The fiscal 2012 budget for the Department of Housing and Urban Development will decline 11% to $37.3 billion under an appropriations bill approved by Congress last month.

The measure — H.R. 2112 — also restored higher FHA mortgage limits through 2013, continued funding for important housing programs and extended a continuing resolution until Dec. 16 to avert a partial government shutdown while Congress works on its remaining 2012 spending bills.

Congress had earlier capped fiscal 2012 discretionary spending at $1.043 trillion, assuring reduced spending levels for several government agencies.

Some HUD programs actually received higher spending levels over the previous year. These include Section 8 tenant-based rental assistance ($18.9 billion), Section 8 project-based rental assistance ($9.3 billion) and the agency’s Choice Neighborhoods initiative ($120 million).

Among HUD initiatives that did not fare as well, the HOME program received $1 billion, a significant reduction from last year’s level of $1.6 billion.

This precipitous drop is directly related to recent reports on mismanagement of HOME funds.

In addition to cutting its funding, the legislation imposes new oversight requirements on the HOME program and stipulates that monies for the program must be dispersed by Sept. 30, 2014.

While HUD is expected to propose additional rule changes for HOME, lawmakers enacted these revisions:

• Require repayment of funds not spent within four years of the commitment date
  
  
• Require participating jurisdictions to conduct an underwriting review, assess developer capacity and fiscal soundness and examine neighborhood market conditions before committing funds
  
  
• Require homeownership units that are not sold within six months to be rented to eligible families
  
  
• Prohibit HOME funds from going to community housing development organizations that do not have staffs with demonstrated development experience

HUD has been asked to report to the Appropriations Committee on how it is monitoring and evaluating the performance of those receiving HOME grants and on its process for approving participating jurisdictions to restart a stalled or cancelled project.

HUD is also required to report by March 16, 2012, and annually thereafter, on all HOME funds that are at least five years old.

Other HUD programs that took a hit in fiscal 2012 include:

• Community Development Block Grants (CDBG): $3 billion in funding
• HOPE VI: No funds
• Section 202: $375 million, does not include funds for new construction
• Sustainable Communities: No funds

On the rural development side, the U.S. Department of Agriculture (USDA) received increased funding for the Section 538 Multifamily Loan Guarantee program, which rises to $130 million in fiscal 2012.

The USDA can now charge upfront and annual fees to make this program revenue-neutral, according to the legislation.

Other USDA program funding levels were reduced in the new fiscal year, including:

• Section 515 Rental Housing program: $65 million
• Section 521 Rental Assistance Program: $900 million
• Multifamily Housing Preservation Revitalization Program: $13 million

On the single-family front, the Section 502 Direct Loans program received $900 million, which is more than 400% above the amount proposed by the Obama Administration.

In a letter to House-Senate appropriators, NAHB supported the higher level, pointing out that this is the only federal program targeting homeownership opportunities for low- and very low-income rural households.

The Section 502 Loan Guarantee program was funded at $24 billion, slightly above last year's $23.9 billion level.

The 502 loan guarantees have become enormously popular in the currently fragile housing market. In rural America, the program is producing more 30-year, fixed-rate loans than other federally guaranteed programs.

NAHB also supported a decision by lawmakers not to fund the Sustainable Communities initiative, which would have imposed federal mandates dictating local land use decisions.

A funding comparison spreadsheet provides more detailed information on 2012 spending levels for key housing programs.

Language was removed from the appropriations bill that that would have struck a requirement for fair market rents (FMRs) to be published on Oct. 1 of each year.

Without this requirement, HUD would be able to publish FMRs at any time, preventing property owners from planning for rent adjustments in the coming year and potentially delaying the publication of annual income limits.

The bill also reinstates the Multifamily Assisted Housing Reform and Affordability Act (MAHRA), which expired on Oct. 1 and has now been extended through Oct. 1, 2015.

MAHRA allows mortgages to be restructured and reduces Section 8 rents for older FHA-insured properties that also receive project-based rental assistance.

The legislation also authorizes, but does not fund, a limited rental demonstration program that allows properties to convert their existing streams of rental subsidies into project-based vouchers.

Eligible properties include public housing and Section 8 moderate rehabilitation properties.

Under this program, HUD can take applications to convert to vouchers until Sept. 30, 2013.

For more information, email Kedrin Simms Brachman at NAHB, or call her at 800-368-5242 x8413.