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FY 2009 Appropriations Mixed Bag for Housing Programs, FY 2010 Looking Brighter

March 2009
People: David Abromowitz, Max Friedman
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FY 2009

On March 11, President Obama signed into law the Omnibus Appropriations Act of 2009. Under the FY 2009 budget, most HUD and USDA programs received either level or increased funding. President Bush’s previous efforts to cut nearly $1 billion from CDBG was rebuffed with a small increase from FY 2008 appropriations to $3.9 billion. Tenant- and project-based Section 8 received $400 and $800 billion funding increases, respectively. HOPE VI was increased by 20 percent from 2008 levels to $120 million. Fair Housing, Section 202, and Section 811 also all received small increases for 2009.

At USDA, the Section 502 Guarantee program received a substantial increase in funding from 2008 levels to $6.2 billion for 2009. The Section 521 Rental Assistance program also received a major increase in funding from $482 million in 2008 to $902 million in 2009. However, the Section 502 Direct and Sections 515 and 538 programs all received small cuts from 2008 levels. Also included in the budget is a change limiting 2009 Section 538 applications to market interest rates, effectively restricting the $8 million included for interest rate subsidy in the 2009 appropriations to 2008 applications and applications already in the pipeline. The interest rate subsidy included in the Section 538 NOFA issued by USDA in January 2009 now no longer applies.

FY 2010

Although firm budget numbers are not expected until April, President Obama’s FY 2010 budget proposal represents a significant shift in spending priorities from President Bush. With a proposed total discretionary allocation of $47.5 billion, President Obama’s HUD spending represents a 25 percent increase over President Bush’s proposed FY 2009 levels. The proposed budget funds CDBG to the tune of $4.5 billion and increases funding for project- and voucher-based Section 8. The budget also requests $1 billion in initial funding for the Affordable Housing Trust Fund, funding for which has been withheld by FHFA, conservator of Fannie Mae and Freddie Mac. New programs include a new Choice Neighborhoods Initiative, designed to “support a range of transformative interventions in neighborhoods of concentrated poverty,” and a new Energy Innovation Fund. The Energy Innovation Fund will support the creation of an energy efficient housing market, which includes retrofitting inefficient housing and catalyzing private sector lending in the residential sector. Notably, the FY 2010 budget eliminates funding for the Section 108 loan program and the American Dream Downpayment Initiative for a budget savings of $16 million. Goulston on Top of Recent Stimulus Developments
Goulston & Storrs has been closely following developments in the economic stimulus legislation recently passed by Congress as well as the Financial Stability Plan proposed by Treasury. For more information on various federal funding-related topics, click here to access analysis prepared by Goulston & Storrs.

For questions relating to the information contained in this alert, please contact your usual Goulston & Storrs’s attorney or:

David M. Abromowitz
617.574.4106
dabromowitz@goulstonstorrs.com

Max Friedman
212.878.5124
mfriedman@goulstonstorrs.com

Pursuant to IRS Circular 230, please be advised that, this communication is not intended to be, was not written to be and cannot be used by any taxpayer for the purpose of (i) avoiding penalties under U.S. federal tax law or (ii) promoting, marketing or recommending to another taxpayer any transaction or matter addressed herein.

This client advisory should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer concerning your situation and any specific legal questions you may have.

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