Making the Cut(s): Trump FY18 budget eliminates key housing programs

On Tuesday, the Trump administration released its highly anticipated Fiscal Year 2018 budget proposal. To fund tax cuts that benefit America’s wealthiest residents, President Trump’s budget plan slashes key programs that allow families to keep roofs over their heads and food on the table.

Of course, no one believes these cuts will become reality. Many sources in Washington, including members of the president’s own party, say the budget proposal is “dead on arrival.” But members of Congress do see the President’s budget as a set of goals — and analysis from the National Low Income Housing Coalition emphasized that “advocates are deeply concerned that Congress could try to pass deep – but less severe –
cuts as a compromise.”

Below is a summary of cuts contained in the budget proposal and the Trump administration rationale for those cuts. Look for a Minnesota-specific analysis on the impact of the Trump budget on housing soon.

Reduces rental assistance by $1.9 billion. Also proposes policies that include administrative relief, streamlining for grantees, policies that encourage work and self-sufficiency, including increases to tenant rent contributions (at the discretion of Secretary Carson).

  • Rationale: The Administration recognizes that rent and utility inflation is increasing costs every year, making it more difficult to assist the same number of households. States and local governments and the private sector need to contribute more to help address affordable housing needs among low-income households.

Eliminates CDBG (Community Development Block Grants)

  • Rationale: The program is not targeted to the poorest population and has not demonstrated results. The budget devolves community and economic development activities to the state and local level. Studies have shown that the allocation formula poorly targets funds to the areas of greatest need. Many aspects of the program have become outdated. Also, decreasing appropriations combined with more localities qualifying for allocations has reduced the size of individual grants over time, making CDBG less impactful.

Eliminates funding for HOME

  • Rationale: Housing for low-income families is a fragmented system with varying rules and regulations that create overlap and inefficiencies, as well as challenges to measuring success. The Administration devolves affordable housing activities to state and local governments who are better positioned to address unique market challenges, local policies, and impediments that lead to housing affordability problems.

Eliminates funding for Choice Neighborhoods

  • Rationale: Reports suggest that many of the funds leveraged by Choice grantees were existing commitments and appear as if they would have occurred in the absence of a Choice grant. Also, examples of grants catalyzing additional resources beyond housing finance were infrequent. State and local governments are better positioned to fund locally driven strategies for neighborhood revitalization.

Eliminates funding for the Self-help Homeownership Opportunity Program (SHOP). SHOP includes the Capacity Building for Community Development and Affordable Housing program (Section 4) and the rural capacity building program.

  • Rationale: The program is duplicative of other federal, state, and local efforts. The non-profit organizations that receive these grants should have the capacity to substitute dollars with more flexible funding from the private sector and philanthropy.

Eliminates allocations to the Housing Trust Fund and the Capital Magnet Fund

  • Rationale: Housing for low-income families is provided by a fragmented system with varying rules and regulations that create overlap and inefficiencies.

Public housing capital fund cut by 68%.

Eliminates the single family housing direct loans in USDA. Beginning in 2018, USDA will offer home ownership assistance only through single-family housing guaranteed loans.

  • Rationale: Financial markets are more efficient, increasing the reach of mortgage credit to lower credit qualities and incomes. Therefore, homeowners can utilize private banking industry to provide this service. Current low mortgage rates often result in average 30 year fixed commercial mortgage rates at or below the average borrower rate for the USDA single family direct loan. Rural areas once isolated from easy access to credit have shrunk as broadband internet access and correspondent lending have grown. USDA is in a position to utilize the guarantee program and still achieve its homeownership goals for rural areas.

Eliminates the Rural Business and Cooperative Service – not a housing program but critical to rural development

  • Rationale: The program is improperly managed. The Administration’s tax, regulatory, and infrastructure policies are expected to be more effective at improving rural economies and job growth.

Eliminates Rural Water and Waste Disposal Program Account – not a housing program but critical to rural development

  • Rationale: Duplicative. Also, elimination of the program might stimulate infrastructure lending from rural lenders.

Cuts Native American Housing Block Grant program $108 million

  • Rationale: The Administration recognizes that the program is fulfilling its mission, yet, improved data collection is necessary to assess grantee performance on efficiency metrics.

Eliminates the Indian Community Development Block Grant

  • Rationale: Unauthorized and duplicative.

Eliminates FEMA’s Emergency Food and Shelter Program

  • Rationale: The Emergency Food and Shelter Program is proposed for elimination because it is duplicative of federal housing programs administered by HUD and emergency food and shelter is primarily a state and local responsibility.

Reduces the Neighborhood Reinvestment Corporation (NeighborWorks) by $148 million

  • Rationale: A strong return on these funds has not been documented. NeighborWorks is not a unique provider of housing and community services. It cannot document that its federal funding leads to higher performance or better outcomes compared to the work of similar organizations.

Eliminates Weatherization Assistance Program (EPA)

  • Rationale: Reduces federal intervention in state-level energy policy and implementation.

Eliminates new grants for CDFIs and cuts funding for oversight of existing commitments by $10 million

  • Rationale: The CDFI industry has matured, and these institutions should have access to private capital needed to extend credit and provide financial services.

Eliminates the Low Income Home Energy Assistance Program (Dept. of Health and Human Services)

  • Rationale: The program is known for fraud and abuse. Also, all 50 States have imposed regulations that prevent utility companies from disconnecting energy needs from their residents under certain circumstances (for example, Minnesota’s “Cold Weather Rule”)

Again, these cuts are wildly unlikely to pass muster in either chamber of Congress. “The president’s budget, as we all know, is a recommendation,” said Senate Majority Leader Mitch McConnell, reminding reporters that he didn’t endorse President Bush’s budget either. Rep Leonard Lance, R-NJ told reporters “there’s an old adage in Washington: the president proposes, the Congress disposes.” And Rep. Mark Meadows, the chairman of the House Freedom Caucus, told the New York Times that “even for some of us who are considered fiscal hawks” cutting Meals on Wheels “may be a bridge too far.”

But MHP, and our national partners, will remain vigilant as the budget process progresses — and share the potential impacts these cuts could have in Minnesota soon.