Part Two: The 21st Century Agenda for Cities and Suburbs

While our homeownership record is improving, shortages of affordable rental housing are worsening. An estimated 5.3 million households have worst case housing needs -- worst case needs most often being where more than half a family's income goes to rent. The U.S. Conference of Mayors reports that in 1998, requests for housing assistance by low-income families rose in 25 of the 30 major cities surveyed. Housing assistance can help working families live near jobs and transportation. It can relieve distress rents so that families have more disposable income to purchase goods and services, save for college, start a business, or accumulate a downpayment on a home.

Finally, we must continue affordable housing programs that address the needs of the most vulnerable Americans. The agenda would build on the Continuum of Care programs that are showing results in helping people move to permanent housing. The agenda would also expand housing assistance programs for our rapidly expanding population of senior citizens.

Boosting Opportunities for Homeownership

Raising Federal Housing Administration (FHA) Volume Caps. Since 1934, the Federal Housing Administration has made homeownership possible for nearly 25 million families by insuring the mortgages issued by private lenders. FHA loans are particularly important to first-time and minority homebuyers. Eighty percent of FHA loans last year went to first-time homebuyers. FHA insures more than 40 percent of all mortgages to African-American and Hispanic homebuyers.

In 1999 the Administration succeeded in raising the limit on the mortgage amount that FHA can insure to enable more families to purchase their first homes, especially in areas with high housing prices. The Administration is now asking Congress to permit FHA to raise its annual cap on the total volume of home mortgages it can insure to accommodate growing homebuyer demand. Congress approved a mid-year increase in FY99 to $140 billion. This will allow FHA to insure about 250,000 additional mortgages this year. FY99 will be a record year for FHA loan originations, and the Administration will be requesting similar levels over the next two years to assure that sufficient resources are available to support increased business due to rising demand. If Congress approves, the annual cap will be increased to $140 billion in each of the next 2 years. This will allow FHA to insure about 500,000 additional mortgages above the number it would insure if the cap remained at the previous level during the 2-year period.

The government-sponsored housing finance institutions, Fannie Mae and Freddie Mac, play a role in increasing homeownership in cities. Carrying out regulatory responsibilities created by Congress, HUD establishes affordable housing goals governing Fannie Mae's and Freddie Mac's purchases of mortgages for lower-income families and underserved neighborhoods.

Homeownership Zones. The FY2000 budget requests $25 million as a set-aside in the CDBG program to fund large-scale homeownership projects in targeted areas. Funds will be awarded competitively to communities that have large numbers of housing units that need rehabilitation and that have made homeownership part of a holistic strategy for community revitalization. The FY2000 request will support five to seven Homeownership Zones, based on the average grant of $3 million to $5 million. In 1997 HUD was able to fund just 6 of the 70 zone applications received.

Homeownership Vouchers. HUD has just published regulations that will enable qualifying families to use Section 8 vouchers to become first-time homebuyers, using their assistance to pay the costs of homeownership rather than remaining renters. By moving hard working families up the ladder to homeownership, homeownership vouchers will be an important resource for strengthening neighborhoods in inner cities and older suburban areas. The vouchers are also a new tool for building family assets.

National Partners in Homeownership. This unprecedented public-private partnership is working to increase homeownership opportunity in America. The Partnership consists of 66 members representing lenders; real estate professionals; home builders; nonprofit housing providers; and Federal, State, and local governments. HUD Secretary Andrew Cuomo leads the Partnership, the goal of which is to achieve a homeownership rate of 67.5 percent of all American households by the end of the year 2000, creating up to 8 million additional homeowners since 1995. To date, more than 150 local partnerships have joined the National Homeownership Strategy.

Partnership for Advancing Technology in Housing (PATH). The PATH initiative, a public-private partnership announced by the President last year, will further increase homeownership by making good quality housing more affordable. Working with the Nation's leading builders, home manufacturers, product suppliers, architects, and insurers, PATH aims to improve the quality, cost, durability, safety, and disaster resistance of the next generation of American housing. PATH will do this by speeding the identification and adoption of building technologies by industry. In FY2000, the Administration is again requesting $10 million for this multiyear program.

Building Homes in America's Cities. Earlier this year, Vice President Gore announced an agreement among HUD, the National Association of Home Builders, and the U.S. Conference of Mayors to build a million homes in urban areas over the next ten years.

Expanding Affordable Rental Housing

The FY2000 budget also requests $580 million in increased funding for 100,000 new Section 8 vouchers to help address the substantial housing need that remains and enable families and individuals to choose housing locations near jobs, families, and support systems. A number of vouchers have designated purposes, including extremely low-income frail elderly (15,000), homeless (18,000), and welfare-to-work (25,000). The remaining 42,000 vouchers will be distributed to housing authorities to help the many families on lengthy Section 8 waiting lists throughout the country.

Low-Income Housing Tax Credit. Since its enactment in 1986, the Low-Income Housing Tax Credit (LIHTC) has allocated Federal tax credits to States for award to private and nonprofit developers of affordable housing. LIHTC can be a particularly important tool for building affordable housing in areas of job growth. The initiative has supported the construction of about 1 million rental units for low-income families. Even though building costs have increased 40 percent in the past decade, the amount of the credit has never been adjusted for inflation. The FY2000 budget proposes to increase the LIHTC cap from $1.25 per capita to $1.75 per capita, restoring the value of the credit to its 1986 level. LIHTC currently helps build an estimated 75,000 to 90,000 affordable housing units each year. Increasing the cap by 40 percent will create an additional 150,000 to 180,000 new rental housing units over the next 5 years at a cost of $1.7 billion.

HOME Investment Partnership Program (HOME). One of the Nation's most successful housing rehabilitation and production programs, HOME can help overcome the geographic mismatch between jobs and affordable housing. HOME works through local governments to finance the construction and rehabilitation of multifamily rental housing, improve substandard housing for current owners, provide tenant-based rental housing assistance, and assist new homebuyers through acquisition, construction, and rehabilitation. HOME has been an important tool for enhancing the capability and experience of nonprofit organizations and other affordable housing producers. The FY2000 budget requests $1.61 billion for HOME, an increase of $10 million over the FY99 enacted level to provide 85,400 additional housing units for owners and renters. About 3 percent of the HOME funds is likely to be used for tenant-based assistance.

Public Housing and HOPE VI. The Administration is pursuing reforms to remove and replace the most distressed public housing projects and to insist that the units remaining (most of the public housing stock) be managed well and maintained as good quality housing. HOPE VI provides funds for innovative and comprehensive approaches to address the problems of severely distressed public housing. By going beyond bricks and mortar, HOPE VI gives local partnerships the chance to undertake comprehensive community building and use the revitalization of public housing as an opportunity to turn neighborhoods around. The FY2000 budget proposes an appropriation of $625 million for HOPE VI. As part of the initiative, HUD plans to approve the demolition of 10,000 obsolete public housing units in FY2000, which will bring the Administration closer to its goal of approving demolition of 100,000 obsolete units. The units will be replaced through a combination of new units and expanded Section 8 rental assistance. HOPE VI communities are composed of well-designed, mixed-income developments. The communities also make social services readily available to those with lower incomes, including families, the elderly, and disabled residents who live there. HOPE VI is thus a tool for comprehensive community building.

For public housing overall, the budget proposes a small increase in operating funds to $3.0 billion in FY2000. In addition to operating funds, the FY2000 budget proposes $2.55 billion for public housing capital needs. These operating and capital subsidies go to approximately 3,200 public housing authorities with 1.2 million units under their management.

Continuum-of-Care Homeless Assistance. In 1994 the Administration launched a new approach to address homelessness, focused on long-term solutions -- not just emergency or stopgap measures. The program works with communities nationwide to establish a continuum of programs that help homeless persons move into jobs and permanent housing. The Federal grants help communities provide a wide array of comprehensive support for homeless people, including emergency shelter, single-room occupancy dwellings, social services and training, and assistance for homeless people with disabilities. As a result of the success of this approach in helping thousands of people move from homelessness to self-sufficiency, the FY2000 budget requests $1.13 billion in continuum-of-care funding, a significant increase over the levels enacted in FY99. Among many initiatives in the program, the funds will support 18,000 incremental Section 8 vouchers to help homeless persons secure permanent housing.

Housing for Older Americans. As many as 1 in 5 Americans will be elderly by 2050, swelling the current elderly population to 80 million people over the age of 65. To address this growing demographic challenge, the Administration is proposing $750 million in FY2000 for housing assistance to senior citizens to increase the supply of housing for America's low-income seniors and improve housing of those already receiving assistance. Many elderly homeowners often find themselves house-rich but cash-poor. To help them acquire the money they need to stay in their homes, the Administration wants to expand its initiative to convert seniors' home equity into rehabilitation and property improvement loans through HUD's reverse mortgage program. The Administration will also continue the Federal Government's long-standing commitment to the Section 202 Housing for the Elderly program. The FY2000 budget calls for $660 million for Section 202, an increase to enable the expansion of nonprofit housing available for unserved elderly by an estimated 5,790 new units. As part of the program, 15,000 new housing vouchers will provide support to very-low-income elderly who move into apartments constructed using LIHTC and $80 million will be for a new capital grants program to convert some or all units of existing Section 202 housing to assisted living.