On April 9, the U.S. Department of the Treasury and the Internal Revenue Service (IRS) announced designated Opportunity Zones in 18 states. Established by the Tax Cuts and Jobs Act of 2017, Congress created the new community development program that encourages long-term investments in low-income urban and rural communities. The Opportunity Zone Program provides tax incentives for investors to re-invest unrealized capital gains into Opportunity Funds. Opportunity Funds are private sector investment vehicles that invest at least 90 percent of their capital in Opportunity Zones. This new program has the potential to be an important, viable program for housing and community development agencies.

Currently, submissions have been approved by: American Samoa; Arizona; California; Colorado; Georgia; Idaho; Kentucky; Michigan; Mississippi; Nebraska; New Jersey; Oklahoma; Puerto Rico; South Carolina; South Dakota; Vermont; Virgin Islands; and Wisconsin.

In light of the recently passed FY 2018 budget, HUD is expecting to raise the Operating Fund proration to 93.53 percent in May. The April proration will remain the same as January, February, and March 2018 as the budget was passed too late in March for HUD to make any changes for April. NAHRO will continue to closely monitor the Operating Fund and provide updates as they occur.

The budget provided $4.55 billion to support the operation and management of public housing. This is $150 million more than funding for FY 2017, $50 million more than what was proposed by the Senate, $150 million more than the House bill and $650 million more than what was proposed by the President’s FY 2018 budget request.

On March 22, HUD released a Notice on demolition and/or disposition of public housing property, eligibility for tenant-protection vouchers and associated requirements (Notice PIH 2018-04). This Notice supersedes and replaces Notice 2012-7, and explains the application requirements to request HUD approval to demolish and/or dispose of public housing under Section 18 of the US Housing Act of 1937, including PHA justification criteria. This Notice includes related Tenant Protection Voucher (TPV) eligibility and application processes for residents of properties that undergo demolition or disposition.

NAHRO will issue an in-depth analysis of the Notice next week.

HUD Secretary Ben Carson testified in front of the House Appropriations Transportation, Housing and Urban Development (T-HUD) subcommittee today, answering questions about HUD’s FY 2019 budget proposal.

A video of the full  hearing and his written testimony are available on the subcommittee’s web site.

Members of the subcommittee asked several pointed questions about the Administration’s plan to eliminate key components of the HUD portfolio, including the the Community Development Block Grant program (CDBG) and the HOME Investment Partnerships program (HOME). Congressman David Valadao (R-Calif.) and full committee Ranking Member Nita Lowey (D-N.Y.) both asked the Secretary to comment on how communities would deal with losing CDBG dollars.

“We do have a way to take care of the good things CDBG does, and that is through the Opportunity Zones, a program that will bring in up to $2.2 trillion in money to substitute for that program and infrastructure,” said Secretary Carson. “I suspect we may be asking ourselves how we can use all that money.”

Several times, Secretary Carson offered the new Opportunity Zone program as a replacement for funding cut by the Administration’s budget. The program was created in December through the tax reform legislation and is run through the Treasury Department. It is unclear how much funding the program will generate or how the dollars will be distributed in communities.

The Administration also proposes eliminating the entire Public Housing Capital Fund, slashing the Operating Fund by $1.6 billion, and shifting the financial burdens of the Capital Fund and all its set-asides to the Operating Fund. This is part of a larger plan at HUD to move away from the public housing model, which the Secretary called “failing and financially unstable,” to the Section 8 platform through the Rental Assistance Demonstration (RAD) program. However, while the Administration does propose $100 million for RAD conversions, it does not request additional funding for more vouchers.

Subcommittee Ranking Member David Price (D-N.C.) asked Secretary Carson to address the budgetary problems this creates. “You’re proposing to totally eliminate public housing and merge the Capital Fund into Operating, while proposing to cut the Operating Fund,” he said. “The Operating Fund is slashed, so that’s not even adequate to address operating, much less absorbing capital expenses. And then if we’re going to go to RAD, we’re going to need some additional section 8 vouchers.”

The Secretary re-emphasized the benefit of RAD conversions. “We’re moving away from the whole concept of public housing, quite frankly,” Carson said. “I think this is going to work much better,”

He again mentioned Opportunity Zones as a replacement for lost capital funding and referenced unused Capital Fund reserves held by housing authorities to address the backlog in deferred maintenance.

The subcommittee has several members from areas hit by natural disasters in the past year, and those members reinforced the importance of HUD assistance to recover from the storms. Congressman John Culberson (R-Texas) pressed the Secretary to agree to lower the mandate that 70 percent of CDBG disaster relief (CDBG-DR) dollars go to families of low to moderate incomes, noting that funding has been slow to get to localities. Subcommittee Chairman Mario Diaz-Balart (R-Fla.) thanked the Administration for its focus on mitigation in disaster relief recovery and asked for coordination on long-term efforts.

The Secretary was also asked several questions about the purchase of a $31,000 dining set for the HUD office and is likely to be pressed further on Thursday when he will testify before the Senate Banking, Housing and Urban Affairs Committee in a hearing on HUD oversight.

One bright spot of the hearing was a comment by full Committee Chairman Rodney Frelinghuysen, who said that the T-HUD bill will be “getting a lot of money in 2018.” The final FY 2018 omnibus spending bill is expected to be released later tonight. The current continuing resolution providing funding for the federal government expires on this upcoming Friday.