Administration's HUD FY 2013 Budget Released

With the President's budget release of yesterday, and one call held to date with HUD multifamily staff, we are looking forward to understanding additional details about how the budget changes briefly outlined below would be implemented. Our initial analysis follows:

While we appreciate the administration requesting $475 million, including $100 million for new Section 202 housing, we are concerned that the proposals may result in at least a 2 year hiatus until new units being are developed.

Under the proposed budget the funding for new units would be allocated as “operating assistance” and the states would be tapped to handle the processing (to include award selection). The proposal is based on changes that would require new legislative authority to fund only operating assistance, instead of capital advances and project rental assistance contracts (PRAC), and it is unclear what this change would mean for fair share requirements to make sure projects are funded in metro and non-metro communities. The current program defines PRAC as operating subsidy only and does not provide for debt service. Although the budget suggests that other sources of funding be used for the development of projects, namely the Low Income Housing Tax Credit (LIHTC) program, few states now give priority to supportive senior housing.

While the budget provides $90 million for service coordinator grants, it is unclear how service coordinators would be funded under the new paradigm in the Section 202 operating assistance (assuming that this new program, like the Section 202 PRACs are not eligible for grants but must include service coordinators in the budget).

We are also disappointed to see that the budget proposal eliminates the Assisted Living Conversion Program (ALCP) thereby making the hard won advances in the Section 202 reform Act of 2010, which included a change to allow Service Enriched Housing as an option for ALCP funds, useless.

We are also concerned that the budget’s reduction in project based rental assistance will have a devastating impact on providers by “short funding” contracts and providing less than a full 12 months of subsidy. A similar move was made in 2007 destabilizing projects and was roundly criticized by members of the multifamily industry and Congress.

Finally, the budget proposed changes in the medical deductions for unreimbursed medical expenses, increasing the threshold from 3% to 10% of income. This change would severely burden those residents with the lowest incomes and the highest medical expenses.