The Department of Housing and Urban Development (HUD): FY2006 Budget

CRS Report for Congress
The Department of Housing and
Urban Development (HUD): FY2006 Budget
Updated February 28, 2006
Maggie McCarty, Libby Perl, and Bruce E. Foote
Domestic Social Policy Division
Eugene Boyd
Government and Finance Division


Congressional Research Service ˜ The Library of Congress

The Department of Housing and
Urban Development (HUD): FY2006 Budget
Summary
In February 2005, a House Appropriations Committee reorganization plan
abolished the Veterans Affairs, Department of Housing and Urban Development
(HUD), and Independent Agencies Subcommittee, sending HUD to a new Treasury,
Transportation, Judiciary, Housing and Urban Development, District of Columbia
and Related Agencies Subcommittee. A similar but not identical change was made
in the Senate, creating the Transportation, Treasury, HUD Subcommittee.
On February 7, 2005, the Administration submitted a $29.1 billion FY2006
budget request for HUD, which is 9% less than was provided in FY2005. The most
controversial part of the budget proposal would have eliminated the Community
Development Block Grant (CDBG) program in HUD and transferred its purposes to
the Department of Commerce, combining it with 17 other programs (that had
approximately $5.6 billion of appropriations in FY2005) into a new $3.7 billion
Strengthening America’s Communities Initiative (SACI) grant program. The
President’s budget proposal also included increased funding for Section 8 tenant-
based rental vouchers, Homeless Assistance Grants, and the HOME program;
decreased funding for Housing for the Disabled (Section 811), Housing for Persons
with AIDS, and Fair Housing programs; and elimination of funding for the HOPE
VI program.
On June 30, 2005, the House approved an FY2006 HUD appropriations bill,
H.R. 3058, funding HUD at more than $4 billion above the President’s requested
level. The bill, which rejected the President’s SACI initiative, would fund CDBG at
HUD and increase funding above the President’s request for several HUD programs.
On October 20, 2005, the Senate passed its version of H.R. 3058, providing for
HUD more than $5 billion above what the President requested and more than $1
billion above what the House version allocated. Like the House bill, the Senate
version rejected the President’s SACI initiative and proposed to fund CDBG and
related programs within the HUD budget, and increase funding above the President’s
request and the House-approved level for several HUD programs, including HOPE
VI and Section 811.
On October 28, 2005, the President submitted to Congress a rescission and
reallocation package that would rescind $124 million in HUD funding and transfer
$2.2 billion to HUD from FEMA’s disaster relief fund. A modified version was
attached to the FY2006 Defense Appropriations law (P.L. 109-148), providing $11.9
billion for HUD. That bill also contained a 1% across-the-board rescission that
applies to all of HUD’s discretionary programs.
On November 18, 2005, the House and Senate approved a final version of the
FY2006 HUD appropriations bill. It does not adopt the CDBG transfer, and funds
most programs between the House- and Senate-approved levels.



CRS
NameArea of ExpertiseDivisionTelephone and E-Mail
Eugene BoydCommunity and
economic
development, 7-8689
including CommunityG&Feboyd@crs.loc.gov
Development Block
Grants, Brownfields,
empowerment zones
Bruce FooteHomeownership,
including FHA,7-7805
predatory lending,DSPbfoote@crs.loc.gov
rural housing, GSEs,
RESPA
Jody FederFair Housing and7-8088
housing-related legalALDjfeder@crs.loc.gov
questions
Pamela JacksonHousing tax policy,
including the Low
Income Housing Tax7-3967
Credit and otherG&Fpjackson@crs.loc.gov
incentives for rental
housing and owner-
occupied housing
Maggie McCartyAssisted rental
housing, including7-2163
Section 8, public andDSPmmccarty@crs.loc.gov
assisted housing,
HOME
Libby PerlHousing for special
populations, 7-7806
including the elderly,DSPeperl@crs.loc.gov
disabled, homeless,
HOPWA
Division abbreviations: ALD — American Law; DSP — Domestic Social Policy;
G&F — Government and Finance



Contents
Most Recent Developments..........................................1
Introduction to the Department of Housing and Urban Development
(HUD) ......................................................3
FY2005 Appropriations.........................................3
FY2006 Budget Issues..........................................4
Section 8 Tenant-based Rental Assistance......................7
Section 8 Project-based Rental Assistance.....................12
Public Housing Programs..................................13
Native American Block Grants..............................17
Housing for Persons with AIDS (HOPWA)....................18
Rural Housing and Economic Development....................19
Empowerment Zones (EZ) and Enterprise Communities (EC)......20
Community Development Fund/Block Grants..................20
CDBG Section 108 Loan Guarantees.........................27
Brownfields Redevelopment................................27
The HOME Investment Partnership Program...................28
Self Help and Assisted Homeownership.......................29
Homeless Programs.......................................30
Housing Programs for the Elderly and the Disabled..............32
Affordable Housing and Economic Development
Technical Assistance Board.............................34
Federal Housing Administration (FHA).......................34
Office of Federal Housing Enterprise Oversight (OFHEO).........36
Fair Housing.............................................36
Lead-Based Paint Hazard Reduction..........................37
List of Tables
Table 1. Department of Housing and Urban Development
Appropriations, FY2001 to FY2005...............................3
Table 2. Appropriations: Housing and Urban Development,
FY2005 to FY2006............................................4
Table 3. Section 8 Tenant-Based Rental Assistance (Vouchers),
FY2005 to FY2006............................................7
Table 4. Section 8 Project-based Rental Assistance......................12
Table 5. Public Housing, FY2005 to FY2006..........................14
Table 6. Native American Block Grants, FY2005 to FY2006..............17
Table 7. HOPWA, FY2005 to FY2006...............................18
Table 8. Rural Housing and Economic Development,
FY2005 to FY2006...........................................19
Table 9. Empowerment Zones and Enterprise Communities,
FY2005 to FY2006...........................................20
Table 10. Community Development Fund (CDF):
Community Development Block Grants (CDBG)
and Related Set-Asides, FY2005 to FY2006........................21
Table 11. CDBG Section 108 Loan Guarantees.........................27



Table 13. The HOME Investment Program, FY2005 to FY2006............28
Table 14. Self Help and Assisted Homeownership.......................30
Table 15. HUD Homeless Programs, FY2005 to FY2006.................31
Table 16. Sections 202 and 811, FY2005 to FY2006.....................32
Table 17. Affordable Housing and Economic Development
Technical Assistance Board.....................................34
Table 18. Federal Housing Administration, FY2005 to FY2006............35
Table 19. Fair Housing Programs, FY2005 to FY2006...................36
Table 20. Lead-Based Paint Hazard Control, FY2005 to FY2006...........37



The Department of Housing and Urban
Development (HUD): FY2006 Budget
Most Recent Developments
Rescission and Reallocation Package Adopted. The President signed
the FY2006 Department of Defense appropriations bill into law, P.L. 109-148, on
December 30, 2005. It contained a reallocation of $29 billion in Hurricane Katrina
recovery funds, as well as a 1% across-the-board rescission for all domestic
discretionary programs. Under the law, HUD received $11.9 billion in supplemental
Katrina funds, $11.5 billion for the Community Development Block Grant program,
and $390 million for Section 8 vouchers for previously HUD-assisted families
displaced by the storm. The 1% cut resulted in a reduction of $380 million in HUD’s
FY2006 budget, as contained in P.L. 109-115. For more information, see CRS
Report RS22239, Emergency Supplemental Appropriations for Hurricane Katrina
Relief, by Keith Bea.
Congress Approves H.R. 3058. On November 18, 2005, both Houses of
Congress approved H.R. 3058, the FY2006 Treasury, Transportation, Judiciary,
Housing and Urban Development (HUD), District of Columbia, and Related
Agencies (TTHUD) funding bill. It was signed into law on November 30, 2005, as
P.L. 109-115. It includes $34 billion for HUD, which is less than the Senate-passed
level, but more than the House-passed or President-requested level. For most
accounts, the final agreement splits the difference between the House- and Senate-
approved levels, and it rejects the Administration’s Strengthening America’s
Communities Initiative (SACI), which would have eliminated the Community
Development Block Grant (CDBG) program and replaced it with a new program
within the Department of Commerce.
Rescission and Reallocation Package Submitted. On October 28,
2005, President Bush submitted to Congress a rescission and reallocation package to
help fund reconstruction in the Gulf Coast after the recent hurricanes. The proposal
would rescind and reallocate funds from selected programs across the government
and reallocate FEMA disaster relief funds to other agencies, including HUD. The
request includes a rescission of unobligated balances from the Section 811 program
of $100 million, from the HUD Brownfields Redevelopment program of $24 million,
and from the Section 108 loan guarantees program of $6 million. The proposal
would provide $2.2 billion in additional funding to HUD programs to aid in disaster
recovery, including $1.5 billion for the CDBG program; $50 million for the Self Help
Homeownership (SHOP) program; $70 million for the HOME Investment
Partnerships program; $390 million for the Section 8 voucher program to serve
displaced, previously HUD-assisted, families; and $200 million for an Urban
Homesteading program, which has not been enacted.



Senate Approves H.R. 3058. On July 21, 2005, the Senate Appropriations
Committee approved a $34.8 billion FY2006 budget for HUD. On October 20, 2005,
the full Senate approved H.R. 3058. Several floor amendments were adopted,
although they did not change the funding levels for any HUD accounts. Like the
House version, the Senate bill rejected the President’s SACI proposal. It included
increases in funding above both the President’s request and the House version for
HOPE VI, CDBG-related programs (including Section 108 loan guarantees), Native
American Housing Block Grants, and Rural Housing and Economic Development.
Continuing Resolution Passed. On September 30, 2005, President Bush
signed H.J.Res. 68 into law. The continuing resolution (CR) funded agencies
through the earlier of November 18, 2005, or the enactment of the regular
appropriations bills into law. Programs were funded at the lower of the FY2005
enacted, FY2006 House-passed, or FY2006 Senate-passed levels as of October 1,
2005. Since the FY2006 HUD appropriations bill had not been passed by the full
Senate by October 1, HUD’s programs were funded at the lower of the FY2005 or
House-passed level. Given the way funding is allocated in the majority of HUD
programs (either on a calendar-year basis or through competitive grants), any
reductions in funding as a result of the CR should have had little, if any, impact.
House Approves H.R. 3058. On June 21, 2005, the House Appropriations
Committee approved, with minor changes, an FY2006 TTHUD funding bill that was
approved by the Subcommittee on June 15, 2005. H.R. 3058 provided an overall
increase in funding for HUD of more than $4 billion above the President’s request.
On June 30, 2005, the House, by a vote of 405 to 18, approved H.R. 3058. During
floor consideration, several amendments were approved, increasing funding for
Section 8 vouchers, HOPE VI, CDBG, Brownfields, HOPWA, Lead-based Paint
Hazard Reduction, and Fair Housing programs, above the Committee-approved
levels.
House and Senate Budget Resolutions Passed. In March 2005, the
House and Senate passed differing versions of a budget resolution for FY2006
(H.Con.Res. 95). Both expressed support for continuing the CDBG program at
HUD.
President’s Budget Submitted. The President submitted his FY2006
budget to the Congress on February 7, 2005, requesting $29.1 billion for HUD, a cut
of $2.8 billion, or 9%, from FY2005 appropriations of $31.9 billion. The most
controversial aspect of the budget was the proposed elimination of the CDBG and
related programs at HUD, and their replacement with a new program at the
Department of Commerce.



Introduction to the Department
of Housing and Urban Development (HUD)
Most of the appropriations for the Department of Housing and Urban
Development (HUD) are designed to address housing problems faced by households
with very low incomes or other special housing needs. These include programs of
rental assistance for the poor, elderly or disabled, housing assistance for persons with
AIDS, and shelter for those who are homeless. The two large HUD block grant
programs, HOME and CDBG, also help communities finance a variety of activities
to address the housing and community development needs of disadvantaged
populations. In recent years, HUD has focused more attention on efforts to increase
the homeownership rates for lower-income and minority households. (At the end of
the fourth quarter of 2004, the national homeownership rate stood at 69.2, while the
rates for White, Black and Hispanic households stood at 76.2%, 49.1% and 48.9%
respectively.) HUD’s Federal Housing Administration (FHA) insures mortgages
made by lenders to lower income homebuyers, many with below-average credit
records, and to developers of multifamily rental buildings containing relatively
affordable units.
Table 1. Department of Housing and Urban Development
Appropriations, FY2001 to FY2005
(net budget authority in billions)
F Y 2001 F Y 2002 F Y 2003 F Y 2004 F Y 2005
$28.92 $30.15 $31.01 $31.20 $31.92
Source: Figures are from the House Appropriations Committee estimate tables. FY2005 figures are
adjusted to reflect the 0.8% across-the-board rescission enacted in P.L. 108-447. Final spending levels
for any fiscal year include all supplemental appropriations or rescissions. They do not reflect revised
estimates of offsetting receipts.
FY2005 Appropriations
The President signed the Consolidated Appropriations Act, 2005 on December
8, 2004 (P.L. 108-447) providing HUD with $31.9 billion, about 2% above the
FY2004 enacted level. The Administration had proposed a controversial initiative,
the Flexible Voucher Program (FVP), that would have significantly revised the
Section 8 voucher program and cut its funding. Congress did not adopt the FVP, but
continued with dollar-based funding, a practice first adopted in FY2004 that provided
some of the spending constraint that the Administration sought. Nevertheless, the
bill signed by the President approved $1.6 billion more for Section 8 than the
requested level. To pay for this significant increase, most other HUD programs were
reduced below their FY2004 appropriation levels. While the Administration
proposed no funding for the HOPE VI public housing revitalization program, P.L.

108-447 appropriated $144 million.



FY2006 Budget Issues
Table 2 below details the President’s FY2006 HUD budget and tracks the
Congressional response.
Table 2. Appropriations: Housing and Urban Development,
FY2005 to FY2006
(budget authority in $ billions)
FY2005FY2006FY2006 FY2006FY2006a
Program enacted request House Sena t e Co nf.
Tenant-based rental
assistance
(Sec. 8 vouchers)14.76615.84515.63115.63615.574
(includes advanced
appropriatio n)
Project-based rental5.2985.0725.0885.0725.088
assistance (Sec. 8)
Public housing capital2.5792.3272.6002.3272.464
fund
Public housing operating2.4383.4073.6003.5573.600
fund
HOPE VI0.143b0.000b0.0600.1500.100
Native American housing0.6220.583c0.600d0.6220.630
block grants
Native Hawaiian Blocke0.0090.009e0.009
Grant
Housing for Persons0.2820.2680.2900.2870.289
With AIDS (HOPWA)
Rural Housing Economic0.0240.000e0.0100.0240.017
Development
Empowerment Zones;f
Enterprise Communities0.0100.0000.0000.0000.000
(EZ/EC)
Co mmunity
Development Fund
(CDF)/Co mmunity g f h
Development Block4.8520.0004.2434.3244.220
Grant (CDBG)
(including supplemental
fund i ng)
B r o wnfield s 0.024 0.000f h 0.015 0.010
redevelopment
HOME Investment1.9001.9411.9001.9001.775
P artnerships
Homeless Assistance1.2411.4401.3401.4151.340
Grants
Self Helpi0.0300.061ji0.061 k


H o me o wne r s hi p

FY2005FY2006FY2006 FY2006FY2006a
Program enacted request House Sena t e Co nf.
Housing for the elderly 0.7410.7410.7410.7420.742
(Sec. 202)
Housing for the disabled 0.2380.1200.2380.2400.239
(Sec. 811)
Housing Counselingl0.040mm0.000
Assista nc e
Rental Housing0.0000.0260.0260.0260.026
Assista nc e
Research and technology0.0450.070n0.061n0.0480.056
Fair housing activities0.0460.0390.0470.0460.046
Office, lead hazard0.1670.1190.1670.1670.152
control
Salaries and expenses0.5430.5790.5790.5700.579
Working capital fund0.2680.2650.0620.2650.197
Inspector General0.0790.0790.0790.0820.082
Loan Guaranteeso0.0130.0040.0040.0130.009
Appro pria t io ns 36.318 33.003 37.226 37.529 37.305
Subt o t a l
Sec. 8 recaptures-1.557-2.500-2.494-1.500-2.050
( r e sc issio n)
HOPE VI rescissionb0.000-0.1430.0000.0000.000
Brownfields reciso0000-0.1p
Other rescissions-0.764q0.0000.0000.0000.000
Rescissions-2.321-2.643-2.494-1.500-2.060
Subt o t a l
Federal Housing-1.724-0.856-0.913-0.913-0.913
Administration (net)
GNMA (net)-0.357-0.357-0.357-0.357-0.357
Offsets Subtotal-2.082-1.213-1.271-1.270-1.271
To tal $31.915 $29.147 $33.671 $34.759 $33.974 a
CDF Supplemental
Funding NANANANA11.500
(P.L. 109-148)
Tenant-based rental
a ssista nc e
supplemental NA NA NA NA .3 9 0
fund i n g
(P.L. 109-148)
Total withNANANANA$45.864
Supplemental Funding
Source: Prepared by CRS based on information provided by the House Committee on
Appropriations, HUD’s Congressional Budget Justifications, House and Senate versions of H.R. 3058,
H.Rept. 109-153, S.Rept. 109-109, Conf. Rept. 109-307, and P.L. 109-148. FY2005 figures are



adjusted to reflect the 0.8% across-the-board rescission enacted in P.L. 108-447; FY2006 figures are
not adjusted to reflect the across-the-board rescission.
Note: This table does not include two accounts whose costs are equal to their offsetting receipts:
Manufactured Housing Fees Trust Fund ($12.9 million in FY2005 and $13 million in FY2006) and
the Office of Federal Housing Enterprise Oversight ($58.7 million in FY2005 and $60 million in
FY2006).
a. Note that P.L. 109-148, enacted after the HUD FY2006 Appropriations law, included an across-
the-board rescission of 1% to all domestic discretionary spending, which is not reflected in the
totals in this table. The rescission-adjusted FY2006 enacted figures will be available in FY2007
CRS HUD budget products.
b. The Administration has proposed that in FY2006, Congress provide no new funding and also
rescind the HOPE VI funding provided in FY2005.
c. Includes $58 million for Indian community and economic development activities, which, in
FY2005, received $68 million as a set-aside within the Community Development Fund.
d. Includes $45 million for Indian community and economic development activities, which, in
FY2005, received $68 million as a set-aside within the Community Development Fund.
e. In FY2005, $8.9 million was provided for this program (Hawaiian Homelands Homeownership)
as a set-aside within the Community Development Fund. The Senate bill provides $8.8 million
for this program in the Community Development Fund.
f. For FY2006, the Administration proposes to eliminate these programs and replace them with a new
program funded in the Commerce Department.
g. The CDBG appropriation includes $180.8 million in CDBG supplemental funding for FY2005,
including $30.8 million appropriated under Section 424 of P.L. 108-447 and $150 million
appropriated under P.L. 108-324.
h. Two floor amendments to the House Appropriations Committee version of H.R. 3058, adding
funds to the CDF account, were approved. H.Amdt. 396 added $67.5 million to the CDF
account to increase funding for CDBG formula grants and ensure funds were available for
Youthbuild. H.Amdt. 404 added $24 million to the CDF account to be used for Brownfields.
i. In FY2005, $24.8 million was provided for this program as a set-aside within the Community
Development Fund. The Senate bill provides $15 million for this program in the Community
Development Fund.
j. The House bill would rename this account Self-Help and Assisted Homeownership and transfer to
it funding for several set-asides that were formerly funded under the Community Development
Fund. See Table 14 for details.
k. The final bill adopts the new account proposed by the House, although it allocates the funds
differently. See Table 14 for details.
l. In FY2005, $41.7 million was provided for this program as a component of HOME.
m. The House provides $41.7 million for Housing Counseling Assistance as a set-aside within the
HOME program. The Senate bill proves $42 million for Housing Counseling Assistance as a
set-aside within the HOME program.
n. Includes $29 million requested for University Partnerships, which, in FY2005, received a total of
$33 million as set-asides within the Community Development Fund.
o. This category includes Section 108 ($7 million in FY2005, $0 in President’s request and House
bill, $7 million in Senate bill, $3.75 million in the conference report), Native Hawaiian housing
($992,000 in FY2005 and $882,000 in President’s request and House bill, $1 million in Senate
bill, $900,000 in the conference report) and Indian housing loan guarantees ($5 million in
FY2005 and $2.6 million in President’s request and House bill, $5 million in Senate bill, $4
million in the conference report). For FY2006, the Administration proposed to replace Section
108 loan guarantees with a new, larger program in the Commerce Department.
p. The bill rescinds $10 million from prior years appropriations; however, if sufficient funds are not
available, they can be taken from current year appropriations.
q. Includes one-time rescissions of unobligated balances from the following accounts: Public Housing
Drug Elimination grants, Title VI credit subsidy, Urban Development Action Grants, rental
housing assistance and GI/SRI credit subsidy.



Section 8 Tenant-based Rental Assistance. The Section 8 program is
really two programs: tenant-based rental assistance, commonly called vouchers, and
project-based rental assistance (see below). The two programs were previously
funded under a joint account called the Housing Certificate Fund, which was split
into the two components by the FY2005 appropriations law. (See CRS Report
RL32284, An Overview of the Section 8 Housing Program, by Maggie McCarty.)
Section 8 Housing Choice Vouchers (vouchers) are portable federal subsidies that
low-income families use to reduce their housing costs in the private market. HUD
currently funds over two million Section 8 vouchers. Note that approximately $4.2
billion of the funds shown in the table below are provided in the form of an advance
appropriation for the following year, and each year approximately $4.2 billion is
available from the previous year. This advance funding structure had been used to
provide funds to the Public Housing Authorities (PHAs) that administer the voucher
program in the months between the beginning of their fiscal years and the time the
federal budget is enacted in final form, which, in recent years, has generally lagged
the federal fiscal year and often lagged the calendar year. The FY2004
appropriations bill synchronized PHA fiscal year start dates; however, this advanced
funding structure has continued.
Table 3. Section 8 Tenant-Based Rental Assistance
(Vouchers), FY2005 to FY2006
(in millions)
FY2005 FY2006 FY2006 FY2006FY2006
enacted request House Sena t e Co nf.
Section 8 a
Tenant-based Rental$14,766$15,845$15,631$15,636$15,574
Assistance (vouchers)
Voucher renewals13,35514,09014,19014,09014,090
Administrative costs1,2001,2951,2251,2951,250
Rental subsidy reserve045bcd
Family Self Sufficiency4655454848
Tenant Protection162354166192180
Workig Captl Fud36666
Tech. Assist. Boarde5
Disaster Assistance
Supplemental $390
(P.L. 109-148)
Total with supplemental $15,964
f unding
Source: See Table 2.
a. The House provides $15,631,400,000 for tenant-based rental assistance, but the amounts provided
for the components of the account as listed in the bill and the report total to $15,631,356,000.
The $44,000 discrepancy has not been clarified and may be due to rounding.
b. The House would permit up to $45 million to be set aside in renewal funding for the Secretary to
use to adjust the budgets of agencies that were adversely impacted by the FY2005 funding
formula due to portability vouchers.



c. The Senate version of H.R. 3058 would permit the Secretary to use up to $45 million of renewal
funds to be used to adjust the budgets of agencies who were adversely impacted by the FY2005
formula due to the three-month period of time used or due to portability vouchers.
d. The final version would permit the Secretary to use up to $45 million of renewal funds to be used
to adjust the budgets of agencies that (1) apply for an adjustment because they had unusually
low leasing levels during the May-July period that was the basis for FY2005 funding or (2) that
the Secretary determines to have a significant increase in renewal costs due to unforeseen
circumstances or portability vouchers.
e. See Table 17.
Advance Appropriations (included in above totals for indicated year):
FY2005: $4.20 billion (for use in FY2006)
FY2006: $4.20 billion (for use in FY2007)
Rescission of Unobligated Balances from Prior Years:
FY2005: $1.6 billion
FY2006: $2.50 billion (proposed); $2.49 billion (House); $1.5 billion (Senate);
$2.1 (final)
Voucher Renewals. The most contentious aspect of the tenant-based
assistance account is the renewal of existing vouchers. Congress has authorized the
creation of more than 2 million vouchers over the history of the program and the
funding for virtually all of them expires every year. If a family is using a voucher to
lease an apartment but funding is not sufficient to renew it, then the family will lose
its assistance and likely lose its current housing. Prior to FY2004, HUD funded
PHAs based on the number of vouchers they were using and the cost of those
vouchers. If costs went up or PHAs were able to use more of their vouchers, they
received additional funds to cover those costs. In FY2005, at Congress’s direction,
HUD funded PHAs based on the number of vouchers they were using and the cost
of those vouchers in May-July 2004, plus inflation, reduced (by 4%) to fit within the
amount appropriated. This new formula was designed to contain the growing cost
of the program. Many PHAs and low-income housing advocates opposed the new
formula, arguing that it left many agencies with inadequate funding to maintain their
programs. While it appears that few agencies were required to terminate assistance
to families as a result of budget shortages, many agencies suspended the reissuance
of vouchers when families left the program and undertook other administrative
measures to cut costs.
The President’s FY2006 budget request included $14.1 billion to renew expiring
voucher subsidies, an increase of 5% from FY2005. It proposed distributing renewal
funding to PHAs on a pro-rata basis, based on what they received last year plus an
inflation adjustment, and prorated to fit within the amount appropriated. In addition
to renewal funding, the Administration requested $45 million for a central reserve
fund to cover the cost of unforeseen exigencies experienced by PHAs, such as natural
disasters or significant changes in the economic condition of a locality. Congress
provided HUD with a central reserve account in FY2003 and FY2004, but not in
FY2005.



H.R. 3058, as it passed the House Appropriations Committee on June 21, 2005,
provided more than $300 million less for tenant-based assistance than the President
requested, but funded renewals at the President’s requested level. During floor
proceedings on June 30, 2005, an amendment adding $100 million for tenant-based
renewals was approved. The increase was offset by a decrease in funding for the
Working Capital Fund. The bill proposed to distribute renewal funding using the
same formula proposed by the President. It would have permitted the Secretary to
set aside $45 million of renewal funding to adjust budgets that were adversely
affected by the FY2005 funding formula due to a high number of portability
vouchers.
The Senate version of H.R. 3058 would have funded renewals at the President’s
requested level. Unlike the House bill and the President’s request, the Senate bill
would not have funded agencies based on the funding they received in FY2005 plus
inflation. Rather, agencies would have received renewal funding based on their
voucher costs and leasing over the past 12 months, plus inflation, and pro-rated to fit
within the amount appropriated. Low-income housing and PHA groups advocated
for this use of more recent data. The Senate bill would have provided the Secretary
with the authority to use up to $45 million to adjust PHA budgets if they were
adversely affected by the May-July formula either because those months were
anomalous for the agency or because the agency faced a high number of portability
vouchers.
The final version of H.R. 3058 funds renewals at the same level proposed by the
Senate bill and the President’s request, $100 million less than the House-passed
level. It adopted the renewal funding formula proposed by the President and included
in the House bill. For calendar year 2006, agencies will receive the amount of funds
they were eligible to receive in 2005, plus inflation, adjusted for tenant protection
vouchers, HOPE VI vouchers, and project-based reservations, and reduced to fit
within the appropriated amount. The bill permits the Secretary to set aside up to $45
million to (1) adjust the budgets of PHAs that apply for an adjustment because of
temporarily low leasing during May-July 2004, and (2) adjust the budgets of PHAs
that experienced a significant increase in renewal costs, as determined by the
Secretary, due to unforeseen circumstances or portability vouchers.
Administrative Fees. Prior to FY2003, PHAs were paid a fixed fee per
voucher administered. Beginning in FY2003, at Congress’s direction, HUD changed
the way it distributed administrative fees, providing agencies with a pro-rata share
of the amount appropriated for administrative fees, based on what they had received
in the previous year. The change was designed to contain the cost of administrative
fees, which were estimated to have grown to account for 10% of the cost of a
voucher.
The President’s FY2006 budget requested $1.3 billion for administrative fees,
an 8% increase over FY2005, and would have distributed the funds on a pro-rata
basis. The House bill proposed $1.2 billion and also would have allocated the funds
on a pro-rata basis, except for $25 million that the Secretary could set aside to
distribute to agencies in need of additional funds to administer their programs. The
bill also would have allowed the Secretary to transfer up to $200 million from the
tenant-based account to project-based rental assistance, which, if done, would have



reduced the amount of administrative funds to well below the FY2005 level. The
Senate bill would have funded administrative fees at the President’s requested level
and distributed them on a pro-rata basis.
The final version of H.R. 3058 provides $1.25 billion for administrative fees,
splitting the difference between the House and Senate levels. Of that amount, $10
million will be available for the Secretary to allocate to agencies in need of extra
money to run their programs, and the remaining funds will be allocated on a pro-rata
basis, based on last year’s distribution. The bill does not include the $200 million
transfer authority provided in the House bill.
Tenant Protection Vouchers. Tenant protection vouchers are provided to
families in a variety of circumstances, including families who are threatened with
displacement because the contract on their assisted unit is ending (project-based
Section 8, for example); families who are displaced from public housing (due to
demolition or disposition); families in the witness protection program; and families
in the child welfare system.
The President requested an increase in funding for tenant protection vouchers
of almost 120% for FY2006. The proposed increase was attributed partly to the
needs of the HOPE VI program and partly to a new rule that HUD stated would be
published in 2005 that would permit the Secretary of HUD to require the conversion
of public housing to vouchers, a practice called Mandatory Conversion. The report
accompanying the House-passed version of H.R. 3058 expressed doubt that the
mandatory conversion rule would be implemented before the end of FY2006, and
therefore proposed to fund tenant-protection vouchers at roughly the same level as
last year (an increase of about 3%). The Senate version expressed the same doubt
about the mandatory conversion rule and noted that, for many of the units that would
be subject to the rule, HOPE VI remains a viable option. The Senate recommended
$192 million for tenant protection vouchers, more than the House but less than the
President’s request.
The final version of H.R. 3058 provided $180 million for tenant protection
vouchers, which is less than the President’s request and falls between the House- and
Senate-proposed levels.
Rescission. The President’s FY2006 budget requested that Congress rescind
$2.5 billion in unobligated balances from the tenant-based rental assistance account.
The request included a provision stating that, if sufficient funds were not available
within the account, the Secretary could use funds from other accounts to meet the
rescission target. Low-income housing advocates stated concern that sufficient funds
would not be available in the tenant-based rental assistance account and that other
programs would be negatively affected by the rescission. When questioned about the
source of funds to meet the requested rescission in hearings before the Senate
Appropriations Committee on April 14, 2005, the Secretary indicated that he was not



sure where the funds would come from and could not guarantee that they would not
come from active programs.1
The House bill proposed a rescission level of $2.49 billion, about $6.4 million
less than the President proposed, and included language permitting the Secretary to
use funds from other accounts, as necessary. The Senate bill proposed a notably
lower rescission level and a provision stating that, if sufficient funds were not
available within the Section 8 tenant-based or project-based account, the Secretary
would be required to first take up to 10% from the HUD salaries and expenses
account and up to 10% from the Office of Management and Budget’s appropriation,
before taking funds from other HUD programs.
The final version of H.R. 3058 rescinds $2.1 billion in unobligated funds from
the Section 8 accounts. The language permits the Secretary to use funds from other
accounts, if necessary, but does not include the language proposed by the Senate
requiring reductions first from HUD and OMB’s appropriations. The accompanying
conference report directs the Secretary to report to the Appropriations Committee

30days before taking funds from other accounts.


Voucher Reform Legislation. Beyond funding levels, the FY2006 budget
documents also stated that the President intends to introduce a new proposal to
reform the tenant-based voucher program. One purpose for this reform proposal is
to contain, if not reduce, the cost of the program. According to the President’s
budget summary: “Section 8’s program costs are cannibalizing every HUD program
— at the same time waiting lists of families seeking housing continue to grow.” The
Congressional Budget Justifications state that this new proposal will provide
additional flexibility to PHAs, which will enable them to run their programs more
effectively and efficiently and better respond to the current budget-based funding
structure in the program. Reform proposals were also submitted as a part of the
FY2004 and FY2005 budgets, although congressional action was not taken on either.
The State and Local Housing Flexibility Act of 2005 was introduced in the Senate
on April 13, 2005 (S. 771) and in the House on April 28, 2005 (H.R. 1999). It would
replace the current voucher program with a new program, called the Flexible
Voucher Program, which would have fewer rules and regulations than the current
program, would provide for greater discretion in administering the program for both
the Secretary of HUD and for PHAs, and, low-income housing advocates contend,
would also provide fewer resources and protections for very poor families. For more
information, see CRS Report RL31930, Section 8 Housing Choice Voucher
Program: Funding and Related Issues, by Maggie McCarty.
Emergency Supplemental Hurricane Funding. In October 2005, FEMA
engaged HUD in a mission assignment to provide rental assistance to families that
were unlikely to qualify for standard FEMA assistance — specifically, families that
were receiving HUD rental assistance or were homeless when the storm struck. On
December 30, 2005, the President signed a supplemental appropriations bill, P.L.109-


1 Congressional Quarterly, Congressional Transcripts, Congressional Hearings, April 14,
2005, Senate Appropriations Subcommittee on Transportation, Treasury, the Judiciary, and
Housing and Urban Development Holds Hearing on FY2006 Appropriations.

148, which transferred $390 million to HUD from FEMA to provide this rental
assistance directly. HUD has implemented the program as the Disaster Voucher
Program (DVP), and it is largely governed by Section 8 voucher program rules,
although the Secretary was given the authority to waive income eligibility and rent
determination rules. For more information on the role of the voucher program in
response to the 2005 Hurricanes, see CRS Report RL33270, The Section 8 Housing
Voucher Program: Reform Proposals, by Maggie McCarty.
Section 8 Project-based Rental Assistance. This account provides
funding to renew existing contracts between HUD and private landlords providing
subsidies to low-income families that allow them to live in private market rental
units, but pay only 30% of their incomes toward rent. Project-based Section 8 differs
from Section 8 vouchers in that the subsidy is provided to a specific unit of housing
in which a family can live, rather than to a family to then use to pay for the housing
of their choice. No new contracts are entered into under this program; the funding
provided is used only to renew existing contracts and pay administrative costs. This
program was formerly funded with the Section 8 tenant-based rental assistance
account in a merged account titled the Housing Certificate Fund until the account was
split in FY2004.
Table 4. Section 8 Project-based Rental Assistance
(in millions)
FY2005 FY2006 FY2006 FY2006FY2006
enacted request House Sena t e Co nf.
Section 8 Project-based$5,298$5,072$5,088$5,072$5,088
Rental Assistance
P r oj ect-b ased 5,195 4,923 4,940 4,918 4,940
Re ne wa ls
Co ntract 101 147 147 147 147
Ad ministrato rs
Working Capital22121
Fund
Tech. Assist. Boarda5
Source: See Table 2.
a. See Table 17.
Renewals. The President requested a 5% decrease in renewal funding for
project-based rental assistance contracts in FY2006. HUD budget documents
explained that the Department planned to augment the renewal funding request with
$622 million in funds recaptured from previous years and savings from program
improvements. The additional funds would have raised the program level to $5.6
billion, an increase of 6% over the FY2005 program level.
The House version of H.R. 3058 proposed $17 million more for renewals than
the President requested. The bill would have permitted the Secretary to transfer, if
necessary, up to $200 million from the tenant-based rental assistance account to the



project-based account. The Senate version of H.R. 3058 proposed funding project-
based renewals at the President’s requested level, and did not include the transfer
language included in the House version. The Senate Committee report raised
concern that HUD was not doing enough to encourage landlords in the project-based
Section 8 program to renew their contracts and thus preserve the properties as
assisted housing. The Senate bill proposed that the Government Accountability
Office (GAO) assess HUD’s efforts to preserve assisted housing.
The final version of H.R. 3058 adopts the House-passed funding level for
project-based renewals, but does not include the transfer authority proposed by the
House. The bill does not include a request for the GAO report proposed by the
Senate, but does direct the Department to study and report back on the living
conditions of residents in two developments in Illinois.
Contract Administrators. The President’s budget requested a 46% increase
in funding for contract administrators and stated that $185 million in unobligated
balances would be used to augment the funding, resulting in a program level increase
of 70% over FY2005. Contract administrators are subcontracted by HUD to manage
the long-term Section 8 contracts between HUD and private owners of subsidized
multifamily units. HUD continues to manage a portion of the contracts; however, the
Department intends to transfer most, if not all, contracts to contract administrators
in the future. The FY2006 budget request includes an increase of $67 million to fund
the transfer of additional contracts from HUD to contract administrators. Further,
HUD’s budget justifications state that the Department intends to begin using contract
administrators to manage rental assistance contracts outside of the Section 8 program,
such as those entered into under the Section 202 Housing for the Elderly program.
The budget documents note that $30 million would be used to fund these transfers.
The House, Senate, and final versions of H.R. 3058 funded contract
administrators at the President’s requested level and permitted the expansion of
contract administrators to additional programs.
Public Housing Programs. Public housing provides publicly owned and
subsidized rental units for very low-income families. While no new public housing
developments have been built for many years (except through the HOPE VI program,
which is discussed below), Congress continues to provide funds to maintain the
existing stock of over 1.2 million units. The Operating Fund provides funds to PHAs
for the ongoing maintenance and administration of public housing. The Capital Fund
provides funding to PHAs for large capital projects and modernization needs. HOPE
VI is a competitive grant program that provides funds to help demolish and/or
redevelop severely distressed public housing developments, with a focus on building
mixed-income communities.



Table 5. Public Housing, FY2005 to FY2006
(in millions)
FY2005 FY2006 FY2006 FY2006FY2006
enacted request House Sena t e Co nf.
Public Housing Operating$2,438 $3,407$3,600$3,557$3,600
F und
Department of Justice
crime prevention (Weed80000
and Seed)
Graduation bonuses101010010
Transition to asset- 05000
based management
Tech. Assist. Boarda50
Public Housing Capital$2,579 $2,327 $2,600,$2,327$2,464
F und
T echnical 39 11 11 11 11
assistance/remediation
Existing judicial39999
receivership
Working Capital Fund1013101311
Emergncy repairs3017171717
Service coordinators
and supportive services5324244538
( ROSS)
Neighborhood 1500158
Netwo r ks
Demolition, site200
r e me d iatio n
HOPE VI$143 $0b$60c$150c$100
Source: See Table 2.
a. See Table 17.
b. The Presidents FY2006 budget proposes no new funding for HOPE VI and requests that Congress
rescind the full amount provided to the program in FY2005.
c. Neither the House nor Senate version of H.R. 3058 would rescind FY2005 HOPE VI funding.
Operating Fund. Operating funds are paid to PHAs to help make up the
difference between the low rents paid by tenants living in public housing and the cost
of running the buildings. The President’s budget requested $3.4 billion for the
operating fund in FY2006. While this represents an increase over the FY2005
enacted level, it is a decrease in the program level. In FY2005, Congress enacted an
accounting change in the program that provided a one-time savings of $992 million.
The total amount available for operating subsides in FY2005 (minus the set-asides
listed above) was $16 million more than the amount requested for FY2006. Despite
the slight decrease, the FY2006 request would have been sufficient to fund agencies
at a similar proration level as FY2005. According to HUD’s budget documents, in
FY2005, agencies received approximately 90.5% of the amount that they qualified



for under the operating subsidy formula; in FY2006 they would receive
approximately 89% at the President’s requested level.
On April 14, HUD issued a proposed rule to revise the current formula for
distribution operating subsidies. The proposed rule differed from a version of the
rule agreed to by HUD and the stakeholders that participated in a congressionally-
mandated negotiated rulemaking process. HUD’s decision to publish an altered, and
arguably less costly, form of the negotiated rule proved to be controversial. HUD
contended that the proposed rule better reflects the Department’s policy and
budgetary priorities. Nonetheless, on September 19, 2005, HUD published a final
rule that reinstated most of the provisions of the negotiated rule that had been
eliminated in the proposed rule and delayed implementation until 2007.
The House version of the HUD funding bill proposed almost $200 million more
for the operating fund than the President requested, resulting in more funding
available in FY2006 than was available in FY2005. It included language directing
the Secretary of HUD to distribute FY2006 operating funds using the formula agreed
to by the negotiated rulemaking committee. The bill also included $50 million to
help agencies that faced losses of more than 5% under the new formula transition to
asset-based management.
The Senate version of the HUD funding bill proposed $150 million more than
the President requested for the Operating Fund. While $50 million less than the
House recommended level, the Senate bill proposed to set aside fewer funds, leaving
more to be distributed through the operating fund formula than the House bill. While
the Senate bill would not mandate the use of the negotiated rule, the accompanying
report stated that the Committee expected the final rule to “reflect the negotiated
agreement ... to the greatest extent possible.”
The final version of H.R. 3058 funds the Operating Fund at the House-passed
level, which is higher than the President’s request or Senate-passed level, but will be
a decrease from the FY2005 program level. The bill does not include language
specifying how the funds should be distributed, noting the postponed implementation
of the new rule. The conference agreement directs HUD to include broad
participation from affected agencies when developing the technical guidance to
implement the new rule.
Capital Fund. The President’s FY2006 budget proposed a 10% decrease in
capital funding for PHAs. Under the request, the amount available for capital grants,
after set-asides, would have been 7% lower than what was distributed in FY2005.
HUD budget justifications state that the decreased funding level would be sufficient
to meet annual capital repair needs. However, there is a backlog of unmet
modernization needs in public housing that is estimated to be between $18-$20
billion, which this funding level would not address. HUD argues that reductions in
the capital fund are necessary to ensure that tenant-based rental assistance receives
sufficient funding. The request would have cut the Resident Neighborhood
Opportunities for Self Sufficiency (ROSS) funding in half. ROSS funds are used to
provide supportive services for residents of public housing, including job training,
work supports and case management. The President also proposed to eliminate
funding for Neighborhood Networks, which are used to build and update technology



centers in Public Housing and to assist low-income households develop computer
skills.
The House-passed version of H.R. 3058 would have provided almost $250
million more than the President requested for capital funding. The bill would have
adopted the President’s requested funding levels for ROSS and Neighborhood
Networks, so the full increase would have gone to capital grants, providing a 4%
increase above the amount available for capital grants in FY2005 and a 12% increase
over the amount the President requested for capital grants in FY2006.
The Senate-passed version of the HUD funding bill would have adopted the
President’s requested level for the capital fund, which is lower than the House-
approved level. It would have increased funding for set-asides above the President’s
requested level (for example, almost doubling ROSS funding over the President’s
request), leaving less available for capital grants than the President requested (-2%),
the FY2005 level (-9%), and the House-approved level (-12%).
The final version of the HUD funding bill splits the difference between the
House and Senate funding levels for the Capital Fund, providing $2.46 billion, a
decrease from the FY2005 level, but higher than the President’s request. The bill
also splits the difference between the House and Senate levels for ROSS and
Neighborhood Networks, providing $38 million and $8 million, respectively.
HOPE VI. For the third year, the President’s budget requested no new funding
for HOPE VI, claiming that the program has met its mandate, that program funds are
spent too slowly, and that per unit costs are too high. Despite the President’s request,
in FY2004 and FY2005, Congress funded HOPE VI, but at a lower level than in
FY2003 when over $570 million was provided to the program. In addition to
requesting no new funding for the program, the President’s budget proposes that
Congress rescind the funds it provided to the program in FY2005.
The version of H.R. 3058 that passed the House Appropriations Committee on
June 21, 2005, did not provide any new funding for the HOPE VI program in
FY2006, but did not rescind the FY2005 funding. During floor debate on June 30,
2005, an amendment was approved transferring $60 million to the HOPE VI program
for FY2006 from the General Services Administration’s Federal Buildings Fund.
The Senate-passed bill proposed $150 million for HOPE VI, a slight increase
over the FY2005 level. The Committee, in its report, “urge[d] the Department to
reconsider the elimination of the HOPE VI program, and consider a restructured
HOPE VI program that is more efficient, cost-effective and still capable of leveraging
other funds for rebuilding often distressed communities....”
The enacted version of H.R. 3058 provides $100 million for the HOPE VI
program, an amount nearly halfway between the House and Senate-passed levels.
Although the final bill funded the program, the accompanying conference agreement
stated that “the conferees believe it is time to consider alternative approaches to the
HOPE VI program....”



For more information, see CRS Report RL32236, HOPE VI Public Housing
Revitalization Program: Background, Funding, and Issues, by Maggie McCarty.
Native American Block Grants. The Native American Block Grants
replaced several separate programs of assistance in 1996. It provides grants to Indian
Tribes and their Tribally Designated Housing Entities to meet housing and
community development needs in their areas.
Table 6. Native American Block Grants, FY2005 to FY2006
(in thousands)
FY2005 FY2006 FY2006 FY2006FY2006
enacted request House Sena t e Co nf.
Native American housing$621,984$582,600$600,000$622,000$630,000
block grants
Formula Grants610,744517,709549,342605,700618,350
Technical Assistance 4,4642,3082,3084,5004,500
National American Indian2,18301,2002,2001,000
Housing Council
Indian Tribesa57,78345,000aa
Tech. Assist. Boardb5,000
Source: See Table 2.
Note: The table does not include all set-asides. The amount for formula grants is not specified in the
House, Senate, or final bill. The figures shown here are derived from subtracting all set-asides from
the total provided for the account.
a. In FY2005, $68.4 million was provided for this program as a set-aside in the Community
Development Fund and the Senate bill recommends $69 million for this program as a set-aside
in the Community Development Fund for FY2006 (see Table 9). The final version appropriates
$60 million as a set-aside in the Community Development Fund.
b. See Table 17.
The President’s FY2006 budget proposed an appropriation of $583 million for
the Native American Block Grant program, a decrease of $39 million. The total
included $58 million for the Indian Community Block Grant activities. In prior years
these activities were funded as a set-aside within the Community Development Block
Grant program. Effectively, this may be regarded as an additional decrease in
funding for the Native American Block Grant program since $58 million, which
would otherwise be used for other purposes, would have to be used for economic
development activities.
The House-passed version of H.R. 3058 increased funding for Native American
Block Grants above the President’s requested level, but below the FY2005 enacted
level. The funding for formula grants is 6% above the President’s request, but 10%
below the FY2005 enacted level. The bill adopted the President’s request that the
Indian Economic Block Grant program, which was funded within the Community
Development Fund, be funded as a set-aside in this account; H.R. 3058 would set



aside $45 million for this purpose, which is a 35% reduction in funding from FY2005
and a 22% reduction in funding from the President’s request.
The Senate-passed version of the HUD funding bill increased funding for the
Native American Block Grants account above the FY2005 level, the President’s
request, and the House level. The amount available for formula grants would be
slightly decreased from FY2005, but would be an increase of 10% over the House-
passed level and 17% over the President’s request. The Senate Committee, in its
report, noted concern about the significant unspent balances in the account as well
as revised eligibility definitions adopted for distribution of FY2004 formula funding.
The Committee encouraged HUD to work to facilitate the timely expenditure of
funds and to reassess the new eligibility definition.
P.L. 109-115 appropriates $630 million for Native American Housing Black
Grants. P.L. 109-115 requires HUD to make two calculations when determining the
allocation to each tribe. HUD must determine the amount of the allocation based on
single-race Census data and on multi-race Census data, and allocate the greater of the
two to the tribe. An administrative provision requires that in FY2006, HUD allocate
block grants to the same Native Alaskan organizations that received block grants in
FY2005.
Housing for Persons with AIDS (HOPWA). HOPWA provides housing
assistance and related supportive services for low-income persons with HIV/AIDS
and their families. Funding is distributed both by formula allocation and competitive
grants to states, localities and nonprofit organizations.
Table 7. HOPWA, FY2005 to FY2006
(in thousands)
FY2005 FY2006 FY2006 FY2006FY2006
enacted request House Sena t e Co nf.
Housing for Persons with$281,728$268,000$295,000$287,000$289,000
AIDS (HOPWA)
Source: See Table 2.
The Administration’s budget proposed to reduce HOPWA program funding by
5% in FY2006. This funding decrease, according to HUD budget documents, would
have reduced the number of households served in FY2006 from 70,400 to 67,000.
The Department stated that this funding decrease was necessary in order to meet the
funding needs of the Section 8 voucher program.
The House Appropriations Committee’s version of the bill proposed funding the
program above the President’s request, at $285 million. During floor debate of the
bill on June 30, 2005, an amendment was added to H.R. 3058 increasing HOPWA
funding by another $10 million, to $295 million. The Senate-passed bill increased
HOPWA funding about $5 million above the FY2005 level and about $20 million
above the President’s requested level, although it provided less than the House by
$18 million.



The final appropriation for HOPWA funds the program at $289 million for
FY2006, an increase of approximately 2.6% over FY2005. The final amount exceeds
the Administration’s request by $21 million, the Senate’s version by $2 million, and
is $6 million less than the House proposal. For more information on HOPWA, see
CRS Report RS20704, Housing Opportunities for Persons with AIDS (HOPWA), by
Maggie McCarty.
Rural Housing and Economic Development. This program provides
competitive grants to states and localities to fund capacity building and innovative
housing and economic development activities in rural areas.
Table 8. Rural Housing and Economic Development,
FY2005 to FY2006
(in thousands)
FY2005 FY2006 FY2006 FY2006FY2006
enacted request House Sena t e Co nf.
Rural Housing$23,808$0$10,000$24,000$17,000
Economic Development
Source: See Table 2.
In prior years, the Administration has proposed zero funding for the Rural
Housing and Economic Development program (RHED), but Congress has responded
by funding the program at about $25 million. For FY2006, the Administration
proposed to consolidate RHED into a new program within the Department of
Commerce, called the “Strengthening America’s Communities Initiative.” (See
discussion of Community Development Fund/Block Grants below.)
Neither the House nor Senate bill would adopt the President’s Strengthening
America’s Communities Initiative, and both would continue to fund Rural Housing
and Economic Development as a freestanding program at HUD. The House
proposed $10 million, less than half of what was provided in FY2005, while the
Senate Committee proposed $24 million, which is slightly more than was approved
in FY2005. P.L. 109-115 appropriates $17 million for the program.



Empowerment Zones (EZ) and Enterprise Communities (EC). The
EZ/EC program awards tax incentives to eligible businesses located in EZ designated
zones. Grant funds are also awarded to support EZ/EC activities.
Table 9. Empowerment Zones and Enterprise Communities,
FY2005 to FY2006
(in thousands)
FY2005 FY2006 FY2006 FY2006FY2006
enacted request House Sena t e Co nf.
Empowerment zones;$9,920$0$0$0$0
enterprise communities
Source: See Table 2.
The Bush Administration’s budget proposal called for eliminating funding for
the EZ/EC program along with 17 other community development, economic
development, and community service programs, and replacing them with a new block
grant called Strengthening America’s Communities Initiative. (See discussion of
Community Development Fund/Block Grants, below.)
The House, Senate, and conference versions of H.R. 3058 rejected the
President’s Strengthening America’s Communities Initiative proposal; however, none
of the versions of H.R. 3058 included funding for EZ/ECs in FY2006.
Community Development Fund/Block Grants. The CDBG program is
the largest source of federal assistance in support of housing, community and
economic development activities of states and local governments. The
Administration’s FY2006 budget would eliminate funding for the CDBG program
and related set-asides. The activities of the CDBG program along with 17 other
community development, economic development, and community services programs
would have been carried out under a new block grant. The new block grant proposal,
called the “Strengthening America’s Communities Initiative,” would have been
funded at $3.7 billion. This amount is $416 million less than the $4.116 allocated to
the formula portion of the CDBG and insular areas in FY2005 and $1.1 billion less
than the $4.8 billion appropriated in FY2005 for the total Community Development
Fund, which includes the CDBG formula program and related set-asides and
earmarks.
According to the Administration, the new initiative would:
!reduce fragmentation in the delivery of federal community and
economic development assistance by consolidating the activities of
18 programs that are presently administered by five different federal
agencies;
!improve accountability by ensuring that communities focus on
tangible outcomes; and
!target assistance to areas with the greatest needs.



A number of organizations representing states and local governments voiced
reservations about the Administration’s new initiative and expressed support for the
CDBG program. Such organizations as the National League of Cities, the U.S.
Conference of Mayors, the National Association of Counties, and the National
Governors Association noted that the Administration was late to include them in any
discussions about its new initiative and provided few details about the initiative. A
March 1 Federal Register notice announced the creation of an advisory panel to
assist the Secretary of Commerce develop the legislative proposal. When support for
the new proposal did not materialize, the Administration characterized the proposal
as a work in progress. On July 21, 2005, the Commerce Department announced the
release of the SACI advisory committee’s report which included a number of
findings, guiding principles, and recommendations intended to assist the Secretary
develop a specific legislative proposal. The SACI Advisory Committee’s report is
available from the Council on Competitiveness at [http://www.compete.org/
pdf/SACAC_Report.pdf]. For a discussion of the Administration’s proposal, see
CRS Report RL32823, An Overview of the Administration’s Strengthening America’s
Communities Initiative, by Eugene Boyd, coordinator.
Table 10. Community Development Fund (CDF):
Community Development Block Grants (CDBG)
and Related Set-Asides, FY2005 to FY2006
(in thousands)
FY2005 FY2006 FY2006FY2006FY2006
Program enacted request House Sena t e Co nf.
Total: CDF, CDBG$4,853,073$0$4,243,000$4,323,610a$4,220,000
(see Note below)
Formula-based grantsb4,116,835 3,877,4003,767,010$3,748,400
Set-asides (see below736,238 365,600553,600471,600
for details)
Set-asides: $736,2380$365,600$553,600471,600
Indian Tribes68,448cd69,00060,000r
Disaster Assistance150,000e
Housing Assistance3,2740f3,000f
Co unc i l
National American2,3810f2,000f
Indian Housing Council
National Housing
Development 4,762000 f
Co rporatio n
National Council of La4,762004,200f
Raza
Section 10743,350gh32,400
Techal asitance1,389000
— Hawaiian
Homelands 8,928 i j 8,800


Ho meo wn e rsh ip

FY2005 FY2006 FY2006FY2006FY2006
Program enacted request House Sena t e Co nf.
— Historically Black9,920gh9,000t
Coll. & Univ.
— Hispanic-Serving6,646gh6,000t
I n stitu tio n s
— Community
Development Work2,877gh1,0000
Study
— Alaskan Native and
Native Hawaiian-3,968gh3,000t
Serving Institutions
— Tribal Colleges and2,976gh2,600t
Un iversities
— Community6,646gh2,0000
outreach partnership
Working capital fund3,4371,6003,0001,600
transfer
Tech. Assist. Boardk00010,000
S e l f-H e l p
ho me o wne r s hi p 24,800 l f 15,000 f
opportunity
National Community
Development Initiative34,2240f30,000qf
(NCDI)/Capacity
b uild ing
Special Olympics1,9840f0f
Yo uthb uild 61,504 m 50,000n 55,000 50,000s
Neighborhood initiative41,6640040,00050,000
d e mo nstr atio n
Econ. development291,648o0290,000290,000310,000
initiatives
Brownfields Economicpp24,000ppp
Development
Disaster Assistance
Supplemental (P.L.11,500,000
109-148)
Total with Hurricane
Supplement a l $15,720,000
F unding
Source: See Table 2.
Note: The total amount shown in FY2005 for the CDF, CDBG account in this table is taken from the
HUD Congressional Budget Justifications and is just under $1 million higher than the amount shown
in the House Appropriations Committee’s re-estimate of the President’s budget table and shown in
Table 2. The source of this discrepancy is unclear, but seems to be attributable to the EDI set-aside.
See table note “o” below for more details.



a. The sum of the amount specified in the Senate bill for formula grants and set-asides totals $2.6
million less than the total appropriation level for the CDF specified in the bill. It is unclear
whether the Committee intends for the Department to use these funds for formula grants or for
a set-aside.
b. The amount specified in each appropriations bill for formula grants is split between grants to
entitlement communities (which receive 70% of grant funds) and states (which receive 30% of
formula grant funds).
c. $57.8 million is requested for this program within the Native American Housing Block Grant.
(See Tables 2 and 5.)
d. The House version of H.R. 3058 includes $45 million for the Indian CDBG program in the Native
American Housing Block Grant account. (See Tables 2 and 5.)
e. P.L. 108-324, a supplemental appropriations bill, provided $150 million to the CDF account for
emergency disaster assistance to communities affected by disasters designated by the President
between August 31, 2003 and October 1, 2004.
f. The House and conference versions of H.R. 3058 would create a new account called the Self-Help
Assisted Homeownership account. The House version of the account included $23.8 million
for Self-Help Homeownership (SHOP); $28 million for NCDI capacity building grants to the
Local Initiative Support Corporation, the Enterprise Foundation, and Habitat for Humanity; $1
million for Special Olympics; $1 million for National American Indian Housing Council; $3
million for the Housing Assistance Council; and $4 million in one-time funding for the Housing
Partnerships Network. An additional $1.2 million is provided in the Native American Housing
Block Grant account to be awarded to the National American Indian Housing Council for
capacity building and technical assistance. The conference version of the act included $20
million for SHOP, $30 million for NCDI/capacity building, $3 million for Housing Assistance
Council, $1 million for National American Indian Housing Council, $4 million for the La Raza
HOPE Fund, $2 million for the National Housing Development Corp., and $1 million for
Special Olympics.
g. The following amounts are requested within Research and Technology (see Table 2): Historically
Black Colleges and Universities — $9.0 million; Hispanic-Serving Institutions — $6.0 million;
Community Development Work Study $2.6 million; Alaskan Native and Native Hawaiian-
Serving Institutions — $3.0 million; Tribal Colleges and Universities — $2.6 million; and
Community Outreach Partnerships — $6.0 million.
h. The House version of H.R. 3058 would provide $29 million within the Research and Technology
Account (see Table 2) for assistance to university based programs previously funded under the
CDBG account. Funding for the following university-based program would shift from the
Office of Planning and Development to the Office of Policy Development and Research:
Historically Black Colleges and Universities — $8.967 million; Hispanic-Serving Institutions
— $5.979 million; Alaskan Native and Native Hawaiian-Serving Institutions — $2.989 million;
Tribal Colleges and Universities — $2.562 million; and Community Outreach Partnerships
$5.979 million; Community Development Work Study — $2.562 million.
i. $8.8 million is requested for this activity within the Native Hawaiian Block Grant. (See Table 2.)
j. The House version of H.R. 3058 would fund this program as a separate account in FY2006 (see
Table 2) at its requested level, $8.8 million.
k. See Table 17.
l. $30 million is requested for this program as a separate line item. (See Table 2.)
m. $58.9 million is requested for this program within the Department of Labor.
n. A House floor amendment to H.R. 3058 added $67.5 million to the CDF account; floor statements
indicate that up to $50 million of the amount was available for Youthbuild, unless the program
is funded within the Department of Labor.
o. In addition to the EDIs specified within the HUD portion of the FY2005 omnibus appropriations
bill ($262 million), P.L. 108-447 also appropriated $31 million to the Community Development
Fund for a grant to the Hudson River Park Trust (Division I, Title IV, Section 424). This brings
the total EDIs in FY2005, pre-rescission, to $293 million, which post-rescission, would total
$291.7 million. However, HUD’s Congressional Budget Justifications indicate that in FY2005,
EDIs were funded at $291.6 million post-rescission, which is equivalent to $294 million in EDIs
pre-rescission. The source of this additional $1 million in EDI funds is unclear and was not
included in the House Appropriations Committee’s re-estimate of the President’s budget.
p. In FY2005 and prior, the Brownfields program was funded in a separate account. A House floor
amendment to H.R. 3058 added $24 million to the CDF account and the sponsor specified that
the funds were to be used for Brownfields. The Senate and conference bills funds Brownfields
in a separate account.



q. S.Amdt. 2183 added language to the bill that would set aside $5 million for capacity building
activities of Habitat for Humanities. This amendment, which was approved by voice vote,
superseded S.Amdt. 2114, which would have set aside $4.5 million for Habitat for Humanities
capacity building activities.
r. Includes $4 million for emergencies that constitute an imminent threat to health and safety.
s. Includes $4 million to establish YouthBuild programs in underserved and rural areas, and $1
million for capacity building activities of YouthBuild USA.
t. The following amounts were provided within Research and Technology (see Table 2): Historically
Black Colleges and Universities — $9.0 million; Hispanic-Serving Institutions — $6.0 million;
Alaskan Native and Native Hawaiian-Serving Institutions — $3.0 million; and Tribal Colleges
and Universities — $2.6 million.
On June 21, the House Appropriations Committee passed a FY2006 HUD
funding bill that included $4.15 billion for the Community Development Fund within
HUD. By recommending FY2006 funding for the CDBG program, the measure
rejected the Administration’s proposed “Strengthening America’s Communities
Initiative (SACI).” The proposed funding of $4.151 billion for the Community
Development Fund included $3.860 billion for CDBG formula grants awarded to
entitlement communities and states, which is $250 less than appropriated in FY2005;
and $290 million for EDI grants for congressional earmarked projects, which is $30
million more than was made available in FY2005.
Under the bill, as reported by the Committee, a number of CDBG set-asides and
related programs would not be funded in FY2006 including the YouthBuild,
empowerment zones, brownfields, and Section 108 loan guarantees. In addition, the
bill proposed transferring funding for several CDBG-related asides to other
accounts within HUD. A new self-help and assisted homeownership account would
provide, among others, $23 million for the Self-Help Homeownership Program
(SHOP), $28 million for the National Community Development Initiative, and $3
million for the Housing Assistance Council. It also recommended transferring to
HUD’s Office of Policy Development and Research $29 million in funding for
university programs previously included as CDBG set-asides under Section 107 —
including assistance to historic black colleges and universities, institutions serving
Hispanic populations, and a community development work study program.
On June 30, 2005, the House, by a vote of 405 to 18, approved H.R. 3058, and
forwarded the bill to the Senate for its consideration. Before approving the bill, the
House considered and approved several amendments, two of which increased funding
for the CDF account to a total of $4.324 billion. The House approved by voice vote
an amendment (H.Amdt. 396) offered by Representative Knollenberg that would
have provided an additional $67.5 million to the CDF account. Floor debate
indicated that $50 million of that amount was to be made available for the
Youthbuild program, unless the program was funded within the Department of
Labor’s budget. The additional $17.5 million was to be allocated to CDBG formula
grants. As approved by the House, the CDBG formula-based program would have
received $3.9 billion in funding, which is approximately $230 million below its
FY2005 funding level. During floor consideration of the bill, the chairman of the
TTHUD Appropriations Subcommittee, Representative Knollenberg, stated his
intention to continue to seek a means of restoring the CDBG formula-based program
to its FY2005 funding level. A second amendment, offered by Representative Gary
Miller and approved by voice vote added another $24 million to the CDF account to
be used for the HUD Brownfields Redevelopment program. In prior years, the



program was funded within its own account, not as a set-aside within the CDF (see
below.)
Representative Gingrey offered, but later withdrew, an amendment that would
have prohibited the use of CDBG funds for economic development projects in
instances where privately owned land was acquired through the use of eminent
domain. The amendment was offered in response to the June 23, 2005, Supreme
Court decision in Kelo v New London, Connecticut, which upheld the use of eminent
domain to acquire privately held property and transfer it to another private party for
government-supported economic development projects. The Supreme Court held,
in a 5 to 4 decision, that such a transfer is permissible if it results in a public benefit
such as job creation and increased tax revenues. The House approved an
amendment, H.Amdt. 427, offered by Representative Scott Garrett that would
prohibit the use of funds in H.R. 3058 to enforce the Supreme Court’s Kelo decision.
The amendment, which was approved by a vote of 231 -189, would, if approved by
both the House and Senate, prohibit the use of any federal appropriations, including
CDBG, transportation, and housing funds, included in H.R. 3058 from being used to
directly or indirectly support economic development projects involving the use of
eminent domain. (For more information, see CRS Report RS22189, Condemnation
of Private Property for Economic Development: Kelo v. City of New London, by
Robert Meltz.)
On July 21, 2005, the Senate Appropriations Committee approved its version
of H.R. 3058 by a vote of 28-0. The Senate version of the bill would have
appropriated $4.324 billion for Community Development Fund (CDF) activities,
including $3.767 billion for CDBG formula grants, and $554 million for CDBG-
related set asides and earmarks. It would have also appropriated $72 million more
for programs and set-asides funded under the CDF account than recommended by the
House (see discussion below), but would have allocated $110 million fewer dollars
to CDBG formula grants.
On October 20, 2005, the full Senate approved its version of H.R. 3058 by a
vote of 93-1. The Senate version of the bill would have continued to fund a number
of smaller CDBG-related programs under the CDF account, unlike the House bill,
which would provide no funding, reduce funding, or would transfer the activity to
another account within HUD. For instance, the Senate bill included $69 million for
the Native American CDBG, while the House version would appropriate $45 million
for the program. The Senate bill would have appropriated $32.4 million in funding
for college and university programs and retain the programs under the CDF account,
while the House bill called for transferring the activity to a new Self Help and
Assisted Homeownership account; it would appropriate $40 million for the
Neighborhood Initiative Program, a program that was not included in the President’s
request or the House version of the bill; and it would have appropriated $30 million
for capacity building grants under the National Community Development Initiative
program, which is $2 million less than the amount recommended by the House.
Like the House version of H.R. 3058, the Senate version also included
provisions limiting the use of federal funds in economic development projects
involving eminent domain. During the Senate Appropriations Committee
consideration of H.R. 3058, Senator Bond introduced and then withdrew a proposed



amendment that would have prohibited the use of federal funds in economic
development projects involving the use of eminent domain. The amendment would
have allowed the use of federal funds if the project involved airports, seaports, mass
transit, or was intended to revitalize a blighted area. During Senate floor
consideration of the bill, Senator Bond again introduced an amendment (S.Amdt.
2113) to limit the use of federal dollars in support of economic development projects
involving eminent domain. The Bond amendment, which was approved by voice
vote, stated that no appropriated funds included in H.R. 3058 could be used to
support any federal, state, or local government-assisted projects involving the use of
eminent domain unless such projects or activities involve a public purpose. The
amendment would not include economic development “that primarily benefits private
entities” as an eligible public purpose, but would include transportation and utility
projects that benefit the general public, as well as projects involving the removal of
blighted areas or brownfields as public use activities. Such projects would be
allowed the use of eminent domain without the loss of federal funds. The
amendment would also direct the Government Accountability Office (GAO) and the
National Academy for Public Administration, state and local government
organizations, and property rights organizations to conduct a study-by-state study of
the use of eminent domain.
The conference version of H.R. 3058, which was approved by the House on
November 18 and the Senate on November 21, 2005, appropriates $4.220 billion for
Community Development Fund activities, including $3.748 billion for the CDBG
formula grant program. This is 9% less than appropriated for formula grants in
FY2005. The act includes $471 million for various CDF set-asides, and earmarks
with the majority of such funds — $310 million — allocated among 1126 EDI
earmarked projects. Of the remaining funds, $50 million is earmarked for
Neighborhood Initiative 50 projects identified in the conference report; another $50
million is to be awarded to local YouthBuild organizations. The $310 million in EDI
earmarks represents a 7% increase in funding for such projects over the amount
appropriated in FY2005 ($290 million) .
The conference version of the act shifts funding for a number of programs
previously funded under this account to other HUD accounts. Funding for the SHOP
program, National Community Development Initiative, the Housing Assistance
Council, the National American Indian Housing Council, and the La Raza HOPE
Fund are now funded under a new Self-Help Assisted Homeownership account.
Assistance for minority-serving universities and colleges previously funded under
Section 107 (Special Projects) are now funded under the Policy Development and
Research account (see footnotes f and t in Table 10 for funding allocations).
Section 726 of the General Provisions of Title VII of the TTHUD
Appropriations Act for FY2006, includes the language prohibiting federal, state, and
local governments from using funds appropriated under the act for projects involving
the use of eminent domain, unless such projects or activities involve a public
purpose. The provision excludes economic development “that primarily benefits
private entities” as an eligible public purpose, except in cases involving the removal
of blighted areas, brownfield redevelopment, mass transit, transportation, and utility
projects that benefit the general public. Such projects would be allowed the use of
eminent domain without the loss of federal funds. The provision also directs GAO



and the National Academy for Public Administration, state and local government
organizations, and property rights organizations to conduct a study-by-state study of
the use of eminent domain.
Emergency Supplemental Hurricane Funding. Congress included $11.5
billion in FY2006 supplemental appropriations for disaster-recovery assistance under
the Community Development Block Grant (CDBG) in P.L. 109-148, to assist the five
states (Louisiana, Mississippi, Alabama, Texas, and Florida) impacted by hurricanes
Katrina, Rita, and Wilma. Of this amount, $6.2 billion was allocated to Louisiana.
Among other provisions, (1) affected states were authorized to use up to 5% of their
allocation for administrative costs; (2) HUD was authorized to grant waivers of
program requirements (except those relating to fair housing, nondiscrimination, labor
standards, and the environment); and (3) Mississippi and Louisiana were authorized
to use up to $20 million for Local Initiative Support Corporation and Enterprise
Foundation-supported local community development corporations. The HUD
income targeting requirement for activities benefitting low- and moderate-income
persons was decreased from 70% to 50% of the state’s allocation.
CDBG Section 108 Loan Guarantees. The Section 108 loan guarantee
program allows states and entitlement communities to leverage their annual CDBG
allocation in order to help finance brownfield redevelopment, large scale economic
development, and housing projects. CDBG entitlement communities and states are
allowed to borrow up to five times their annual CDBG allocation for qualifying
activities. As security against default states and entitlement communities must
pledge their current and future CDBG allocation.
Table 11. CDBG Section 108 Loan Guarantees
(in thousands)
FY2005 FY2006 FY2006 FY2006 FY2006
enacted request House Sena t e Co nf.
Section 108 loan$5,592$0$0$6,000$3,000
guarantee
Source: See Table 2.
The Administration included the Section 108 program in the list of programs
whose activities would be consolidated under its Strengthening America’s
Communities Initiative. The House version of H.R. 3058 did not include funding
for the program, but the Senate version of the bill would have provided a $6 million
subsidy fund that would have supported a loan commitment ceiling of $275 million.
The conference version of the act included $3 million subsidy fund that will support
a loan commitment ceiling of $137.5 million.
Brownfields Redevelopment. The Brownfields Redevelopment program
is a competitive grant program that provides funds to assist cities with the
redevelopment of abandoned, idled and underused industrial and commercial
facilities where expansion and redevelopment is burdened by real or potential
environmental contamination.



Table 12. Brownfields Redevelopment, FY2005 to FY2006
(in thousands)
FY2005 FY2006 FY2006FY2006FY2006
enacted request House Sena t e Co nf.
B r o w nf ields $23,808 $0 a $15,000 $10,000
redevelopme nt
Source: See Table 2.
a. For FY2006, the House funds the Brownfields program at $24 million as a set-aside within the
Community Development Fund.
The Administration’s FY2006 budget included Brownfield Economic
Development Initiative grants among the 18 programs that would be eliminated and
whose activities would be consolidated under a new program — Strengthening
America’s Communities Initiative — to be administered by the Department of
Commerce. (See discussion above.)
H.R. 3058, as reported by the Appropriations Committee, rejected the
President’s Strengthening America’s Communities Initiative proposal; however, it
did not include funding for the Brownfields Redevelopment program in FY2006.
During consideration of H.R. 3058, the full House approved by voice vote an
amendment offered by Representative Gary Miller that would have appropriated $24
million to the Community Development Fund account for HUD’s Brownfield
program. The Senate version of the bill included $15 million for the program. The
conference version of the act appropriates $10 million for the Brownfield
Redevelopment activities.
The HOME Investment Partnership Program. Created in 1990, the
HOME Investment Partnerships Program provides formula-based block grant
funding to states, units of local government, Indian tribes and insular areaas to fund
affordable housing initiatives. Eligible activities include acquisition, rehabilitation
and new construction of affordable housing as well as rental assistance for eligible
families.
Table 13. The HOME Investment Program, FY2005 to FY2006
(in millions)
FY2005 FY2006 FY2006 FY2006 FY2006
enacted request House Sena t e Co nf.
HOME (total)$1,900$1,941$1,900$1,900$1,775
Formula grantsa1,7891,7301,7901,7911,697
American Dream50200505025
Downpayment Initiative
HOME/CHDO 18 10 17 10 10
Technical Assistance
Housing counseling42b424242



FY2005 FY2006 FY2006 FY2006 FY2006
enacted request House Sena t e Co nf.
Working capital fund21121
transfer
Tech. Assist. Boardc5
Source: See Table 2.
a. Includes funding for insular areas, which received $3.6 million in FY2005 and for which the
President requested $3.5 million in FY2006.
b. The budget proposed that Housing Counseling be funded at $39.7 million in a separate account.
c. See Table 17.
The FY2006 budget requested $1.94 billion for the HOME program, an increase
of $41.3 million over the level enacted in FY2005. This increase was attributable to
an increase of $150 million for the American Dream Downpayment Initiative (ADDI)
and a decrease for all the other HOME program set-asides. A similar increase was
requested in FY2005 and ADDI was funded instead at $50 million. Concern was
raised that the program may be helping families who may not be the best candidates
for homeownership, and a Government Accountability Office (GAO) review of the
program suggested that it was unlikely that HUD would be able to obligate more than
$40 to $50 million during the fiscal year. As in prior years, the budget requested that
Housing Counseling be funded in a separate account within the housing programs
budget.
Both the House and Senate-passed versions of the FY2006 HUD bill would
have provided $1.9 billion for the HOME program in FY2006, less than the President
requested, but slightly more than was provided in FY2005. In the House bill, funding
for formula grants would have been increased over both the FY2005 level and the
President’s requested level. The Senate bill would have increased formula grants
slightly above the House level. In both bills, the American Dream Downpayment
Initiative would have been funded close to the FY2005 level, which is substantially
less (-75%) than the President’s requested level. Neither bill would have provided
separate funding for Housing Counseling, as requested by the President; instead, the
bills included a set-aside for housing counseling within the HOME account.
The final version of H.R. 3058 cut funding for the HOME program by $125
million from the President’s request, House-passed, and Senate-passed levels. The
American Dream Downpayment Initiative is funded at half of the House and Senate
levels. The HOME formula grants face the largest decrease, a 5% cut from the
FY2005 enacted level. The final version of H.R. 3058 continues to fund housing
counseling assistance as a set-aside within the HOME program.
Self Help and Assisted Homeownership. The Self Help Homeownership
Program (SHOP) provides grants to non-profits, including Habitat for Humanity, to
fund self-help homeownership (for example, sweat-equity) programs. In FY2005
and prior years, SHOP was funded as a set-aside within the CDF account. As a part
of the larger SACI proposal, the President requested in his FY2006 budget that
Congress fund the Self Help Homeownership program as a separate line-item in the
budget.



While SACI was not adopted in H.R. 3058, the House did choose to fund SHOP
in a new account, with several other programs. This new account, called Self Help
and Assisted Homeownership, would consolidate funding for several programs that
were previously funded as set-asides within the Community Development Fund
account and provide funding for one program that does not appear to have received
funding in FY2005. H.Rept. 109-153 notes that most of the programs in the account
are funded at a reduced level, consistent with reductions in many HUD programs
necessary to meet rental assistance priorities. The Senate-passed version of the bill
does not include this account. P.L. 109-115 creates the new account and appropriates
$61 million for it.
Table 14. Self Help and Assisted Homeownership
(In thousands of dollars)
FY2005 FY2006 FY2006 FY2006 FY2006
enacted request House Sena t e Co nf.
Self Help and AssistedNANA$60,800NA$61,000
Homeow nership
Self Helpaa30,80023,800a20,000
Homeownership (SHOP)
National Communityaa b28,000a30,000
Development Initiative
Housing Assistanceaab3,000a3,000
Co unc i l
Housing Partnership 4,00002,000
Netwo r k
National American Indianaa b1,000ca1,000
Housing Council
Special Olympicsaab1,00001,000
National Council of Laab0a4,000
Raza
Source: See Table 2.
a. In FY2005 and in the Senate-passed version of the FY2006 HUD funding bill, these programs were
funded as set-asides in the Community Development Fund (see Table 9).
b. These programs are proposed for elimination as a part of the Presidents Strengthening America’s
Communities Initiative (see discussion beginning on page 17).
c. An additional $1.2 million is provided in the Native American Housing Block Grant account to be
awarded to the National American Indian Housing Council for capacity building and technical
assistance. (See Table 5.)
Homeless Programs. 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) and administered by HUD. Three of the four programs
are competitive grant programs: the Supportive Housing Program (SHP), the Shelter
Plus Care program (S+C) and the Single Room Occupancy program (SRO). Funding
for the fourth HUD program, the Emergency Shelter Grants program (ESG), is
distributed via a formula allocation to states and local communities.



Table 15. HUD Homeless Programs, FY2005 to FY2006
(in thousands)
FY2005 FY2006 FY2006FY2006FY2006
enacted request House Sena t e Co nf.
Homeless $1,240,511 $1,440,000 $1,340,000 $1,415,000 $1,340,000
Assistance Grants
T echnical 11,408 11,674 11,674 11,674 11,674
Assist. / Da ta
Working 2,480 1,000 1,000 1,000 1,000
Capital Fund
Sama r itan 0 200,000 0 0 0
I nitiative
Prisoner Re-025,000000
entry Initiative
Tech. Assist.a5,000
Board
Source: See Table 2.
a. See Table 17.
The President’s FY2006 budget request proposed to provide $200 million more
for homelessness programs than in FY2005. In addition, as in FY2004 and FY2005,
the Administration proposed to consolidate the three competitive components of the
Homeless Assistance Grants account into a single competitive program.
Consolidation legislation was not introduced in FY2004 or FY2005, although the
FY2006 budget stated that legislation would be submitted to Congress this session.
The Administration’s budget included two additional initiatives. The Samaritan
Initiative accounted for the full $200 million increase over FY2005 appropriations.
It would fund services-enriched supportive housing for chronically homeless
individuals. Authorizing legislation for the Samaritan Initiative was introduced in
the 108th Congress, but was not enacted, and no funds were provided for the initiative
in FY2005. In addition to the Samaritan Initiative, the President’s budget proposed
$25 million for a Prisoner Re-entry Initiative, with funds transferred from HUD to
the Department of Justice for use in helping individuals exiting prison successfully
transition to community life and employment. The same proposal was included in
the President’s FY2005 budget request, but was not enacted.
The House-passed version of H.R. 3058 provided $100 million less for the
Homeless Assistance Grants account than the President requested, which is $100
million more than the account received in FY2005. The House bill did not designate
any funding for the Samaritan Housing Initiative and did not authorize funding for
the Prisoner Re-entry Initiative. The House Appropriations Committee report
(H.Rept. 109-153) noted that because authorizing legislation for the Prisoner Re-
entry Initiative has not been enacted, funding for the program was not included in its
version of H.R. 3058.
The Senate-passed version of the FY2006 HUD appropriations bill increased
funding above the FY2005 level by about $175 million, and above the House-



approved level by about $75 million. Like the House bill, the Senate bill did not
designate any funding for the Samaritan Housing Initiative and did not authorize
funding for the Prisoner Re-entry Initiative.
The final spending bill adopted the House’s proposed funding level and
appropriates $1.34 billion for the Homeless Assistance Grants, $100 million below
the President’s request, and $100 million more than FY2005, an increase of just more
than 8%. The final version does not include funding for the Samaritan Initiative or
the Prisoner Reentry Initiative. The Conference Report (H.Rept. 109-307) reiterated
the directive in the Senate Appropriations Committee Report (S.Rept. 109-109) that
HUD continue to implement its Homeless Management Information System to count
and track the homeless, and report its progress to Congress by March 10, 2006. For
more information on HUD’s Homeless Assistance Grants, see CRS Report RL30442,
Homelessness: Recent Statistics, Targeted Federal Programs, and Recent
Legislation, by Libby Perl, coordinator. For more information on HMIS, see CRS
Report RS22328, The Homeless Managment Information System, by Libby Perl.
Housing Programs for the Elderly and the Disabled. Formerly known
together as Housing for Special Populations, the Section 202 housing for the elderly
and the Section 811 housing for the disabled programs provide capital grants and
ongoing rental assistance to developers of new subsidized housing for these
populations.
Table 16. Sections 202 and 811, FY2005 to FY2006
(in thousands)
FY2005FY2006 FY2006FY2006FY2006
enacted request House Sena t e Co nf.
Housing for the Elderly$741,024$741,000$741,000$742,000$742,000
(202)
Service coordinators49,60053,00049,60053,00051,600
Grants for conversion to24,80030,00024,80030,00024,800
assisted living
Pre-development grants17,856 20,00020,000
Working Capital Fund446450400450400
Tech. Assist. Boarda2,500
Housing for the Disabled$238,080$119,900$238,100$240,000$239,000
(811)
Working Capital Fund446450400450400
PRAC Renewal2,3305,0002,300NSNS



FY2005FY2006 FY2006FY2006FY2006
enacted request House Sena t e Co nf.
New Mainstream 9,92005,0005,0005,000
V o uc he r s
Mainstream Voucher49,60080,00078,300NS78,300
Re ne wa l
Voucher Amendments28,659
Tech. Assist. Boarda2,500
Source: See Table 2.
Note:NS” indicates that a specfic amount is not specified.
a. See Table 17.
While the President’s FY2006 budget proposal for the Section 202 program
represented level funding, the President’s request for Section 811 represented a 50%
cut in funding over FY2005. Further, Section 811 funding would not have been
available for capital grants under the President’s proposal; rather, the full amount
would have been used to provide vouchers to persons with disabilities. HUD budget
documents do not provide a rationale for the reduction or restriction on use for capital
grants. In testimony before the House Appropriations Subcommittee on
Transportation, Treasury, HUD, the Judiciary, and the District of Columbia, the
Secretary of HUD referred to the need to make unpopular cuts in programs such as
Section 811 in order to maintain adequate funding for Section 8 and programs for the
homeless.
Both the House and Senate versions of H.R. 3058 proposed to fund the Section
202 program at about the President’s requested level, and approximately the same
level as FY2005 spending. A floor amendment in the Senate (S.Amdt. 2140) made
$10 million available for the Section 202 LEGACY demonstration program (P.L.
108-186), which provides housing for low-income elderly heads of households who
care for children. Both House and Senate versions proposed to fund the Section 811
program at about the FY2005 level, and, unlike the President’s request, allowed
funds to be used for capital grants. The Senate bill included language proposing to
transfer the renewal of Section 811 vouchers to the Section 8 tenant-based rental
assistance account. Under the Senate proposal, it appeared that the tenant-based
account would be required to absorb the cost of vouchers, thus leaving additional
dollars in the Section 811 account for capital grants.
The enacted appropriation for FY2006 funds Section 202 at $742 million. It
also retains the Senate’s proposal to set aside funding for the Section 202 LEGACY
demonstration program, but reduces the amount to $4 million from $10 million. The
final spending bill funds Section 811 at $239 million, an increase of approximately
$1 million over FY2005, and twice as much as the President’s request. Like the
House and Senate versions, the final version includes funds for capital grants, but
does not transfer Section 811 vouchers to the Section 8 tenant-based rental account,
as the Senate version proposed.



Affordable Housing and Economic Development Technical
Assistance Board. The Senate version of H.R. 3058 would have established a
new program designed to provide technical assistance to local non-profit
organizations involved in managing HUD programs and activities. The Affordable
Housing and Economic Development Technical Assistance Board (AHEDTAB)
would be comprised of three national organizations (the Local Initiative Support
Corporation, the Enterprise Foundation, and the Centre for Management and
Technology), and would be charged with developing uniform policies and best
practices to assist local non-profit organizations to effectively develop and manage
local housing and economic development programs. The AHEDTAB would be
assisted by an advisory board composed of a number of groups which have
participated in HUD programs, including the Housing Assistance Council, the
Corporation for Supportive Housing, the National Alliance to End Homelessness, the
National Council of La Raza, the National Urban League, the National American
Indian Housing Council, the National Association for the Mentally Ill, and the
American Association of Homes and Services for the Aging.
The program would have been funded by transferring a total of $50 million from
several existing HUD programs, including Section 8 tenant-based and project-based
rental assistance, the CDBG program, the Native American Housing Block Grant
program, the HOME program, Section 202 Housing for the Elderly, the Homeless
Assistance program, and Section 811 Housing for Persons with Disabilities program.
Neither the President’s budget request nor the House version of H.R. 3058 includes
a similar provision. The Board was not created in the final version of H.R. 3058.
Table 17. Affordable Housing and Economic Development
Technical Assistance Board
(in thousands)
FY2005FY2006FY2006 FY2006 FY2006
enacted requestHouseSenateConf.
Tech. Assist. Board00050,0000
Source: See Table 2.
Note: This account would not receive a direct appropriation, rather, the funds are transferred from
other accounts.
Federal Housing Administration (FHA). The FHA administers a variety
of mortgage insurance programs that insure lenders against loss from loan defaults
by borrowers. Through FHA insurance, lenders make loans that otherwise may not
be available, and enable borrowers to obtain loans for home purchase and home
improvement as well as for the purchase, repair, or construction of apartments,
hospitals, and nursing homes. The programs are administered through two program
accounts — the Mutual Mortgage Insurance/Cooperative Management Housing
Insurance fund account (MMI/CMHI) and the General Insurance/Special Risk
Insurance fund account (GI/SRI). The MMI/CMHI fund provides insurance for home
mortgages. The GI/SRI fund provides insurance for more risky home mortgages, for
multifamily rental housing, and for an assortment of special purpose loans such as
hospitals and nursing homes.



Table 18. Federal Housing Administration, FY2005 to FY2006
(in thousands)
FY2005 FY2006a FY2006 FY2006 FY2006
enacted request House Sena t e Co nf.
Total FHA$-1,724,436$-856,300$-913,300$-913,300$-913,300
Appro pria t io ns
Expenses - MMI432,419436,600418,600418,600418,600
Offsetting (2,234,000) (1,309,000) (1,309,000) (1,309,000) (1,309,000)
Receipts - MMI
Net
Appropriations -$-1,801,581$-872,400$-890,400$-890,400$-890,400
MMI
Expenses -352,145316,100316,100316,100316,100
GI/SRI
Offsetting (248,000) (300,000) (339,000) (339,000) (339,000)
Receipts - GI/SRI
Net
Appropriations -$77,145$16,100$-22,900$-22,900$-22,900
GI/ S R I
Source: See Table 2.
a. Note that the President’s request numbers are taken from the Appropriations
Committee’s re-estimate of the President’s budget as shown in tables provided in
H.Rept. 109-153 and S.Rept. 109-109.
As shown in Table 18, FHA has negative appropriations, which means that the
income to the program from insurance premiums exceeds the program expenses.
This suggests that, because of the surplus generated by FHA, HUD needed $1,724
million less in appropriations in FY2005. The negative appropriation has
implications for two legislative initiatives that have been proposed by the
Administration. One initiative would permit 100% FHA financing for first-time
buyers with strong credit records. Under the other initiative, HUD would amend its
underwriting guidelines in order to permit borrowers with blemished credit records
to obtain FHA-insured loans. The FHA insurance premiums for these borrowers
would be increased to cover the higher risks and costs involved in these initiatives.
The President’s budget assumed that these initiatives would create $268 million in
additional negative appropriations in FY2006. The budget also assumed that the
MMI and GI/SRI programs would generate $1,956 million in offsetting receipts.
Based on its assumptions of income, costs, and fees to the insurance funds, the
Administration estimated net FHA appropriations of $-1,489 million for FY2006.
The Appropriations Committee, however, did not accept the Administration’s
assumptions. The Committee’s re-estimate (shown in Table 18 as the FY2006
request) assumes zero savings from the proposed initiatives, and it assumes $347
million less in offsetting receipts.
Both House and Senate versions of H.R. 3058 assume lower administrative
expenses in the MMI account and lower offsetting receipts in the GI/SRI account
than presented in the President’s request. As a result, the committees are able to



realize greater savings than the re-estimate of the President’s budget would have
allowed, although notably less than in the President’s original budget and less than
was available in FY2005. As shown in Table 18, the committees’ assumptions result
in an estimated appropriation of $-913 million. The decrease in FHA net income
implies a need for an additional $811 million in appropriations to support other HUD
programs at the same level as FY2005. P.L. 109-115 funds FHA as proposed by the
House and Senate.
Office of Federal Housing Enterprise Oversight (OFHEO). OFHEO
is the office within HUD which is responsible for regulating Fannie Mae and Freddie
Mac regarding the safety and soundness of their operations. The appropriations for
OFHEO are completely offset by fees collected from Fannie Mae and Freddie Mac.
In recent years there has been criticism that OFHEO has been ineffective in its role.
The Administration expects that the resources of OFHEO will be transferred to a
strengthened regulator that will be proposed. H.R. 1461, as passed by the House,
would combine OFHEO and HUD’s regulatory division into a new independent
agency called the Federal Housing Finance Agency.
Fair Housing. The Office of Fair Housing and Equal Opportunity enforces
the Fair Housing Act and other civil rights laws that make it illegal to discriminate
in the sale, rental, or financing of housing based on race, color, religion, sex, national
origin, disability, or family status. This is accomplished through the Fair Housing
Assistance Program (FHAP) and the Fair Housing Initiatives Program (FHIP). FHAP
provides grants to state and local agencies to enforce laws that are substantially
equivalent to the federal Fair Housing Act. It provides grants on a non-competitive
basis. FHIP provides funds for public and private fair housing groups, as well as state
and local agencies, for activities that educate the public and housing industry about
the fair housing laws.
Table 19. Fair Housing Programs, FY2005 to FY2006
(in thousands)
FY2005 FY2006FY2006FY2006FY2006
enacted request House Sena t e Co nf.
Fair Housing$46,128$38,800$46,500$46,000$46,000
Fair Housing Assistance 26,28822,70026,50025,00026,000
Fair Housing Initiatives19,84016,10020,00021,00020,000
Source: See Table 2.
The President’s budget recommended decreases in funding for both Fair
Housing programs in order to provide needed funding for the tenant-based Section
8 voucher program. FHAP would be reduced 14% from its FY2005 level and FHIP
would be reduced 19%. H.R. 3058, as reported by the House Appropriations
Committee, adopted the President’s funding request. An amendment by the full
House increased funding for the program to a slight increase over the FY2005 level.
The increase was offset by a reduction of $7.7 million from the information system
budget of the IRS. The Senate version of H.R. 3058 increased funding for fair



housing activities above the President’s requested level, but provided less than was
appropriated in FY2005 and what was recommended by the House.
For FY2006, P.L. 109-115 funds the Fair Housing programs at $46 million, of
which $26 million is for Fair Housing Assistance and $20 million is for Fair Housing
Initiatives. An administrative provision precludes the use of these funds to prosecute
or investigate legal activities under the Fair Housing Act.
Lead-Based Paint Hazard Reduction. The Office of Lead Hazard Control
at HUD administers both the Lead-Based Paint Hazard Control Grant Program and
the Healthy Homes Initiative (HHI), designed to reduce the hazards of lead-based
paint in homes.
Table 20. Lead-Based Paint Hazard Control, FY2005 to FY2006
(in thousands)
FY2005 FY2006 FY2006FY2006FY2006
enacted request House Sena t e Co nf.
Office, lead hazard control$166,656$119,000$166,656$167,000$152,000
Source: See Table 2.
For FY2006, the Administration proposed a funding level of $116 million for
the Healthy Homes and Lead Hazard Control Reduction program. This $48 million
(29%) reduction from the FY2005 level is largely the result of proposing zero
funding for the Lead Hazard Demonstration program, which was funded at $47
million in FY2005. The justification for this reduction is that the funds are needed
instead for the Section 8 voucher program. H.R. 3058, as reported by the House
Appropriations Committee, adopted the President’s funding request. During full
House debate on the bill, a floor amendment was adopted that restored funding to the
level enacted in FY2005. The Senate-passed bill proposed to fund the account
slightly above the FY2005 level. For FY2006, P.L. 109-115 appropriates $152
million for the program.