Department of Housing and Urban Development (HUD): Funding Trends Since FY2002

Summary

The Department of Housing and Urban Development (HUD) administers a number of programs and activities that are primarily designed to address housing problems faced by households with very low incomes or other special housing needs. Most of the funding for HUD’s programs and activities comes from discretionary appropriations provided each year in the annual appropriations acts enacted by Congress.

HUD’s appropriations are generally made up of several components, including regular annual appropriations, which fund HUD’s regular programs and activities; emergency appropriations, which are sometimes provided in response to national emergencies such as disasters; rescissions of unspent prior-year funding; and offsetting collections and receipts. Combined, these components make up HUD’s net budget authority, which is the amount that counts for the purposes of federal budget enforcement, including discretionary spending limits.

Since FY2002, in terms of nominal dollars, HUD’s regular (non-emergency) annual net budget authority has increased by 21%. When adjusting for inflation, HUD’s regular annual net budget authority in FY2015 is 6% less than it was in FY2002. However, these figures mask several important recent trends.

New appropriations for HUD’s programs and activities have increased since FY2002 by 32% in nominal dollars, 2% in inflation-adjusted dollars. The difference between the increase in appropriations versus net budget authority is due to an increase in the savings available from offsetting receipts attributable to the Federal Housing Administration (FHA) mortgage insurance program. FHA receipts are used to offset the cost (in terms of budget enforcement) of providing appropriations for HUD’s programs and activities. The offsetting receipts available from FHA increased from a low of about $140 million in FY2010 to a peak of almost $12 billion in FY2014.

The increase in funding for HUD has not been linear. After a period of steady increase, regular appropriations for HUD’s programs and activities peaked in FY2010 and then declined so that in FY2015 they were 3% below the FY2010 level. Over that same period HUD’s regular annual net budget authority was reduced much more dramatically, by 23%, attributable to growth in savings from FHA offsetting receipts. FY2013, the year of the discretionary spending sequestration, provided HUD’s lowest level of appropriations since 2009, and the lowest level of net budget authority since FY2003.

Growth in appropriations for HUD’s programs and activities has largely been driven by increases in appropriations for the Section 8 Housing Choice Voucher program and the Section 8 project-based rental assistance program. Combined, their funding has increased by 86% from FY2002 to FY2015. Conversely, funding for all other HUD programs combined has declined by about 13%. The formula grants under HUD’s two largest block grant programs—the HOME Investment Partnerships Program and the Community Development Block Grant (CDBG) program—have experienced some of the largest reductions in funding during this time (48% and 31%, respectively).

Looking toward the future, it can be assumed that if policymakers maintain interest in cutting the deficit, there will continue to be efforts to reduce overall discretionary spending, including HUD’s budget. Deficit reduction measures led to the FY2013 sequestration, which resulted in a roughly 5% cut for most domestic discretionary spending from the FY2012 level. These overall budgeting considerations will likely interact with the specific cost-drivers in HUD’s budget. Cost growth in the Section 8 project-based program is unlikely to continue at the same rate, given that most long-term contracts are now on an annual funding cycle. Future cost growth in the Section 8 voucher program is less certain, as it is driven by market factors, although if major reforms are enacted, that could change. Assuming policymakers continue to prioritize maintaining current service levels in the Section 8 voucher program, pressure to reduce funding for other HUD programs and activities, including block grant programs, may continue. Thus far, it appears that increases in offsetting receipts available from FHA have minimized the effect of efforts to limit discretionary spending on the amount of appropriations available for HUD programs and activities. As receipts from FHA eventually decline—anticipated because of market changes and policy changes—pressure to further reduce appropriations for HUD programs may increase.