Tuesday, April 18, 2017

Appropriations outlook for housing, FY 2017 and 2018

by Kaitlyn Snyder

As NHC's Ethan Handelman predicted in an earlier appropriations discussion, appropriations for both Fiscal Year (FY) 2017 and 2018 are indeed messy, again. Funding for the federal government for FY 2017 is set to expire on April 28. Senators return from a two-week recess on Monday, April 24 and representatives return on Tuesday, April 25, leaving just a few days to pass a bill. Of the 12 spending bills, 1 (military construction and veterans affairs) has already passed both chambers of Congress and become law, another (defense) was passed by the House and now awaits passage by the Senate. We expect to see the remaining 10 bills attached to the defense bill, pass the Senate, and then go back over to the House for a final vote. To achieve this, we expect Congress to pass a short-term Continuing Resolution that will fund the federal government for a week or so, and then pass a larger bill that will fund the government for the remainder of the fiscal year, till September 30th, 2017.

However, complicating matters is President Trump’s request to cut $18 billion from discretionary spending programs for the remainder of FY 2017. Cutting $18 billion over the remaining 5 months of the fiscal year would amount to zeroing out entire programs. HUD alone would face about $1.7 billion in cuts coming from the Choice Neighborhoods Initiative (-$125 million), the Community Development Block Grant (CDBG) (-$1,494 million), and the Self-Help Homeownership Opportunity Program (SHOP) ($56 million). Congressional leaders from both parties have largely dismissed the cuts and are hoping to stick to the agreed upon funding in the Bipartisan Budget Act of 2015 which raised the sequester caps. Should Congress pass a spending bill that largely ignores the president's proposed cuts, President Trump could decide to veto the bill. It is unlikely that the bill will have a veto-proof majority, leaving an alternative path uncertain. With the uncertainty around FY 2017 funding, public housing agencies have been administering fewer vouchers in case the program does get cut when Congress addresses FY 2017 spending. No cuts to housing programs have gone into effect yet. However, a full-term continuing resolution for FY 2017 would essentially be a cut to housing programs, discussed below.

Once the federal government is funded for the remainder of FY 2017, appropriators will immediately focus on funding for FY 2018. President Trump released his skinny budget in March and we expect to see a full budget in mid-May.  The skinny budget would keep the overall FY 2018 spending cap of $1.065 trillion set in place by the Budget Control Act of 2011, but increase the defense side of the budget by $54 billion and decrease the non-defense side by $54 billion. Under President Trump’s skinny budget, HUD faces a $6.2 billion or 13% cut for FY 2018. While the skinny budget did not provide much detail, it did propose eliminating CDBG, the HOME Investment Partnerships Program, SHOP, Choice Neighborhoods and Section 4. Altogether, eliminating those 5 programs would cut about $4.45 billion, meaning an additional $1.75 billion needs to be cut from the HUD budget to reach $6.2 billion. And that’s just within HUD; many housing programs that aren’t based within HUD would face similar cuts.

Appropriations for FY 2018 were already going to be messy because sequestration would take full effect in FY 2018. Notably, the full impact of the sequestration law has never taken place because Congress has found alternatives. The caps only applied to 6 of 12 months in FY 2013. FY 2014 and FY 2015 caps were raised by the Bipartisan Budget Act of 2013, otherwise known as the Murray-Ryan deal. FY 2016 and FY 2017 caps were raised by the Bipartisan Budget Act of 2015. Absent another bipartisan deal to raise the caps, non-defense discretionary funding would be cut by $3 billion from sequestration alone, only to be cut by an additional $54 billion from President Trump’s budget.

While congressional appropriators may not fully support President Trump’s request for $54 billion in cuts, the request alone has changed the discussion and made smaller, but still harmful, cuts seem reasonable. The HUD budget requires a 3-4% increase every year just to keep up with inflation and rising housing costs. So even keeping funding levels at current levels effectively amounts to a cut for HUD. The housing community must come together to stave off these proposed cuts. This is why the National Housing Conference has teamed up with groups like NDD United and the Campaign for Housing and Community Development Funding to support efforts for robust federal funding of affordable housing and other domestic programs that help lift families out of poverty and enable them to reach better outcomes.

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