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22. Department of Housing and Urban Development


Highlights of 2002 Funding

  • Assists over 130,000 low-income families with the down payment on their first home.

  • Increases the number of community technology centers in high poverty neighborhoods.

  • Renews all expiring rental subsidy contracts, which protects current families.

  • Provides 34,000 additional low-income families with housing vouchers.

  • Expands the number of jurisdictions receiving assistance to house people with AIDS.

  • Continues Community Block Grant formula funding at the 2001 level.

  • Continues to reform the Section 8 program by implementing measures that improve the utilization of vouchers.

  • Rehabilitates or constructs 100,000 homes through the Renewing the Dream tax credit.

  • Provides tax credit to financial institutions that match private Individual Development Accounts to save for a first home, start a business, or pay for education.



The Down Payment Assistance Initiative will provide $200 million within the HOME Investment Partnerships Program to match down payment assistance provided by third parties, up to $1,500 per family. Funds will be administered by State housing finance agencies and each year help over 130,000 first-time low-income homebuyers.

The Community Technology Centers Initiative will enhance the Department of Housing and Urban Development's (HUD's) Neighborhood Networks program by providing $80 million in competitive grants to help communities create or expand technology centers in high poverty urban communities.

An Improving Access Initiative will provide $20 million in competitive grants within the Community Development Block Grant (CDBG) program for Americans with Disabilities Act exempt organizations that have limited resources, including civic organizations and religiously affiliated service providers, to make their facilities accessible to the disabled.

Department of Housing and Urban Development, 2.5% Average Program Level Annual Growth, 1998-2002

Redirected Resources

HUD will increase housing opportunities for low-income households by funding 34,000 incremental Section 8 housing vouchers and renewing all expiring rental subsidy contracts. HUD will also expand funding for the Housing Opportunities for People with AIDS program. This expansion will support an increase in the number of eligible jurisdictions based on projections of AIDS cases by the Centers for Disease Control without reducing funding for other jurisdictions. Additional funding will be provided within the Lead Hazard Reduction program, with increased private sector leveraging, to reduce exposure of low-income children to lead-based paint.

The Public Housing Capital program will decline by $700 million relative to 2001 funding. Full funding will be provided for the accrual of new capital needs and local Public Housing Authorities will be encouraged to use more than $6 billion in unspent funds to reduce the backlog of needs. In addition, regulatory tools will be used to address distressed public housing units that represent a disproportionate share of the backlog of capital needs. The Public Housing Operating program is increased by $150 million, in part to cover utility rate increases and other cost increases to operate public housing. The Public Housing Drug Elimination program is terminated because the program was found to have limited impact, the same activities are eligible under the Public Housing Operating and Capital programs, and regulatory tools such as eviction are more effective at reducing drug activity in public housing. Program funds will be redirected to other drug prevention efforts.

The Rural Housing and Economic Development program, which began in 1999, is terminated because it duplicates several programs, including CDBG and those of the Department of Agriculture.

A new Federal Housing Administration hybrid adjustable-rate mortgage will work with proposed tax incentives for savings and proposed tax credits for rehabilitation and construction of homes to expand homeownership, increase housing affordability, and strengthen established neighborhoods. The premiums for some specialized FHA programs (e.g., condominium, rehabilitation, and multifamily loans) are to be increased so that all single-family FHA borrowers pay the same premiums and so that these programs operate without the need for subsidy.

Potential Reforms

Oversight of Local Housing Providers: Housing assistance is delivered through thousands of local intermediaries public housing agencies and private property owners. Weak oversight of these local agents has reduced the quality of housing services and increased costs, reducing the numbers of households that can be aided. HUD will improve its management rating instruments, making them more outcome-oriented rather than process-oriented and making other revisions as recommended by the National Academy of Public Administration and HUD's Inspector General. Using the improved instruments, HUD will act against intermediaries who violate the terms of their contract with HUD as demonstrated by failing scores on these instruments. Non-performing intermediaries will automatically be subject to appropriate remedial action, including termination and reassignment of contractual obligations.

Overpayments in HUD's Rental Assistance Programs: HUD overpays hundreds of millions of dollars in low-income rent subsidies because tenants' incomes are underreported and rents are improperly calculated or not fully collected. Latest estimates show substantial overpayment of subsidies in HUD's rental assistance programs, including public housing and Section 8 rental assistance programs. HUD will undertake reforms to correct these errors, including steps to ensure that local agencies and landlords can correctly calculate rent owed based on program rules, full implementation of HUD's existing authority to match tenant-reported incomes with IRS records, and steps to ensure that local housing agencies report tenant characteristics for all assisted households.

FHA Fraud Reduction and Improved Program Controls: Inadequate information systems have weakened FHA's ability to monitor lenders that use its guarantees and contributed to HUD's failure to obtain a clean opinion from its auditors in 1999. A fraudulent scheme known as "property-flipping" recently highlighted internal weaknesses in FHA's single-family systems and controls. To combat the scheme last year, FHA implemented emergency foreclosure moratoria to protect borrowers in areas where property flipping was prevalent. FHA will strengthen the integrity of internal systems and controls to eliminate the need for foreclosure moratoria or other emergency responses. Actions will include improving the loan origination process and providing better monitoring of lenders and appraisers.

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