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May 4, 2006

Background on the FY 2007 HUD Budget

Housing – 50% Cut Proposed for Section 811, Funding for Homeless Programs and Section 8 Vouchers Boosted

Overall, funding for the Department of Housing and Urban Development (HUD) for FY 2007 would shrink by 1.8%, down to $33.6 billion under the President’s budget.  As with the proposed budget for FY 2006, the President's budget seeks a deep cut for the Section 811 program, the only program at the Department of Housing Urban Development (HUD) that still produces housing for people with severe disabilities. 

The President's budget would cut Section 811 in half, dropping funding down to $119 million from its current FY 2006 level of $237 million.  Nearly all of this proposed reduction would come from the portion of the 811 program that produces new units of permanent supportive housing, the capital advance/project-based side of the program, i.e. capital grants and project-based rental assistance directed to non-profit disability groups that develop supportive housing (specifically, housing targeted to individuals with severe disabilities who need services directly linked to their housing).  This "production" side of the program that funds new housing and is funded in the current fiscal year at $155.7 million and would be reduced in the President's budget to just under $16 million, a cut of close to $140 million.    

Instead, the President's FY 2007 budget proposes to direct most of the $119 million in the Section 811 program to the renewal of existing rent subsidies (both tenant-based and project-based), with a small amount left to fund new capital advance/project-based grants and new tenant-based subsidies.  The $119 million would be allocated as follows:

  • $75 million would be directed to tenant-based renewals – to renew the existing 811 tenant-based vouchers now in use,
  • $15 million for project-based renewals (also known as PRACs) – renewing rent subsidies that are tied to 811 properties,
  • $14.85 million for new 811 tenant-based rental assistance, and
  • $15.84 million for new capital advance/project-based grants to non-profit disability groups.

This is the second consecutive year that the President's budget proposed deep cuts to the capital advance/project-based side of the 811 program.  Both the House and Senate rejected this proposal in 2005.  The budget also marks a continued effort to back away from a 30-year commitment from HUD to support the production of new housing targeted to non-elderly people with severe disabilities (including severe mental illnesses).  Reliance solely on tenant-based assistance (portable rent subsidies that rely on voucher recipients being able to find rental housing on their own) also represents a major change in the targeting of 811 away from people with more severe impairments who need housing related supports.  

Section 8 Rental Vouchers

The President's budget does propose a $112 million increase for the Section 8 voucher program for FY 2007, boosting funding to $15.920 billion.  Section 8 is by far the largest program in HUD's overall request (nearly 62% of the entire HUD budget).  While Section 8 continues to grow, the levels recommended in the budget are barely enough to renew the estimated two million vouchers that are currently in use. 

Prior to 2004, funding in the program was driven by costs in the rental housing market and changes in tenant income (the program pays the difference between what a rental unit costs and what the voucher recipient can afford to pay).  By contrast, over the past two years – and again for FY 2007 under the President's budget – each housing agency gets an allocation of funding from HUD based on voucher renewal costs from the previous year.  In other words, prior to 2004, funding was "unit-based" ensuring that local agencies got enough funds to meet the actual renewal costs of their vouchers in use. 

For 2006 and 2007, agencies will receive a fixed allocation of funds tied to prior year costs that may or may not keep pace with the costs that actually determine how much is needed to renew a voucher (i.e., actual rents and tenant income).  Given such uncertainty, many housing agencies are reluctant to make vouchers available.  More worrisome are proposals in the budget that would allow hosing agencies greater flexibility to increase required tenant rent contributions or target vouchers to higher income families.  NAMI remains concerned that these changes would make it ever more difficult for local housing agencies to target assistance to individuals with mental illnesses living on SSI.  

Homeless Programs Funding

In a rare bright spot for the HUD budget, the President is requesting a $209 million increase for programs under the McKinney-Vento Homeless Assistance Act, boosting funding to $1.536 billion.  This includes $285 million to renew rent subsidies for permanent supportive housing developed under the Shelter Plus Care program.  In addition, $200 million is being sought for the President's Samaritan Initiative to end chronic homelessness – including new grants for permanent housing paired with case management targeted to individuals and families experiencing long-term chronic homelessness.  Finally, $25 million is being requested as part of an interagency initiative on reintegration of criminal offenders returning from prison. 


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