HUD Budget Seeks $1.8 Billion Increase for housing & jobs -

Tom Boland (wgcp@earthlink.net)
Tue, 10 Feb 1998 05:53:15 -0800 (PST)


FWD

SOURCE: U.S. Department of Housing and Urban Development

Cuomo Says President's HUD Budget Seeks $1.8 Billion Increase to
Revitalize Communities and Create More Jobs and Housing

WASHINGTON, Feb. 2 /PRNewswire/ -- The Department of Housing and Urban
Development budget that President Clinton proposed to Congress today seeks
$1.8 billion in additional program funds for an intensified effort to
revitalize communities, create jobs, produce affordable housing and expand
homeownership, Secretary Andrew Cuomo said.

The $25 billion HUD budget calls for no new programs. Instead, it focuses
on reinventing and increasing funding for 20 existing programs to improve
their performance and benefit more of America's people and communities,
Cuomo said. The reinvented programs will place a greater emphasis on HUD
working in partnership with local governments, businesses and non-profit
groups. In addition, program performance will be improved by far-reaching
management reforms instituted at HUD over the past year, Cuomo said.

The spending plan carves out a role for HUD as the key Department in
implementing what President Clinton last week called ``one of the broadest,
strongest and most innovative urban agendas in a generation.''

The budget also builds on the reinvention of HUD that Cuomo implemented
over the past year, which was highlighted by management reforms to improve
the Department's performance and an aggressive campaign to wipe out waste,
fraud and abuse in HUD programs. Cuomo said the reinvention closed a
``competency gap'' that HUD faced in previous years because of questions
about its ability to perform its job effectively.

The closing of the competency gap was validated by President Clinton last
week, when he told the U.S. Conference of Mayors: ``Secretary Cuomo's
reinvented HUD exemplifies the kind of approach we're trying to take to
working with the cities all across the federal government.''

``With the closing of the competency gap within HUD, the Department's
budget can now move forward to close the opportunity gap that stands as a
barrier to the American Dream for far too many families,'' Cuomo said. ``We
will give more of America's people and communities the opportunity to share
in the bounty of the strong economy created by President Clinton's
policies.

``The 1999 HUD budget reflects the President's belief that HUD today is
smaller, faster and better than it was a year ago,'' Cuomo said. ``The
budget creates jobs and economic opportunity in America's communities, and
it provides the American people with more affordable housing and new
opportunities for home ownership.''

Programs targeted for expansion and improvement in the budget involving
jobs and economic opportunity include: $400 million in grants for a
Community Empowerment Fund to create and retain an estimated 280,000 jobs;
funding for 15 additional urban Empowerment Zones to stimulate job creation
and economic development in inner cities; expanded Community Development
Block Grants to local communities; and increased funding for programs to
redevelop contaminated industrial sites and to train high school dropouts
for jobs.

Programs being expanded and improved dealing with housing and homeownership
include: higher FHA loan limits to enable about 3 million more families to
qualify for FHA-insured mortgages over the next five years; 100,000 new
rental housing vouchers for people needing affordable housing, including
those moving from welfare to work; record funding for programs to help
homeless Americans; an intensified crackdown on housing discrimination;
increased HOME grants and a HOME Bank to make thousands of additional
affordable housing units available; increased funding for capital
improvements for public housing; the creation of new Homeownership Zones to
revitalize inner city neighborhoods and promote homeownership; additional
funds to control lead hazards around housing; more assistance to help
people with AIDS meet their housing needs; more help for families receiving
Section 8 rental assistance to find housing outside low-income
neighborhoods; and expanded housing counseling to boost homeownership.

The budget responds to a vital need to jump-start the economies of
America's communities, particularly inner cities, where job growth has
trailed other parts of the country, Cuomo said. Just 13 percent of the 14
million jobs created around the nation in the past five years are in
central cities.

``The most powerful engine of economic growth in our nation is American
business, and the most effective social program is a job,'' Cuomo said.
``Our budget will strengthen our partnership with businesses and local
communities, so we can use HUD funds as a catalyst to stimulate far greater
private investment that will create more jobs and strengthen local
economies.''

Cuomo said creating more affordable housing is also an urgent need.

``More than 5 million Americans with very low incomes pay 50 percent or
more of their income for rent because affordable housing isn't available,''
Cuomo said. ``Under the President's budget, HUD will once again expand
rental assistance to enable more people to live in affordable housing.
America is back in the housing business.''

In addition, Cuomo said, HUD will emphasize that ``all of HUD's separate
housing roads should ultimately lead to one place -- homeownership. Our
goal is to help more people become homeowners, and this budget does so in
innovative ways.

``All told, the 1999 HUD budget represents not just a shift in policy, but
a shift in philosophy,'' Cuomo said. ``This budget seeks to change HUD's
role from Washington dictates to community empowerment. Not with federal
mandates, but with a federal menu of opportunity. Not with solutions driven
from the top-down, but from the bottom-up. Not with a one-size-fits-all
mentality, but with action plans written by and tailored to local
communities. HUD's goal is not to tell communities what to do, but to help
communities do what they want to do.''

The $1.8 billion in increased program spending in the proposed HUD budget
is offset in part by $900 million in savings resulting largely from
improved management and the expiration of one-time expenses, such as
disaster relief funding to respond to Midwest flooding. As a result, HUD's
budget authority would rise from $24.1 billion this year to $25 billion
next year.

Highlights of the HUD's expanded and improved initiatives include:

JOBS AND ECONOMIC OPPORTUNITY

Community Empowerment Fund: The budget proposes $400 million in grants for
a HUD Community Empowerment Fund to help economically distressed
communities create and retain an estimated 280,000 jobs. The Community
Empowerment Fund would distribute the $400 million as grants to states and
local governments, which in turn would use the money to leverage an
estimated $2 billion in private sector loans to businesses. The new fund
would improve and expand on $38 million in similar grants in HUD's current
budget under the Economic Development Initiative. The investment from the
Community Empowerment Fund would be used to buy down interest rates on the
private sector loans and to guarantee repayment of the loans. As a result,
businesses in low-income communities would gain access to long-term,
low-interest loans that are now unavailable. The new initiative is designed
to bring more jobs to areas of high poverty and unemployment and help
create jobs for families trying to move from welfare to work. It would also
provide strong incentives for standardization of economic development
lending -- a crucial first stop in creating an effective secondary market
for economic development loans.

New Empowerment Zones: The budget calls for $150 million in new funds next
year -- and a total of $1.5 billion over 10 years -- for 15 additional
urban Empowerment Zones to stimulate job creation, welfare-to-work efforts
and economic development in economically distressed inner cities. Another
five rural Zones are to be funded by the Agriculture Department. The new
Zones would receive grants and tax incentives for a broad range of urban
revitalization activities. In 1994, the Clinton Administration selected
nine Empowerment Zones -- six urban and three rural. Congress has already
mandated funding for creating a second round of Zones.

Community Development Block Grants: The budget proposes a $50 million
increase for an improved Community Development Block Grant Program.
Combined with reduced set-asides, this would effectively increase funding
to help revitalize America's communities by $238 million, bringing total
funding to $4.7 billion. For 25 years, the Community Development Block
Grant Program has been the principal source of relatively unrestricted
federal assistance to local governments to carry out a wide range of
community development activities that reflect locally-determined
priorities. By removing many set-asides, the Budget enhances local
government resources and discretion. Equally important, the discretion
available to local governments is enhanced by the reduction of federal
earmarking and/or grant competitions.

Brownfields: The budget seeks $25 million in increased funding to redevelop
contaminated industrial sites called brownfields -- doubling this year's
funding. There are an estimated 450,000 brownfields in the nation. HUD's
program is expected to leverage an additional $200 million investment and
create about 28,000 construction and related jobs.

Youthbuild: The budget seeks $10 million in increased funding for the
Youthbuild program, which provides job training and education for high
school dropouts ages 16 to 24, boosting total funding for the program to
$45 million -- a 30 percent increase. The program would be changed from a
set-aside within the Community Development Block Grant program to an
independent program. It is expected to serve up to 6,000 inner city young
people in 1999.

HOUSING AND HOMEOWNERSHIP

Higher FHA Loan Limit: At no additional budget cost, the budget seeks a
higher Federal Housing Administration home mortgage loan limit to enable
about 3 million more middle-class American families to qualify for
FHA-insured mortgages over the next five years. In most communities, FHA
mortgages are limited to $86,317. In some high-cost communities, the FHA
can insure mortgages up to $170,362. The budget seeks a new nationwide
limit of $227,150. The higher ceiling would open the door of homeownership
to middle-class families needing FHA insurance to get mortgages, but locked
out because the current ceilings have not kept pace with rising home
prices. Under the new limit, a family with an income of about $46,000 could
qualify for an FHA mortgage of $150,000 (the expected average of new loans
insured under the new initiative). The FHA-insured loans benefit homebuyers
because they require lower downpayments, can cover closing costs, allow
more flexible requirements for homebuyers' credit ratings, and permit
homebuyers to use gifts from family members and others to make
downpayments.

New Housing Vouchers: The budget seeks $585 million in new funds for more
than 100,000 new rental housing vouchers -- compared with no funding for
new vouchers this year. This represents an innovative targeting of new
vouchers to meet high priority needs. HUD has not received funding for new
vouchers since 1994. Of the 100,000 new vouchers, 50,000 would be provided
through a new $283 million welfare-to-work initiative announced earlier by
the President to provide stable housing to families struggling to move off
welfare rolls and join the workforce. A second initiative would provide
$192 million for 34,000 additional Section 8 rental assistance vouchers for
homeless people moving from shelter care into permanent homes. This aid
would help ensure that homeless people who have benefited from HUD's
Continuum of Care transitional housing programs have stable housing to ease
their transition into the mainstream. The 1999 budget also asks for $60
million to provide an additional 10,600 Section 8 vouchers and $50 million
for 8,800 new vouchers targeted to elderly and disabled Americans.

Homelessness: The budget calls for $135 million in increased funding for
homeless grants -- combined with $192 million for 34,000 rental assistance
vouchers for homeless people (included in above paragraph) -- for a total
of $1.15 billion to help more homeless Americans get housing and become
self-sufficient. This represents a nearly 40 percent increase over this
year's enacted funding of $823 million. If enacted, the 1999 funding level
will be the highest in history, providing $958 million in Continuum of Care
grants. Besides providing housing, Continuum of Care grants also allow for
education, training, and substance abuse treatment programs

Housing Discrimination: The budget requests $22 million in increased
funding to fight housing discrimination, for a total of $52 million -- a 73
percent increase over this year. The additional funds would enable HUD to
intensify the crackdown on housing discrimination the Department began in
September at President Clinton's direction. Additional funds would be used
to help local non-profit groups and local enforcement agencies reduce
housing discrimination, which is illegal under the Fair Housing Act.

HOME Grants: The budget proposes $50 million of additional HOME grants for
a total of $1.55 billion in resources to provide permanent housing to low-
and moderate-income families. This would produce 78,520 units of affordable
housing for owners and renters through construction, rehabilitation and
acquisition activities. In addition, 11,200 families would receive
tenant-based rental assistance.

HOME Bank: The budget proposes $11 million to establish a HOME Bank that
will provide $100 million in loan guarantees to enable localities to
finance more rental and homeownership developments. HUD would insure loans
made to localities, enabling them to leverage up to five times their
current HOME grant allocation. The $100 million is expected to generate an
additional $350 million to $400 million in investment for affordable
housing.

Public Housing: The budget calls for $50 million in increased funding to
finance capital improvements in public housing, boosting total capital
improvement funding to $2.55 billion. Capital funds may be used to upgrade
viable housing units, demolish obsolete units, provide continued assistance
to displaced families, or build replacement units. In addition, funding for
the HOPE VI program, which demolishes and replaces severely deteriorated
public housing, would remain at $550 million. The budget also fully funds
public housing operating subsidies.

Homeownership Zones: The budget proposes $25 million in new funds for
Homeownership Zones -- large-scale, revitalization efforts that create
neighborhoods of single-family homes, promoting homeownership in inner
cities. The proposal would support five to seven Homeownership Zones,
bringing major revitalization to the communities, while helping to create
about 1,500 new homeowners. Last year, HUD awarded $30 million in grants
and just over $60 million in Section 108 loan guarantees to start six
Homeownership Zones.

Lead Hazard Reduction: The budget seeks $25 million in increased funding to
control lead hazards in and around housing, for a total of $85 million -- a
40 percent increase over this year. Extra funds would go to the ``Healthy
Homes Initiative,'' which reduces environmental health and safety risks to
children. The budget also would use $50 million for grants to states to
eliminate lead-based paint hazards and $10 million to fund technical
research studies.

Housing For People With AIDS: The budget seeks $21 million in additional
funds for the Housing Opportunities for Persons with AIDS program, for a
total of $225 million -- a 10 percent increase. The program helps people
with AIDS who need housing assistance because of the high costs of treating
their disease or because they have been unable to work due to their
illness. The funding would provide assistance for 41,500 housing units and
would provide related services to 75,000 people.

Enhancing Tenant Choice in Section 8: The budget requests $20 million in
new funds to help 13,000 low-income families receiving Section 8 vouchers
find homes outside low-income neighborhoods through the Regional
Opportunity Counseling program. Assistance may include education to
families, outreach to landlords, help in paying security deposits and
relocation expenses, and post-move problem solving.

Housing Counseling: The budget requests $5 million in increased funds for
housing counseling to boost homeownership, for a total of $25 million -- a
25 percent increase. Studies show that minority and immigrant households
are the least likely to become homeowners because they lack knowledge about
the homebuying process, lack credit histories to justify mortgage
applications and lack information about financing.

SOURCE: U.S. Department of Housing and Urban Development

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