RURAL HOUSING SUMMIT

OCTOBER 25-26, 2012PACIFIC GROVE, CA

Where We Stand

Impact of Continuing ResolutionThe CR continues funding at the current rate of operations for federal agencies, programs and services. To meet the agreement under the Budget Control Act to ensure a total rate of operations at $1.047 trillion, a government-wide, across-the-board increase of 0.6 percent over the base rate is also included.

In total, including all discretionary spending, the annual rate of the CR is $26.6 billion below last year’s level.

Impact of SequestrationThe White House release its report on the impact of the sequestration, which will cut non-defense discretionary spending by 8.2 percent.

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Rural Development Programs($ in millions)

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FY11 Final

FY12 Final

FY13 President

FY13 Senate

FY13 House

FY13 CR

Section 502 Direct 1,122 900 653 900 653 900

Section 523 SHH 37 30 10 30 15 30

Section 515 Rental 70 65 0 28 31 65

Section 514 FLH 27 20.8 26 26 21 20.8

Section 516 FLH 10 7.1 9 9 7 7.1

Section 504 Loans 34 10 28 28 10 10

Section 504 Grants 24 30 28 30 17 30

Section 521 RA 955 904 907 907 886 904

HUD Programs($ in millions)

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FY11 Final

FY12 Final

FY13 President

FY13 Senate

FY13 House

FY13 CR

CDBG Formula Grants

3,408 2,948 2,932 3,100 3,344 2,950

HOME 1,610 1,000 996 1,000 1,200 1,001

SHOP 82 53.5 0 53.5 60 53.5

Taxmageddon/Fiscal Cliff

Taxes

Expiration of Bush Tax Cuts and AMT Patch $221 billion

Expiration of Payroll Tax Cut $ 95 billion

Other expiring provisions $65 billion

Taxes included in Affordable Care Ac $18 billion $399 billion

Spending

Across the board cut (Budget Control Act) $65 billion

Expansion of long term unemployment $26 billion

“Doc Fix” $11 billion $102 billion

Increased revenue/ lower spending $105 billion

_______________________

$606 billion6

Simpson-Bowles

Cuts to Discretionary Spending* $1.66 trillion

Health Care Reform $600 million

Social Security Reform $238 million

Tax Reform** $996 million

Net Interest $673 million

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$4.167 trillion

* Over 10 years, defense-discretionary spending would rise from 55% to 62.7% of all discretionary spending.

** Tax Reform would reduce or eliminate $1.1 trillion in tax expenditures, and cut tax rates with the top rate at 29%.

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Obama Deficit Reduction PlanCuts Discretionary Spending* $982 billion

Mandatory Savings $257 billion

Health Savings $320 billion

Cap Overseas Contingency Operations $1.084 trillion

Tax Reform $1.573 trillion

Debt Service Savings $715 billion

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$4.895 trillion**

*Budget Control Act

** Offset of $448 billion for American Jobs Act – which was not enacted.

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Comparing Budget Plans

9FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 1,050

1,100

1,150

1,200

1,250

1,300

1,350

1,170

1,107

1,066 1,070 1,076 1,090

1,118

1,146

1,167

1,212

1,259

1,183

1,155 1,158 1,158 1,170

1,198

1,225

1,248

1,282

1,297

1,237

1,200 1,195 1,195 1,197 1,210

1,222

Discretionary Spending ($ in billions)

Ryan Budget Resolution

President's Budget Request

Simpson Bowles

Community Development Funding(Percent of Federal Total Outlays)

Rural Housing Service Budget Authority($ in millions)

FY03 FY12 FY13 Proposed0

100

200

300

400

500

600

503

185149

Corporate Tax Expenditures

Tax Incentives for Economic Development in Low-Income Communities

Empowerment zones; 730; 7%

HTC (20%) + 10% rehab credit; 410; 4%

NMTC; 720; 7%

Rental Housing (LIHTC + Exclu-sion of interest on

rental housing bonds); 6700; 67%

Exclusion of interest on rental housing bonds; 1050;

11%

Recovery zone bonds; 60; 1%

Tribal economic devel-opment bonds; 10; 0%

Brownfields redevelopment; 80; 1%Credit for holders of quali-fied academy bonds; 200;

2%

Empowerment zones; 730; 15%

*HTC (20%) + 10% rehab credit, $316 , 6%

NMTC, $720 15%

**LIHTC, $1,752 Recovery zone bonds; 60; 1%

Tribal economic de-velopment bonds; 10;

0%

Brownfields redevel-opment; 80; 2%

Credit for holders of qual-ified academy bonds;

200; 4%

Exclusion of interest on rental housing bonds;

1050; 21%

Dollars That Reach Low-Income Communities

*Based on NPS data, 77% of HTC projects are in low-income areas. Source: Nat’l Trust Community Investment Corp. **Based on HUD data, 31% of LIHTC projects are in low-income areas. Source: New Markets Tax Credit Coalition.Source: GAO Report

Rural DefinitionOn March 27, 2013, USDA will update its “rural” definition with 2010 Census Data. As a result, 923 rural communities will no longer be eligible for USDA Rural Housing funding. USDA extended this deadline from October 1, 2012 to correspond with the expiration of the FY13 Continuing Resolution.

Impact In CaliforniaIn 2011, California received a combined $768 million in Section 502 Guaranteed Loans ($699 million) and Section 502 Direct Loans ($69.7 million).

Nearly 75 percent of the state’s Rural Development funds went to communities that will no longer be eligible for USDA Rural Housing programs as of March 27, 2013.

Without Congressional action, California will lose an estimated $576 million in USDA Direct and Guaranteed loans. This means that 4,431 fewer rural Californian families will be able to access affordable mortgages through these programs, resulting in 7,753 fewer jobs and nearly $222 million less in local wages.

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Legislative OpportunitiesFarm Bill

The Senate Farm Bill includes an amendment sponsored by Sen. Nelson (NE), Johanns (NE), Moran (KS), and Johnson (SD) to: (1) extend the grandfathering clause until the 2020 Census; and (2) increase the population limit to 35,000. Rep. Fortenberry (R-NE) offered an amendment to the House Farm Bill, but withdrew it due to jurisdictional issues. Under House rules, the amendment was not “germane.”

FY13 AppropriationsThe Senate Appropriations bill includes language to extend eligibility for all currently eligible communities for 1 year. In the House, Rep. Fortenberry intends to offer an amendment to the Appropriations bill when it gets to the House floor. His amendment would extend eligibility for all currently eligible communities until the end of FY13.

Continuing ResolutionLanguage was not included in the CR because Congressional leaders wanted to keep the bill as “clean” as possible. However, 99 Representatives signed onto Rep. Fortenberry’s letter, urging House Leadership to address the issue, and 2 others sent in their own individual letters. 16

GAO ReportFindings: Rural Housing Service

After reviewing 160 housing assistance programs at USDA, FHA, and VA for overlap, duplication, and fragmentation, the GAO found:

• FHA’s loan guarantee serves more LMI families in rural areas than the Section 502 Guaranteed Loan program. USDA’s shift towards guaranteed loans provides a stronger argument for consolidation due to its similarity to FHA.

• USDA does not even set priority goals for housing, unlike HUD.

The GAO explicitly recognizes the unique role of Section 502 Direct Loans, which is targeted to very low- and low-income borrowers, has no down payment requirement, and subsidized interest rates. However, it holds that Section 502 Direct has “struggled to make a measurable impact” due to low funding levels and a labor-intensive loan processing system.

The GAO makes a stronger case for the unique role of USDA multi-family programs, as being more concentrated in rural areas than HUD programs and LIHTC. These programs also have different income limits, geographic limits, loan terms, and guaranteed loan features.

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GAO ReportRecommendations:

The GAO’s recommendations:

• The Administration’s Task Force − which was announced in February 2011 to evaluate the potential for coordinate or consolidate homeownership loan programs at HUD, USDA, and VA − review their various housing programs and identify potential areas for consolidation and those areas that would require statutory change.

• Congress should consider requiring HUD and USDA to explore merging their loan guarantee programs and aligning their multi-family management programs.

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