President Proposes Spartan Spending on Some Housing Programs - 2/14/2005 - Mortgage Loan Refinance Debt Equity

President Proposes Spartan Spending on Some Housing Programs

Under the plan, the White House estimates that more than 150 major discretionary programs would be eliminated, saving the U.S. Treasury approximately $20 billion.

Bush proposed consolidating 18 federal grant programs — including Community Development Block Grants (CDBGs) — into the “Strengthening America’s Communites Grant Program,” which would be administered by the Commerce Department. Appropriations for those programs would dwindle from about $5.3 billion in FY 2005 to only $3.7 billion under the consolidated plan.

Several lawmakers on Capitol Hill have expressed skepticism about the new grant program.

While the President’s budget recommends spending levels for the next fiscal year, it is not legally binding. Congressional appropriators will have the final say in program realignment and spending levels.

While proposed allocations are similar to this year’s for many programs, others have been slated for drastic cuts. In areas of interest to housing, the President’s budget plan:

• Calls once again for a homeownership tax credit initiative to spur production of affordable housing and a Federal Housing Administration single-family zero downpayment mortgage insurance program
• Provides the FHA multifamily insurance programs with $35 billion in loan commitment authority, ensuring that they would not be shut down during FY 2006
• Creates a new regulator for government-sponsored enterprises (GSEs) Fannie Mae, Freddie Mac and the Federal Home Loan Banks that would be housed in the Department of the Treasury. Under terms of the proposal, the regulator would have the authority to place a failing GSE into receivership, to adjust both risk-based and minimum capital requirements, to exercise independent supervisory authority and to review ongoing activities and approve new programs in consultation with HUD.
• Eliminates the Partnership for Advancing Technology in Housing (PATH), HOPE VI and brownfields redevelopment programs.
• Slashes funding for the Section 515 Rural Rental Housing Direct Loans program to $27 million from $100 million in FY 2005.
• Proposes $15.8 bllion for the Section 8 Housing Voucher program, an increase of about $1 billion over FY 2005. The bulk of the proposed spending, $14 billion, is earmarked for renewing expiring Section 8 tenant-based vouchers, including renewals for enhanced vouchers.
• Reduces Jobs Corps program funding by $29.3 million, to $1.52 billion
• Calls for replacing the Carl D. Perkins vocational education grant program with a new state block grant, and cuts funding for that program by almost $1 billion
• Calls for the repeal of the Byrd Amendment, which was sponsored by Sen. Robert Byrd (D-W. Va.), and allows U.S. companies to receive duties collected from foreign rivals. The World Trade Organization has ruled this practice illegal.

NAHB continues to analyze the President’s budget package, and will be working with congressional appropriators as they craft the FY 2006 spending bills.

Given the austere budget presented to Capitol Hill, the scores of key programs that have been cut or eliminated and the number of lawmakers who have already voiced concerns over the President’s budget, the ensuing appropriations process is likely to be drawn out and contentious.