Preliminary Analysis of the Administration’s Proposed FY 2016 Budget
On February 2, 2015 the Administration sent Congress its FY 2016 Budget, proposing funding for all federal programs, including HUD and the Department of Agriculture’s (USDA) rural housing programs. NCSHA has posted on its website a preliminary analysis of the Budget’s housing proposals and will provide a more comprehensive analysis soon.
The Administration proposes, after accounting for offsetting receipts from the Federal Housing Administration (FHA) mortgage insurance program and other accounts, to spend $49.3 billion on HUD programs, an 8.7 percent increase over the FY 2015 funding level provided in the appropriations bill the President signed on December 16, 2014. HUD’s Budget documents state that for FY 2016, 85 percent of HUD’s total budget is needed to renew rental assistance to 5.5 million residents of HUD-subsidized housing, including public housing operating subsidies and capital funds, and to renew existing HUD grants to homeless assistance programs.
The FY 2016 Budget proposes to increase funding for the HOME program from $900 million in FY 2015 to $1.06 billion in FY 2016, reduce funding for the Community Development Block Grant program from $3.07 billion in FY 2015 to $2.88 billion, restore the nearly 67,000 Housing Choice Vouchers lost in 2013 due to cuts required under the “sequestration” Congress established to meet federal spending targets, and support the shift of project-based rental assistance funding from a fiscal-year basis to a calendar-year basis. The Budget proposes to increase funding for Homeless Assistance Grants to $2.48 billion, or 16 percent over the FY 2015 enacted level. The Budget also proposes $108 million for the Section 811 program and $455 million for the Section 202 program, increases of $24 million and $35 million over the FY 2015 enacted levels, respectively.
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, FY 2014, and FY 2015 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 continue to maintain a positive financial balance, growing by $14 billion over the next two years. The Budget does not indicate when the Administration expects the MMIF to return to its statutorily mandated 2 percent capital ratio.
For USDA’s rural housing programs, the Budget recommends funding the Section 502 unsubsidized guaranteed loan program at $24 billion, equal to its FY 2015 funding level. The Budget also proposes to make this program a direct endorsement program, allowing approved lenders to make loans under the program without requiring USDA to approve each loan. The Budget proposes $900 for the Section 502 single-family subsidized direct loan program, the same amount as its FY 2015 appropriation; and $200 million for the Section 538 multifamily loan guarantee program, a $50 million increase from FY 2015.
The Budget also contains the Administration’s tax proposals. For the third year in a row, the Administration proposes to allow states to convert a portion of their private activity bond (PAB) volume cap into Housing Credit authority. This year’s bond conversion proposal would allow states to convert up to 18 percent of their PAB cap to Credit authority—a significant increase over prior year proposals. In FY 2014 and FY 2015, the Administration’s bond conversion proposal was limited to 7 and 8 percent of PAB cap, respectively.
The Administration again proposes to repeal the Mortgage Revenue Bond (MRB) program purchase price limit and refinancing restriction; create a new permanent American 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 Budget also proposes permanently extending the New Markets Tax Credit Program (NMTC) at $5 billion per year.