How Federal Policy Changes May Affect the Financing

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How Federal Policy Changes May Affect the Financing of Affordable Housing Barbara Sard 2012

How Federal Policy Changes May Affect the Financing of Affordable Housing Barbara Sard 2012 Housing Land Advocates Conference Portland, Oregon September 14, 2012

Center on Budget and Policy Priorities 4 Key Policy Dimensions 1. 2. 3. 4.

Center on Budget and Policy Priorities 4 Key Policy Dimensions 1. 2. 3. 4. Deficit Reduction Tax Reform Housing Finance Reform Affordable Housing Program Reform cbpp. org

Center on Budget and Policy Priorities 1. DEFICIT REDUCTION cbpp. org

Center on Budget and Policy Priorities 1. DEFICIT REDUCTION cbpp. org

Center on Budget and Policy Priorities HUD Rental Assistance Has Remained Flat Despite Increase

Center on Budget and Policy Priorities HUD Rental Assistance Has Remained Flat Despite Increase in Need Worst-Case Housing Needs Have Increased by More than 40 Percent from 2001 – 2009 Source: HUD analysis of Census data; CBPP analysis of HUD data

Center on Budget and Policy Priorities Since 2010, Funding for Housing and Community Development

Center on Budget and Policy Priorities Since 2010, Funding for Housing and Community Development Have Been Cut Significantly Change in Funding, 2010 – 2012, in millions of nominal dollars Source: OMB public budget database. Figures are for discretionary programs, in nominal dollars.

5 Center on Budget and Policy Priorities Budget Control Act Cuts Funding for Nondefense

5 Center on Budget and Policy Priorities Budget Control Act Cuts Funding for Nondefense Discretionary Programs 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 0% FY 2012, adj. for inflation -5% BCA Spending Cap -10% BCA Sequestration -15% -20% -25% -30% Source: CBPP analysis based on CBO data. cbpp. org

Center on Budget and Policy Priorities Bipartisan Consensus on Three Fiscal Policy Issues The

Center on Budget and Policy Priorities Bipartisan Consensus on Three Fiscal Policy Issues The leaders of both parties, including President Obama, broadly concur on three key fiscal policy matters: • That we need at least enough deficit reduction over the coming decade to stop the debt from growing faster than the economy; this requires more than $3 trillion in additional deficit reduction over the coming decade on top of the roughly $1 trillion in cuts under the BCA. • That we shouldn’t reduce Social Security and Medicare benefits much — if at all — for people now 55 and over, meaning there will be little savings there over the coming decade. • That we should not reduce defense below the caps set in the BCA, meaning there will be little additional defense savings beyond those reflected in the caps.

Center on Budget and Policy Priorities How to Get $3 Trillion+ in Deficit Reduction?

Center on Budget and Policy Priorities How to Get $3 Trillion+ in Deficit Reduction? • If Social Security, Medicare, and defense are largely protected… • And there is little or no new revenue… • Then there are only two major parts of the budget left from which the bulk of the savings will have to come: 1) the entitlement safety net for low-income households; and 2) nondefense discretionary programs, including employment and training, education, Head Start, WIC, low-income housing, research, infrastructure, environmental protection, and international. • Revenues are key: without them, nondefense discretionary programs and anti-poverty programs will face massive cuts. The Ryan budget is an illustration of this. 7 10/24/2020

Center on Budget and Policy Priorities 8

Center on Budget and Policy Priorities 8

Center on Budget and Policy Priorities Strategies for Deficit Reduction • Goal is a

Center on Budget and Policy Priorities Strategies for Deficit Reduction • Goal is a balance of spending cuts and revenues in a comprehensive deficit reduction package that will not increase poverty or inequality. • Make no further cuts in nondefense discretionary spending. • Make Medicaid/Medicare sustainable without major structural changes that undermine the ability to serve needy recipients. • Do not extend the Bush-era tax cuts for households with the highest incomes (top 2% with incomes above $250 K). • Reform inefficient, regressive tax subsidies (loopholes, deductions) • Cancel/modify sequestration only as part of a comprehensive, balanced deficit reduction plan. cbpp. org

Center on Budget and Policy Priorities House (Ryan) Plan Forces Very Deep Cuts in

Center on Budget and Policy Priorities House (Ryan) Plan Forces Very Deep Cuts in Nondefense Programs 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 0% FY 2012, adj. for inflation -5% BCA Spending Cap -10% BCA Sequestration -15% -20% House (Ryan) FY 2013 Budget -25% -30% Source: CBPP analysis based on OMB and CBO data.

Center on Budget and Policy Priorities Fiscal Debate Threatens Vulnerable People Tuesday, April 24,

Center on Budget and Policy Priorities Fiscal Debate Threatens Vulnerable People Tuesday, April 24, 2012 11 cbpp. org

Center on Budget and Policy Priorities 2. TAX REFORM cbpp. org

Center on Budget and Policy Priorities 2. TAX REFORM cbpp. org

Center on Budget and Policy Priorities Tax Reform Holds Risks for Low-Income People and

Center on Budget and Policy Priorities Tax Reform Holds Risks for Low-Income People and Programs • Bush tax cuts and the Obama tax cuts for low-income working families — which lift 1. 6 million people out of poverty and reduce the severity of poverty for 13 million others —will expire at the end of 2012. • Congress may consider tax reform in 2013, to improve efficiency of tax code and help reduce deficits. • Some agreement that reducing “tax expenditures” is a worthwhile approach, but this category includes key benefits for low-income families (e. g. , Earned Income and Child Tax Credits) and the Low Income Housing Tax Credit (LIHTC). 3

Center on Budget and Policy Priorities But Tax Reform Could Present Opportunity to Rebalance

Center on Budget and Policy Priorities But Tax Reform Could Present Opportunity to Rebalance Housing Policy • Tax reform may include changes in homeownership and other tax deductions, as recommended by 3 bipartisan panels. • Using a portion of savings from tax reform for a new renters’ tax credit as a complement to the LIHTC and rental assistance programs could make housing spending more fair and effective. 3

Center on Budget and Policy Priorities Most Federal Housing Spending Benefits Homeowners Three-Quarters of

Center on Budget and Policy Priorities Most Federal Housing Spending Benefits Homeowners Three-Quarters of Federal Housing Expenditures Benefit Homeowners Source: OMB public budget database and Budget of the United States, FY 2013, Analytical Perspectives. Figures for spending on homeownership and rental housing include estimated outlays and tax expenditures for 2012.

Center on Budget and Policy Priorities Benefits of Federal Housing Spending Are Concentrated on

Center on Budget and Policy Priorities Benefits of Federal Housing Spending Are Concentrated on Higher Income Families More Than Half of All Housing Assistance Goes to Households with Incomes Above $100, 000 Source: Joint Committee on Taxation, Estimates of Federal Tax Expenditures for Fiscal Years 2011 – 2015 , Table 3, and CBPP analysis of HUD program data and the OMB public budget database. Tax expenditures include the mortgage interest and real property tax deductions; income figures are for tax filing units. Rental subsidies include total outlays for the Housing Choice Voucher, Section 8 Project-Based, Public Housing, Housing for the Elderly (Section 202), and Housing for People with Disabilities (Section 811) programs.

Center on Budget and Policy Priorities Average Housing Benefit for Higher Income Households Four

Center on Budget and Policy Priorities Average Housing Benefit for Higher Income Households Four Times Benefit for Lower Income Households 7

Center on Budget and Policy Priorities Overview of Renter Credit Proposal • Would authorize

Center on Budget and Policy Priorities Overview of Renter Credit Proposal • Would authorize states to allocate capped amount credits to make housing affordable for low-income renters. • Families assisted with credits generally would pay no more than 30 percent of their income for rent and property owners (or sometimes banks that lend to them) would receive a tax credit in exchange. • If capped at $5 billion, the proposal could help 1. 2 million families afford housing, reduce rents by an average of $400, and lift four of five of the cbpp. org poorest families it assists out of deep poverty.

Center on Budget and Policy Priorities 3. HOUSING FINANCE REFORM cbpp. org

Center on Budget and Policy Priorities 3. HOUSING FINANCE REFORM cbpp. org

Center on Budget and Policy Priorities Unpredictable Future of Mortgage Lending • Implementation of

Center on Budget and Policy Priorities Unpredictable Future of Mortgage Lending • Implementation of Dodd-Frank may alter downpayment requirements for non-FHA loans (“Qualified Residential Mortgage”) • Obama Administration is trying to reduce federal role and increase incentives for buyers to use private mortgage insurance • No political consensus on extent of federal role needed after housing market rebounds, if any • Multifamily lending tends to be overlooked cbpp. org

Center on Budget and Policy Priorities 4. AFFORDABLE HOUSING PROGRAM REFORM cbpp. org

Center on Budget and Policy Priorities 4. AFFORDABLE HOUSING PROGRAM REFORM cbpp. org

Center on Budget and Policy Priorities SEVRA/AHSSIA Provisions Could Stretch Funds and Improve Project-based

Center on Budget and Policy Priorities SEVRA/AHSSIA Provisions Could Stretch Funds and Improve Project-based Voucher Policies • April 2012 House draft would reduce Section 8 and public housing program costs by about $2. 8 billion over 5 years. • Streamlined rules for rents and HQS inspections that would reduce administrative burdens/costs for PHAs’ and owners. • A stable, predictable policy on voucher renewal funding that would encourage PHAs to serve more families with existing funds. • PBV changes would increase share of vouchers that PHAs may project-base, facilitate project-basing in tight markets, and allow site-based waiting lists. • Minimum rent and expansion of MTW carry risks, but recent draft could limit harmful effects of these provisions. • Congressional appropriators are very interested in enacting at least the cost-saving provisions of the bill. cbpp. org

Center on Budget and Policy Priorities In Second Term, Likely Increased Focus on Regulatory

Center on Budget and Policy Priorities In Second Term, Likely Increased Focus on Regulatory Changes • Proposed rule on Affirmatively Furthering Fair Housing may be published after election if Obama wins. • Additional priority areas may include: • Streamlining within HUD’s authority if AHSSIA/SEVRA changes not enacted; • Consortia and other changes to facilitate economies of scale of administering agencies • Improved performance measurement focused on outcomes in Housing Choice Voucher and Public Housing programs cbpp. org

Center on Budget and Policy Priorities CBPP Resources • Background/analysis of low-income housing policy

Center on Budget and Policy Priorities CBPP Resources • Background/analysis of low-income housing policy http: //www. cbpp. org/research/index. cfm? fa=topic&id=33 • Renters’ Credit proposal: http: //www. cbpp. org/rentercredit • Fact sheets on federal rental assistance programs http: //www. cbpp. org/cms/index. cfm? fa=view&id=3586 • Timely updates on housing policy issues http: //www. offthechartsblog. org/category/housing/ http: //www. cbpp. org/research/index. cfm? fa=topic&id=143 • Sign up for CBPP housing email updates http: //www. cbpp. org/research/index. cfm? fa=housing • Background/analysis of federal budget issues http: //www. cbpp. org/research/index. cfm? fa=topic&id=29