Congress passed the fiscal year 2014 appropriations bill for the U.S. Department of Housing and Urban Development (HUD) this week. The bill increases funding for many programs compared to funding levels in fiscal year 2013.

The appropriations bill provides funding increases for many programs:

• The bill calls for $1.875 billion for the public housing capital fund, a slightly higher amount than the $1.78 billion funded in fiscal year 2013 under the automatic spending cuts known as sequestration.
• The Public Housing Operating Fund will be funded at $4.4 billion, an 8 percent increase over the fiscal year 2013 funding amount of $4.054 billion.
• Renewal funding of $17.36 billion for housing choice vouchers is intended to support renewal of all vouchers in use in 2013. Language in the bill would permit HUD to offset allocations by the excess amount of agencies' reserves, as determined by HUD. This amount also takes into account changes to the laws defining income targeting and utility allowances.
• Administrative fees for the housing choice voucher program will increase 15 percent, from $1.306 billion in fiscal year 2013 to $1.5 billion in fiscal year 2014. A sharp drop in administrative fees in previous years had resulted in housing authorities opting out of operating this program and strained its operations across the country.
• The bill includes $75 million in incremental funding for veterans affairs vouchers.
• The bill will fund $90 million for the Choice Neighborhoods Program, a decrease from $114 million appropriated in fiscal year 2013.
• The appropriations bill extends the authorization of the Rental Assistance Demonstration (RAD) through December 31, 2014. The bill did not include an increase in the number of units eligible for the RAD program.
• The Project Based Rental Assistance program would be funded at $9.5 billion. The bill authorizes HUD to collect excess residual receipts from owners and use these funds to support assistance payments.

The budget includes a number of changes to the public housing program. The changes include:

• Requiring a transition in the calculation for flat rents for public housing to a floor of 80 percent of fair market rent
• Changing the inspection requirements for units receiving a Section 8 voucher subsidy from an annual requirement to a biennial requirement
• Adding language that clarifies that the Section 8 voucher program will use the utility allowance standard used for public housing
• Permitting consortia of housing authorities to operate public housing

In addition, the omnibus bill changes the definition of "extremely low-income" to be the higher of 30 percent of area median income or the poverty guidelines. The appropriations bill changes the income-targeting requirement for public housing and housing choice vouchers by using this new definition. Under the new law, 40 percent of new public housing households and 75 percent of new voucher recipients must be "extremely low-income," rather than households at or below 30 percent of area median income. This change in definition will affect only areas with lower median incomes.

Generally, Moving to Work (MTW) agencies are funded in accordance with their MTW Agreements with HUD. MTW agencies do not appear to be subject to adjustments to Section 8 allocations based upon excess reserves. All PHAs, including MTW agencies, will be subject to minor adjustments of their allocations to take into account the impact of changes in targeting and utility allowances.

The bill also includes a provision restricting salaries of PHA employees, prohibiting the use of capital fund, operating fund, or tenant-based vouchers from the current or prior years' appropriations above a benchmark. This benchmark is $157,100 for fiscal year 2014.

Ballard Spahr will continue to monitor t HUD's implementation of the provisions included in the bill.