The Department of Housing and Urban Development (HUD): FY2006 Budget
Released: 2006-02-28T00:00:00

Most Recent Developments

Rescission and Reallocation Package Adopted. ThePresident signed the FY2006 Department of Defense appropriations bill into law, P.L. 109-148 , onDecember 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 CommunityDevelopment Block Grant program, and $390 million for Section 8 vouchers for previouslyHUD-assisted families displaced by the storm. The 1% cut resulted in a reduction of $380 millionin 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 [author name scrubbed].

Congress Approves H.R. 3058. OnNovember 18, 2005, both Houses of Congress approved H.R. 3058 , the FY2006Treasury, 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 thanthe House-passed or President-requested level. For most accounts, the final agreement splits thedifference between the House- and Senate- approved levels, and it rejects the Administration'sStrengthening America's Communities Initiative (SACI), which would have eliminated theCommunity Development Block Grant (CDBG) program and replaced it with a new program withinthe Department of Commerce.

Rescission and Reallocation Package Submitted. OnOctober 28, 2005, President Bush submitted to Congress a rescission and reallocation package tohelp fund reconstruction in the Gulf Coast after the recent hurricanes. The proposal would rescindand reallocate funds from selected programs across the government and reallocate FEMA disasterrelief funds to other agencies, including HUD. The request includes a rescission of unobligatedbalances from the Section 811 program of $100 million, from the HUD Brownfields Redevelopmentprogram of $24 million, and from the Section 108 loan guarantees program of $6 million. Theproposal would provide $2.2 billion in additional funding to HUD programs to aid in disasterrecovery, including $1.5 billion for the CDBG program; $50 million for the Self HelpHomeownership (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. OnOctober 20, 2005, the full Senate approved H.R. 3058 . Several floor amendments wereadopted, although they did not change the funding levels for any HUD accounts. Like the Houseversion, the Senate bill rejected the President's SACI proposal. It included increases in fundingabove 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 Housingand 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 regularappropriations bills into law. Programs were funded at the lower of the FY2005 enacted, FY2006House-passed, or FY2006 Senate-passed levels as of October 1, 2005. Since the FY2006 HUDappropriations bill had not been passed by the full Senate by October 1, HUD's programs werefunded at the lower of the FY2005 or House-passed level. Given the way funding is allocated in themajority of HUD programs (either on a calendar-year basis or through competitive grants), anyreductions 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 TTHUDfunding 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'srequest. 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 8vouchers, HOPE VI, CDBG, Brownfields, HOPWA, Lead-based Paint Hazard Reduction, and FairHousing programs, above the Committee-approved levels.

House and Senate Budget Resolutions Passed. InMarch 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 Presidentsubmitted his FY2006 budget to the Congress on February 7, 2005, requesting $29.1 billion forHUD, a cut of $2.8 billion, or 9%, from FY2005 appropriations of $31.9 billion. The mostcontroversial aspect of the budget was the proposed elimination of the CDBG and related programsat 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 otherspecial 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 largeHUD block grant programs, HOME and CDBG, also help communities finance a variety of activitiesto address the housing and community development needs of disadvantaged populations. In recentyears, HUD has focused more attention on efforts to increase the homeownership rates forlower-income and minority households. (At the end of the fourth quarter of 2004, the nationalhomeownership rate stood at 69.2, while the rates for White, Black and Hispanic households stoodat 76.2%, 49.1% and 48.9% respectively.) HUD's Federal Housing Administration (FHA) insuresmortgages 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 DevelopmentAppropriations, FY2001 to FY2005

(net budget authority in billions)

Source: Figures are from the House Appropriations Committee estimate tables. FY2005 figuresare adjusted to reflect the 0.8% across-the-board rescission enacted in P.L. 108-447 . Final spendinglevels for any fiscal year include all supplemental appropriations or rescissions. They do not reflectrevised 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. TheAdministration had proposed a controversial initiative, the Flexible Voucher Program (FVP), thatwould have significantly revised the Section 8 voucher program and cut its funding. Congress didnot adopt the FVP, but continued with dollar-based funding, a practice first adopted in FY2004 thatprovided some of the spending constraint that the Administration sought. Nevertheless, the billsigned by the President approved $1.6 billion more for Section 8 than the requested level. To payfor this significant increase, most other HUD programs were reduced below their FY2004appropriation levels. While the Administration proposed no funding for the HOPE VI public housingrevitalization program, P.L. 108-447 appropriated $144 million.

FY2006 Budget Issues

Table 2 below details the President's FY2006 HUD budget and tracks the Congressionalresponse.

Table 2. Appropriations: Housing and Urban Development,FY2005 to FY2006

(budget authority in $ billions)

Source: Prepared by CRS based on information provided by the House Committee onAppropriations, 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) andthe Office of Federal Housing Enterprise Oversight ($58.7 million in FY2005 and $60 million inFY2006).

a. Note that P.L. 109-148 , enacted after the HUD FY2006 Appropriations law, included anacross-the-board rescission of 1% to all domestic discretionary spending, which is notreflected in the totals in this table. The rescission-adjusted FY2006 enacted figures will beavailable in FY2007 CRS HUD budget products.

b. The Administration has proposed that in FY2006, Congress provide no new funding and alsorescind the HOPE VI funding provided in FY2005.

c. Includes $58 million for Indian community and economic development activities, which, inFY2005, received $68 million as a set-aside within the Community Development Fund.

d. Includes $45 million for Indian community and economic development activities, which, inFY2005, 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 $8.8million for this program in the Community Development Fund.

f. For FY2006, the Administration proposes to eliminate these programs and replace them with anew 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 millionappropriated 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 ensurefunds were available for Youthbuild. H.Amdt. 404 added $24 million to theCDF account to be used for Brownfields.

i. In FY2005, $24.8 million was provided for this program as a set-aside within the CommunityDevelopment Fund. The Senate bill provides $15 million for this program in the CommunityDevelopment Fund.

j. The House bill would rename this account Self-Help and Assisted Homeownership and transferto it funding for several set-asides that were formerly funded under the CommunityDevelopment Fund. See Table 14 for details.

k. The final bill adopts the new account proposed by the House, although it allocates the fundsdifferently. 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 theHOME program. The Senate bill proves $42 million for Housing Counseling Assistance asa set-aside within the HOME program.

n. Includes $29 million requested for University Partnerships, which, in FY2005, received a totalof $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 Housebill, $7 million in Senate bill, $3.75 million in the conference report), Native Hawaiianhousing ($992,000 in FY2005 and $882,000 in President's request and House bill, $1 millionin Senate bill, $900,000 in the conference report) and Indian housing loan guarantees ($5million in FY2005 and $2.6 million in President's request and House bill, $5 million inSenate bill, $4 million in the conference report). For FY2006, the Administration proposedto replace Section 108 loan guarantees with a new, larger program in the CommerceDepartment.

p. The bill rescinds $10 million from prior years' appropriations; however, if sufficient funds are notavailable, they can be taken from current year appropriations.

q. Includes one-time rescissions of unobligated balances from the following accounts: PublicHousing 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. TheSection 8 program is really two programs: tenant-based rental assistance, commonly calledvouchers, and project-based rental assistance (see below). The two programs were previously fundedunder a joint account called the Housing Certificate Fund, which was split into the two componentsby the FY2005 appropriations law. (See CRS Report RL32284 , An Overview of the Section 8Housing Program , by [author name scrubbed].) Section 8 Housing Choice Vouchers (vouchers) areportable federal subsidies that low-income families use to reduce their housing costs in the privatemarket. HUD currently funds over two million Section 8 vouchers. Note that approximately $4.2billion of the funds shown in the table below are provided in the form of an advance appropriationfor 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 fiscalyears and the time the federal budget is enacted in final form, which, in recent years, has generallylagged the federal fiscal year and often lagged the calendar year. The FY2004 appropriations billsynchronized 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)

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 Secretaryto use to adjust the budgets of agencies that were adversely impacted by the FY2005 fundingformula due to portability vouchers.

c. The Senate version of H.R. 3058 would permit the Secretary to use up to $45 millionof renewal funds to be used to adjust the budgets of agencies who were adversely impactedby the FY2005 formula due to the three-month period of time used or due to portabilityvouchers.

d. The final version would permit the Secretary to use up to $45 million of renewal funds to be usedto adjust the budgets of agencies that (1) apply for an adjustment because they had unusuallylow 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 tounforeseen circumstances or portability vouchers.

e. See Table 17 .

Voucher Renewals. The most contentious aspect ofthe tenant-based assistance account is the renewal of existing vouchers. Congress has authorized thecreation of more than 2 million vouchers over the history of the program and the funding for virtuallyall of them expires every year. If a family is using a voucher to lease an apartment but funding is notsufficient to renew it, then the family will lose its assistance and likely lose its current housing. Priorto FY2004, HUD funded PHAs based on the number of vouchers they were using and the cost ofthose vouchers. If costs went up or PHAs were able to use more of their vouchers, they receivedadditional funds to cover those costs. In FY2005, at Congress's direction, HUD funded PHAs basedon the number of vouchers they were using and the cost of those vouchers in May-July 2004, plusinflation, reduced (by 4%) to fit within the amount appropriated. This new formula was designedto contain the growing cost of the program. Many PHAs and low-income housing advocatesopposed the new formula, arguing that it left many agencies with inadequate funding to maintaintheir programs. While it appears that few agencies were required to terminate assistance to familiesas a result of budget shortages, many agencies suspended the reissuance of vouchers when familiesleft the program and undertook other administrative measures to cut costs.

The President's FY2006 budget request included $14.1 billion to renew expiring vouchersubsidies, an increase of 5% from FY2005. It proposed distributing renewal funding to PHAs ona pro-rata basis, based on what they received last year plus an inflation adjustment, and prorated tofit within the amount appropriated. In addition to renewal funding, the Administration requested $45million 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. Congressprovided 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, butfunded renewals at the President's requested level. During floor proceedings on June 30, 2005, anamendment adding $100 million for tenant-based renewals was approved. The increase was offsetby a decrease in funding for the Working Capital Fund. The bill proposed to distribute renewalfunding using the same formula proposed by the President. It would have permitted the Secretaryto set aside $45 million of renewal funding to adjust budgets that were adversely affected by theFY2005 funding formula due to a high number of portability vouchers.

The Senate version of H.R. 3058 would have funded renewals at the President'srequested level. Unlike the House bill and the President's request, the Senate bill would not havefunded agencies based on the funding they received in FY2005 plus inflation. Rather, agencieswould have received renewal funding based on their voucher costs and leasing over the past 12months, plus inflation, and pro-rated to fit within the amount appropriated. Low-income housingand PHA groups advocated for this use of more recent data. The Senate bill would have providedthe Secretary with the authority to use up to $45 million to adjust PHA budgets if they wereadversely affected by the May-July formula either because those months were anomalous for theagency 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 bythe Senate bill and the President's request, $100 million less than the House-passed level. It adoptedthe renewal funding formula proposed by the President and included in the House bill. For calendaryear 2006, agencies will receive the amount of funds they were eligible to receive in 2005, plusinflation, adjusted for tenant protection vouchers, HOPE VI vouchers, and project-basedreservations, and reduced to fit within the appropriated amount. The bill permits the Secretary toset aside up to $45 million to (1) adjust the budgets of PHAs that apply for an adjustment becauseof temporarily low leasing during May-July 2004, and (2) adjust the budgets of PHAs thatexperienced a significant increase in renewal costs, as determined by the Secretary, due to unforeseencircumstances or portability vouchers.

Administrative Fees. Prior to FY2003, PHAs werepaid a fixed fee per voucher administered. Beginning in FY2003, at Congress's direction, HUDchanged the way it distributed administrative fees, providing agencies with a pro-rata share of theamount 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 havegrown to account for 10% of the cost of a voucher.

The President's FY2006 budget requested $1.3 billion for administrative fees, an 8% increaseover 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 thatthe Secretary could set aside to distribute to agencies in need of additional funds to administer theirprograms. The bill also would have allowed the Secretary to transfer up to $200 million from thetenant-based account to project-based rental assistance, which, if done, would have reduced theamount of administrative funds to well below the FY2005 level. The Senate bill would have fundedadministrative 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 beavailable for the Secretary to allocate to agencies in need of extra money to run their programs, andthe remaining funds will be allocated on a pro-rata basis, based on last year's distribution. The billdoes not include the $200 million transfer authority provided in the House bill.

Tenant Protection Vouchers. Tenant protectionvouchers are provided to families in a variety of circumstances, including families who arethreatened with displacement because the contract on their assisted unit is ending (project-basedSection 8, for example); families who are displaced from public housing (due to demolition ordisposition); 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 andpartly to a new rule that HUD stated would be published in 2005 that would permit the Secretary ofHUD to require the conversion of public housing to vouchers, a practice called MandatoryConversion. The report accompanying the House-passed version of H.R. 3058 expressed doubt that the mandatory conversion rule would be implemented before the end ofFY2006, and therefore proposed to fund tenant-protection vouchers at roughly the same level as lastyear (an increase of about 3%). The Senate version expressed the same doubt about the mandatoryconversion rule and noted that, for many of the units that would be subject to the rule, HOPE VIremains 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 protectionvouchers, which is less than the President's request and falls between the House- andSenate-proposed levels.

Rescission. The President's FY2006 budget requestedthat Congress rescind $2.5 billion in unobligated balances from the tenant-based rental assistanceaccount. The request included a provision stating that, if sufficient funds were not available withinthe 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 thetenant-based rental assistance account and that other programs would be negatively affected by therescission. When questioned about the source of funds to meet the requested rescission in hearingsbefore the Senate Appropriations Committee on April 14, 2005, the Secretary indicated that he wasnot sure where the funds would come from and could not guarantee that they would not come fromactive programs. (1)

The House bill proposed a rescission level of $2.49 billion, about $6.4 million less than thePresident 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, theSecretary would be required to first take up to 10% from the HUD salaries and expenses account andup to 10% from the Office of Management and Budget's appropriation, before taking funds fromother HUD programs.

The final version of H.R. 3058 rescinds $2.1 billion in unobligated funds fromthe Section 8 accounts. The language permits the Secretary to use funds from other accounts, ifnecessary, but does not include the language proposed by the Senate requiring reductions first fromHUD and OMB's appropriations. The accompanying conference report directs the Secretary toreport 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 toreform the tenant-based voucher program. One purpose for this reform proposal is to contain, if notreduce, the cost of the program. According to the President's budget summary: "Section 8's programcosts are cannibalizing every HUD program -- at the same time waiting lists of families seekinghousing continue to grow." The Congressional Budget Justifications state that this new proposal willprovide additional flexibility to PHAs, which will enable them to run their programs more effectivelyand 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, althoughcongressional action was not taken on either. The State and Local Housing Flexibility Act of 2005was 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 currentprogram, would provide for greater discretion in administering the program for both the Secretaryof HUD and for PHAs, and, low-income housing advocates contend, would also provide fewerresources and protections for very poor families. For more information, see CRS Report RL31930, Section 8 Housing Choice Voucher Program: Funding and Related Issues , by [author name scrubbed].

Emergency Supplemental Hurricane Funding. InOctober 2005, FEMA engaged HUD in a mission assignment to provide rental assistance to familiesthat were unlikely to qualify for standard FEMA assistance -- specifically, families that werereceiving HUD rental assistance or were homeless when the storm struck. On December 30, 2005,the President signed a supplemental appropriations bill, P.L.109-148 , which transferred $390 millionto HUD from FEMA to provide this rental assistance directly. HUD has implemented the programas the Disaster Voucher Program (DVP), and it is largely governed by Section 8 voucher programrules, although the Secretary was given the authority to waive income eligibility and rentdetermination rules. For more information on the role of the voucher program in response to the2005 Hurricanes, see CRS Report RL33270 , The Section 8 Housing Voucher Program: ReformProposals , by [author name scrubbed].

Section 8 Project-based Rental Assistance. Thisaccount provides funding to renew existing contracts between HUD and private landlords providingsubsidies to low-income families that allow them to live in private market rental units, but pay only30% of their incomes toward rent. Project-based Section 8 differs from Section 8 vouchers in thatthe subsidy is provided to a specific unit of housing in which a family can live, rather than to afamily to then use to pay for the housing of their choice. No new contracts are entered into underthis program; the funding provided is used only to renew existing contracts and pay administrativecosts. This program was formerly funded with the Section 8 tenant-based rental assistance accountin a merged account titled the Housing Certificate Fund until the account was split in FY2004.

Table 4. Section 8 Project-based RentalAssistance

(in millions)

Source: See Table 2 .

a. See Table 17 .

Renewals. The President requested a 5% decreasein renewal funding for project-based rental assistance contracts in FY2006. HUD budget documentsexplained that the Department planned to augment the renewal funding request with $622 millionin funds recaptured from previous years and savings from program improvements. The additionalfunds would have raised the program level to $5.6 billion, an increase of 6% over the FY2005program level.

The House version of H.R. 3058 proposed $17 million more for renewals thanthe 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. TheSenate version of H.R. 3058 proposed funding project-based renewals at the President'srequested level, and did not include the transfer language included in the House version. The SenateCommittee report raised concern that HUD was not doing enough to encourage landlords in theproject-based Section 8 program to renew their contracts and thus preserve the properties as assistedhousing. The Senate bill proposed that the Government Accountability Office (GAO) assess HUD'sefforts to preserve assisted housing.

The final version of H.R. 3058 adopts the House-passed funding level forproject-based renewals, but does not include the transfer authority proposed by the House. The billdoes not include a request for the GAO report proposed by the Senate, but does direct theDepartment to study and report back on the living conditions of residents in two developments inIllinois.

Contract Administrators. The President's budgetrequested a 46% increase in funding for contract administrators and stated that $185 million inunobligated balances would be used to augment the funding, resulting in a program level increaseof 70% over FY2005. Contract administrators are subcontracted by HUD to manage the long-termSection 8 contracts between HUD and private owners of subsidized multifamily units. HUDcontinues 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 anincrease of $67 million to fund the transfer of additional contracts from HUD to contractadministrators. Further, HUD's budget justifications state that the Department intends to begin usingcontract administrators to manage rental assistance contracts outside of the Section 8 program, suchas those entered into under the Section 202 Housing for the Elderly program. The budget documentsnote that $30 million would be used to fund these transfers.

The House, Senate, and final versions of H.R. 3058 funded contractadministrators at the President's requested level and permitted the expansion of contractadministrators to additional programs.

Public Housing Programs. Public housingprovides publicly owned and subsidized rental units for very low-income families. While no newpublic 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 ofover 1.2 million units. The Operating Fund provides funds to PHAs for the ongoing maintenanceand administration of public housing. The Capital Fund provides funding to PHAs for large capitalprojects and modernization needs. HOPE VI is a competitive grant program that provides funds tohelp demolish and/or redevelop severely distressed public housing developments, with a focus onbuilding mixed-income communities.

Table 5. Public Housing, FY2005 toFY2006

(in millions)

Source: See Table 2 .

a. See Table 17 .

b. The President's FY2006 budget proposes no new funding for HOPE VI and requests thatCongress rescind the full amount provided to the program in FY2005.

c. Neither the House nor Senate version of H.R. 3058 would rescind FY2005 HOPEVI funding.

Operating Fund. Operating funds are paid to PHAsto help make up the difference between the low rents paid by tenants living in public housing andthe cost of running the buildings. The President's budget requested $3.4 billion for the operatingfund in FY2006. While this represents an increase over the FY2005 enacted level, it is a decreasein the program level. In FY2005, Congress enacted an accounting change in the program thatprovided a one-time savings of $992 million. The total amount available for operating subsides inFY2005 (minus the set-asides listed above) was $16 million more than the amount requested forFY2006. Despite the slight decrease, the FY2006 request would have been sufficient to fundagencies 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 operatingsubsidy formula; in FY2006 they would receive approximately 89% at the President's requestedlevel.

On April 14, HUD issued a proposed rule to revise the current formula for distributionoperating subsidies. The proposed rule differed from a version of the rule agreed to by HUD and thestakeholders that participated in a congressionally-mandated negotiated rulemaking process. HUD'sdecision to publish an altered, and arguably less costly, form of the negotiated rule proved to becontroversial. HUD contended that the proposed rule better reflects the Department's policy andbudgetary priorities. Nonetheless, on September 19, 2005, HUD published a final rule that reinstatedmost of the provisions of the negotiated rule that had been eliminated in the proposed rule anddelayed implementation until 2007.

The House version of the HUD funding bill proposed almost $200 million more for theoperating fund than the President requested, resulting in more funding available in FY2006 than wasavailable in FY2005. It included language directing the Secretary of HUD to distribute FY2006operating funds using the formula agreed to by the negotiated rulemaking committee. The bill alsoincluded $50 million to help agencies that faced losses of more than 5% under the new formulatransition to asset-based management.

The Senate version of the HUD funding bill proposed $150 million more than the Presidentrequested for the Operating Fund. While $50 million less than the House recommended level, theSenate bill proposed to set aside fewer funds, leaving more to be distributed through the operatingfund formula than the House bill. While the Senate bill would not mandate the use of the negotiatedrule, the accompanying report stated that the Committee expected the final rule to "reflect thenegotiated 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 fromthe FY2005 program level. The bill does not include language specifying how the funds should bedistributed, noting the postponed implementation of the new rule. The conference agreement directsHUD to include broad participation from affected agencies when developing the technical guidanceto implement the new rule.

Capital Fund. The President's FY2006 budgetproposed a 10% decrease in capital funding for PHAs. Under the request, the amount available forcapital 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 annualcapital repair needs. However, there is a backlog of unmet modernization needs in public housingthat is estimated to be between $18-$20 billion, which this funding level would not address. HUDargues that reductions in the capital fund are necessary to ensure that tenant-based rental assistancereceives sufficient funding. The request would have cut the Resident Neighborhood Opportunitiesfor Self Sufficiency (ROSS) funding in half. ROSS funds are used to provide supportive servicesfor residents of public housing, including job training, work supports and case management. ThePresident also proposed to eliminate funding for Neighborhood Networks, which are used to buildand update technology centers in Public Housing and to assist low-income households developcomputer skills.

The House-passed version of H.R. 3058 would have provided almost $250million more than the President requested for capital funding. The bill would have adopted thePresident's requested funding levels for ROSS and Neighborhood Networks, so the full increasewould have gone to capital grants, providing a 4% increase above the amount available for capitalgrants in FY2005 and a 12% increase over the amount the President requested for capital grants inFY2006.

The Senate-passed version of the HUD funding bill would have adopted the President'srequested level for the capital fund, which is lower than the House-approved level. It would haveincreased funding for set-asides above the President's requested level (for example, almost doublingROSS funding over the President's request), leaving less available for capital grants than thePresident 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 Senatefunding levels for the Capital Fund, providing $2.46 billion, a decrease from the FY2005 level, buthigher than the President's request. The bill also splits the difference between the House and Senatelevels for ROSS and Neighborhood Networks, providing $38 million and $8 million, respectively.

HOPE VI. For the third year, the President's budgetrequested no new funding for HOPE VI, claiming that the program has met its mandate, that programfunds are spent too slowly, and that per unit costs are too high. Despite the President's request, inFY2004 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 theprogram, the President's budget proposes that Congress rescind the funds it provided to the programin FY2005.

The version of H.R. 3058 that passed the House Appropriations Committee onJune 21, 2005, did not provide any new funding for the HOPE VI program in FY2006, but did notrescind the FY2005 funding. During floor debate on June 30, 2005, an amendment was approvedtransferring $60 million to the HOPE VI program for FY2006 from the General ServicesAdministration's Federal Buildings Fund.

The Senate-passed bill proposed $150 million for HOPE VI, a slight increase over theFY2005 level. The Committee, in its report, "urge[d] the Department to reconsider the eliminationof 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 distressedcommunities...."

The enacted version of H.R. 3058 provides $100 million for the HOPE VIprogram, an amount nearly halfway between the House and Senate-passed levels. Although the finalbill funded the program, the accompanying conference agreement stated that "the conferees believeit is time to consider alternative approaches to the HOPE VI program...."

For more information, see CRS Report RL32236 , HOPE VI Public Housing RevitalizationProgram: Background, Funding, and Issues , by [author name scrubbed].

Native American Block Grants. The NativeAmerican Block Grants replaced several separate programs of assistance in 1996. It provides grantsto Indian Tribes and their Tribally Designated Housing Entities to meet housing and communitydevelopment needs in their areas.

Table 6. Native American Block Grants, FY2005 toFY2006

(in thousands)

Source: See Table 2 .

Note: The table does not include all set-asides. The amount for formula grants is not specified inthe House, Senate, or final bill. The figures shown here are derived from subtracting all set-asidesfrom the total provided for the account.

a. In FY2005, $68.4 million was provided for this program as a set-aside in the CommunityDevelopment Fund and the Senate bill recommends $69 million for this program as aset-aside in the Community Development Fund for FY2006 (see Table 9 ). The final versionappropriates $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 NativeAmerican Block Grant program, a decrease of $39 million. The total included $58 million for theIndian Community Block Grant activities. In prior years these activities were funded as a set-asidewithin the Community Development Block Grant program. Effectively, this may be regarded as anadditional 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 developmentactivities.

The House-passed version of H.R. 3058 increased funding for Native AmericanBlock Grants above the President's requested level, but below the FY2005 enacted level. Thefunding for formula grants is 6% above the President's request, but 10% below the FY2005 enactedlevel. The bill adopted the President's request that the Indian Economic Block Grant program, whichwas 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 fundingfrom 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 NativeAmerican Block Grants account above the FY2005 level, the President's request, and the Houselevel. The amount available for formula grants would be slightly decreased from FY2005, but wouldbe an increase of 10% over the House-passed level and 17% over the President's request. The SenateCommittee, in its report, noted concern about the significant unspent balances in the account as wellas revised eligibility definitions adopted for distribution of FY2004 formula funding. TheCommittee encouraged HUD to work to facilitate the timely expenditure of funds and to reassess thenew 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 onmulti-race Census data, and allocate the greater of the two to the tribe. An administrative provisionrequires that in FY2006, HUD allocate block grants to the same Native Alaskan organizations thatreceived block grants in FY2005.

Housing for Persons with AIDS (HOPWA). HOPWA provides housing assistance and related supportive services for low-income persons withHIV/AIDS and their families. Funding is distributed both by formula allocation and competitivegrants to states, localities and nonprofit organizations.

Table 7. HOPWA, FY2005 to FY2006

(in thousands)

Source: See Table 2 .

The Administration's budget proposed to reduce HOPWA program funding by 5% inFY2006. This funding decrease, according to HUD budget documents, would have reduced thenumber of households served in FY2006 from 70,400 to 67,000. The Department stated that thisfunding 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 programabove the President's request, at $285 million. During floor debate of the bill on June 30, 2005, anamendment was added to H.R. 3058 increasing HOPWA funding by another $10million, to $295 million. The Senate-passed bill increased HOPWA funding about $5 million abovethe FY2005 level and about $20 million above the President's requested level, although it providedless than the House by $18 million.

The final appropriation for HOPWA funds the program at $289 million for FY2006, anincrease of approximately 2.6% over FY2005. The final amount exceeds the Administration'srequest by $21 million, the Senate's version by $2 million, and is $6 million less than the Houseproposal. For more information on HOPWA, see CRS Report RS20704, Housing Opportunities forPersons with AIDS (HOPWA), by [author name scrubbed].

Rural Housing and Economic Development. Thisprogram provides competitive grants to states and localities to fund capacity building and innovativehousing and economic development activities in rural areas.

Table 8. Rural Housing and Economic Development, FY2005to FY2006

(in thousands)

Source: See Table 2 .

In prior years, the Administration has proposed zero funding for the Rural Housing andEconomic Development program (RHED), but Congress has responded by funding the program atabout $25 million. For FY2006, the Administration proposed to consolidate RHED into a newprogram within the Department of Commerce, called the "Strengthening America's CommunitiesInitiative." (See discussion of Community Development Fund/Block Grants below.)

Neither the House nor Senate bill would adopt the President's Strengthening America'sCommunities Initiative, and both would continue to fund Rural Housing and Economic Developmentas a freestanding program at HUD. The House proposed $10 million, less than half of what wasprovided in FY2005, while the Senate Committee proposed $24 million, which is slightly more thanwas 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 inEZ designated zones. Grant funds are also awarded to support EZ/EC activities.

Table 9. Empowerment Zones and Enterprise Communities,FY2005 to FY2006

(in thousands)

Source: See Table 2 .

The Bush Administration's budget proposal called for eliminating funding for the EZ/ECprogram along with 17 other community development, economic development, and communityservice programs, and replacing them with a new block grant called Strengthening America'sCommunities Initiative. (See discussion of Community Development Fund/Block Grants, below.)

The House, Senate, and conference versions of H.R. 3058 rejected thePresident's Strengthening America's Communities Initiative proposal; however, none of the versionsof 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 andeconomic development activities of states and local governments. The Administration's FY2006budget would eliminate funding for the CDBG program and related set-asides. The activities of theCDBG program along with 17 other community development, economic development, andcommunity services programs would have been carried out under a new block grant. The new blockgrant proposal, called the "Strengthening America's Communities Initiative," would have beenfunded at $3.7 billion. This amount is $416 million less than the $4.116 allocated to the formulaportion of the CDBG and insular areas in FY2005 and $1.1 billion less than the $4.8 billionappropriated in FY2005 for the total Community Development Fund, which includes the CDBGformula program and related set-asides and earmarks.

According to the Administration, the new initiative would:

reduce fragmentation in the delivery of federal community and economicdevelopment assistance by consolidating the activities of 18 programs that are presently administeredby five different federal agencies;

improve accountability by ensuring that communities focus on tangibleoutcomes; and

target assistance to areas with the greatest needs.

A number of organizations representing states and local governments voiced reservationsabout the Administration's new initiative and expressed support for the CDBG program. Suchorganizations as the National League of Cities, the U.S. Conference of Mayors, the NationalAssociation of Counties, and the National Governors Association noted that the Administration waslate to include them in any discussions about its new initiative and provided few details about theinitiative. A March 1 Federal Register notice announced the creation of an advisory panel to assistthe Secretary of Commerce develop the legislative proposal. When support for the new proposal didnot 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 reportwhich included a number of findings, guiding principles, and recommendations intended to assistthe Secretary develop a specific legislative proposal. The SACI Advisory Committee's report isavailable 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[author name scrubbed], coordinator.

Table 10. Community Development Fund (CDF): CommunityDevelopment Block Grants (CDBG) and Related Set-Asides, FY2005 toFY2006

(in thousands)

Source: See Table 2 .

Note: The total amount shown in FY2005 for the CDF, CDBG account in this table is taken fromthe HUD Congressional Budget Justifications and is just under $1 million higher than the amountshown in the House Appropriations Committee's re-estimate of the President's budget table andshown in Table 2 . The source of this discrepancy is unclear, but seems to be attributable to the EDIset-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 $2.6million less than the total appropriation level for the CDF specified in the bill. It is unclearwhether the Committee intends for the Department to use these funds for formula grants orfor a set-aside.

b. The amount specified in each appropriations bill for formula grants is split between grants toentitlement 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 programin 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 foremergency disaster assistance to communities affected by disasters designated by thePresident between August 31, 2003 and October 1, 2004.

f. The House and conference versions of H.R. 3058 would create a new account calledthe Self-Help Assisted Homeownership account. The House version of the account included$23.8 million for Self-Help Homeownership (SHOP); $28 million for NCDI capacitybuilding grants to the Local Initiative Support Corporation, the Enterprise Foundation, andHabitat for Humanity; $1 million for Special Olympics; $1 million for National AmericanIndian Housing Council; $3 million for the Housing Assistance Council; and $4 million inone-time funding for the Housing Partnerships Network. An additional $1.2 million isprovided in the Native American Housing Block Grant account to be awarded to the NationalAmerican Indian Housing Council for capacity building and technical assistance. Theconference version of the act included $20 million for SHOP, $30 million for NCDI/capacitybuilding, $3 million for Housing Assistance Council, $1 million for National AmericanIndian Housing Council, $4 million for the La Raza HOPE Fund, $2 million for the NationalHousing 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 andNative Hawaiian-Serving Institutions -- $3.0 million; Tribal Colleges and Universities -- $2.6million; and Community Outreach Partnerships -- $6.0 million.

h. The House version of H.R. 3058 would provide $29 million within the Research andTechnology Account (see Table 2 ) for assistance to university based programs previouslyfunded under the CDBG account. Funding for the following university-based program wouldshift from the Office of Planning and Development to the Office of Policy Development andResearch: Historically Black Colleges and Universities -- $8.967 million; Hispanic-ServingInstitutions -- $5.979 million; Alaskan Native and Native Hawaiian-Serving Institutions --$2.989 million; Tribal Colleges and Universities -- $2.562 million; and Community OutreachPartnerships -- $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 Table2 .)

j. The House version of H.R. 3058 would fund this program as a separate account inFY2006 (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 appropriationsbill ($262 million), P.L. 108-447 also appropriated $31 million to the CommunityDevelopment Fund for a grant to the Hudson River Park Trust (Division I, Title IV, Section424). This brings the total EDIs in FY2005, pre-rescission, to $293 million, whichpost-rescission, would total $291.7 million. However, HUD's Congressional BudgetJustifications 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 $1million in EDI funds is unclear and was not included in the House AppropriationsCommittee's re-estimate of the President's budget.

p. In FY2005 and prior, the Brownfields program was funded in a separate account. A House flooramendment to H.R. 3058 added $24 million to the CDF account and the sponsorspecified that the funds were to be used for Brownfields. The Senate and conference billsfunds Brownfields in a separate account.

q. S.Amdt. 2183 added language to the bill that would set aside $5 million for capacitybuilding activities of Habitat for Humanities. This amendment, which was approved byvoice vote, superseded S.Amdt. 2114 , which would have set aside $4.5 millionfor 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 $1million 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; andTribal Colleges and Universities -- $2.6 million.

On June 21, the House Appropriations Committee passed a FY2006 HUD funding bill thatincluded $4.15 billion for the Community Development Fund within HUD. By recommendingFY2006 funding for the CDBG program, the measure rejected the Administration's proposed"Strengthening America's Communities Initiative (SACI)." The proposed funding of $4.151 billionfor the Community Development Fund included $3.860 billion for CDBG formula grants awardedto entitlement communities and states, which is $250 less than appropriated in FY2005; and $290million for EDI grants for congressional earmarked projects, which is $30 million more than wasmade available in FY2005.

Under the bill, as reported by the Committee, a number of CDBG set-asides and relatedprograms would not be funded in FY2006 including the YouthBuild, empowerment zones,brownfields, and Section 108 loan guarantees. In addition, the bill proposed transferring fundingfor several CDBG-related asides to other accounts within HUD. A new self-help and assistedhomeownership account would provide, among others, $23 million for the Self-HelpHomeownership Program (SHOP), $28 million for the National Community Development Initiative,and $3 million for the Housing Assistance Council. It also recommended transferring to HUD'sOffice of Policy Development and Research $29 million in funding for university programspreviously included as CDBG set-asides under Section 107 -- including assistance to historic blackcolleges and universities, institutions serving Hispanic populations, and a community developmentwork study program.

On June 30, 2005, the House, by a vote of 405 to 18, approved H.R. 3058 , andforwarded the bill to the Senate for its consideration. Before approving the bill, the Houseconsidered and approved several amendments, two of which increased funding for the CDF accountto 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 millionto the CDF account. Floor debate indicated that $50 million of that amount was to be made availablefor the Youthbuild program, unless the program was funded within the Department of Labor'sbudget. The additional $17.5 million was to be allocated to CDBG formula grants. As approved bythe House, the CDBG formula-based program would have received $3.9 billion in funding, whichis approximately $230 million below its FY2005 funding level. During floor consideration of thebill, the chairman of the TTHUD Appropriations Subcommittee, Representative Knollenberg, statedhis intention to continue to seek a means of restoring the CDBG formula-based program to itsFY2005 funding level. A second amendment, offered by Representative Gary Miller and approvedby voice vote added another $24 million to the CDF account to be used for the HUD BrownfieldsRedevelopment program. In prior years, the program was funded within its own account, not as aset-aside within the CDF (see below.)

Representative Gingrey offered, but later withdrew, an amendment that would haveprohibited the use of CDBG funds for economic development projects in instances where privatelyowned land was acquired through the use of eminent domain. The amendment was offered inresponse to the June 23, 2005, Supreme Court decision in Kelo v New London, Connecticut , whichupheld the use of eminent domain to acquire privately held property and transfer it to another privateparty for government-supported economic development projects. The Supreme Court held, in a 5to 4 decision, that such a transfer is permissible if it results in a public benefit such as job creationand increased tax revenues. The House approved an amendment, H.Amdt. 427 , offeredby Representative Scott Garrett that would prohibit the use of funds in H.R. 3058 toenforce 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 federalappropriations, including CDBG, transportation, and housing funds, included in H.R. 3058from being used to directly or indirectly support economic development projects involving the useof eminent domain. (For more information, see CRS Report RS22189 , Condemnation of PrivateProperty for Economic Development: Kelo v. City of New London , by [author name scrubbed].)

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 forCDBG 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 thanrecommended by the House (see discussion below), but would have allocated $110 million fewerdollars to CDBG formula grants.

On October 20, 2005, the full Senate approved its version of H.R. 3058 by avote of 93-1. The Senate version of the bill would have continued to fund a number of smallerCDBG-related programs under the CDF account, unlike the House bill, which would provide nofunding, 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 wouldappropriate $45 million for the program. The Senate bill would have appropriated $32.4 million infunding for college and university programs and retain the programs under the CDF account, whilethe House bill called for transferring the activity to a new Self Help and Assisted Homeownershipaccount; it would appropriate $40 million for the Neighborhood Initiative Program, a program thatwas not included in the President's request or the House version of the bill; and it would haveappropriated $30 million for capacity building grants under the National Community DevelopmentInitiative 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 includedprovisions limiting the use of federal funds in economic development projects involving eminentdomain. During the Senate Appropriations Committee consideration of H.R. 3058,Senator Bond introduced and then withdrew a proposed amendment that would have prohibited theuse of federal funds in economic development projects involving the use of eminent domain. Theamendment 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 thebill, Senator Bond again introduced an amendment ( S.Amdt. 2113 ) to limit the use offederal dollars in support of economic development projects involving eminent domain. The Bondamendment, 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 projectsinvolving the use of eminent domain unless such projects or activities involve a public purpose. Theamendment would not include economic development "that primarily benefits private entities" asan eligible public purpose, but would include transportation and utility projects that benefit thegeneral public, as well as projects involving the removal of blighted areas or brownfields as publicuse activities. Such projects would be allowed the use of eminent domain without the loss of federalfunds. The amendment would also direct the Government Accountability Office (GAO) and theNational Academy for Public Administration, state and local government organizations, and propertyrights 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 onNovember 18 and the Senate on November 21, 2005, appropriates $4.220 billion for CommunityDevelopment Fund activities, including $3.748 billion for the CDBG formula grant program. Thisis 9% less than appropriated for formula grants in FY2005. The act includes $471 million for variousCDF set-asides, and earmarks with the majority of such funds -- $310 million -- allocated among1126 EDI earmarked projects. Of the remaining funds, $50 million is earmarked for NeighborhoodInitiative 50 projects identified in the conference report; another $50 million is to be awarded to localYouthBuild organizations. The $310 million in EDI earmarks represents a 7% increase in fundingfor such projects over the amount appropriated in FY2005 ($290 million) .

The conference version of the act shifts funding for a number of programs previously fundedunder this account to other HUD accounts. Funding for the SHOP program, National CommunityDevelopment Initiative, the Housing Assistance Council, the National American Indian HousingCouncil, and the La Raza HOPE Fund are now funded under a new Self-Help AssistedHomeownership account. Assistance for minority-serving universities and colleges previouslyfunded under Section 107 (Special Projects) are now funded under the Policy Development andResearch 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 forFY2006, includes the language prohibiting federal, state, and local governments from using fundsappropriated under the act for projects involving the use of eminent domain, unless such projects oractivities involve a public purpose. The provision excludes economic development "that primarilybenefits private entities" as an eligible public purpose, except in cases involving the removal ofblighted areas, brownfield redevelopment, mass transit, transportation, and utility projects thatbenefit the general public. Such projects would be allowed the use of eminent domain without theloss of federal funds. The provision also directs GAO and the National Academy for PublicAdministration, state and local government organizations, and property rights organizations toconduct 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-recoveryassistance under the Community Development Block Grant (CDBG) in P.L. 109-148 , to assist thefive 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 wereauthorized to use up to $20 million for Local Initiative Support Corporation and EnterpriseFoundation-supported local community development corporations. The HUD income targetingrequirement for activities benefitting low- and moderate-income persons was decreased from 70%to 50% of the state's allocation.

CDBG Section 108 Loan Guarantees. TheSection 108 loan guarantee program allows states and entitlement communities to leverage theirannual CDBG allocation in order to help finance brownfield redevelopment, large scale economicdevelopment, and housing projects. CDBG entitlement communities and states are allowed toborrow up to five times their annual CDBG allocation for qualifying activities. As security againstdefault states and entitlement communities must pledge their current and future CDBG allocation.

Table 11. CDBG Section 108 LoanGuarantees

(in thousands)

Source: See Table 2 .

The Administration included the Section 108 program in the list of programs whose activitieswould be consolidated under its Strengthening America's Communities Initiative. The Houseversion of H.R. 3058 did not include funding for the program, but the Senate versionof the bill would have provided a $6 million subsidy fund that would have supported a loancommitment ceiling of $275 million. The conference version of the act included $3 million subsidyfund that will support a loan commitment ceiling of $137.5 million.

Brownfields Redevelopment. The BrownfieldsRedevelopment program is a competitive grant program that provides funds to assist cities with theredevelopment of abandoned, idled and underused industrial and commercial facilities whereexpansion and redevelopment is burdened by real or potential environmental contamination.

Table 12. Brownfields Redevelopment, FY2005 toFY2006

(in thousands)

Source: See Table 2 .

a. For FY2006, the House funds the Brownfields program at $24 million as a set-aside within theCommunity Development Fund.

The Administration's FY2006 budget included Brownfield Economic Development Initiativegrants among the 18 programs that would be eliminated and whose activities would be consolidatedunder a new program -- Strengthening America's Communities Initiative -- to be administered by theDepartment of Commerce. (See discussion above.)

H.R. 3058 , as reported by the Appropriations Committee, rejected thePresident's Strengthening America's Communities Initiative proposal; however, it did not includefunding for the Brownfields Redevelopment program in FY2006. During consideration of H.R.3058, the full House approved by voice vote an amendment offered by RepresentativeGary Miller that would have appropriated $24 million to the Community Development Fund accountfor 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 Redevelopmentactivities.

The HOME Investment Partnership Program. Created in 1990, the HOME Investment Partnerships Program provides formula-based block grantfunding to states, units of local government, Indian tribes and insular areaas to fund affordablehousing initiatives. Eligible activities include acquisition, rehabilitation and new construction ofaffordable housing as well as rental assistance for eligible families.

Table 13. The HOME Investment Program, FY2005 toFY2006

(in millions)

Source: See Table 2 .

a. Includes funding for insular areas, which received $3.6 million in FY2005 and for which thePresident 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 $41.3million over the level enacted in FY2005. This increase was attributable to an increase of $150million for the American Dream Downpayment Initiative (ADDI) and a decrease for all the otherHOME program set-asides. A similar increase was requested in FY2005 and ADDI was fundedinstead at $50 million. Concern was raised that the program may be helping families who may notbe the best candidates for homeownership, and a Government Accountability Office (GAO) reviewof 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 Counselingbe 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 morethan was provided in FY2005. In the House bill, funding for formula grants would have beenincreased over both the FY2005 level and the President's requested level. The Senate bill wouldhave increased formula grants slightly above the House level. In both bills, the American DreamDownpayment Initiative would have been funded close to the FY2005 level, which is substantiallyless (-75%) than the President's requested level. Neither bill would have provided separate fundingfor Housing Counseling, as requested by the President; instead, the bills included a set-aside forhousing counseling within the HOME account.

The final version of H.R. 3058 cut funding for the HOME program by $125million from the President's request, House-passed, and Senate-passed levels. The American DreamDownpayment Initiative is funded at half of the House and Senate levels. The HOME formula grantsface 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 HOMEprogram.

Self Help and Assisted Homeownership. The SelfHelp Homeownership Program (SHOP) provides grants to non-profits, including Habitat forHumanity, to fund self-help homeownership (for example, sweat-equity) programs. In FY2005 andprior years, SHOP was funded as a set-aside within the CDF account. As a part of the larger SACIproposal, the President requested in his FY2006 budget that Congress fund the Self HelpHomeownership program as a separate line-item in the budget.

While SACI was not adopted in H.R. 3058 , the House did choose to fund SHOPin a new account, with several other programs. This new account, called Self Help and AssistedHomeownership, would consolidate funding for several programs that were previously funded asset-asides within the Community Development Fund account and provide funding for one programthat does not appear to have received funding in FY2005. H.Rept. 109-153 notes that most of theprograms in the account are funded at a reduced level, consistent with reductions in many HUDprograms necessary to meet rental assistance priorities. The Senate-passed version of the bill doesnot include this account. P.L. 109-115 creates the new account and appropriates $61 million for it.

Table 14. Self Help and AssistedHomeownership

(In thousands of dollars)

Source: See Table 2 .

a. In FY2005 and in the Senate-passed version of the FY2006 HUD funding bill, these programswere funded as set-asides in the Community Development Fund (see Table 9 ).

b. These programs are proposed for elimination as a part of the President's Strengthening America'sCommunities Initiative (see discussion beginning on page 17).

c. An additional $1.2 million is provided in the Native American Housing Block Grant account tobe awarded to the National American Indian Housing Council for capacity building andtechnical assistance. (See Table 5 .)

Homeless Programs. Homeless Assistance Grantsis the blanket title given to the four homeless programs authorized by the McKinney-VentoHomeless Assistance Act ( P.L. 100-77 ) and administered by HUD. Three of the four programs arecompetitive 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, theEmergency Shelter Grants program (ESG), is distributed via a formula allocation to states and localcommunities.

Table 15. HUD Homeless Programs, FY2005 toFY2006

(in thousands)

Source: See Table 2 .

a. See Table 17 .

The President's FY2006 budget request proposed to provide $200 million more forhomelessness programs than in FY2005. In addition, as in FY2004 and FY2005, the Administrationproposed to consolidate the three competitive components of the Homeless Assistance Grantsaccount into a single competitive program. Consolidation legislation was not introduced in FY2004or FY2005, although the FY2006 budget stated that legislation would be submitted to Congress thissession. The Administration's budget included two additional initiatives. The Samaritan Initiativeaccounted for the full $200 million increase over FY2005 appropriations. It would fundservices-enriched supportive housing for chronically homeless individuals. Authorizing legislationfor the Samaritan Initiative was introduced in the 108th Congress, but was not enacted, and no fundswere provided for the initiative in FY2005. In addition to the Samaritan Initiative, the President'sbudget proposed $25 million for a Prisoner Re-entry Initiative, with funds transferred from HUD tothe Department of Justice for use in helping individuals exiting prison successfully transition tocommunity life and employment. The same proposal was included in the President's FY2005 budgetrequest, but was not enacted.

The House-passed version of H.R. 3058 provided $100 million less for theHomeless Assistance Grants account than the President requested, which is $100 million more thanthe account received in FY2005. The House bill did not designate any funding for the SamaritanHousing Initiative and did not authorize funding for the Prisoner Re-entry Initiative. The HouseAppropriations Committee report ( H.Rept. 109-153 ) noted that because authorizing legislation forthe Prisoner Re-entry Initiative has not been enacted, funding for the program was not included inits version of H.R. 3058.

The Senate-passed version of the FY2006 HUD appropriations bill increased funding abovethe 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 HousingInitiative and did not authorize funding for the Prisoner Re-entry Initiative.

The final spending bill adopted the House's proposed funding level and appropriates $1.34billion for the Homeless Assistance Grants, $100 million below the President's request, and $100million more than FY2005, an increase of just more than 8%. The final version does not includefunding 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 countand track the homeless, and report its progress to Congress by March 10, 2006. For moreinformation on HUD's Homeless Assistance Grants, see CRS Report RL30442 , Homelessness:Recent Statistics, Targeted Federal Programs, and Recent Legislation , by [author name scrubbed], coordinator. For more information on HMIS, see CRS Report RS22328, The Homeless Managment InformationSystem , by [author name scrubbed].

Housing Programs for the Elderly and theDisabled. Formerly known together as Housing for Special Populations, the Section202 housing for the elderly and the Section 811 housing for the disabled programs provide capitalgrants and ongoing rental assistance to developers of new subsidized housing for these populations.

Table 16. Sections 202 and 811, FY2005 toFY2006

(in thousands)

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 levelfunding, 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'sproposal; rather, the full amount would have been used to provide vouchers to persons withdisabilities. HUD budget documents do not provide a rationale for the reduction or restriction onuse for capital grants. In testimony before the House Appropriations Subcommittee onTransportation, Treasury, HUD, the Judiciary, and the District of Columbia, the Secretary of HUDreferred to the need to make unpopular cuts in programs such as Section 811 in order to maintainadequate funding for Section 8 and programs for the homeless.

Both the House and Senate versions of H.R. 3058 proposed to fund the Section202 program at about the President's requested level, and approximately the same level as FY2005spending. A floor amendment in the Senate ( S.Amdt. 2140 ) made $10 million availablefor the Section 202 LEGACY demonstration program ( P.L. 108-186 ), which provides housing forlow-income elderly heads of households who care for children. Both House and Senate versionsproposed to fund the Section 811 program at about the FY2005 level, and, unlike the President'srequest, allowed funds to be used for capital grants. The Senate bill included language proposingto transfer the renewal of Section 811 vouchers to the Section 8 tenant-based rental assistanceaccount. Under the Senate proposal, it appeared that the tenant-based account would be required toabsorb the cost of vouchers, thus leaving additional dollars in the Section 811 account for capitalgrants.

The enacted appropriation for FY2006 funds Section 202 at $742 million. It also retains theSenate's proposal to set aside funding for the Section 202 LEGACY demonstration program, butreduces 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 thePresident's request. Like the House and Senate versions, the final version includes funds for capitalgrants, but does not transfer Section 811 vouchers to the Section 8 tenant-based rental account, asthe Senate version proposed.

Affordable Housing and Economic Development TechnicalAssistance Board. The Senate version of H.R. 3058 would haveestablished a new program designed to provide technical assistance to local non-profit organizationsinvolved in managing HUD programs and activities. The Affordable Housing and EconomicDevelopment Technical Assistance Board (AHEDTAB) would be comprised of three nationalorganizations (the Local Initiative Support Corporation, the Enterprise Foundation, and the Centrefor Management and Technology), and would be charged with developing uniform policies and bestpractices to assist local non-profit organizations to effectively develop and manage local housing andeconomic development programs. The AHEDTAB would be assisted by an advisory boardcomposed of a number of groups which have participated in HUD programs, including the HousingAssistance Council, the Corporation for Supportive Housing, the National Alliance to EndHomelessness, the National Council of La Raza, the National Urban League, the National AmericanIndian Housing Council, the National Association for the Mentally Ill, and the American Associationof Homes and Services for the Aging.

The program would have been funded by transferring a total of $50 million from severalexisting HUD programs, including Section 8 tenant-based and project-based rental assistance, theCDBG program, the Native American Housing Block Grant program, the HOME program, Section202 Housing for the Elderly, the Homeless Assistance program, and Section 811 Housing forPersons 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 versionof H.R. 3058.

Table 17. Affordable Housing and Economic DevelopmentTechnical Assistance Board

(in thousands)

Source: See Table 2 .

Note: This account would not receive a direct appropriation, rather, the funds are transferred fromother accounts.

Federal Housing Administration (FHA). TheFHA administers a variety of mortgage insurance programs that insure lenders against loss from loandefaults by borrowers. Through FHA insurance, lenders make loans that otherwise may not beavailable, and enable borrowers to obtain loans for home purchase and home improvement as wellas for the purchase, repair, or construction of apartments, hospitals, and nursing homes. Theprograms are administered through two program accounts -- the Mutual MortgageInsurance/Cooperative Management Housing Insurance fund account (MMI/CMHI) and the GeneralInsurance/Special Risk Insurance fund account (GI/SRI). The MMI/CMHI fund provides insurancefor home mortgages. The GI/SRI fund provides insurance for more risky home mortgages, formultifamily rental housing, and for an assortment of special purpose loans such as hospitals andnursing homes.

Table 18. Federal Housing Administration, FY2005 toFY2006

(in thousands)

Source: See Table 2 .

a. Note that the President's request numbers are taken from the Appropriations Committee'sre-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 tothe program from insurance premiums exceeds the program expenses. This suggests that, becauseof 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 proposedby the Administration. One initiative would permit 100% FHA financing for first-time buyers withstrong credit records. Under the other initiative, HUD would amend its underwriting guidelines inorder to permit borrowers with blemished credit records to obtain FHA-insured loans. The FHAinsurance premiums for these borrowers would be increased to cover the higher risks and costsinvolved in these initiatives. The President's budget assumed that these initiatives would create $268million in additional negative appropriations in FY2006. The budget also assumed that the MMI andGI/SRI programs would generate $1,956 million in offsetting receipts. Based on its assumptions ofincome, costs, and fees to the insurance funds, the Administration estimated net FHA appropriationsof $-1,489 million for FY2006. The Appropriations Committee, however, did not accept theAdministration's assumptions. The Committee's re-estimate (shown in Table 18 as the FY2006request) assumes zero savings from the proposed initiatives, and it assumes $347 million less inoffsetting receipts.

Both House and Senate versions of H.R. 3058 assume lower administrativeexpenses in the MMI account and lower offsetting receipts in the GI/SRI account than presented inthe President's request. As a result, the committees are able to realize greater savings than there-estimate of the President's budget would have allowed, although notably less than in thePresident's original budget and less than was available in FY2005. As shown in Table 18 , thecommittees' assumptions result in an estimated appropriation of $-913 million. The decrease in FHAnet income implies a need for an additional $811 million in appropriations to support other HUDprograms at the same level as FY2005. P.L. 109-115 funds FHA as proposed by the House andSenate.

Office of Federal Housing Enterprise Oversight(OFHEO). OFHEO is the office within HUD which is responsible for regulatingFannie Mae and Freddie Mac regarding the safety and soundness of their operations. Theappropriations for OFHEO are completely offset by fees collected from Fannie Mae and FreddieMac. In recent years there has been criticism that OFHEO has been ineffective in its role. TheAdministration expects that the resources of OFHEO will be transferred to a strengthened regulatorthat will be proposed. H.R. 1461 , as passed by the House, would combine OFHEO andHUD's regulatory division into a new independent agency called the Federal Housing FinanceAgency.

Fair Housing. The Office of Fair Housing andEqual Opportunity enforces the Fair Housing Act and other civil rights laws that make it illegal todiscriminate in the sale, rental, or financing of housing based on race, color, religion, sex, nationalorigin, disability, or family status. This is accomplished through the Fair Housing AssistanceProgram (FHAP) and the Fair Housing Initiatives Program (FHIP). FHAP provides grants to stateand 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 fairhousing groups, as well as state and local agencies, for activities that educate the public and housingindustry about the fair housing laws.

Table 19. Fair Housing Programs, FY2005 toFY2006

(in thousands)

Source: See Table 2 .

The President's budget recommended decreases in funding for both Fair Housing programsin order to provide needed funding for the tenant-based Section 8 voucher program. FHAP wouldbe 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. Anamendment by the full House increased funding for the program to a slight increase over the FY2005level. The increase was offset by a reduction of $7.7 million from the information system budget ofthe IRS. The Senate version of H.R. 3058 increased funding for fair housing activitiesabove the President's requested level, but provided less than was appropriated in FY2005 and whatwas recommended by the House.

For FY2006, P.L. 109-115 funds the Fair Housing programs at $46 million, of which $26million is for Fair Housing Assistance and $20 million is for Fair Housing Initiatives. Anadministrative provision precludes the use of these funds to prosecute or investigate legal activitiesunder the Fair Housing Act.

Lead-Based Paint Hazard Reduction. The Officeof Lead Hazard Control at HUD administers both the Lead-Based Paint Hazard Control GrantProgram and the Healthy Homes Initiative (HHI), designed to reduce the hazards of lead-based paintin homes.

Table 20. Lead-Based Paint Hazard Control, FY2005 toFY2006

(in thousands)

Source: See Table 2 .

For FY2006, the Administration proposed a funding level of $116 million for the HealthyHomes and Lead Hazard Control Reduction program. This $48 million (29%) reduction from theFY2005 level is largely the result of proposing zero funding for the Lead Hazard Demonstrationprogram, which was funded at $47 million in FY2005. The justification for this reduction is that thefunds are needed instead for the Section 8 voucher program. H.R. 3058 , as reported bythe House Appropriations Committee, adopted the President's funding request. During full Housedebate on the bill, a floor amendment was adopted that restored funding to the level enacted inFY2005. The Senate-passed bill proposed to fund the account slightly above the FY2005 level. ForFY2006, P.L. 109-115 appropriates $152 million for the program.