill include:

• $1.362 billion for HOME, $412 million or 43 percent more than in FY 2017, representing the program’s highest funding level in the last seven years. The Administration proposed to eliminate HOME in both its FY 2018 and 2019 budgets.
• Extends HOME’s 24-month commitment deadline suspension through 2020.
• $11.15 billion for project-based rental assistance (PBRA), enough to renew all existing contracts and provide $285 million for contract administration ($50 million more than FY 2017).
• Includes report language saying that HUD’s decision to cancel its December 2017 solicitations for the Performance Based Contract Administration (PBCA) program is “appropriate” given “overwhelming critical responses from industry and stakeholders.” The bill further directs HUD to report to Congress, within 90 days of enactment, the “staffing and funding requirements necessary… to undertake and oversee a state-by-state contracting methodology, as compared to the cancelled proposals.”
• Directs HUD to provide quarterly reports to the House and Senate Appropriations Committees on PBRA properties that receive deficient or unsatisfactory scores and include HUD’s plans to remedy the deficiencies.
• $22 billion to renew all Housing Choice Vouchers, including $1.76 billion for administrative fees.
• $505 million for Section 811 mainstream vouchers for persons with disabilities, $385 million more than in FY 2017.
• $3.3 billion for the Community Development Block Grant program, $300 million (10 percent) more than in FY 2017.
• Lifts the cap on the number of public housing units that can convert under the Rental Assistance Demonstration (RAD) program from 225,000 to 455,000 and extends the program’s sunset date to 2024.
• $2.75 billion for the Public Housing Capital Fund, 42 percent more than in FY 2017.
• $2.513 billion for Homeless Assistance Grants, $130 million more than in FY 2017.
• $678 million to the Section 202 Housing for the Elderly program, enough to renew all existing contracts and provide $105 million for capital advance and project-based rental assistance awards. The bill also includes language allowing Section 202 Project Rental Assistance Contract (PRAC) properties to convert under RAD.
• $230 million for the Section 811 Housing for People with Disabilities program, $83 million more than in FY 2017. $82.6 million of this funding level is set aside for capital advance and project rental assistance awards.

USDA Rural Housing Programs

The FY 2018 omnibus also provides funding for USDA rural housing programs. Highlights include:

• $1.1 billion for the Section 502 Single-Family Direct Loan program, a 10 percent boost over enacted FY 2017 levels. Funding for the guaranteed loan portion of the program remains the same at $24 billion.
• $40 million for the Section 515 Multifamily Direct loan program, 14 percent more than in FY 2017. Funding for the guaranteed loan portion of the program remains the same at $230 million.
• $1.345 billion for the Section 521 Rental Assistance program, 4 percent less than in FY 2017.
• $25 million for the Section 542 Rural Voucher Assistance program, an increase of 29 percent; an additional $22 million, equal to FY 2017 funding levels, is set aside for the rental preservation demonstration.
• Directs the USDA Secretary to incentivize public housing authorities (PHAs) and nonprofit organizations to take over ownership of rental housing properties and to ensure that they remain affordable by allowing these entities to receive a return on investment and asset management fee up to $7,500 per property.

The Low Income Housing Tax Credit

The omnibus also includes the following Housing Credit provisions:

• A 12.5 percent increase in state Housing Credit authority for four years beginning in 2018 (2018-2021). In each of those years, the per capita amount and small state minimum that otherwise would have been in effect would be multiplied by 1.125. The Joint Committee on Taxation estimates that the Credit cap increase will cost the federal government $6 million in 2018 and $2.72 billion over 10 years.
• Permanently establishes a new income limit option for Housing Credit developments. Specifically, rather than committing to either 40 percent of units limited to 60 percent of area median income (AMI) or 20 percent of units limited to 50 percent of AMI, developers would have a third option, allowing Credit-qualified units to serve households earning as much as 80 percent of AMI, so long as the average income limit in the property is 60 percent or less of AMI. Developers would have to commit to having at least 40 percent of the units in the property affordable to eligible households. The 80 percent of AMI standard is consistent with long-standing federal affordable housing policies, which define “low income” as households earning no more than 80 percent of AMI. Under the income averaging option, the higher rents that households with incomes in the 61-80 percent of AMI range could pay would have the potential to offset the lower rents for extremely low- and very low-income households living in the property, thereby allowing developments to maintain financial feasibility while providing a deeper level of affordability than is currently possible without other subsidies. Income averaging would thus preserve rigorous targeting to low-income households, while providing more flexibility and greater income-mixing potential. The Joint Committee on Taxation estimates that this provision will cost the federal government $109 million over 10 years.

Other Housing-Related Provisions

• $250 million to the Treasury Department for the Community Development Financial Institutions (CDFI), $2 million more than in FY 2017.
• Extends the National Flood Insurance Program until July 31, 2018.

For more information, please contact NCSHA’s Jennifer Schwartz.