HUD 2012 Budget Highlights: You're Screwed

Last Updated May 7, 2011 12:15 AM EDT

A solemn HUD Secretary Shaun Donovan unveiled the 2012 budget for the U.S. Department of Housing and Urban Development (HUD) yesterday and delivered a most fitting quote: "We can do more with less."
"We must do more with less" might have been a more appropriate way of putting it.

According to Donovan the proposed 2012 budget "requires hard choices, but will deliver results."

Those hard choices include cutting off the program responsible for first time home buyer grants, cutting funding to programs for the elderly and disabled, and cutting out additional funding for Public Housing Agencies.

The budget is what you'd expect from HUD, lots of promises for commitment to rental housing and struggling families, plans that mirror the vision President Obama laid out in his State of the Union address, and warnings about cuts that we desperately need.

Donovan also said the "President has proposed a freeze on domestic spending for the next five years, cutting the deficit by $400 billion over 10 years and bringing non-security discretionary spending to the lowest share of the economy since President Eisenhower."

Still, it seems like HUD is planning to spend a lot more than it will save. But maybe not. Here's how the HUD 2012 budget breaks down:

HUD 2012 Budget Highlights:

The Department's $48 billion in gross budget authority is offset by:
  • $5 billion in projected FHA and Ginnie Mae receipts credited to HUD's appropriations accounts, leaving net budget authority of $43 billion, or 1percent below the fiscal year 2010 enacted level of $43.5 billion.
  • Reductions to funding for the Community Development Block Grant program (CDBG). CDBG is the program that includes the first time home buyer grants. It will be cut by 7.5 percent (or $300 million) while the HOME Investment Partnerships program will be cut by by 9.5 percent, or $175 million relative to current funding levels.
  • Reduce funding for new units and projects--meaning cuts to new construction components of the Supportive Housing Programs for the Elderly (202) and Disabled (811).
  • FHA will raise insurance premiums on new loans starting in April, 2011, as authorized to do so by Congress last year. FHA plans on increasing its annual mortgage insurance premium (MIP) by a quarter of a percentage point (.25) on all 30- and 15-year loans.
  • Big give-backs from Public Housing Agencies' budgets. Donovan says PHA's only need four to six months of reserves to run their agencies and HUD will "recapture the excess funds". Donovan says those funds were intended to run PHAs on a rainy day and "that rainy day is here."

Where HUD Wants to Spend Money

  • $19.2 Billion for the Housing Choice Voucher program. This rental housing assistance will help more than two million low-income families live in decent housing in neighborhoods of their choice.
  • $9.4 billion for project-based rental assistance. These funds will preserve approximately 1.3 million affordable units through increased funding for contracts with private owners of multifamily properties.
  • $2.5 billion for Opening Doors. The Federal strategic plan to end homelessness, released by the Administration in June 2010, establishes a five year timeline for ending chronic and veterans homelessness and commits to ending family homelessness over a decade.
  • $2.3 billion for Homeless Assistance Grants.
  • $953 million for the Housing for the Elderly (202) and Housing for Persons with Disabilities Programs (811). Ironic that this item is both on the list of programs to cut and places to spend, but that's a government budget for you.
  • $790 million to fund programs that will directly support housing and economic development in rural communities. I guess they're counting rural votes as well as urban ones.
  • $200 million for housing conversion studies. These funds supposedly cover a demonstration and rigorous process evaluation of the conversion of up to 255,000 public housing units to long-term project-based rental assistance contracts.
  • $168 million for housing and homeowner counseling through HUD and the Neighborhood Reinvestment Corporation (NeighborWorks). To be fair, the federal government is also providing millions of dollars in grants to other non-profit housing and credit counseling organizations in addition to NeighborWorks.
  • $150 million in sustainable region grants to "help local governments make those improvements and make regions that are more economically competitive."
  • $145 million in new housing vouchers for over 19,000 homeless veterans and homeless persons. These funds will help those who receive education, health care and other services through the Departments of Education (DoE), Health and Human Services (HHS) and Veterans Affairs (VA).
  • $120 million to the Transformation Initiative Fund (TI Fund). Includes "technical assistance" and a new initiative--involving twelve other agencies including the White House--aimed at "improving the capacity of local governments in chronically distressed cities and developing partnerships to support job creation."
  • $50 million to "test new incentives" including additional service coordinators and special payments or insurance.
What do you think about the HUD 2012 proposed budget? Will it get approved?
To read the full HUD 2012 Budget click here.
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Ilyce R. Glink is the author of several books, including 100 Questions Every First-Time Home Buyer Should Ask and Buy, Close, Move In!. She blogs about money and real estate at ThinkGlink.com and The Equifax Personal Finance Blog, and is Chief Content Strategist at RealtyJoin.com, a community for real estate investors.
  • Ilyce Glink On Twitter»

    Ilyce R. Glink is an award-winning, nationally syndicated columnist, best-selling book author, and radio talk show host who also hosts "Expert Real Estate Tips," a Internet video show. She owns ThinkGlink.com as well as Think Glink Media, a privately held company that provides consulting, content and video services companies and non-profit organizations.

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