The Department of Housing and Urban Development: FY2004 Budget

CRS Report for Congress
The Depart ment of Housing and
Urban Development:
FY2004 Budget
Upda ted September 22, 2003
Richard Bourdon, Coordinator
Domestic Social Policy Division

Congressional Research Service ˜ The Library of Congress

The Department of Housing and Urban Development:
The Administration’s p roposed FY2004 budget for t he Department of Housing
and Urban Devel opment (HUD) requests $31.7 billion (not including an “advance
appropriation”of $4.2 billion t hat cannot be spent until FY2005), an i ncrease o f about
$700 million above FY2003 (P.L. 108-7). T h e House-approved b ill, H.R. 2861,
which recommends a n et appropriation o f $31.8 billion, and t he Senate Committee
bill, S. 1584, at $31.9 billion, are m argi nally high er than the budget request.
The budget proposal requests $18.4 billion for the S ection 8 Housing C ertificate
Fund (HCF); the House b ill recommends slightly more at close t o $18.6 billion, and
the S enate bill would provide $18.4 billion. Although HUD claims its request will
al l o w r e n ewal of all housing vouchers currently in use, low-income housing
advocates m a i n t a i n the budget will be insufficient t o d o t his. The S enate
Appropriations Committee acknowledges that $18.4 billion m ay not be adequate to
cover all renewals because the Administration m ay have under-es timated t he per-unit
costs o f vouchers or the voucher u tilization rate, and thus, it expects the
Administration t o addres s any budget shortfal l i n a FY 2004 supplem ental
appropriations bill. Nei t h e r the House nor the S enate b ills accept t he
Administration’s p roposed Housing Assistance f or Needy Families (HANF) progr a m
initiative (H.R. 1841/S. 947) that would convert the ex i s t i n g S ection 8 Housing
Choice Voucher program into a block grant t o s tates.
In the s harpest reduction p roposed for any HUD program, t h e Administration
requested no new funding for t he HOPE VI p rogram, which received $570 million
in FY2003 to rehabilitate public housing. It cited l arge amounts o f unspent money
in the pipeline. The House bill would provide $50 million i n FY2004 and t he Senate
b i l l , $195 million. The S enate C ommittee ex p ressed d isappointment that t h e
Administration h as sought to eliminat e t he p r o g r am without proper review and
without providing alternative authority an d funding – and has i ncluded b ill language
to ex tend the ex p iring p rogram through S eptember 30, 2006.
The P resident’s budget requests $2.2 b i l lion for the HOME program , with a
$200 million s et-aside for a Downpaym ent Assistance In itiative. Under t he House
bill, HOME would receive $2.1 billi o n , with $125 million for the Downpaym ent
Initiative. The S enate bill would provide $1.975 billion for HOME, with $50 million
for t he homeownership initiative. The House b ill would i ncrease HUD’s Homeless
Assistance Grants programs by $25 million above the FY2003 level and the S enate
bill, by $108 million. Both the House and Senate bills would fund the C ommunity
Development Block Grant p rogram at close t o $ 5 b illion, mor e than $230 million
above the budget request of $4.716 billion. U nder t he Administration’s p roposed
budget, t he Office of Lead Haz ard Control would b e cut b y $ 3 9 m i l lion t o $136
million, and Brownfiel ds Redevelopment and Rural H o using Development would
receive no funding. H.R. 2861 provides $130 million for Lead Haz ard Control; S.
1584 provides $175 million. Both the House and Senate bills pro v i d e $25 million
for Brownfiel ds Redevelopment and $25 million for Rural Housing. This report will
be updated t o reflect further action o n HUD appropriations.

In troduction ..................................................1
High lights o f t he Proposed HUD Budget ...........................2
House (H.R. 2861) and S enate (S. 1584) Response t o P roposed Budget ...2
TheMajorIssues ..............................................3
FY2003 Appropriations .........................................5
PublicandIndianHousingPrograms ...............................8
Project-basedandTenant-basedRentalAssistance ................8
PublicHousingPrograms ..................................17
PublicHousingOperatingFund ..............................17
PublicHousingCapitalFund ................................18
HOPEVIRevitalizationofDistressedPublicHousing ............20
NativeAmerican BlockGrants ..............................20
CommunityPlanningandDevelopment ...........................21
HousingforPersons withAIDS (HOPWA) ....................21
RuralHousingandEconomicDevelopment ....................21
Empowerment Zones and Enterprise Communities ..............22
CommunityDevelopmentBlockGrants .......................23
BrownfieldsRedevelopment ................................27
TheHOMEInvestment PartnershipProgram ...................28
Homeless AssistanceGrants ................................29
HousingProgram Administration ................................31
Housing for Special Populations (Elderly and Disabled) ..........31
FederalHousingAdministration(FHA) .......................32
OfficeofFederalHousingEnterpriseOversight (OFHEO).........34
Lead-BasedPaintHazardReduction ..........................36
Table 1 . Department of Housing and Urban Development Appropriations,
FY1999 to FY2003 ............................................5
Table 2 . Appropriations: Housing and Urban Development, FY2003-FY2004 . 6
Table 3 . C omparison o f Ex i sting Housing Voucher P rogram and HANF
Proposal ....................................................10
Table 4 . FY2003 and FY2004 Appropriation Levels for Vouchers and
Project-basedRental Assistance .................................15
Table 5 . C ommunity Development Fund Appropriations,C DBG and Related
Set Asides: FY2003-FY2004 ...................................25

The D epartment of Housing and Urban
Development: FY2004 Budget
Most of the appro p r i a t i o n s for t he Department of Housing and Urban
Development (HUD) address t he housing p roblems faced by households with very
low i ncomes o r other s pecial housing n eeds. Programs of rental assistance for t he
poor, elderly or disabled, housing assistan ce for p ersons with AIDS, v aryi ng types
of shelter for those who are homel es s — al l deal with the i ssue of t he availability of
low- c o s t housing. The t wo large HUD block grant programs, HOME and
Community Development Block Grants, also hel p communities finance a variety of
activities t o address housing n eeds o f d isadvantaged populations. S ince 1994, when
the C linton Administration started its homeowner initiative i n partnership with the
hous i n g i ndustry, HUD has focused more atte ntion t han p reviously on efforts t o
increase homeownership opportunities for lower-income and minority households.
This report o n t he FY2004 HUD budget first s ummariz es t he major i ssues in the
proposed budget, and then ex amines individua l p rograms, comparing enacted levels
for FY2003 with Administration p roposals for FY2004 and t he congression al
response, high lighting s ignificant changes in funding levels and associated issues.
Name Area of Expertise CRSDivision Tel e phone and E- M ai l
issues and l egislation, 7-7806
Richard Bourdon homeownership, t ax- DSP
E u ge n e B o yd CommunityDeve lopment G&F
Bruce Foote Hous i n g: FHA,HOM E, Predatory DSP 7-7805
Lending, RESPA
Housing: Section 8,
Maggi e McCarty Public Housing,home l e s s , AIDS, DSP
elderly/ disabled
Division abbreviations: DSP =Domestic Social P o licy; G&F=Gove rnme nt and Finance.

Hi ghl i ghts of t he Pr oposed HUD Budget
! FY2004 budget request of $31.73 billion, up by about $719 million
over t he $31.01 billion enacted for F Y 2003 (including a 0.65%
“across-the-board” rescission enacted in FY2003);
! New Housing Assistance for Needy Families (HANF) b lock grants
to states, funded at $13.6 billion (including the u se of recaptured
funds) t o replace current Sec tion 8 housing choice vouchers;
! Approx i m at el y 5,600 i n crem ent al hous ing vouchers , t argeted t o non-
el derly disabled families;
! No new funding for t he HOPE VI public housing p rogram,
Brownfields R edevel opment, Rural H o u s ing Economic
Development, and Empowerment Zone/Enterprise C o m munities
(EZ/ ECs) programs;
! A new Public Housing R ei nvestment Initiative t o encourage private
capital for the rehabilitation of public housing;
! New Downpaym ent Assistance In itiative as a $200 million s et-aside
within HOME p rogram (H.R. 1276), $45 million for counseling, and
new FHA insurance p ro d uct s t o hel p l ower income and minority
households (an effort to combat predatory l ending);
! In creased funding for homeles s assistance, wit h new $50 million
Samaritan Initiative; and
! Community Development Block Grants requested at $4.716 billion,
$189 million below FY2003 level, with no funding for Economic
Development Initiatives (congressionally earmarked project s).
House ( H. R. 2861) and S enate ( S. 1584) Respons e t o
! Recommends HUD budget of $31.8 billion (H.R. 2861) and $31.9
billion (S. 1584), not sign ificantly different from t he budget request;
! Housing C ertificate Fund fun d e d a t $18.6 billion (H.R. 2861) and
$18.4 billion (S. 1584), with no incremental vouchers funded and
some doubt tha t e i ther amount will be sufficient t o renew all
! Both House and S enate bil l s reject HANF, P ublic Housing
Reinvestment, S am aritan and Colonias Initiatives;
! HOME recommended at near $2.1 billion, including $125 million
for Admi n istration’s Downpaym ent Assistance Initiative (H.R.
2861) and n ear $2. 0 b i l lion, with $50 million for Downpaym ent
Initiative (S. 1584);
! Large reduction recommend ed for HOPE VI at $50 million (H.R.
2861) and $195 million (S. 1584) compar ed t o $570 million i n
! Near level funding for P ublic Housing C apital and Op e r a t ing
programs, t ogether at about $6.2-$6.3 billion;
! Homeless programs increased by $25 million over F Y2003 (H.R.

2861) and $108 million (S. 1584);

! Proposed anti-predatory l ending FHA p roduct not adopted;

! Brownfields funded at $25 million and Rural Housing, $25 million;
! Community Development Block Grants recommended at about $5
billion, near level funding with FY2003, but about $230 million
above the budget request.
There are a number o f b asic themes in the FY2004 budget proposal: d evolution,
deregu lation, more private capital i nvolvement in solutions to housing problems, and
efforts t o i ncrease homeownership for l ower income and m i nority households (to
i n crease t hei r net w ort h and fi n anci al i ndependence). Of p articular controversy are
major changes in the way the agency woul d operate and fund its two l argest housing
programs, S ection 8 t enant-based vouchers ( a bout 2 million vouchers) and public
hous i n g (about 1.25 million units). On J uly 25, 2003, the House res ponded t o t he
HUD proposal with the p assage of an ame nded v ersion of H.R. 2861 (H.Rept. 108-

235) that was approved b y t he House Appropriations Committee on J uly 21, 2003.

The S en ate Appropriations Committee p assed S . 1584 (S.Rept. 108-143) on
September 8 , 2003.
The Administration’s m aj or initiative, the Housing Assistance f o r Needy
Families Act of 2003 (HANF), presented i n t he FY 2004 budget proposal and
introduced on April 30, 20 03 as H.R. 1841/S. 947, would convert the ex i sting
Section 8 housing choice voucher p r o gr a m in to a s tate-administered b lock grant
pro gram. Grants would be m ade t o s tates t o p rovide tenant-based rental and
homeownership housing assistance. Under t he current program, there are thousands
of pages of federal regulations that ar e c i t ed as inhibiting HUD from quickly
adjusting t he program t o m eet local needs. HUD believes t hat by eliminating m ost
of these regulations (and limiting its involvement largely t o oversight of performance
standards), each state would h ave t he flex ibility to be innovative i n m eeting its
unique housing p roblems. HUD believes t his approach would m ake i t m ore possible
to end t he chronic problem of unspent m onies in the hous i n g voucher program .
Opponents worry that funding under t he new HANF program would not keep pace
with rapidly rising housing costs, and that states might establish n e w requirements
such as time limits on receiving assistance for t enants, s imilar t o t hose under welfare
reform programs. Opponents also question whether a b lock grant t o s t a t e s would
merely add another l ayer of bureaucracy if states were to reroute federal funds back
to the s ame l ocal public housing authorities. The House Appropriations Committee
report recommends continued funding of the Housing Certificate Fund account rather
than through t he HANF proposal, noting t h a t “this proposal is currently under
consideration b y t he relevant authoriz ation committees and t herefore [ t he committee]
defers any changes to the funding structure until further congressional action o n t he
legi slative p roposal.” The House-approved bill concurs with this view. The Senate
bill, S. 1584, also rejects t he HANF proposal, with the C ommittee report s tating t hat
“Until there i s reliable dat a on t he current per-unit costs and utili z a t i o n r at es of
vouc h e r s a s well as assurances that the b lock grant funding will meet all voucher
needs, the C ommittee i s not inclined t o consider fully the administration’s block
grant p roposal.”

The Administration’s FY2004 budget does not request funding for t he HOPE
VI program for t he revitaliz ation o f d istressed public housing. This progr am
received $57 0 m illion i n FY2003. HUD Secretary M artinez argu es that there are
sufficient uns pent funds in the pipeline to keep this program operating, and in the
meantime, he s eeks a dial ogue with C ongress on how the program might be
improved. During a number o f congres s i o n a l h earings on the p roposed budget in
February, M arch, and April, 2003, considerable bipartisan support was ex pressed for
continued funding of the p rogram. Others m ade t he case t hat i n a tight budget period,
this was t he most reasonable p rogram to cut. On J une 19, 2003, the House Financial
S e rvices Committee reported out H. R .1614 (H.R ept . 108-165) t h at woul d reaut hori z e
HOPE VI t hrough FY2005. The House-approved b ill, H.R. 2861, recommends $50
million i n funding for HOP E VI and the S enate bill, S. 1584, w oul d provide $195
million for FY2004.
The Administ r a tion proposed its Public Housing Rei nves tment Initiative to
encourage P ublic Housing Authorities (PHAs) t o convert some public housing units
to Section 8 project-based assistance again this year. Under this i nitiative, PHAs
would t urn t o t he privat e s ect or for rehabilitation l oans, pledging t he project -bas ed
rev enues as collateral. Congress reject ed this reinvestment initiative l as t year,
directing HUD to repo r t t o the Appropriations Committees about PHAs that have
already obtained p rivate financing for t h ei r capi t al n eeds. HUD woul d l i k e t o m ove
public housing t owards private o wnership, with more market-based decisions about
the operations and m aintenance of project s. HUD also believes t hat t he large b acklog
of moderniz ation n eeds faced by P HAs may b e m ore quickly addre s s e d i f annual
capital fund app r o p r i a t i ons are s upplemented b y an i nfusion o f p rivate capital.
Opponents believe the $90 billion public housing s t o ck i s a national asset t hat
provides a social safety net for the m ost d isadvantaged and poorest o f households —
and t hat i t s hould not be m o r t gaged o r s old o ff. The House Appropriations
Committee report s ays i t understands that “ under ex i sting s tat u t o r y authorities, a
number of P HAs have in fact successfully pursued appro x imately $1 billion i n
public-private financing partnerships ... [and] the C ommittee believes t hat s u c h
proposals n eed to be more fully ex amined before s i gn ificant s tatutory and funding
changes are made.” (Baltimore, C hicago, and P hiladelphia are ex am ples of cities t hat
have obtained s uch p rivate financing.) T h e House-approved b ill rejects t he
initiative. The S enate b ill also rejects t he proposal, with the C ommittee report s tating
t h a t it “could result i n a loss of public housing units, and would not benefit public
housing units with the greatest capital n eeds.”
Under t he President’s FY2004 budget, t he HOME housing b lock grant p rogram
would be i ncreased by $210 million t o $2.2 billion, with $200 million of t he increase
set-as ide for the Administration’s American Dream Downpayment Initiative. HUD
estimates t hat t his p rogram would p rovide an average grant of $5,00 0 for
downpaym ent and closing cost assistance for 40,000 low-income househ o l ds each
year. Few are opposed to increasing homeo wnership opportunities for lower i ncome
households unless i t m eans l ess funding for rental assistance. Bu t s ome u rge caution
in putting l ower income households into their first home i f t hey have a high risk of
failure because of inadequate savings o r t he inability to protect themselves from a
variety o f financial predators. On J une 19, 2003, the House Financial Services
Committee reported H.R. 1276 (H.Rep t . 108-164), t he Administration’s
Downpaym ent Assistance In itiative. The House-approved budget bill, H.R. 2861,

would provide $125 million for the Downpayment Initiative and the S enate would
provide $50 million.
FY2003 Appropriations
President Bus h s i g n e d P .L. 108-7, the consolidated appropriations bill for
FY2003, on February 20, 2003, nearly 5 m onths into the fiscal year. T h e l aw
provided HUD with $31.01 billion (after application of a 0.65% across-the-board
rescission included i n t he law). HUD’s l argest program, the Housing C ertificate
Fund (frequently referre d t o as “Section 8 "), received $17.1 billion, almost $1.5
billion m ore t han enacted in FY2002. Despite the i ncrease, no incremental housing
vouchers were funded — t hat i s, there was no increase i n t he number o f l ow-income
renters assisted. The FY2003 appropriations law i ncluded s ome reforms to address
the chronic underutil i z ation of housing voucher funds, d irecting t hat HUD only
renew contract s with PHAs for t he number of vouchers they had under lease, not
those s imply authorized in the previous year.
Table 1. D epartment o f H ousing and Urban D evelopment
Appropriations, F Y1999 to FY2003
(net budget authority in billions)
FY1999 FY2000 FY2001 FY2002 FY2003
$24.08 $25.92 $28.48 $30.15 $31.01
So urc e : Figures fo r FY1999-FY2002 are from Administratio n b ud get sub missions o f sub sequent
ye a r s . T he FY2002 number does not includ e $ 2 b illion in emergency supplemental fund s for the
C o mmu n i t y D e ve lo p ment Fund fo r a ssistance to New Y o r k City fo llo wing the ter r o r ist attacks o f
Se p t ember 11, 2001, a o ne time ano maly. FY2003 figures are from p reliminary numbers provid ed
by the House Ap p r o p r iatio ns Co mmittee’s Sub co mmittee o n the VA, HUD, and I nd ep end e nt Agencies
and includes an across-the-board rescissi o n o f 0 .65% enacted in FY2003. Final spend ing levels
rema in uncertain until all p rogr am experience ha s b een recorded, and any supplemental appropriations
or rescissions have b een includ ed.
The conferees approved $2.7 billion i n FY 2003 for t he Public Housing C apital
Fund, $113 million below the FY2002 funding level. The Administration’s P ublic
Housing R ei nvestment Initiative, designed to encourage P HAs to con vert s ome
public housing units to Section 8 project-based assistance, was r ejected. Under t his
initiative, PHAs would pledge t he project -bas ed revenue as collateral for
rehabilitation l oans. The conferees direct ed HUD to rep o r t t o t he Appropriations
Committees about PHAs that have already obtai ned p rivate financing for their capital
P.L. 108-7 i ncreased the P ublic Housing Operating Fund to $3.58 billion, $82
million above the FY2002 level. The conferees agr eed t o al low HUD to use t his
ap p r o p r iation t o cover a controversial $250 million s hortfall for FY2002 that th e
agency bl am ed on fl aws i n i t s account i n g s ys t em . Thi s t ransfer effect i v el y reduced
the FY2003 appropriation by $250 million.
T h e HOPE VI program , which is used to rehabilitate or tear down t he w o rs t
public housing units, received $570 million, level with the p rior year’s funding.

Almost $5 billion was approved for the C ommunity Development Block Grant
p r o g ram, nearly the s ame as i n FY2002, while the HOME b lock grant received a n
increas e of about $141 million t o a total of j us t under $ 2 b i llion. There was a $75
million s et -aside within the HOME program for t he Administration’s Downpaym ent
Assistance In itiative, which was less than the Agency’s $200 million request.
Housing for the elderly was funded at $776 million, down by $7 million from
FY2002, and housing for the disabled recei v ed $251 million, up by about $10
million. Housing opportunities for pers ons with AIDS was funded at $290 million,
an increase o f about $13 million.
The Administration has made ending chronic homelessness i n t he nex t 10 years
a t op priority. The conferees agreed to $1.22 billion, $93 million m ore t han enacted
Fo r m ore d etails, s ee CRS Report R L31304, Appropriations for FY 2003: VA,
HUD, and Independent Agencies .
Table 2. Appropriations: H ousing and Urban D evelopment,
(budget authority in billions)
P r ograms F Y 2003 F Y 2004request F Y 2004House F Y 2004Senat e F Y 2004Conf .
Housing Certificate Fund (HCF) 17.112 — 18.581 18.434
HCF appropriation 12.939 — 14.381 14.234
Advance approp. from prior FY 4.173 — 4.200 4.200
Housing Assistance for Needya — 12.535 — —
HANF appropriation — 8.335 ——
advance approp. from prior FY — 4.200 ——
Adva nce a pprop. for f ollowi ng FY (4.200) (4.200) (4.200) (4.200)
Proj ect-based Rental Assistance 0.000 4.823 0.000 0.000
Sec. 8 r ecaptures (rescission) -1.600 -0.300 -1.372 -1.372
Public housing capital f und 2.712 2.641 2.712 2.641
Public housing operating f und 3.577 3.574 3.600 3.577
Revitalization of distressed public 0.570 0.000 0.050 0.195
Native Ame rican housing block gr ants 0.645 0.647 0.662 0.647
Indian housing l oan guarantee 0.005 0.001 0.005 0.005
Native Hawaiian Block Grant 0.000 0.010 0.000 0.000
Native Hawaiian l oan guarantee 0.001 0.001 0.001 0.001
Subtotal: Public & I ndian Hsg. (net) 23.022 23.932 24.089 24.127

P r ograms F Y 2003 F Y 2004request F Y 2004House F Y 2004Senat e F Y 2004Conf .
Housing, persons with AIDS 0.290 0.297 0.302 0.291
Rural Housing Economic 0.025 0.000 0.025 0.025
Empowerme nt zones; enterprise 0.030 0.000 0.015 0.000
Community Deve lopment Block Grant 4.905 4.716 4.959 4.950
Colonias Initiative 0.000 0.016 0.000 0.000
Urban Development Action Grants — -0.030 -0.030 -0.030
Sec.108 loan guarantee; subsidy 0.007 0.000 0.000 0.007
Brownfields r edevelopment 0.025 0.000 0.025 0.025
HOME Investment Partnerships 1.987 2.197 2.064 1.975
Home less Assistance Grants 1.217 1.325 1.242 1.325
Sama ritan Initiative — 0.050 0.000 0.000
Subtotal: Community Plan. & Dev. 8.486 8.571 8.602 8.568
Housing, special populations b 1.027 1.025 1.024 1.034
Housing f or the e lderly 0.776 0.774 0.773 0.783
Housing f or the disabled 0.251 0.251 0.251 0.251
Housing Counseling Assistance — 0.045 0.000 0.000
Rental housing a ssistance (rescission) -0.100 -0.303 -0.303 -0.303
Federal Housing Administrationc -2.212 -2.359 -2.359 -2.359
GNM A ( ne t ) d -0.348 -0.307 -0.307 -0.307
Research and t echnology 0.047 0.051 0.047 0.047
Fair housing activities 0.046 0.050 0.046 0.050
Office, lead haza rd control 0.175 0.136 0.130 0.175
Salaries and e xpenses 0.527 0.536 0.547 0.536
Working capital f und 0.275 0.276 0.090 0.240
Inspector General 0.074 0.076 0.076 0.078
Office of Federal Housing Enterprisee 0.000 0.000 0.000 0.000
Manufactured Housing Offsets e 0.000 0.000 0.000 0.000
Rescissions; l egislative savings; -0.008 — — —
Subtotals: 31.009 31.729 31.831 31.886
Appropriations (36.096) (35.876) (37.046) (37.100)

P r ograms F Y 2003 F Y 2004request F Y 2004House F Y 2004Senat e F Y 2004Conf .
Rescissions; t otal (- 1.708) (- 0.633) (- 1.705) (- 1.705)
Negative s ubsidy (-2.978) (- 3.146) (- 3.146) (- 3.146)
Offsetting c ollections (- .401) (- .367) (- .363) (- .363)
Total; net ( w / o advance f r om
previous F Y ) 31.009 31.729 31.831 31. 886
Source: H.Rept. 108-235, updated with floor amendments by CRS and S.Rept. 108-143.
No te: T o t a l s ma y n o t add d ue to round ing. Levels fo r FY2003 includ e a 0 .65% across-the-board
r e sc issio n.
a T he Administration has requested a direct appropriation o f $12.535 billion for FY2004; ho wever,
they anticip ate t h e a v a i l a b ility o f $ 1 . 0 7 2 b illio n in uno b ligated b a lances, lead ing to a to tal
program level of $13.607 billion.b
T he Administr atio n d id no t r equest a total amount fo r s p e c i a l populatio ns, b ut requests separate
amounts for the eld erly and the disabled. T he Ho use adopted the Administratio ns p roposal to
fund the p ro gr ams se p a r a t e l y. T he Senate Ap p r o p r iatio ns Co mmittee d id no t accep t the
Ad ministrations p roposal to sp lit the account; i nstead, the Senate provides $1.034 billion for
the combined account.c
Net, interage nc y transfe rs and o ffsetting r eceip ts a ga inst ap p r o p r iatio ns o f the c urrent year; inc lud e d
i n t h e t otals are proj ected experience gains greater than premiums to the mortgage insur a n c e
fu n d , which are no w treated as o ffsetting r eceip ts a ga inst d iscretio na ry fund s. T he e ffect is
estimated to be $-2.753 billion for FY2003 and $ -2 .921 billion for FY2004.d
Net, interage nc y transfe rs and o ffsetting r eceip ts a ga inst ap p r o p r iatio ns o f the c urrent year.e
Amounts less than o ne million dollars do no t appear in this table. In FY2003, $195 thousand in
surp lus o ffsetting r eceip ts was co llected b y HUD fr o m the O ffice o f Fed e ral H o using Enterp rise
Oversight and $85 thousand was collected fr om the M anufactur ed Housing Fees T r ust Fund .
Publ i c and I ndi an Housi ng P r ogr ams
Project-based and Tenant-based Re ntal Assistance. HUD’s low-
i n com e rent al assi st ance program , com m onl y r e f e r r ed t o as S ect i o n 8 , h as t wo
components: vouchers (the Housing C hoice Voucher (HCV) program); and project-
based rental assistance. Vouchers are rental s ubsidies t hat eligible families can use
to lower t heir rents i n t he housing units they choose t o live i n; project-based subsidies
are rental s ubsidies attached to specific housing d evelopments that are under contract
with HUD. For s everal years, funding for t hese two p rograms h as been provided i n
one account, called t he Housing C ertificate Fund (HCF). In FY2003, Congress
provided $17.1 billion i n direct appropriations for t he HC F. For FY2004, the
Administration h as proposed to abolish t h e HCF by s plitting i t i nto t wo separate
accounts, creating t wo separate programs: t he Housing Assistance fo r N e e d y
Families (HANF) b lock gran t t o s t ates, which would p rovide vouchers; and the
proj ect -based rent al assi st ance program which would remain essentially unchanged.
Fo r HANF, t he Administration h as request ed a t otal funding level o f $13.6 billion for
FY2004. This figu re includes a direct appropriation o f $12.5 billion and $1.1 billion
that the Administration estimates will be av ailable from unobligated balances carried
over from p revi ous years. For t h e p r oj ect -based rent al assi st ance program , t h e
Administration h as requested $4.8 billion i n n ew budget authority for FY2004 and
has i ndicated that $300 million i s available for rescission. Combined, t he President

requested $18.4 billion for the S ection 8 p rograms (including the $1.1 billion i n
unobligated balances).
The House appropriations bill, H.R. 2861, does not adopt the HANF proposal’s
funding structure. Instead, t he House bill would provide $18.6 billion for the HCF
for FY2004, up $150 m illion from the Pres ident’s request. Of t hat amount, $4.7
billion would b e p rovided for project-based rental assistance and $13.8 billion would
be provided i n d irect appropriations for vouchers. The House p roposes to rescind t he
$1.1 billion i n carryover funds that the Administration h ighlighted for p rogram use
as well as the $300 million t he Administration highlighted for rescission.
Th e S enate Appropriations Committee bill also rejects t he President’s HANF
proposal. The Committee did adopt the P resident’s funding level for Section 8 ,
providing $18.4 billion for FY2004, less t h an t h e $18.6 billion provided by t he
House. The b ill would also rescind $1.4 billion i n unobligated balances.
Wha t is HANF? The Housing Assistance for Needy Families (HANF) (H.R.
1841, S. 947 ) p r o gr a m would replace the ex i sting voucher p rogram, which is
currently administered by l ocal PHAs, with a block grant provided t o s tates. In the
Administration’s FY2004 congressional budget justifica tion, HUD asserts t hat s tate
administration would i ncrease t he utiliz ation o f vouchers, eliminating t he l a r ge
amounts o f unobligated balances available for recapture every year. T hey argue that
stat es would have t he flex ibility to quickly adjust the program to meet local and
regi onal n eeds. Critics o f t he proposal fear that the v alu e o f t h e b l o ck grant will
erode over time, l eaving t he program underfunded. They also ex press concern t hat
st at es wi l l not have t h e capaci t y, b ecause of i n ex peri ence wi t h t h e p rogram and t i ght
budgets, to handle t he program.
A ccording t o t he Administration, FY2004 would b e a t ransition year f o r t h e
HANF proposal, m eaning t hat P HAs would continue to adm i n i s t er t he program as
usual; the Administ r at i on anticipat es that the program , i f passed, would be fully
implemented in FY2005. The t able below compares s ome o f t he proposed features
of HANF to ex isting features of the HCV program.
For m ore d etails on the Housing C hoi ce Voucher P rogram and t he HANF
proposal, s ee CRS Report R L31930, The Housing C hoice Vouche r P r ogram:
Background, Funding and Issues in the 108 th Congress .
Contract Renewals. Most vouchers and p roject-b ased r e ntal assistance
subsidies are funded b y C ongress in 1-year increments. As a result, PHAs enter i nto
1-yea r c o n t r a c t s , which come u p for renewal every year. T he renewal o f ex p iring
contracts accounts for the m ajority of the cost o f t he Section 8 programs. In FY2003,
$10.9 billion was appropriated for the renew al of approx imately 2 million ex p iring
vouchers (not includin g administrative funds and central reserve funds) and $4.3
billion was appropriated t o renew approx imately 817,000 project-based units. These
renewal co s t s acco unted for $15.24 billion (or 89%) of t he HCF appropriation i n
FY2003. Fo r FY2004, the Administration requested $11.48 billion for the renewal
of ex piring vouchers through t he HANF program (not including administrative funds
or central reserve funds) and $4.72 billion t o ren ew ex piring project -based contracts.
The Administration estimated t hat its request for renewal s , $ 1 6.2 billion, would

renew approx imately 1.9 million vouchers and approx imately 870,000 project-based
Table 3. C omparison o f Existing H ousing Voucher Program
Housing c hoice voucher program HANF
T hirty-t hree states currently admi nister a States would have t he option t o
portion of the HCV program, but most admi nister the whole progr am, contract
funds are a dministered by l ocal PHAs. all or part t o PHAs or not participate. If a
state c hose not to participate, HUD could
admi nister the progr am itself or choose
another entity to admi nister the progr am.
At least 75% of vouchers must be At least 75% of vouchers would be
targeted to extremely l ow income targeted to extremely l ow income
families ( 30% or below area median families ( 30% or below area median
income), although t he Secretary can income), although t he Secretary would be
change the definition of extremely low able to gr ant waivers to communities as
income for certain communities. long as at least 55% of vouchers remain
targeted to extremely l ow income
PHAs currently have the option of setting A minimum rent of at least $50 per
a minimum rent of up to $50 per month. month would be r equired f or each family.
Initial eligibility for t he program i s set at Initial eligibility for t he program would
the very l ow income level (50% or below besetatthelow i ncome l evel (80% or
area median income), although PHAs can below a rea median i ncome), a lthough t he
choose to expand eligibility to the low Secretary c ould c hoose to expand
income leve l ( 80% or below a rea median eligibility above t he low i ncome l evel for
income) f or certain categories of f amilies elderly and disabled families.
Families cannot pay more t han 40% of Families could not be required t o pay
their i ncomes toward rent. more than 30% of their i ncomes towards
rent, but could c hoose t o pay more.
Housing units under voucher c ontracts Housing units under voucher c ontracts
must be inspected annually. would be r equired t o be i nspected every 3
An estimated 2 million vouchers are up States would be r equired t o make every
for r enewal in FY2004. effort to assist the same number of
families under HANF as are currently
being a ssisted under t he HCV progr am.
PHAs are e va luated annually through t he Each state would be r equired t o make
Section 8 M anagement Assessment performance evaluation r eports to the
Protocol (SEMAP) which is a s et of 14 Secretary on its progress in reaching t he
c r i t e r i a e s t a b l i s he d b y HUD. If PHAs goals i t has established i n an annual plan.
perform poorly, t hey may face financial If a state is not maki ng sufficient
penalties until they improve or may come progress, HUD can retake admi nistration
under r eceive rship. of the progr am.
So urce : Congr essional Research Service, fr om CRS Report RL31930, Th e Housin g Choice Voucherth
Program, Funding, and Issu es in th e 108 Congress.

The House-passed appropriations bill would provide a t otal of $16.5 billion for
Section 8 renewals. Of that amount, $11.73 billion wou l d b e provided t o renew
ex piring vouchers (slightly more than the Administration requested) and $4.72 billion
would b e p rovided t o renew ex pi ri ng proj ect -based cont ract s.
The S enate C ommittee bill would provide $16.2 billion for renewals in
FY2004–$11.5 billion for voucher renewals and $4.7 b illion for project-based
In prior years, HUD had s et aside funding for each P HA b ased on the number
of vouchers the P HA was authoriz ed to leas e, rather than the number o f vouchers it
was actually using (leasing). Every ti m e a P H A would h ave l ess t han 100%
utiliz ati o n o f vouchers, HUD would come i n at t he end o f t he year and recapture
unobligated balances. This s ys tem resulted i n HUD recapturing over a billion dollars
in unobligated balances every year. In F Y 2 0 03, Congress adopted a n ew funding
structure for voucher renewals. This structure p rovides funding to local PHAs only
for t hose vouchers that they are l easing, or can reasonably ex p ect to lease, rather than
the full numb e r t h a t t hey are authoriz ed to lease. This change provides HUD with
the flex i bility to move money t o where it is needed in a m ore timely manner and is
ex pect ed t o reduce t he si z e of u n obl i gat ed bal ances avai l abl e for recapt u re. Bot h
H.R. 2861 and S . 1584 continue this new funding structure.
The P resident’s FY2004 budget request has raised s ome funding concerns
among low-income housing advocates. S everal are worried that there m ay not be
adequate funds under t he Administration’s FY2004 budget request to renew all1
cur r e n tly authoriz ed vouchers. Analyz ing HUD data, t he Center on Budget and
Policy P riorities (CBPP) has concluded t hat t he Administration’s funding request for
vouchers could result i n i nsufficient funding in 2004 to support as m any as 90,000
housing vouchers n o w in use. HUD’s FY2004 funding request was b ased on data
from 2001 and 2002, which i ndicated that fe wer vouchers were being u sed and that
voucher costs were lower t han C BP P estimated u sing FY2003 data.
If the funding provided b y C ongress is insufficient t o renew all e x i s ting
vouchers, t hen HUD has s everal options. It could dip into unspent funds from prior
years t o cover any shortfall, althou gh i t is unclear how much is available from t his
source. HUD could also d irect PHAs not to re issue vouchers that become available,
which would cut down o n c o s t s without evicting anyone. Finally, i f t hese other
strategi es did not work, HUD could d irect PHAs to take back subsidies from
In recogn ition o f a possible funding shortfall, H.R. 2861 increased the Housing
Certificate Fund (HCF) b y $150 million ( t a k i n g t h e m oney from HUD’s working
capital fund that is used to make improvements t o computers and other i nformation
technology s ys tems). Some housing groups say t his i s s till too little to pay for all
renewals and t hat, even with the i ncrease, more than 60,000 vouchers would s till be
at risk. The Senate Appropriations Committee acknowledges , i n t heir committee

1 New HUD Data Show Families Will Likely Lose Housing Vouchers If Congress Approves
President’s Budget Request , Center on Budget and Policy Priorities, J uly 11, 2003.

re p o r t , t h at the funding level t hey p rovi ded might not be adequate to cover all
renewals and t h a t t h e y ex p ect the Administration t o address any budget shortfall
through a FY2004 supplemental appropriations request.
Central Reserve Fund. The S ecretary can use central reserve funds to
supplement t he voucher p rogram if PHAs’ costs increase. Such cost increases can
result either from i n c r e a s es in the average cost per voucher o r i ncreases in the
average u tilization o f vouchers. The central reserve fund was created in FY2003 and
funded at $389 million. For FY2004, the Ad ministration h as requested $609 million
for t h e c e n tral reserve fund as a p art o f its HANF proposal. Of t hat amount, $100
million would be earmarked for states t o use in preparation for full implementation
of HANF in FY2005. An additional $36 million from t he central reserve fund would
be available for incremental vouchers targeted to non-elderly d isabled families. The
authority to use central reserve funds for new incremental vouchers would b e n ew;
currently, central reserve funds cannot be used for n ew vouchers.
H.R. 2861 proposes $569 million for the central reserve fund, up substantially
from FY2003, but down s lightly from t he Administration’s request. The House d id
not include a $100 million s et-aside for HANF costs, nor did i t p rovide the S ecretary
with the authority to use central reserve funds to create i ncremental vouchers.
S. 1584 would provi de $461 m i llion for the central reserve fund. Li ke the
Administration’s request, u p t o $36 million could be used t o p r o v i d e vouchers to
non-elderly, disabled families; however, unlike t he Administration’s request, t his bill
would not set aside any m oney for state HANF start-up costs.
Incremental Vouc he r s. The t erm “i n crem ent al ” i s used t o descri be new
vouchers. No n ew incremental vouchers were provided i n FY2003; for FY2004, as
described above, t he Administration re quests t he authority to use central reserve
funds for new increm ental vouchers , incl uding up to $36 million for non-el derl y
disabled families.
The House appropriations bill, H.R. 2861, does not include any funding for n ew
incremental vouchers and does not permit the S ecretary t o u se central reserve funds
for n ew incremental vouchers. S . 1584 would p ermit HUD to use u p t o $36 million
fr o m t h e central reserve fund for i ncremental vouchers for non-elderly, disabled
families, if the S ecretary d etermines that the funds are not needed to support ex i sting
Tenant Protection V ouchers. Tenant protection vouchers are u sed t o
r elocate families whose s ubsidized housing units have been demolished, sold or
converted to market-rate. T hese vouchers are also u sed for families i n t he Family
Unification P rogram or in the W itnes s P rotection P rogram . The Administ r at i o n
requested $252 million for tenant protec tion vouchers as a p art o f its FY2004 HANF
request, which is an increase from t he $232 million p rovided i n FY2003. T h e
FY2004 request would fund the s ame number o f vouchers funded i n FY2003
(43,300). Funding for t enant p rotection vouch ers, like o ther vouchers, does not
incl ude administrative costs.

H.R. 2861 would provide $206 million for te n a n t protection vouchers, down
both from t he FY2003 funding level as well as t he Administration’s request. S . 1584
would p rovide $252 milli o n f o r t enant p rotection vouchers, equal t o t he
Administration’s request.
Administrative Costs. The voucher p rogram is managed at t he local level
by quasi-governmental bodies called P HAs; t he project-based program i s m anaged
by stat e, local , and privat e entities called contract ad m i n i s trat ors. PHAs distribute
vouchers, h elp families find housing, and m anage t he program accounting; contract
administrators oversee the p h ys i c al and financial h ealth of projects t hat are under
contract with HUD. Funding for contract ad mi n i strators in the p roject-based
program i s p rovided s eparately from funding for P HAs in the voucher p rogram.
Fo r t he voucher p rogram, HUD requested $1.19 billion for administrative costs
in FY2004, as a p art o f its overall HAN F r e q u e s t . T his request would p rovide an
increase from t he $1.07 billion p rovided i n FY2003. Fo r t he project-based program,
HUD requested $100 million for contract admin istrators i n FY2004. This request is
a d ecrease from t he $195 million p rovided i n FY2003.
The House bill, H.R. 2861, would provide $1.21 billion for voucher
administrative costs in FY2004, which i s up from t he President’s request. The House
bill maintains provisions included i n t he FY2003 appropriations law t hat limited t he
administrative fee reserves maintained by PHAs to 5% and prohibited t he use of
administrative fees for p rograms o ther than the voucher p rogram. In addi t i on, the
Hous e b ill includes n ew provisions which d irect the S ecretary t o d istribute
administrative fees to PHAs, i n a manner p rescribed b y t he Secretary, in an amount
not to ex ceed the amount provided i n t he bill. Under current practice, the S ecretary
uses a formula to determine administrative fees earned by P HAs. As a result, the
cumulative amount owed to PHAs can vary based o n a number o f factors, including
utilization rates and fair m arket rents, and therefore, could conceivably rise above the
amount provided i n an appropriations bill. The provision in the House bill would
direct the S ecretary t o ensure t hat t he amount of administrative fees paid to PHAs
stays at o r b elow the appropriated amount , which may m ean that the S ecretary will
have to adopt a n ew formula for providing ad ministrative fees, potentially resulting
in lower fees paid to PHAs.
S. 1 5 8 4 would p rovide $1.3 billion for administrative fees for t he voucher
program, greater than the amount requested and recommended b y t he House. The
Senate bill would m ai ntai n t he 5% cap on administrative fee reserves introduced in
FY2003, however, t he bill does not include the l angu a g e f rom t he House b ill that
could potentially limit PHA administrative fee earnings.
Fo r contract administrators, both t he H ouse and Senate bills provide funding at
the P resident’s requested level o f $100 million.
Family Self Sufficiency Coordinators. Family Self Suffici ency (FSS)
coordinators help families obtai n j ob trai ning and employm ent. The FSS program’s
go al is to decrease families’ dependency on public assistance programs and m o v e
them towards economic self sufficiency. In FY2003, $48 million was provided for
FS S coordinators; i n FY2004, $72 million i s requested for FSS coordinators.

The amount provided i n H.R. 2861 for FSS coordinators in FY2004 would
match t he amount provided i n FY2003 ($48 million), but would be s ignificantly less
than the amount requested by the Administration ($72 million). S . 1584 would fund
FS S coordinators at the P re sident’s requested level.
Unobligated Ba lances. For s everal years, unspent funds have accumulated
within the HCF. These unspent funds, called unobligated balances, accrue w h en
local PHAs do not spend all of the funds, o r u se all o f t he vouchers, t hey were given
in a year. C ongress has ex p ressed great concern over t his “chronic underutilization.”
In FY2003, HUD had $2.84 billio n i n u nobligated balances in the Housing
Certificate Fund, according t o t he FY2004 Budget Appendix . Of that amount, HUD
ex pected Congress to rescind $1.1 billion i n FY2003. Congress actually rescinded
$1.6 billion i n FY2003 and required HUD to change the way that it obligated voucher
funds i n t h e hopes o f reducing future unob ligated balances. The remaining $1.24
billion dollars was available for use i n FY2003 or could b e carried over i nto FY2004.
In its FY2004 request, t he Administration s tated t hat i t ex p ected to have $1.37
billion available i n unobligated balances . Of t hat amount, t h e Administration
anticipates that $1.07 billion wi l l b e used for vouchers under HANF and $300
million will be rescinded by C ongress from t he projec t-based rental assistance
program. However, HUD’s estimate of unobligated balances a v a i lable i n FY2004
is no longer current. S ince the Administration d eveloped t he FY2004 budget request
before the FY2003 funding level was enacted , t hey h ad to base their estimates o n t he
funding levels they had requested , rather t han w hat t hey h ad recei ved . T herefore, t he
$1.37 billion was estimated u sing a s maller r escission level and a h igher o v e r all
appropri at i o n l evel for t he HC F t han w as act ual l y enact ed. T herefore, i t i s uncl ear
how much HUD will actually have available i n unobligated balances in FY2004.
Bot h H.R . 2861 and S . 1584 accept t he Adm i n i st r at i o n’s estimate of unobl i gat ed
balances and both chose t o rescind the full $1.37 billion t hat HUD cl ai m s t o have
Advance Appropriations. Fo r t he past several years, two t yp es of
appropriations have been used to f u nd the Housing C ertificate Fund: an
appropriation available i n t he named fiscal year; and an advance a p p r o p r i ation o f
$4.2 billion, which i s not available until the next fiscal year. For ex ample, funding
for t he HCF i n FY2003 included:
$12.9 billion i n appropriations for use in FY2003; and
+ $ 4.2 billion i n advance appropriations provided i n FY2002 for u se in FY2003
$17.1 billion i n available appropriations (not incl uding unobligat ed balances )
for t he HCF i n FY2003

Note that the $4.2 billion i n advance appro p r i a tions that was p rovided i n
FY2003 for FY2004 is not included i n t he total for the HCF in FY2003 shown above.
However, it is included i n t he Adm i n istration’s FY2004 anticipated budget for
$ 4.8 billion i n appropriations for u se in FY2004 (for t he project-based program);
$ 8.3 billion i n appropriations for u se in FY2004 (for HANF); and
+ $ 4.2 billion i n advance appropriations provided i n FY2003 for u se in FY2004
$17.3 billion i n available appropriations (not including unobligated balances) for
HANF and t he project-based rental assistance program i n FY2004
The advance appropriation s tructure was adopted again i n t he FY2004 budget
request. For FY2004, the Administra tion r eq u e sted $4.2 billion i n advance
a p p r o p r i a t i ons (to b e s pent in FY2005) for HANF. The House also p roposes to
maintain the advance appropriation funding structure.
Table 4 shows a breakdown o f funding for t he vouchers and p roject-based
Table 4. F Y2003 and F Y2004 Appropriation Levels for Vouchers
and Project-based Rental Assistance
FY2003 FY2004 FY2004 FY2004 FY2004
enacted a request House Senate Con f .
Budget authority:
New appropriations 12.604 12.535 13.757 13.611
Advance appropriation
from p rior year (4.172) (4.200) (4.200) (4.200)
Current-year appropriation (8.431) (8.335) (9.557) (9.411)
Budget authority available b b b
from unobligated balances 2.838 1.072 1.072 1.072
Budget authority rescinded o r
not ex pect ed t o be used i n
specified FY -2.838 c 0 -1.072b -1.072b
Subtotal 12.604 d 13.607e 13.757e 13.611e
Contract renewals 10.870 11.482 11.725 11.484
New i ncremental vouchers 0.000 0.036 0.000 0.036 g
Tenant protection vouchers 0.232 0.252 0.206 0.252
Administrative fees 1.065 1.192 1.209 1.339
Central reserve fund 0.389 0.473 0.569 0.425h

FY2003 FY2004 FY2004 FY2004 FY 200 4
enacted a request House Senate Con f .
Funds to states for HANF
start-up costs 0.000 0.100 0.000 0.000
Family self suffici ency
coordinators 0.048 0.072 0.048 0.072
Audit C osts 0.000 0.000 0.000 0.003i
Subtotal 12.604 13.607 13.757 13.611
Budget authority:
Project-b ased ren tal
New appropriations 4.507 4.823 4.823 4.823
Budget authority available
from unobligated balances 0 0.300 f 0.300 f 0.300f
Budget authority rescinded o r
not ex pect ed t o be used i n
specified FY 0 -0.300 -0.300 -0.300
Subtotal 4.507 4.823 4.823 4.823
Project-b ased ren tal
Project based vouchers 4.309 4.720 4.720 4.720
Contract administrators 0.195 0.100 0.100 0.100
W o rking capital fund 0.003 0.003 0.003 0.003
Subtotal 4.507 4.823 4.823 4.823
T en a n t-b ased an d p roject-
based combined f unding
level 17.111 18.430 18.580 18.434
Source: T his table was prepared by the Congr essional Research Service using data fr om the FY2003
Co nsolid ated Appropriatio ns Co nference Report ( Rp t. 108-10), the HUD FY 2004 Congressional
Justificatio n, H.Rept. 108-235 and S.Rept. 108-143.
a T he FY2003 numbers reflect an across the board rescission of .65% enacted in FY2003.
b T he Ad ministratio n a ssume s a recap ture o f $ 1 . 0 7 2 b illio n in uno b ligated fund s fro m H AN F a nd ha s,
ther efo r e, r e q uested a n a p p r o p r iatio n o f $ 1 . 0 7 2 b illi o n l e ss than their actua l need s; ho we ve r ,
Co ngr e s s ha s hi st o r i c a l l y c o n s i d e r e d t he a c t ua l ne e d s a s t he r e q ue s t fo r ne w b ud ge t a ut ho r i t y
while r e scind ing uno b ligated b a lances. T he Ad ministr a tio ns e stimate o f uno b ligated b a lances
may not be accurate (see earlier d iscussion of unobligated balances).c
In FY2003, $2.838 billion was ava i l a b l e in unobligated balances, according to the FY2004 HUD
B u d g e t Ap p e nd ix. O f this a mo unt, Co ngr ess r escind ed $ 1 . 6 b illio n. T he FY 2003
ap p r o p r iatio ns b ill co nfer ence r e p o r t stated tha t any unobligated balances in excess o f the $1.6
b illio n necessary to meet the r escissio n wo uld b e a va ilab le to the Secretary. H o we ve r, the
conferees provid ed mo re than the Secretary had requested for the HCF in FY2003, so one could
assume that the Secretary would no t need to use any un o b l i g a t e d b a lances in FY2003. (See
earlier d iscussion of unobligated balances.)

d T his amount does not includ e $4.2 b illion in advance appropriations provided in FY2003 fo r use in
FY2004. T he $4.2 b illion p rovided in FY2003 fo r use in FY 2004 is included in the next
column und eradvance appropriations fr om previous year.”e
T his amount does n o t includ e $4.2 b illion in advance appropriations requested in FY2004 fo r use
in FY2005.f
B ased o n the FY2004 HUD budget j ustification, this table allocates $300 million o f the unobligated
balances fr om the Housing Certificate Fund to the p roj ect-b ased rental assistance program. T he
Ad ministrations estimate o f unobligated balances may not be accurate (see earlier d iscussion
of unobligated balances).g
Amo unt availab le f o r s e t a s i d e within the Centr al Reser ve Fund to p r o vid e new, inc r e me ntal
vo uc he r s t o no n-e l d e r l y, d i sa b l e d ho use ho l d s .h
Amo unt r e d uced b y $ 3 6 milli o n , wh i c h is availab le, at the Secr etar ys d iscr etio n, to p r o vid e new,
incremental vouchers to non-elderly, d isabled househo lds.i
S. 1584 proposes to se t-asi d e $ 3 million within the HCF to fund an outside, independ ent a ud it
cond uc t ed b y a maj o r accounting firm to d etermi ne the status o f a ll fund s within the account,
obligated and unobligated fo r all programs fo r this fiscal year and p rior and sub sequent fiscal
Public Housing P rograms. The public housing p rogram is design ed to
provide safe, d ecent and affordable housing (HUD defines “affordable” housing as
having costs t hat require a family to pay no m ore t han 30% of its adjusted income for
rent) t o l ow-income families. While no new public housing d evelopments have been
bui l t for m any years (ex cept t hrough t he HOP E VI p rogram , whi ch i s d i s c u s s e d
below), C ongress continues t o p rovide funds to maintain the ex i sting s tock of over
1.2 million units. (HUD defines “affordability” as requiring a family to pay no m ore
than 30% of its adjusted income for rent.)
Public Housing O perating Fund. The P ublic H o u s i n g Operating Fund
provides s ubsidies t o l ocal PHAs for pub lic housing operating ex penses, including
m aintenance, utilities, and t enant and protective services. These subsidies allow
PHAs to keep rents affordable for very l ow-income families.
For FY2004, the Administration re quested $3.57 billion for the Operating Fund,
which i s l ess t han t he $3.58 billion p rovi ded i n FY2003. Of the amount requested
for FY2004, $15 million would be s et aside for the R esident Opportunities for Self
Sufficiency (ROS S ) p r o g r a m . T h e R O S S p r o gr a m p r o v i d e s r e s i d e n t s with supportive
servi ces and assi st ance i n becom i n g econom i cal l y sel f-suffi ci ent .
H.R. 2861would provide $3.6 billion for the P ublic Housing Operating Fund,
an increase over t he FY2003 level and the P resident’s request. Of t hat amount, t he
H o u s e b i l l would t ransfer $10 million t o t he Department of J ustice t o be used f o r
efforts t o fight crime and d rugs in public housing. This transfer was not proposed by
the Administration. The House bill does not adopt the P resident’s proposal to set-
asid e O p e r a t i ng Fund dollars for t he ROSS program. However, the House also
proposes to set aside Capital Fund dollars for t he ROSS program, as has b een done
in the pas t (see discussion below).
S. 1584 would provi de $3.58 billion for the Operating Fund for FY2004, the
same lev e l t hat was provided i n FY2003. As in the House bill, $10 million would
be available for transfer to the Department of J ustice.
A Note About the O perating Fund Shortfall From FY2002. In FY2002,
HUD did not have enough operating funds to provide full subsidies t o all PHA s .

HUD was s hort $250 million b ecause it had b een miscalculating how much it needed
for t he Operat i n g Fund for s everal years. In past years, HUD woul d cover t he
shortfall by automatically dipping into future years’ ap p r opriations without
requesting advance a p p r o v al from C ongress. However, HUD was unable t o
automatically dip i nto its FY2003 appropriation t o cover its FY2002 shortfall
because the agency was operating under a series of short-term continuing resolutions.
In stead, HUD had t o ask Congress’ permission to use funds from FY2003 to cover
FY2002. C o n g r ess granted HUD that permission, but Congress did not increase
HUD’s FY2003 appropriation t o compensat e for the $250 million t hat was used for
FY2002. S i n ce t he FY2003 Operating Fund was effectively reduced, HUD had t o
reduce P HAs’ operating budgets. HUD in s t r u c t ed PHAs to reduce t heir budget
requests b y 30%, but informed them that th eir budgets m ay be adjust e d a gain l ater
in the year (See HUD Notice P IH 2003-1, released in J anuary 2003). HUD has s ince
adjusted PHA budgets t o close to 90% (a final cut of approx imately 10%).
A Note About Calculating O perating Subsidies. The Quality Housing
and W ork R esponsibility Act o f 1998 (P.L. 105-276) directed HUD to develop a new
formula for allocating operating funds to the P HAs. However, d eveloping this new
formula i s p roving difficult and controversial. An interim formula-bas ed approach
for allocating operating funds was implemented in FY2001, following regulatory
nego tiations required b y t he 1998 Act. The current formula t akes into account siz e,
location, age o f housing s tock, o ccupancy and ot h e r factors i ntended t o reflect the
cost of operating a well-managed public housing development.
The f i n a l report o f t he Public Housing Operating C ost S tudy was released in
J une 2003 [ h ttp:// /research_centers/phocs/] . The s tud y
makes s everal recommendations including using FHA properties t o b e n ch-mark
f u t u r e operating costs and converting t he ex isting public housing s ys tem t o a
propert y-based m a n a g e m ent s t ruct u re. S i n ce i t s rel ease, t h e s t udy has generat ed
m u ch cont roversy, i n part i cul ar i t s reco m m endat i ons have recei ved s om e resi s t ance
from t he advocacy groups who represent P HAs. HUD states that it has undertaken
rule making action b ased on the recommendations of the s tudy; advocacy groups and
some Members of C ongress are calling for the creation of a negotiated rule m aking
committee, including advocacy groups and i ndus try representatives, t o complete
work on the regulations. HUD has i ndicat ed that it would like t o finalize a new
formula b y t he end o f 2003.
Public Housing Capital Fund. The P ublic Housing C apital Fund provides
money t o P HAs for t he rehabilitation and modernization of public housing. Regular
physical maintenance ensures that these d e v elopments do not become unsafe for
residents or s o obsolet e t hat t hey m ust be dem olished. HUD es timates t hat t here is
a backlog of $20 billion i n rehabilitat i on and modernization needs facing public
housing and that an additional $2.2 billion i n capital n eeds accrue annually.
The HUD budget requests $2.64 billion for the capital fund in FY2004, less than
the $2.71 billion enacted in FY2003. The j ustification for this cut i n t he face of such
a l arge backlog i s t he introduction o f what t h e Administration t erms the P ublic
Housing R einvestment Initiative (PHRI) and Lo an Guarantee. Under t his p roposal,
HUD would consider requests from P HAs to participate i n t his i niti a t i v e o n a
property-by-property b asis. The program would i nclude leveragi ng of private capital

through a combination o f l oan guarantees and t he conversion of public housing units
to project-based voucher assistance. Fo r l oan guarantees, t his p roposal would s et
aside $131 million i n public housing capital funds, which could p artially gu arantee
(up t o 80%) $1.7 billion i n l oans to pay for capital improvements t o public housing.
The c o n v ersion of public housing t o p roject-based vouchers is design ed to make
PHAs seem more credit-worthy. The Administration believes t hat l enders will view
project-based voucher funding as a m ore p re dictable stream of income than capital
fund appropriations. Further more, t he Administration t hinks that converting public
housing t o p roject-based vouchers would b enefit famili es . Families with project-
based vouchers have the a b ility to convert their p roject-based vouchers to portable
tenant-based vouchers after 1 year. T here fore, families who used to be tied t o public
housing but who convert to project-based an d t hen t o t enant-based vouchers, would
be able to move to the housing o f t heir choice. Legi slation t o enact this proposal hasth
not been introduced in the 108 Congress. A similar proposal was o ffered b y t he
Administration i n FY2003, but was not adopted.
Critics of t he Administration’s P HRI proposal ar gu e t hat m any P HAs already
successfully participat e i n pri vate fi nancing without c onverting public housing t o
vouchers. T hey ar e concerned t hat converting public housing units to vouchers
would essentially privatiz e public housing and further d eplete the n ation’s s tock of
low-cost housing.
In addition t o t he $131 million for the P HRI, the Administration has requested
the following set-asides in the C apital Fund for FY2004: $40 million for ROSS; $40
million for the emergency disaster reserve; $10 million for the working capital fund;
$50 million for technical assistance; and $30 million for the dem olition of obsolet e
public housing units.
The House appropr i ations bill, H.R. 2861, would provide $2.7 billion for the
Capital Fund for FY2004, an amount high er th an the Administration’s request and
level with FY2003. The C ommittee rejected the Administration’s P HRI i nitiative,
st at i n g t hat m any P HAs have al ready pursued public-private financing partnerships
under ex i sting s tatutory authority. The Hous e p rovided for the following set-asides
in the C apital Fund for FY2004: $55 million for ROSS; $40 million for emergency
disaster reserve; $11 million for t h e working capital fund; and $51 million for
technical assistance. The H o u s e d id not provide a s et -aside for t he demolition of
obsolete public housing units since t hey p rovided HOPE VI funding, which can be
used for t hat purpose (see b elow). However, the House d id provide for $429 million
to be set aside from t he funds available for formula allocation t o b e distributed to
those P HAs who h ad obligated all o f t he Capital Funds they had received for FY2001
and FY2002. This “timely ex penditure bonus ” w as included i n t he FY2003
appropriations bill and i s d esigned t o reward t hose housing authorities who are fully
utilizing t heir Capital Fund allocations.
S. 1584 would provide $2.6 billion for the C apital Fund for FY2004, an amount
l e s s t h an the House-passed l evel and equal t o t he amount requested b y t h e
Administration. While the committee did not adopt the Administrat i o n ’ s P HRI
initiative, the committee did voice support for PHAs seeking p rivate financing. To
support t heir efforts, the committee b i l l w ould establish a new public housing
development l oan guarantee program. The b i l l woul d al l o w t he S e cret ary t o m ake

$125 million of t he Capital fund available for a l oan l oss reserve and o ther purposes
implementing t he loan guarantee. In addition t o t he loan gu arantee s et -aside, t he
Senate bill would s et aside $400 million t o p rovide timely ex penditure bonuses.
HO PE VI Re vi ta lization of Distressed Public Housing. The HOP E VI
program funds the d emolition and revitalization o f d eteriorated and distressed public
housing. Since t he inception o f t h e HOPE VI p rogram, HUD has approved t he
demolition of approximately 115,000 units of distressed public housing and the
creation o f over 66,000 rental and homeo wner units. New housing created by HOPE
V I must have a mix ed-income t enancy – t he poor, t he not quite so poo r , a n d s o m e
moderate-income households – i n an eff ort t o change t he culture and eliminate t he
stigma o f p u b l i c housing. Authoriz ation for the p rogram ended at t he end o f
FY2002; it was ex t ended i n FY2003 through t he end o f FY2004. The House
Fi nancial S ervices Committee p assed H.R. 1614 to revise and reauthorize t he HOPE
VI program t hrough FY2005.
For FY2004, the Administration requeste d no new funding for t he HOPE VI
program, which was funded at $570 million i n FY2003. The Administration argues
that the p rogram does not need new funding for t w o r e a s ons. First, t he program’s
goals – namely the demolition of t he nation’s worst public housing – have largel y
been accomplished. S econd, the p r o gram has s ome p roblem areas. One major
problem with the H OPE VI program is the amount of time it takes t o complete a
project. Of t he 195 projects funded s ince 1992, only 1 6 are completed and only h alf
of the obligated funds have been spent. Another p roblem with the HOPE VI p rogram
is the d isplacement o f fo r m er residents. Few families whose units have been
demolished under HOPE VI come b ack to live i n t he revitalized housing and little is
known about what happens to them.
Despite these concerns, t he HOPE VI p r o gram is one of the m ost popular
programs under HUD’s j urisdiction. Many advocacy groups and M embers of
C o n g r e s s h ave spoken out on behalf of the p rogram. They argue that need for t he
program i s s till great and t hat i nstead of ending the p rogram, HUD should work with
Congress to improve it so that it can continue to transform t he most distressed public
housing i n t he nation.
H.R. 2861would provide $50 million for the HOPE VI program, $5 million of
which would b e av a i l a b l e for technical assistance. S. 1584 would p rovide $195
million for HOPE VI, $3 million of which would b e a v a ilable for technical
Na tive American Block Grants. This block grant program p rovides t ribes
or tribally designated housing entities with a flex i ble s ource of funding for l ow-cost
housing a nd related activities. As provi ded i n t he Native American Housing
Assistance and S elf-Determ i n a tion Act (P.L. 104-330), b lock grant funds may b e
used for a wide range of homeownership and rental activities. The Administration’s
FY2004 budget requests $646.6 mi l l i o n , about $2 million m ore t han enacted in
W i t h unem p l o ym ent t hat o ft en ex ceeds 80% i n m a n y Indi an and N at i v e
communities, the S enat e Appropriations Committee report for FY2003 (S .R ept . 107-

222) directed HUD and its grantees to gi ve primary consideration t o qualified Native
owned firms in the design and construction of Indian housing. For FY2004, S. Rept,
108-143, repeats h is directive and direct s HUD to report o n t he use o f Native o wned
firms under t his account by April 15, 2004.
The House-approved b ill recommends $661.6 million for FY2004, an increase
of $15 million above HUD’s reque s t and $16.8 million m ore t han p rovided i n
FY2003. The S enate b ill approves $646.6 million, the s ame as t he budget request.
Communi ty Pl anni ng and Devel opment
Housing for Persons w i th AI DS (HOPW A). The Presi dent requested $297
million for the HOPWA program for FY2004, up from t he $290 million enacted in
FY2003. The House appropriations bill, H.R. 2861, would fund H O P WA at $302
million, $5 million above the P resident’s requested level. This increase was added
on the House floor and was offset by a reduction i n N a t i o n a l S cience Foundation
funding. S . 1584 would provide $291 million, less than the P resident’s request and
t h e House-passed l evel .
HOPW A provides housing assistance and r elated supportive s ervices for l ow-
income persons with HIV/AIDS and t heir families. Funding is distributed both b y
formula allocation and competitive gr a n t s t o s tates, localities and nonprofit
organiz ations. HOPW A funds may be used for housing i nform a tion s ervices,
resource identification t o establish and c oordinate housing assistance resources, t o
acquire, rehabilitate or lease housing and services, t o construct s i n gl e room
occupancy dwelling and community residences , for rental assistance and for short-
term rental assistance. Funds may also b e used for mortgage or utility paym ents to
prevent homelessness o f a tenant or mort gago r and for s upportive s ervices including
health, m ental h ealth, d rug and alcohol abuse t reatment an d c ounseling, day care,
nut ri t i o n a l s ervi ces and assi st ance i n gai n i n g access t o l ocal , s t at e and federal
government benefits.
For m ore i nformation on HOPW A, s ee CRS Re p o r t R S 20704, Housing
Opportunities f or Persons with AIDS (HOPWA).
Rural Housing and Economic Development. The FY1999 HUD
Appropriations Act (P.L. 105-276) established within HUD an Office of Rural
Housing and Economic Development t o support housing and economic development
in rural areas. C ongress provided $25 million i n each of FY2001 and FY2002, and
j u st short of $25 million i n FY2003. However, the Administration d id not request
funds in FY2002 and FY2003, and does not do so for FY2004, argu ing t hat m any o f
the agency’s core program s, such as CDBG, already serve ru ral communities, and
because ot her Depart m ent s l i k e t he U.S . Depart m ent of Agri cul t u re have very l arge
and effective p rograms already i n p lace to address rural housing and economic
development i ssues. However, both t h e House and Senate Appropriations
Committees have continued t o appropriate funds in recent years, believing that this
housing p rogram is sufficiently different from Department of Agriculture programs
to merit s eparate appropriations.

H.R. 2861 p ropos es $25 million for the R ural Housing and Economic
Development p rogram for FY2004, requi ri ng that HUD award funds for t his p rogram
by J une 30, 2004. The S enate bill, S. 1584, also recommends $25 million.
Empow erment Zones a nd Enterprise Communities. Spendouts h ave
been much slower than projected for t hese programs. The Administration p roposed
no funding for Empowerment Zones/Enterprise Communities (EZs/ECs) for FY2003
(although C ongress appropriated close to $30 million) and p roposes no funding for
FY2004, concluding that this program h as not been sufficiently effective.
This initiative i s an i nteragency effort to pr o m o t e economic development and
community revitaliz ation i n distressed areas, b y d irecting t ax relief and federal funds
t o desi gn at ed EZs and EC s. EZs and EC s are el i gi b l e for a vari et y o f t ax credi t s and
other i ncentives intended t o s timulate investment, econo m i c growth, and
revitalization activities. Grants are used for activities t hat assist residents and
businesses, including workfo rce p reparatio nandjobcreationeffortslinkedtowelfare
reform; n eighborhood development; support for financing capital p rojects; financing
of projects i n conju nction with Section 108 loans o r o ther economic development
projects. Funds are also u sed for rental assistance and o ther housing assistance.
To date, t here have been three rounds of EZ/EC d esignations. In t he first round,
nine communities (six urban and t hree rural ) w e re designat ed as Empowerment
Zones; and 95 communities were nam ed as Enterprise Communities. Twenty new
Empowerment Zones — 15 u r b a n and 5 rural — were d esignated i n t he Round II
competition, al ong with 20 new Enterprise C ommunities, al l rural . The Community
Renewal Tax Relief Act of 2 000 (P.L. 106- 554) authoriz ed the d esignation o f 4 0
renew a l c o m m u n i ties (28 urban and 12 rural) and 9 n ew Round III Empowerment
Zones (seven u rban, t wo rural) designated on December 21, 2001, which u tiliz e only
tax i ncentive p rovisions.
In FY2002, $45 million was approved for urban EZs — $ 3 million each for t he
15 Round II z ones d esign a t e d b y HUD. The Administration’s FY2003 budget
propo s e d n o funding for R ound II Empowerment Zones b ecause after 4 years o f
fun d i n g , m ajor balances of unused funds had b een built up. To help develop t he
econom i es o f d i s t r e s s e d u rban and rural areas, HUD has recent l y desi gn at ed 40
Renewal C ommunities (RZs) and seven additional Round II urban Empowerment
Zones. Private i nvestors i n both R Z and EZ areas are eligible for t ax benefits over
the n ex t 1 0 years tied t o t he ex pansion o f j ob opportunities i n t hese locations.
P.L. 108-7 i ncluded $30 million for Round II EZ-designated communities with
$ 2 million allocated to each of the 1 5 empowerment z one communities. Bo th th e
Senate and House recommended an appropriation of $30 million for this program for
FY2003, $15 million l ess t han enacted for FY2002 and $30 million m or e t h an t he
President’s budget reque s t e d . T he confer ence report argued t hat, consistent with
Round I empowerment z one funding, t his program should b e classified as mandatory
spendi n g rather than an obligation of t he VA-HUD appropriations bill. During its
consideration of t he bill, the S enat e Appropriations Committee also ex pressed
concern over accountability in this program and noted that the HUD In spector
General h as been critical about how commun ities h ave i m p lemented this program
and u sed EZ funds.

The House-pas s e d b i l l , H.R. 2861, recommends $15 million for FY2004 for
continued grant funding for t he 15 urban R ound II EZ/ECs. S . 1584, as reported o n
September 1 5 , 2003 by the S enate Appropriations Committee, does not include an
appropriation for the p rogram for FY 2004. The C ommittee report (S.Rept.108-143)
notes that “the Committee b elieves t hat t hi s p rogram was i ntended t o b e funded as
a m andatory program and not as an obligation of t his bill,” and ex pect s t he Senate
Fi nance C ommittee t o fund this program as m andatory. The report also notes that an
In spector General was critic a l o f t h e poor recording and misuse o f funds found
during an audit o f five s elected EZ programs. 2
Community Deve lopment Block Grants. The C ommunity Development
Bl ock Grant (CDBG) program i s t he largest source of federal fi n anci al assi st ance i n
support o f s tate and l ocal governments’ community development and neighborhood
revitalization activities. The p rogram was first authorized by Congress under Title
I o f t he Housing and Community Development Act of 1974, P.L. 93-383, and now
stands as the federal government ’s longest running block grant. 3 During its 29-year
history, the p rogram has undergone some changes, but its structure and focus h ave
remained essentially unchanged. The program p romotes local decision making in the
development o f community development p lans intended t o p rincipally benefit l ow-
or moderate- i ncome persons, aid in preventing or eliminating s lums and blight, or
meeting u rgent n eeds t hreatening t he health and s afety o f t he public. C DBG funds
are allocated by fo r m u l a t o 1,082 entitlement communities, states, and the
Commonwealth of Puerto Rico. After funds are s et aside t o fund a number o f related
categorical programs, 70% of the rem a i n i n g funds appropriated are allocated by
formula t o C DBG entitlement communities while stat es share t he remaining 30%.
FY2004 Fund i n g P r oposal. The Bush Administration’s FY2004 budget
propos es $4.716 billion for the C ommunity Development Fund (C DF), which
incl udes C DBG formula grants to stat es and entitlement co m m unities and related
programs. The Bush Administration’s budget request inclu d e s $280 million for
program s et-asides, and $4.436 billion i n C DBG formula-based grants to entitlement
communities and s t ates. The Administration’s budget request would i ncrease t he
formula-based portion o f t he program b y $96.5 million for FY2004, and i t would
convert Section 107 funding for i nsular ar eas into a formula-based allocation. The
Administration’s budget does not inclu d e f unding for Neighborhood In itiative o r
Economic Development Initiative grants, two cat egorical programs that recently have
been used ex cl usi v el y t o fund congressi onal l y earm arked proj ect s.
Within the contex t of HUD’s total budget request for FY2004, the
Administration p roposes to allocate 15% ($4.7 billion) of the HUD proposed $31.1
billion budget to programs funded under the CDF account. W ithin the C DF account,
CDBG formula grants t o t he states and entitlement communities would account for
93.6% of the C DF budget request while set-asides and earmarks would account for

6.4% of the request.

2 T he IG r eport i s a va ilable on t he web a t [].
3 42 U.S.C. 5301.

The Administration is also requesting $16 million in funding for its Colonias
Gateway Initiative (CGI), a proposal th at was first included i n its FY2003 budget
request within the C ommunity Development Fund but is proposed for FY2004 as a
separate program. This southwes t regional i nitiative would be t argeted t o
communities i n Tex as, New Mex i co, Arizona, and California within 150 miles of t he
border with Mex i co. Funds would b e u sed for housing, infrastructure, and economic
development p rojects i n t hese distressed areas.
H.R. 2861, as passed b y t h e H o u s e o n J uly 25, 2003, recommends a t otal
appropriation of $4.959 billion, including $4.539 billion for the formula portion of
the C DBG p rogram, and $420.4 million i n s et-asides and earmarks. The House b ill
incl udes $137.5 million i n earmarked funds under the Economic Development
In itiative, which represents 32.7% of the funds targeted for earmarks and set-asides.
In addition, the House would provide $26.5 million i n university-based community
development p rograms i ntended t o encourage col l aborat i v e effort s b et ween
institutions of higher education and their s urrounding neighborhoods an d s upport
professional t raining o f minority students i n t he fields communi t y and economic
As approved b y t he House, H.R. 2861 would appropriate $243 million m ore i n
total C DF funds than the $4.716 billion re quested by the Administration and $125.2
million m ore i n s et -asides and earmarks. Most notably, t he House bill in cl udes
$137.5 m illion in Econo mic Development Initiative (EDI) funded earmarks while the
Administration’s budget request does not include funding for t he program.
The S enate appropriations bill , S . 1584, would appropriate $4.950 billion for the
program, including $4.546 billion for CDBG formula grants and $404.3 million i n
various set-asid e and earmarked programs and p rojects. The b ill includes $140
million for $330 EDI earmarked projects and $21 million for 20 NI earmarked
project s. The bill would also appropriate $60 million for the Youth B u i l d program
and $32.5 million in support university-based commun i t y d e v e l o p m e n t e d u c a t i o n a n d
revitalization efforts. The C ommittee report voiced concern about the l ack of private
funding to support and supplement fed eral Youth Build appropriations.
The following table p rovides a breakdown o f t he actual FY2003 appropriations
and t he Administration’s FY2004 propos ed budget request for t he CDF account and
the recommendations of the House as outlined in H.R. 2861 and t he accompanyi ng
H.Rept. 108-235, and t he Senate, as outlined in S. 1584 and its accompanyi ng report
(S.Rept. 108-143).

Table 5. C ommunity Development Fund Appropriations,
CDBG and R elated Set Asides: FY2003-FY2004
(funding in millions)
Programs a nd set-asides enacted Request H o use Sena t e
Set-asid es (see belo w for deta ils) 565.4 280.0 420.4 404.3
Formula-based (entitlement communities) 3,037.6 3 ,100.3 3 ,177.0 3 ,182.0
Insu la r a reas 0.0 7 .0 0.0 0 .0
Formula-based (sta te allo cation) 1,301.9 1 ,328.7 1 ,361.6 1 ,363.7
Set- asid es:
Indian Trib es 70.5 72.5 72.0 72.5
Housin g Assistance Council 3.3 3 .0 3.3 3 .3
Na tional American Indian Housin g Council 2.4 2 .2 2.4 2 .6
Na tional Housing Development 5.0 0 .0 5.0 0 .0
Op eratin g expenses (2.0) (0 .0) (2.0) (0 .0)
Na t. Council of La Raza HOPE Fund 5.0 0 .0 5.0 0 .0
Technical a ssistance (0.5) (0 .0) (0.5) (0 .0)
HOPE F und, other a ctivities (4.5) (0 .0) (4.5) (0 .0)
Sectio n 107 48.8 37.9 43.0 52.5
I n su la r a re a s (7 . 0 ) (0 . 0 a) (7.0) (7 .0)
Prog. management and analysis (0 .0) (3.0) (0 .0) (3.0)
Na tive Hawaiia n Housin g Blo ck Grant (9 .5) (0.0) (9 .5) (10.0)
Training and Technical a ssistance 0 .0 0.0 0 .0 (0 .4)
Un iversity Programs (32.3) (31.9) (26.5) (32.5)
Historically Black Colleges & Un iv. (9.9) (10.0) (10.0) (11.0)
HBCU technical a ssistance 0 .0 (3 .0) (2.0) (2 .0)
Hispanic S erving Institutions (6 .4) (5.5) (6 .5) (7.5)
Co mmunity Development Work S tudy (3 .0) (3.0) (3 .0) (3.0)
Alaskan Native and Na tive Hawaiia n (3 .0) (2.4) (0 .0) (4.0)
S e rvin g I n stitu tio n s
Trib a l Co lleg e s a n d Un iversities (3 . 0 ) (3 .0 ) (0 . 0 ) (3 .0 )
Co mmunity Ou treach Partnersh ip (7 .0) (8.0) (7 .0) (4.0)
Wo rking Capital Fund for the development 3.4 4 .9 4.9 4 .9
of in fo rmatio n technology systems
We llsto n e Cen ter fo r Co mmu n ity Bu ild in g 8 .9 0 . 0 0 .0 0 . 0
Self-Help Ho meownersh ip Opportunity 25.1 65.0 28.0 12.0
Capacity build in g (0.0) (3 .0) (0.0) (0 .0)
Capacity Build in g for Co mmunity 28.1 25.0 33.2 35.5

Development and Affordable Housing

Programs a nd set-asides enacted Request H o use Sena t e
Na tional Co mmunity Developmentb
I n itia tive (NCDI ) (23.1) (20.0) (28.2) (31.5)
Rura l a rea and tribal landsc (5 .0) (5.0) (5 .0) (5.0)
Habita t for Hu manity 4.2 4 .5 5.0 (4.0)
Indian trib es SHOP (0 .0) (0.0) (0 .7) (0.0)
Neighborhood Initiative Demonstration 41.8 0 .0 21.0 21.0
Youthbuild 59.6 65.0 65.0 60.0
Youthbuild in ru ra l and underserved (10.0) (10.0) (10.0) (10.0)
Youthbuild US A capacity build in g (2.0) (2 .0) (2.0) (2 .0)
Economic Development I nitiative 259.3 0 .0 137.5 140.0
To tal: CDF, CDB G 4 ,904.9 4 ,716.0 4 ,959.0 4 ,950.0
Source: U. S. Dept. o f Housing and Urban Development and Ho use Appropriatio ns Report (H.Rept.
108-235) and Senate Appropriatio ns Report (S.Rept. 108-143).
No te: T o tals ma y no t ad d d ue to r o und ing. I talics ind icates entr ies sub sume d und er CDB G line in
Ta ble 2 ; p arenthesis indicates entry sub sume d in this table und er summa ry line imme diately a bove.
a Insular areas wo uld b e included in formula portio n o f the CDBG program and wo uld not be includ ed
as a set aside und er Section 107 (Special P urpose Grants) .b
Includ es fund ing for the E nterprise Found atio n and the Local Initiative Support Corporation in
support o f local community development corporatio ns.c
T he $ 5 millio n fo r NCDI fo r r ur al ar eas and tr i b e s i s a s e t - a s id e within the p r o gr am. HUD is
r e q uir ed to allo cate $ 5 millio n o f the $ 2 5 millio n to the se ar eas.
Earmarks a nd Set-Asides. The Administration ’ s p roposed increase i n
entitlement funding and its Colonias Gateway Initiative are to be offset by
eliminating funding for t wo CDF- related s et-asides, notably, t he Neighborhood
In itiative (NI), which received $41.8 m i llion for FY2003, and t he Economic
Development Initiative (EDI), which recei ved $259.3 million i n FY2003. In the
recent p ast , bot h p rogram s h ave rout i n el y b een used by som e Mem b ers o f C ongress
to earmark funding for s pecific p rojects. Organizations repres enting entitlement
communities and stat es , along with this and previous Administrations, have object ed
to these earm a r k s o n t h e grounds that they are noncompetitive, and reduce t he
amount of funds available under t he form ula p o r tion o f t he CDBG program for
distribution t o entitlement communities and states. For FY2003, EDI assistance was
earm arked for m ore t han 850 speci fi c p roj ects i dentified i n t he conference report
accompanyi ng the FY 2003 VA-HUD, an d Independent Agen ci es A p p r o p r i a t i o n s A c t ,
P.L. 108-7. The NI grants s upport p rojects i ntended t o s timulate economic
diversification and investment in areas ex periencing population out-m i g r a tion,
improve conditions in bli gh t ed and dis tressed n eighborhoods , or facilitate the
integration o f housing assistance with we lfare reform i nitiat i v es. For FY2003, the
$565.4 million u sed t o fund CDBG-linked categorical programs represented 11.5%
of the $4.9 billion appropriated under t he Community Development Fund account,
compared to 6% of the Administration’s C DF bud ge t p r o p o sal for FY2004. The
$301.1 million i n combined FY2003 appropriations for NI and EDI grants represent

more than half (53%) o f t he $565 million C ongress appropriated for CDBG-linked
set -asi d es and earm arks. As not ed e a r l i er, t he Adm i n i s t rat i o n h as request ed no
funding for t hese two p rograms for FY2004.
H.R. 2861 would appropriate $137.5 million for EDI projects and $21 million
for NI activities. Combined, t hese programs represent 37.7% of the $420.4 million
in CDF s et-asides and earmarks recommended by t he House for FY2004. The bill
does not include funding for t he Administration’s Colonias Gateway Initiative. The
bill, as requested by the Administration i n its FY2004 budget submission, does not
incl ude additional l oan commitments for the S ection 108 loan guarantee program .
The report accompanyi ng H.R. 2861 as s u m e s t hat $6,000,000 in unobligated
balances from p rior year credit subsidy appropriations and $189,344,000 in unused
loan commitment authority will be available i n FY2004 for new Section 108 loan
commitments. This assumption i s based on current estimated u sage of funds
appropriated i n FY2003.
The S enate C ommittee b ill recommends an appropriation o f $140 million and
$21 million for NI activities. The t wo programs represent 40% of the $404.3 million
in CDF s et -asides recommended by t he Senate Appropriations Committee. Li ke the
House v ersion of H.R. 2861, the S enate b ill does not include funding f o r t he
Administration’s Colonias In itiative. It would reduce funding for t he SHOP program
to $12 million, $13 million l ess t han appro p riated i n FY2003. Contrary to the
House-version o f t he bill and t he Administration’s budget request, which provided
no new funding for t he Section 108 loan gu arantee p rogram, t he Senate
Appropriations Committee would appropriate $6.325 million i n s ubsidy funding in
s upport of $275 million i n S ection 108 loan guarantees. It noted that whil e t he
program has had an uneven history, i t allows communities t o l everage private capital
for l arge projects t hrough a pledge of future CDBG funds.
Br ow nfi e l ds Redevelopment. The Administration does not request funding
for t he Brownfields R edevelopment p rogram in FY2004, citing i neffective
performance. In the p ast s everal years t his p rogram has b een funded as a s e p a r ate
line item i n t he budget at or close t o $25 million. Bu t b ecause of lower t han ex p ected
interest in the program, s low ex penditures o f funding, and very lengthy time-frames
to produce a c t u al results, t he Administration recommends that the p rogram be
transferred t o t he Environmental P rotectio n A gen cy and combined with its
brownfield program. The Administration also points out that the redevelopment o f
brownfields can occur t hrough t he use o f C o m m u n i t y Development Block Grant
Brownfields redevel opment f unds are used t o recl ai m abandoned and
contaminated commercial and industrial sit es . Administration estimates p lace the
number of eligible brownfield sites at 450,000 nationwide. Funds are u sed t o finance
job creation activities t hat b enefit low and moderate income persons, and funds have
been used i n co n j u n ct i o n w i t h S ect i o n 108 l o an gu arant ees and w i t h EP A
brownfields cleanup efforts. In HUD’s FY2003 budget, t h e agency supported
decoupling t he brownfields p rogram from t he Section 108 loan gu arantee p rogram,
believing that this would attract more participants. During t he 107 th Congress, the
House approved l egislation, the Brownfi el d D evel opm ent E nhancem en t A ct (H.R .

2941), t ha t would n o l onger require that communities receive Section 108 loan

gu arantees as a condition for the receipt of Brownfield Eco nomic Development
Fu nds, b elieving that this would m ake i t easier for communities t o gain acce s s t o
brownfield funding. However, P .L. 108-7 i ncluded a $25 million appropriation for
brownfield projects, maintaining t he program’s p resent structure – which requires
that funds must be used in coordination with CDBG Section 108 loan gu arantees. In
addition, the Act requires t hat HUD aw ard s uch funds on a competitive b asis.
The House-passed H.R. 2861 reco mmends $25 million for Brownfields
Redevelopment, disagreeing with the Administration t hat t he cur r ent program i s
dupl i cat ive of brownfields activities funded through t he Environmental P rotection
Agency. To avoid duplication, the C ommittee report notes that it ex pect s HUD to
closely coordinate its efforts with EPA. The S enat e v ersi on of t h e b i l l al so
reco m m ends an appropriation of $25 million. In an effort to support p rogram
flexibility, the Senate report notes that Brownfield Redevelopment Grants are no
l onger requi red t o b e l i nked t o S ect i o n 108 l o an gu arant ees.
T he HOME I nvestment Partnership P rogram. For FY2004, th e
Administration requests $2.197 billion for the HOME P rogram, $210 million m ore
than enacted in FY2003. The House-approved b ill, H.R. 2861, would p rovide $2.064
billion for the p rogram. S . 1584, as passed b y t he Appropriations Committee, would
provide 1.975 billion for the p rogram, $12 million l ess t han t he FY2003 enacted level
and $222 million l ess t han t he budget request.
The H OME b lock grant p rogram makes funds available t o p articipating
jurisdictions to increase t he supply o f l ow-cost rental housing and homeow n e rship
opportunities for low-income families. J urisdictions have considerable flex ibility in
the u se of these funds, but all households assisted must have incomes b elow 80% of
t h e area m edi an; and 90% of rent ers recei vi ng assi st ance m u st have i n com es b el ow
60% of the m edian. Funds can be used to help new homebuyers. Bo th homebuyers
and renters can be helped through t he re habilitation o f s ubstandard housing and new
construction. Funds may also b e u sed for tenant-based rental vouchers. S ome
HOME funds are u sed with the H O P E V I p rogram and with the Low-Income
Housing Tax Credit. According t o HUD budget documents, s ince its begi nning in
1992, HOM E funds have been used to cons truct or rehabilitate more than 250,000
rental units, and have provided d irect rent al assi s t ance (vouchers) t o m ore t han

73,000 households.

The Administration requests a $200 million s et-asid e within HOME for the
“American Dream Down paym ent Initiative” (H.R. 1276) to assist low-income
homebuyers with downpaym ents for t he pur chase o f t heir first home. The s ame
am ount was requested in the FY2003 budget , and $75 million was enact ed. H.R .

2861 would p rovide $125 million for the p rogram as a s et-aside within HOME. S.

1 5 84 would provide $50 million, and t he Committee notes its objection t o a n y
proposals b y HUD which would tie the u se of HOME funds for homeownership to
the allocation o f funds under t he American Dream Downpaym ent Fund . The
Administration notes that the downpaym ent i s often the m ost s ignificant obstacl e t o
homeownership and t hat t he program i s ex p ected to help 40, 0 0 0 homebuyers with
assi st ance for t hei r downpaym ent s and cl o si ng cost s.

The Administration requests t hat Hous ing C ounseling Assistance be funded at
$45 million, an increase o f $ 5 mill i o n over t he FY2003 level. In stead of being
funded within the HOME program, t he Administration i s requesting t hat counseling
be funded i n a new free-standing appropriation account under t he Housing P rograms
section o f t he HUD budget. The same program change was requested in the FY2003
Budget, but Congress v o t e d t o keep the counseling p rogram within the HOME
program. H.R. 2861 and S . 1584 would fund the p rogram at $40 million within the
HOME program . The Senate Committee urges HUD to use t he program as a means
of educating homebuyers on t he dangers of predatory lending in addition t o t he stat ed
purpose o f ex p anding homeownership opportunities.
The Administration regards counselin g as a n i m portant part of advancing its
goal of increasing homeownership and also not es the importance of rental
counseling. The Budget estimates t hat t he proposed funding would p rovide 550,000
families with home purchase and homeow n ership counseling and provide 250,000
families w ith rental counseling. An increased emphasis would b e p laced on
providing counseling t hrough t h e funding of national and regi onal i ntermediary
o rganiz ations, and an increased percentage of funds would b e awarded to s u c h
The Administration also i s p roposing a new Innov a t i v e Lead Haz ard
Demonstration program as a $25 million s et -aside within HOME t o eliminat e l ead-
based h az ards i n hom es of l o w-i n com e chi l d ren. Thi s woul d b e u sed t o h el p d evel op
creative ways o f i dentifyi ng methods of e liminating lead-based paint hazards that
coul d s erve as m odel s for ex i st i n g l ead haz ard cont rol p rogram s, such as repl aci ng
old w i n dows contaminated with high levels of lead paint dust with new energy-
efficient windows. H.R 2861 and S. 1564 do not incl ude funding for t he Lead
Hazard Demonstration program .
H.R. 2861 would p rovide that up to $2.1 million b e t ransferred t o t he Working
Capital Fund for t he development and modification o f t echno l o gy s ystems s erving
community development program s and activities.
Homeless Assistance Grants . Homeless Assistance Grants is the blanket
title given to the four homeless programs authorized by the McKinney-Vento
Homeless Assistance Act (P.L. 100-77) an d administered b y HUD. Three o f t he four
programs are competitive grant programs: t he Supportive Housing P rogram (SHP),
the S helter P lus C are p rogram (S+C) and the S i n gl e R o o m Occupancy p rogram
(SRO). Funding for t h e f ourth HUD program, the E mergency Shelter Grants
program (ESG), i s distributed via a formula al l o cation t o s tates and local
Fo r FY2004, the Admi n istration h as proposed combining t he competitive
Homeless Assistance Grants i n t o o n e consolidat ed competitive program ; t he ESG
program would remain a formula allocation. The Administration has requested $1.33
billion for homeless assistance in FY2004. This would b e an i ncrease over t he $1.2
billion for homeless assistance grants provided i n FY2003. The amount requested
for FY2004 would i nclude: $150 million for the ESG program, $194 million for S+C
renewals, $12 million for technical assistance (incl u d i ng homel es s m anagem ent

information s ys tems – HMIS), $2.6 million for the W orking Capital Fund and $1.5
million for the Interagency Council on Homelessness.
The Administration h as proposed that the E mergency Food and S helter p rogram
(EFS P ) , which is currently administered by t he Federal Emergency Management
Agency (FEMA), b e t ransferred from t he Department of Homeland Security to HUD
in FY2004. This transfer was p roposed in the FY2003 budget, but was not adopted.
Fo r FY2004, $153 million was requested for t he EFSP.
The Administration’s FY2004 budget also requests $50 million for a n ew
Samari t a n H o u s ing p rogram. This p rogram, which would b e conducted i n
co n j u n ct i o n w i t h t h e D epart m ent s o f H eal t h and H um an S ervi ces and V et erans
Affairs, would focus on the chronic homeless population t hrough aggressive
outreach. Both t he Secretary o f HUD an d t he President h ave m ade a commitment to
end chronic homel essnes s i n 10 years. The Administration s tates i t will sub m i t
legi slat ion t o amend the M cKinney-Ve nto Homeless Assistance Act o f 1987 to
incl ude the S am aritan Housing program .
The House appropriations bill, H.R. 2861, would provide $1.24 billion for the
ex isting Homeless Assistance Grants programs, about $9 million l ess t h a n t h e
Administration’s request. Of t his amount, 30% of the funds not dedicated t o S +C
renewals must be u s e d f o r p ermanent housing, under t he House l angu age. No
language in the House bill or report refers t o t he consolidation of t he competitive
hom el ess p rogram s; however t h e b i l l does d i rect t h e S ecret ary t o ful l y renew al l S +C
vouchers. This amount does not include funding for t he President’s p roposed
Samaritan Initiative, whi c h t he House chose not to adopt since t he authorizing
l e gi s l ation h ad not yet b een introduced. The House does not adopt the P resident’s
request to transfer the E FS P p rogram from FEMA t o HUD.
The S enate C ommittee v ersion of the HUD spending bill would p rovide $1.325
for Homel es s Assistance Grants, s lightly less than the Administration’s request, but
more than proposed by the House. Of that amount, 3 0 % o f the non-S+C dollars
would b e required t o b e s pent on permanent hous ing and $12 million would b e s et
aside t o s upport t he Homeless Ma n a ge m e nt In formation S ys tem (HMIS ), which
HUD has b een de v eloping to collect nati onwi d e d at a o n t he hom el ess, and o t h er
t echni cal assi st ance.
The hom el ess assi st ance program s are i nt e n ded t o h el p hom el ess p ersons and
families b reak the cycle of homelessness and move to permanent housing and self-
sufficiency. HUD’s C ontinuum of Care (C o C ) p rocess encourages the creation o f
linkages t o o ther housing and community development p rograms i ncluding pub lic
housing, Section 8 , C ommunity Development Block Grants, HOME, Housing
Opportunities for Persons with AIDS, and st ate and local programs. In addition, the
strategy promotes direct links to mainstream soci al service program s critical to the
success o f hom el ess assi st ance effort s, such as Medi ca i d , S t at e C h i l d ren’s Heal t h
Insurance P rogram , Food Stam ps, T em p o r ary Assistance for Needy Families
(TANF), and s ervices funded t hrough t he Mental Health and S ubstance Abuse Block
Grant, Workforce Investment Act, and t he W elfare-to-W ork grant program.

Fo r m ore i nformation o n federal homel ess p rograms, see CRS Report R L30442,
Homel e s s n e s s: Recent S t a t i s t i cs, T a rget ed Federal P rograms and Recent
Housi ng P r ogr am Admi ni str a ti on
Housing for Special Populations (Elderly and Disabled). The Housing
for S pecial P opulations account i s m a d e up of two p rograms: the S ection 202
program for the elderly and t he Section 811 program for the d isabled. They provide
capital grants for the d ev e l o p m e n t o f additional n ew subsidiz ed housing for these
populations. For FY2004, the Administration has proposed abolishing the Housing
for S peci al Populations account and replacing it with two separate accounts:
Housing for the Elderly (Section 202) and Housing for the Disabled (Section 811).
The P resident proposed a f u nding level of $774 million (for a total of $783
million, inclu d i n g the reprogramming of $9.7 million i n unobligated funds from
prev i o u s years) for housing assistance for t he elderly i n FY2004, the s ame amount
as requested in the p revious year. $776 million was provided as d irect appropriations
in FY200 3. HUD points out that an increasing number o f t he elderly living i n
Section 20 2 ap art m ents have become frail and l ess able t o live i n rental facilities
without some additional s ervices. Therefore, t he Administration h as proposed that
$30 million o f t he appropriated amount be made available for construction grants t o
convert ex isting S ection 202 units to assi sted living facilities. This would allow
individual elderly residents t o remain i n their units and m aintai n t heir independence
as they age. The P resident proposed that another $53 million of t he appropriation b e
used to fund service coordinators who h elp elderly residents obtain n eeded supportive
serv i c e s from t he community. Finally, t he Administration p roposes to transfer
$470,000 of the amount to the W orking Capital Fund.
The Administration ex p ressed concer n i n its FY2004 budget justification about
the l engt h of time it takes t o devel op a S ection 202 property and the high cost of
developing Section 202 units relative t o private units. HUD stated tha t i t would
ex amine t he program and propose changes to improve its performance to address t he
aforementioned concerns.
H.R. 2861, the House appropriations bill, agreed to split the Housing for Special
P opulations account. For the Housing for the Elderly account, t he bill would p rovide
$773 million, slightly less than the Administra tion’s request. However, t he bill states
that an additional $16 million will be available for the account from ex cess funding
provided i n FY2003. The b ill would s et aside $50 million for service coordinators,
$25 million t o facilitate the conversion t o assisted living.
S . 1584 would not split the Housing for S p ecial P opulations account, as
proposed by the Administration. Instead, i t would provide $1.03 million, of which
$783 million would be designated t o provide housing for the elderly. Of t hat $783
million, $30 million would be available t o facilitate the conversion t o assisted living
and $50 million would be available for service coordinators.
The Administration requested $251 millio n f o r t h e Housing for the Disabled
account (Section 811), which is the s ame l evel at which t he program was funded i n

FY2003. Li ke last year, u p t o 25% of the funds for t he disabled could b e u sed for
vouchers to gi ve disabled individuals more flex ibility and choice so they could live
in mainstream rental housing.
Li ke the S ection 202 program, the S ection 811 program was cited i n t he FY2004
budget justif i c a t i o n as n eeding reform. Out o f concern regarding how slowly
grantees spend S ection 811 funds, t he Adminis tration i ncluded i n its justification a
list o f p rogram reforms, which i t i ntends to pursue i n FY 2 004. They include:
coordinating S ection 811 funded vouchers with the Administra t i o n’s HANF
proposal; ex panding the eligible uses of Section 811 funds; giving p reference t o
applicants who l everage funds from o ther sou r ces; p roviding a p reference for
smaller-scale p rojects; requiring gr an t e es to use funds in a timely manner o r face
recapt u re; and al l o wi ng t h e S ecret ary t he aut hori t y t o wai v e regul at ory and st at ut ory
provisions in order t o s treamline t he program.
The House appropriations bill, H.R. 2861, would provide $251 million for the
Section 811 Housing for the Disabled p rogram. The bill notes that an additional $ 6
million i s also available i n t h i s acco unt from FY2003 ex cess funds. The bill
maintains t he 25% voucher flex i b ility, but would not grant t he Secretary t he
requested waiver authority.
As noted earlie r, S. 1584 would not split the Housing for Special Populations
account into two accounts, as proposed by the Administration. Of the $1.03 billion
the S enate would provide, $251 million would be available for housing for the
disabled. Like t he House, the S enate would a l l o w u p t o 25% of these funds to be
used to provide vouchers to the d isabled.
Federal Housing Ad m i n istration (FHA). The FHA is an insurance
program t hat m akes homeownership possible for individuals and families who lack
the s avings , credit h istory, o r i ncome t o qualify for a conventional home l oan. HUD
repor t s t h at i n 2003, FHA i nsured $120 billion o f m ortgages for 1.3 million
households, 700,000 of them first-time home buyers. Thirty-seven percent (260,000)
were minority households. The insurance premiums (receipts) paid by homebuyers
(or t hose refinancing a m ortgage) pay t he cost of the p rincipal program o f t he FHA
program, the M utual M ortgage Insurance (MMI) accoun t, although s pending of these
receipts i s s ubject to annual appropriations acts.
Since t he early 1990s, t he MMI program h as contributed a s ubstantial s urplus
of funds to the federal government, and will add an estimated $2.9 billion i n FY2004.
Since FY2002, the Office of Management and Budget (OMB) and the C ongressional
Budge t O f fice (CBO) h ave d etermined that FHA receipts under t he MMI account
should be classified within the discretionary rather than the m andatory part of HUD’s
budget. According t o C BO, t he reclassification h as no effect on the a m o unt of
budgetary resources available t o HUD, and t he MMI program will continue operating
as it did prior to the recl assification. Mandatory spen d i n g m ust comply with the
pay-as-you-go rules o f t he Budget Enforcement Act (BEA) (P.L. 101-508), while
discretionary spending must comply with the BEA’s discretionary spending caps.
Fo r FY2004, the Ad m i n i s tration requests and H.R. 2861 and S . 1584 would
provide a commitment to insure up to $185 billion under t he FHA M utual M ortgage

Insurance and Cooperative Housing M ortgage Insurance (MMI/CHMI) fund, an
increase o f $20 billion over t he level approved for FY2003.
The Administrati o n s ays i t will propose l egislation t hat would p ermit FHA t o
insure loans t o borrowers that, due to poor cr edit ratings , would not ordinarily qualify
for FHA-insured l oans. S uch borrowers w ould either be unable t o obtain l oans, o r
would obtain l oans at high er interest rates o n t he sub-prime mortgage market. Under
the p roposed initiativ e, b o rrowers would also b e able t o obtain FHA-insured l oans
to help them keep their p resent home o r for home purchase. The p roposal is
projected to generate loans for an additional 62,000 homes.
The Budget, H.R. 2861, and S . 1584 and would provide a l oan limitation of $50
million for direct loans under t he MMI/CHMI fund, a $50 million reduction from t he
FY2003 level. The d irect loans are made to nonprofit and governmental entities for
the purchase o f HUD-owned s ingl e family properties which had b een insured under
The Budget, H.R. 2861, and S . 1584 would provide $15 million for the s ubsidy
cost of loan gu ara n t e e s under t he General Insurance and S pecial Risk In surance
(GI/ SRI) fund which would s ubsidize up t o $25 billion i n i nsurance commitments on
loans under t he fund, an increase o f $ 1 b illion over t he level approved for FY2003.
The credit s ubsidy i s b ased on the n et c o s t to the government, ex clusive of
administrative ex penses, of a d irect loan or loan guarantee over its full term,
discounted to the p resent value at t he Treasury’s borrowing cost.
The Budget, H.R. 2861, an d S . 1 584 propose a direct loan limitation of $50
million for the GI/ SRI fund, the s ame limit as in FY2003. Up to $30 million would
b e u s e d to facilitate the s ale o f HUD-owned m ultifamily properties. Up to $ 2 0
million would used t o facilitate the s ale of HUD-owned s ingl e family properties t o
non-profit and governmental agencies for t he ultimate resale to low- and m oderate-
income borrowers.
The Budget, H.R. 2861, and S . 1584 request administration ex p enses o f $359
million for the MMI/CHMI accounts, an increase o f $13 m illion over the FY2003
level. The Budget, H.R. 2861, and S . 1584 request administration ex p enses o f $229
million for the GI/SRI accounts, an increase o f about $7 million over t he FY2003
The Administration p roposes to reduce t he annual m ortgage i nsurance from 5 7
basis points t o 50 basis points on t he Section 221(d)(4) m ultifamily rental hous i n g
projects. HUD estimates t hat t he program will produce 42,000 new rental housing
units annually, and that most of them will be affordable to moderate-income families.
The S enat e C ommittee notes that it remains concerned t hat HUD has failed t o
calculate adequately the amount of credit subsidy needed to support its multifamily
mortgage insurance program s. The C ommittee notes that it ex pect s HUD to institute
a com put er program t hat accurat el y i d ent i fi es t he ri sk of defaul t and fi nanci al ri s k t o
the i nsurance fund. The C ommittee also d irects HUD to issue any changes i n
insurance premiums through notice and comment rule making, as required by l aw.

The S enate C ommittee notes its disappoin tment in FHA’s failure to notify t he
appropriate Congressional committees that FHA m ay not have had adequate authority
to cover l oan commitments for its FHA S ingl e Family Mortgage Insurance program
for t he remainder o f FY2003. The C ommittee notes its concern t hat C ongress was
never notified regarding the potential risk of t ermination t o t his homeownership
program. To en sure proper notification i n t he future, t he Committee d irect s HUD to
continue submitting reports required b y section 3 (b) o f P .L. 99–289 as well as weekly
updates t o t he House and Senate Committees on Appropriations regarding FHA’s
commitment levels following notificat i on t hat t he FHA’s m ortgage i nsurance
commitments h ave ex ceeded 75% of the authoriz ed limit.
The S enat e C ommittee notes that 83% of the portfolio of the FHA Section 242
Hospit al In s u rance program is in the state of New York. The C ommittee i s
concerned t hat t his focus in a s ingl e s tate constitutes unacceptably h igh risk and that
the HUD should t ake s teps to reduce t hat concentration i n o rder to ensure the l ong-
term viability of the p rogram and mitigate risks for t he General Insurance Fund. The
Committee d irects HUD to report t o t he Committee by J une 30, 2004 on its efforts
to reduce geo grap h i c c o ncentration of ris k i n t he Section 242 program. The report
should also i dentify alternatives to HUD’ s un d e r w r i t i ng of hospitals, assess the
overall financial risk t o HUD in underwriting hospital i nsurance, determine how risk
is assessed, find ways to mitigat e and minimize t his risk, ass e s s t h e p rivate and
p u blic investment in hospitals and healthcare facilities, and det ermine h o w t h e
market place works i n m eeting t he healthcare facility needs of rural and urban areas .
HUD i s di rect ed t o consul t wi t h t h e Depart m ent of Heal t h and Hum an S ervi ces on
these i ssues for t he final report.
The S enat e C ommitt ee u r ges HUD to take more proactive s teps to prevent
forecl osures in its FHA s ingl e family programs. During t he pu rchase of FHA-insured
houses in revitaliz ation areas, F H A i s d i r e cted to require one or more of the
following: an appraisal conducted b y a state-certified appraiser, with ex perience in
the m arket and certified by t he city; a home i nspection; or the p resence o f s omeone
with a fiduciary responsibility to the buyer, s uch as a buyer’s realtor, or other agent
repres enting t he buyer’s interest. HUD is al so urged t o rei nstitute its policy which
requi red t hat n ew hom es purchased wi t h F H A i nsurance recei ve ei t h er an FHA-
cert i fi ed i nspect i o n o r a 10-year i n surance-backed warrant y.
In its administ r a t ive provisions, S . 1584 would require that within 90 days of
enactment of the bill, HUD would promulgat e a regu l ation t o i nstitute a ‘‘good
neighbor’’ policy i n t he disposition of m u lti-family housing which had b een acquired
by HUD through d efault and foreclosure. The regulation would p rovide that
regardless of whether purchasing t he property directly from HUD or through s tates
or localities, prospective purchas ers of t he properties would be certified as bei ng in
compliance with state and local housing codes with regard to other p roperties o wned
by such purchasers. T h e i ntent o f t he regu lation would b e t o p revent the s ale o f
properties t o p arties d emons trating a pattern of owning housing with severe housing
Office of Federal Housing E nterprise O ve rsight (OFHEO). HUD has
oversi ght respons i b ilities for establishi ng Fanni e Mae’s and Freddi e M ac’s affordabl e
housing goals and for monitoring their p rogress t oward achieving those goals.

W ithin HUD, OFHEO i s t he “safety and soundness” regu lator for the Government-
Sponsored Enterprises (GSEs) Fa nnie M ae and Freddie M a c . T h e FY2004 HUD
budget proposes $32.4 million i n budget authority for t he operation o f OFHEO.
There has been increased criticism i n r ecent months in the C ongress and
elsewhere o f OFHEO for what s ome s ee as inadequate oversight of Fannie M ae and
Freddie M ac. Legi slation (H.R. 2575) has b een introduced to move oversight from
HUD t o t h e T reasury Depart m ent .
The HUD budget request for FY2004 says that OFHEO i ntends to ex pand and
be more aggressive in its oversight activities, incl uding: reviewing GSE requests for
approval o f n ew programs; ensuring t hat t he GSEs are consistent in their adherence
to fair housing l aws; providing an annual public use d atabase o n t he GSEs’ m ortgage
purchas es — and reports and res earch on GSE activities; and t he setting, monitoring
a n d enforcem ent o f GS E s’ go al s for t h e purchase o f m ort gages m ade t o l o w- a n d
moderate-income families, an d m ortgages on properties located in underserved areas.
In FY 2 0 03, legi slation was proposed to remove OFHEO from t he annu a l
appropriations process and fund the o rgan izat ion directly. The idea was t o place
OFHEO o n a par with o t h e r s a f e t y and soundness regu lators such as the Federal
R eserve Board, t he Office of Thrift S upervision, and t he Federal Housing F inance
Bo ard. P.L. 107-8 p rovided close to $30 million for OFHEO, to be funded b y fees
from Fanni e M ae and Freddi e M ac. HUD was d i rect ed t o provi de a d et ai l ed report
to the C ommittee on Appropriations by Au gu st 15, 2003, detailing OFHEO’s current
staffing levels and corresponding responsibilities, an d w h e t h er this is adequate to
fully meet its regulatory mission.
The House bill, H.R. 2861, provides $32.4 million for FY2004, to be offset to
z ero as fees are recei ved from Fanni e M a e and Freddi e M ac duri n g t he fi scal year.
The S enate bill, S. 1584, also recommends $32.4 million, the s ame as t he HUD
budget request. The Senate Committee remains very concerned regardi ng t h e
c o m p e t ency of the OFHEO office to provide the n ecessary financial oversight o f
Fanni e M ae and Freddi e M ac.
Fair H o u s ing. The Fai r Housing Act makes i t illegal t o discriminat e i n t he
sale, rental, or financing o f housing b as ed on r a ce, color, religion, sex , national
origin, d i s ability, or family status. HUD’s FY2004 budget reiterates t he
Administration’s commitment to fight against housing d iscrimination, and requests
$50 million for its two fair housing programs, nearly 10% above FY2003 funding of
The Fa ir H o u s ing Assistance Program (FHAP) s trengt hens nationwide
enforce m ent effort s b y p rovi di ng grant s t o st at e and l o cal agenci es t o enforce l aws
that are substantially equivalent to the federal Fair Housing Act. It p rovides grants
awarded annually on a noncompetitive b as is. For FY2004, HUD is requesting $29.7
The Fair Housing I nitiatives Program (FHIP) provides funds for public and
privat e fai r housing groups , as well as state and local agenci es, for activities t hat
e d u c a t e t he public and housing i ndustry about the fair housing l aws, including

accessibility requirements; investigate allegations of discrimination; help to combat
predatory l ending practices, and reduce barri ers t o m i nori t y hom eownershi p . FHIP
would be funded at $20.3 million i n FY2004.
The FHIP p rogram for FY2004 is structured to respond to the findings o f t he 3-
year National Discrimination S tudy and rel ated studies, and will continue to support
five special initiatives: C ombating P redatory Lending includes s upport o f p rograms
to increase financial literacy. E ducatio n Outreach includes a major educati o n a n d
publ i c awareness cam pai gn t o m ake i ndi vi dual s m o r e a w are o f t hei r ri gh t s and
responsibilities under t he Fair Housing Act. Fair Housing i n t he Colonias is intended
to help residents i n t he Colonias (areas within 150 mi les of t he Tex as/Mex i can
border), many of whom are recent immigrants unaware of their rights under t he Fair
Housing Act. Funds will be targeted to FHIP agencies t h a t provide education and
enfor c e m ent effort s i n t hese areas. Faith-Based and C ommunity Partnerships
em phasize the participation of faith-based and community partners, recognizing t he
sign ificant impact they can have on the implementation o f fair housing l aws.
Accessibility for P ersons with Disabilities is an important Dep a rt m e ntal priority
within FHIP t h at p romotes trai ning for architect s, builders, and others on how to
design and construct m ultifamily buildings in compli a n c e w i th the accessibility
requirements o f t he Fair Housing Act.
H . R . 2861 would provide a t otal of $46 million for Fair Housing progr am s ;
$25.75 million for FHAP and $20.25 million for FHIP . S . 1584 would provide $50
million for Fair Housing program s; $23 million for FHAP and $27 million for FHIP .
The S enate C ommittee report emphasizes t hat s tate and l ocal agencies under FHAP
should h ave t he primary responsibility for i dentifyi ng and addressi ng discrimination
in t h e s ale, rental, and financing o f housing and in the p rovision of brokerage
Le a d -Based Paint Ha z a r d R e duc ti on. HUD is proposing $136 million for
the Lead-Based Paint Hazard C ontrol P rogram for FY2004, $39.9 million l ess t han
the $174.9 million enacted for FY2003. As noted above under t he HOME p rogram,
there also i s a new Innovative Lead H a z ard Demonstration p rogram proposed as a
$25 million s et -aside within HOME t o eliminat e l ead-based hazards i n homes of low-
Title X of t he Ho u s i n g and Community Development Act of 1992 (P.L. 102-
550), authoriz ed HUD to establish t he Lead - B a s ed Paint Haz ard C ontrol Grant
program, to eliminate lead paint hazards in homes that are at risk of not being
modified through normal renovation o r d emolition activities. Before 1997, funding
for t he lead haz ard control grant program w a s provided under t he Annual
Contributions for Assisted Housin g A c count. In 1997 and 1998, the p rogram was
funded as a se t - a s ide under t he Community Development Block Grant account.
Since 1999, the program h a s r eceived appropriations as a separat e, stand-al one
program. Funds are d istributed through competitive grants t o entities t hat agree to
m at ch t hose federal grant s .
Over t h e p ast d ecade, HU D h a s w o r k ed wi t h l o cal governm ent s and agenci es
t o i n crease t he num ber o f l ead haz ard cont rol p rogram s, and t he C ent er for Di s ease
C o n t r o l and Prevention reports that while 890,000 children h ave elevated b l o o d

levels, t hi s i s down from1.7 million i n the l at e 1980s. Despite this, the Senate
A p propriations Committee s ays t hat l ead poisoning remains a serious childho o d
environmental condition, with some 4.4% of all c h i l d r en aged 1 t o 5 years h aving
el evat ed blood levels. This percent a ge, t h e Committee reports, i s m uch higher for
low-income children living i n o lder housing.
The House-approved b ill, H.R. 2861, would p rovide $130 million for the Lead
Hazard Control program in FY 2004, instead of the $136 million requested in the
budget and n early $45 million l ess t han appropriated f o r FY 2 003. In cluded i n t he
$130 million, $10 million i s recommended for Op eration LEAP (Lead Elimination
Action P rogram), a n ew initiative requested in the budget to leverage private s ector
resources to eliminate l ead-based paint hazards in low-income housing.
The S enate C o m mittee bill, S. 1584, recommends $175 million for the l ead
hazzard control p rogram, $39 million m or e t han t he budget request, n ear level with
the FY2003 funded amount, and $45 million m ore t han t he House approved amount
of $130 million. The S enate C ommittee also recommends $50 million for the l ead
haz z ard reduction d emonstration p rogram which was established i n FY2003 as a s et
as ide within the HOME program , t o focus on major urban areas where children are
disproportionately at risk for lead poisoning. The House bill does not include
funding for t his d emonstration p rogram.