CHCDF Series on Housing as Infrastructure

HUD Programs Create Jobs and Build Infrastructure. So Why Would the President Want to Eliminate Them?

By Marion McFadden, Vice President for Public Policy at Enterprise Community Partners 

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Late last night Politico leaked the story that the Office of Management and Budget (OMB) proposed $18 billion in new program cuts for fiscal year (FY) 2017 to offset the President’s proposed increases to Defense and ‘border security’ spending. The skinny budget released earlier this month also proposed an $18 billion cut to non-Defense discretionary (NDD) programs to fund a $33 billion Defense and border security increase but did not detail where the $18 billion would come from.

This latest proposal would cut FY 2017 Community Development Block Grant (CDBG) program funding in half, about $1.5 billion, and would eliminate all funding for the Community Development Financial Institutions Fund (CDFI Fund) at Treasury Department as well as the Self-Help Homeownership Opportunity Program (SHOP), Section 4 Capacity Building for Affordable Housing and Community Development, and the Choice Neighborhoods Initiative. The Neighborhood Reinvestment Corporation (NeighborWorks) would be reduced by $75 million.

Congress must reject these outrageous proposals from the White House and refuse to increase Defense spending at the cost of cuts to vital domestic programs both this year and next.  Both Republicans and Democrats in Congress seem opposed to making cuts so late in the fiscal year, but it remains to be seen how Republicans will follow the lead of the President, as the head of their party.

As a lifelong advocate for a social safety net for people of modest means, I’m deeply disheartened by the budget proposals, and I’m confused by them, since they work against the best interests of the nation. The President’s budget outline for next year (FY 2018) seeks to eliminate funding for nearly all grant programs that provide flexible funding to states and communities for their local housing and community development needs, including zeroing out the HOME Investment Partnerships (HOME) program in addition to the cutting or eliminating all of the programs I called out above. At a time when Americans are demanding more jobs and better infrastructure, I am at a loss as to why the White House proposes eliminating the programs that are most effective at doing those things.

Choice Neighborhoods, for example, is a competitive grant program that supports locally driven strategies to address struggling neighborhoods with HUD-assisted housing. To receive a grant, a community must develop a comprehensive neighborhood transformation plan that provides a strategy for the simultaneous revitalization of the publicly assisted housing units as well as the surrounding neighborhood. The program empowers communities to take ownership of their own redevelopment. Choice Neighborhoods among other community development programs are designed to give communities flexibility to address their unique challenges but also requires grant recipients to closely track their accomplishments and leverage other funding sources to achieve their revitalization goals.

Choice Neighborhoods is just one program in a larger network of mutually reinforcing housing and community development programs that leverage each other as well as private funding to utilize taxpayer money as efficiently as possible. The Community Development Financial Institutions Fund (CDFI Fund) provides targeted investment to some of the nation’s most distressed communities by investing federal dollars and private sector capital. CDFI Fund investments take a market-based approach to supporting disadvantaged communities. HOME and CDBG are both flexible grant programs that are commonly used as gap financing for the Low-Income Housing Tax Credit (Housing Credit), which is responsible for the development of nearly all new homes affordable to low-income households. A local housing nonprofit may use HOME funding to rehabilitate modest homes but requires a Section 4 Capacity Building grant to cover personnel costs. Federal housing and community development programs efficiently leverage other funding sources, and they also provide funding for projects that would otherwise not happen. Whether it’s laying the infrastructure for new affordable homes, leveraging private capital under the Low Income Housing Tax Credit (Housing Credit), or building a convention center, CDBG, HOME, Choice Neighborhoods, and Section 4 actually provide our communities with their building blocks and do so efficiently.

When I was Deputy Assistant Secretary for Grant Programs at the Department of Housing and Urban Development, I oversaw the Community Development Block Grant (CDBG) formula program, which, in light of the proposed spending cuts, has received attention as a funding stream for the deservedly popular Meals-on-Wheels program. CDBG is so much more than a source of support for meals for the elderly; it is in fact one of the most Federalist of HUD programs, providing flexible dollars to governors and local elected officials, who have the discretion to choose how to spend the funds and consequently are ultimately responsible for ensuring they are used wisely to meet their local needs. The program works in part because it is built on the acknowledgment that where federal funds are needed, locals are in the best position to prioritize and address those needs.

If there is one thing we can all agree on, it’s that America needs jobs. CDBG provides funding for programs and projects that otherwise would not happen, which means that CDBG creates jobs that otherwise would not exist. When announcing the state of Georgia’s CDBG allocations last year, Governor Nathan Deal (R-Ga.) remarked that the projects funded by CDBG “stimulate economic development in these communities and enhance the quality of life for all Georgians,” and that CDBG “allows cities and counties to direct federal funding to address critical community needs, maximizing opportunities for citizens and ensuring that Georgia remains a top state for business.”  In the past ten years, CDBG has supported nearly 390,000 jobs in all 50 states and over 7,200 rural, suburban, and urban communities. On average, each dollar of CDBG leverages another $3.60, and there can be no doubt about the targeting to those most in need.

No matter where you live, I can almost guarantee that you’ve benefitted from a CDBG-funded project at some point in your life, whether it’s a business you patronized that got a loan of CDBG funds, a public park, rec center, or library you visited, or demolition that removed an unsightly abandoned property. Since its creation in 1974, CDBG has invested more than $150 billion in communities nationwide.  Because our country still needs flexible federal support for infrastructure investments, job creation, and poverty elimination, we must not allow CDBG to be terminated by the stroke of a pen.

The President’s skinny budget claims loosely that CDBG “is not well-targeted to the poorest populations and has not demonstrated results.” The data and the first-hand accounts of community leaders nationwide indicate that this could not be more untrue. CDBG like all federal housing and community development programs, requires grant recipients to closely track their accomplishments, under the watchful eyes of HUD, the HUD Office of Inspector General, and Congressional overseers. Nobody who has even skimmed through the data and project reports for these programs would suggest that they haven’t “demonstrated results.”

And putting evidence aside, there is a huge difference between whether funds have been proven to meet a need and whether funds are unneeded.  If we concede that there is a need for the funding that Congress provides each year, the best choice to address remaining concerns is to amend the reporting requirements. The Secretary of HUD and his hard-working career staff have all the authority they need to tailor the rules to ensure better reporting.

Communities would lose too much under the President’s plan. Federal grants of this magnitude likely cannot be replaced with other sources of funding, no matter how hard communities work to increase the amount of skin they put into the game. Eliminating nearly all programs that invest in community development amounts to giving up on the people and places that need support the most.

Along with my colleagues at Enterprise Community Partners, I am speaking out against President’s reckless budget proposals and urge Congress to reject them outright.


 

This article was originally published on March 28, 2017 at: www.enterprisecommunity.org/blog

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