2008 Budget Process Likely to Be Drawn-Out
In the $2.9 trillion fiscal 2008 budget request he sent to the Congress last month, President Bush proposed increasing discretionary spending to $929.8 billion, $57 billion above the fiscal 2007 spending cap.
As in previous Administration budgets, the lion’s share of this increase is targeted to “security” funding — defense, homeland security and international affairs — which is slated to grow by $53.5 billion, or 10.7%. The remaining domestic discretionary programs would receive a $3.5 billion or 1% increase under the White House plan.
While the President’s budget recommends spending levels for the next fiscal year, it is not legally binding. Congressional appropriators will have the final say in program realignment and spending levels.
The Administration requested $35.2 billion for the Department of Housing and Urban Development, up from last year’s $33.6 billion budget request, with much of the difference slated for a proposed increase for the Section 8 voucher program.
After deep cuts were proposed and enacted in fiscal 2006, the Administration’s fiscal 2008 budget proposes a total of $16 billion for the Section 8 program in an attempt to restore some of that funding.
Of the $16 billion, $14.4 billion would be directed to the Section 8 voucher renewals. The Administration is seeking to use $100 million of that amount as a set-aside to pay for unforeseen emergencies and for one-time payments to housing authorities that incurred high costs as a result of voucher holders leaving one jurisdiction and relocating in another.
Project-based rental assistance would rise to $5.8 billion from $5.5 billion, up 5%.
The budget would provide $150 million for tenant protection vouchers, which would only be provided for units under lease just prior to demolition or loss. Congress did not adopt this approach in fiscal 2006. Currently, demolished units that have been vacant for some time for various reasons are counted towards the tenant protection voucher total to ensure that the community does not suffer a net loss of affordable housing units.
This change could have significant impact in areas affected by the hurricanes in 2005. If damaged public housing properties or other Section 8 assisted properties need to be demolished rather than rehabilitated, residents who had to relocate, and therefore, did not renew their lease, may not be eligible for tenant protection vouchers.
The Home Investment Partnership Program, the largest federal block grant program dedicated to creating affordable housing for low-income families, would receive $1.91 billion in fiscal 2008. The Administration proposes $50 million for the American Dream Downpayment program to be set-aside within HOME. NAHB supports this program, but would prefer to see it funded elsewhere.
The Administration proposed another consolidation of community and economic development programs in its budget, but retains the Community Development Block Grant (CDBG) program at HUD.
The consolidation refers to the elimination of the Brownfields Economic Development Initiative, the Rural Housing and Economic Development program and the Section 108 Loan Guarantee program. NAHB opposes their elimination, which would be transferred to a newly “consolidated” grant program under the CDBG.
The CDBG program would be funded at $3 billion, a decrease of $735 million from the previous year’s budget plan. The grants provide affordable housing and supportive services to families with low to moderate incomes.
In other areas of interest to housing, the President’s budget plan:
- Calls for reform of the housing government-sponsored enterprises, and the creation of a new, strong and independent regulatory agency to oversee Fannie Mae, Freddie Mac and the Federal Home Loan Banks.
- Proposes to revitalize the Federal Housing Administration's single-family mortgage insurance program through new legislation that would include an increase in the FHA single-family loan limit from 87% to 100% of the conforming loan limit.
- Proposes an increase in the up-front mortgage insurance premiums for the FHA single-family programs from 150 basis points (1.5%) to 166 basis points. Additionally, the annual mortgage insurance premium is assumed to increase from 50 basis points to 55 basis points.
- Eliminates funding for the HOPE VI program. In addition, the Administration proposes to rescind $99 million in previously allocated funding for the program. No funding to replace or repair HOPE VI units destroyed or substantially damaged by the hurricanes in 2005 was proposed. NAHB has consistently supported HOPE VI, which promotes mixed-income affordable rental and owner-occupied housing in place of deteriorated and obsolete public housing.
- Eliminates the Partnership for Advancing Technology in Housing (PATH) as a stand-alone program, although the Administration notes that PATH would remain an eligible program, and could receive funding through the Policy Development and Research component of the budget.
- Fails to request the creation of a homeownership tax credit.
- Makes permanent the tax cuts enacted in 2001 and 2003.
- Increases the Alternative Minimum Tax exemption levels for 2007 to $43,900 for single and head of household filers and $65,350 for married taxpayers filing jointly.
- Abolishes the Section 502 Direct Rural Housing Loan program, and replaces it with a subsidized loan program within the Section 502 Guaranteed Rural Housing program.
- Eliminates the Section 515 Multifamily Rural Rental Housing Direct Loan program.
- Increases funding for the Building Technologies Program to $86.4 million.
- Earmarks $912 million to the Environmental Protection Agency for activities related to clean air and global climate change in fiscal 2008.
- Reduces Job Corps funding to $1.518 billion, down approximately $55 million from fiscal year 2006.
- Funds the YouthBuild program at $50 million in its new home at the Department of Labor.
NAHB continues to analyze the President’s budget package, and will be working with congressional appropriators as they craft the fiscal 2008 spending bills.
Given the austerity of the fiscal 2008 budget presented to Congress, the differing priorities of the new governing majorities in the House and Senate, the scores of key programs that the Administration has targeted to be cut or eliminated and the number of lawmakers who have already voiced concerns over the President’s budget, the ensuing appropriations process is likely to be drawn-out and contentious.
For more information, e-mail Jenna Morgan Hamilton at NAHB, or call her at 800-368-5242 x8407.