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CUOMO SAYS PRESIDENT'S HUD BUDGET SEEKS $1.8 BILLION INCREASE TO REVITALIZE COMMUNITIES AND CREATE MORE JOBS AND HOUSING

WASHINGTON - The Department of Housing and Urban Development budget that President Clinton proposed to Congress today seeks $1.8 billion in additional program funds for an intensified effort to revitalize communities, create jobs, produce affordable housing and expand homeownership, Secretary Andrew Cuomo said.

The $25 billion HUD budget calls for no new programs. Instead, it focuses on reinventing and increasing funding for 20 existing programs to improve their performance and benefit more of America's people and communities, Cuomo said. The reinvented programs will place a greater emphasis on HUD working in partnership with local governments, businesses and non-profit groups. In addition, program performance will be improved by far-reaching management reforms instituted at HUD over the past year, Cuomo said.

The spending plan carves out a role for HUD as the key Department in implementing what President Clinton last week called "one of the broadest, strongest and most innovative urban agendas in a generation."

The budget also builds on the reinvention of HUD that Cuomo implemented over the past year, which was highlighted by management reforms to improve the Department's performance and an aggressive campaign to wipe out waste, fraud and abuse in HUD programs. Cuomo said the reinvention closed a "competency gap" that HUD faced in previous years because of questions about its ability to perform its job effectively.

The closing of the competency gap was validated by President Clinton last week, when he told the U.S. Conference of Mayors: "Secretary Cuomo's reinvented HUD exemplifies the kind of approach we're trying to take to working with the cities all across the federal government."

"With the closing of the competency gap within HUD, the Department's budget can now move forward to close the opportunity gap that stands as a barrier to the American Dream for far too many families," Cuomo said. "We will give more of America's people and communities the opportunity to share in the bounty of the strong economy created by President Clinton's policies."

"The 1999 HUD budget reflects the President's belief that HUD today is smaller, faster and better than it was a year ago," Cuomo said. "The budget creates jobs and economic opportunity in America's communities, and it provides the American people with more affordable housing and new opportunities for homeownership."

Programs targeted for expansion and improvement in the budget involving jobs and economic opportunity include: $400 million in grants for a Community Empowerment Fund to create and retain an estimated 280,000 jobs; funding for 15 additional urban Empowerment Zones to stimulate job creation and economic development in inner cities; expanded Community Development Block Grants to local communities; and increased funding for programs to redevelop contaminated industrial sites and to train high school dropouts for jobs.

Programs being expanded and improved dealing with housing and homeownership include: higher FHA loan limits to enable about 3 million more families to qualify for FHA-insured mortgages over the next five years; 100,000 new rental housing vouchers for people needing affordable housing, including those moving from welfare to work; record funding for programs to help homeless Americans; an intensified crackdown on housing discrimination; increased HOME grants and a HOME Bank to make thousands of additional affordable housing units available; increased funding for capital improvements for public housing; the creation of new Homeownership Zones to revitalize inner city neighborhoods and promote homeownership; additional funds to control lead hazards around housing; more assistance to help people with AIDS meet their housing needs; more help for families receiving Section 8 rental assistance to find housing outside low-income neighborhoods; and expanded housing counseling to boost homeownership.

The budget responds to a vital need to jump-start the economies of America's communities, particularly inner cities, where job growth has trailed other parts of the country, Cuomo said. Just 13 percent of the 14 million jobs created around the nation in the past five years are in central cities.

"The most powerful engine of economic growth in our nation is American business, and the most effective social program is a job," Cuomo said. "Our budget will strengthen our partnership with businesses and local communities, so we can use HUD funds as a catalyst to stimulate far greater private investment that will create more jobs and strengthen local economies."

Cuomo said creating more affordable housing is also an urgent need.

"More than 5 million Americans with very low incomes pay 50 percent or more of their income for rent because affordable housing isn't available, " Cuomo said. "Under the President's budget, HUD will once again expand rental assistance to enable more people to live in affordable housing. America is back in the housing business."

In addition, Cuomo said, HUD will emphasize that "all of HUD's separate housing roads should ultimately lead to one place - homeownership. Our goal is to help more people become homeowners, and this budget does so in innovative ways."

"All told, the 1999 HUD budget represents not just a shift in policy, but a shift in philosophy," Cuomo said. "This budget seeks to change HUD's role from Washington dictates to community empowerment. Not with federal mandates, but with a federal menu of opportunity. Not with solutions driven from the top-down, but from the bottom-up. Not with a one-size-fits-all mentality, but with action plans written by and tailored to local communities. HUD's goal is not to tell communities what to do, but to help communities do what they want to do."

The $1.8 billion in increased program spending in the proposed HUD budget is offset in part by $900 million in savings resulting largely from improved management and the expiration of one-time expenses, such as disaster relief funding to respond to Midwest flooding. As a result, HUD's budget authority would rise from $24.1 billion this year to $25 billion next year.

Highlights of the HUD's expanded and improved initiatives include:

Community Empowerment Fund: The budget proposes $400 million in grants for a HUD Community Empowerment Fund to help economically distressed communities create and retain an estimated 280,000 jobs. The Community Empowerment Fund would distribute the $400 million as grants to states and local governments, which in turn would use the money to leverage an estimated $2 billion in private sector loans to businesses. The new fund would improve and expand on $38 million in similar grants in HUD's current budget under the Economic Development Initiative. The investment from the Community Empowerment Fund would be used to buy down interest rates on the private sector loans and to guarantee repayment of the loans. As a result, businesses in low-income communities would gain access to long-term, low-interest loans that are now unavailable. The new initiative is designed to bring more jobs to areas of high poverty and unemployment and help create jobs for families trying to move from welfare to work. It would also provide strong incentives for standardization of economic development lending -- a crucial first stop in creating an effective secondary market for economic development loans.

New Empowerment Zones: The budget calls for $150 million in new funds next year - and a total of $1.5 billion over 10 years -- for 15 additional urban Empowerment Zones to stimulate job creation, welfare-to-work efforts and economic development in economically distressed inner cities. Another five rural Zones are to be funded by the Agriculture Department. The new Zones would receive grants and tax incentives for a broad range of urban revitalization activities. In 1994, the Clinton Administration selected nine Empowerment Zones -- six urban and three rural. Congress has already mandated funding for creating a second round of Zones.

Community Development Block Grants: The budget proposes a $50 million increase for an improved Community Development Block Grant Program. Combined with reduced set-asides, this would effectively increase funding to help revitalize America's communities by $238 million, bringing total funding to $4.7 billion. For 25 years, the Community Development Block Grant Program has been the principal source of relatively unrestricted federal assistance to local governments to carry out a wide range of community development activities that reflect locally-determined priorities. By removing many set-asides, the budget enhances local government resources and discretion.

Brownfields: The budget seeks $25 million in increased funding to redevelop contaminated industrial sites called brownfields - doubling this year's funding. There are an estimated 450,000 brownfields in the nation. HUD's program is expected to leverage an additional $200 million investment and create about 28,000 construction and related jobs.

Youthbuild: The budget seeks $10 million in increased funding for the Youthbuild program, which provides job training and education for high school dropouts ages 16 to 24, boosting total funding for the program to $45 million -- a 30 percent increase. The program would be changed from a set-aside within the Community Development Block Grant program to an independent program. It is expected to serve up to 6,000 inner city young people in 1999.

Higher FHA Loan Limit: At no additional budget cost, the budget seeks a higher Federal Housing Administration home mortgage loan limit to enable about 3 million more middle-class American families to qualify for FHA-insured mortgages over the next five years. In most communities, FHA mortgages are limited to $86,317. In some high-cost communities, the FHA can insure mortgages up to $170,362. The budget seeks a new nationwide limit of $227,150. The higher ceiling would open the door of homeownership to middle-class families needing FHA insurance to get mortgages, but locked out because the current ceilings have not kept pace with rising home prices. Under the new limit, a family with an income of about $46,000 could qualify for an FHA mortgage of $150,000 (the expected average of new loans insured under the new initiative). The FHA-insured loans benefit homebuyers because they require lower downpayments, can cover closing costs, allow more flexible requirements for homebuyers credit ratings, and permit homebuyers to use gifts from family members and others to make downpayments.

New Housing Vouchers: The budget seeks $585 million in new funds for more than 100,000 new rental housing vouchers -- compared with no funding for new vouchers this year. This represents an innovative targeting of new vouchers to meet high priority needs. HUD has not received funding for new vouchers since 1994. Of the 100,000 new vouchers, 50,000 would be provided through a new $283 million welfare-to-work initiative announced earlier by the President to provide stable housing to families struggling to move off welfare rolls and join the workforce. A second initiative would provide $192 million for 34,000 additional Section 8 rental assistance vouchers for homeless people moving from shelter care into permanent homes. This aid would help ensure that homeless people who have benefited from HUD's Continuum of Care transitional housing programs have stable housing to ease their transition into the mainstream. The 1999 budget also asks for $60 million to provide an additional 10,600 Section 8 vouchers and $50 million for 8,800 new vouchers targeted to elderly and disabled Americans.

Homelessness: The budget calls for $135 million in increased funding for homeless grants -- combined with $192 million for 34,000 rental assistance vouchers for homeless people (included in above paragraph) - for a total of $1.15 billion to help more homeless Americans get housing and become self-sufficient. This represents a nearly 40 percent increase over this year's enacted funding of $823 million. If enacted, the 1999 funding level will be the highest in history, providing $958 million in Continuum of Care grants. Besides providing housing, Continuum of Care grants also allow for education, training, and substance abuse treatment programs.

Housing Discrimination: The budget requests $22 million in increased funding to fight housing discrimination, for a total of $52 million - a 73 percent increase over this year. The additional funds would enable HUD to intensify the crackdown on housing discrimination the Department began in September at President Clinton's direction. Additional funds would be used to help local non-profit groups and local enforcement agencies reduce housing discrimination, which is illegal under the Fair Housing Act.

HOME Grants: The budget proposes $50 million of additional HOME grants for a total of $1.55 billion in resources to provide permanent housing to low- and moderate-income families. This would produce 78,520 units of affordable housing for owners and renters through construction, rehabilitation and acquisition activities. In addition, 11,200 families would receive tenant-based rental assistance.

HOME Bank: The budget proposes $11 million to establish a HOME Bank that will provide $100 million in loan guarantees to enable localities to finance more rental and homeownership developments. HUD would insure loans made to localities, enabling them to leverage up to five times their current HOME grant allocation. The $100 million is expected to generate an additional $350 million to $400 million in investment for affordable housing.

Public Housing: The budget calls for $50 million in increased funding to finance capital improvements in public housing, boosting total capital improvement funding to $2.55 billion. Capital funds may be used to upgrade viable housing units, demolish obsolete units, provide continued assistance to displaced families, or build replacement units. In addition, funding for the HOPE VI program, which demolishes and replaces severely deteriorated public housing, would remain at $550 million. The budget also fully funds public housing operating subsidies.

Homeownership Zones: The budget proposes $25 million in new funds for Homeownership Zones - large-scale revitalization efforts that create neighborhoods of single-family homes, promoting homeownership in inner cities. The proposal would support five to seven Homeownership Zones, bringing major revitalization to the communities, while helping to create about 1,500 new homeowners. Last year, HUD awarded $30 million in grants and just over $60 million in Section 108 loan guarantees to start six Homeownership Zones.

Lead Hazard Reduction: The budget seeks $25 million in increased funding to control lead hazards in and around housing, for a total of $85 million - a 40 percent increase over this year. Extra funds would go to the "Healthy Homes Initiative," which reduces environmental health and safety risks to children. The budget also would use $50 million for grants to states to eliminate lead-based paint hazards and $10 million to fund technical research studies.

Housing For People With AIDS: The budget seeks $21 million in additional funds for the Housing Opportunities for Persons with AIDS program, for a total of $225 million - a 10 percent increase. The program helps people with AIDS who need housing assistance because of the high costs of treating their disease or because they have been unable to work due to their illness. The funding would provide assistance for 41,500 housing units and would provide related services to 75,000 people.

Enhancing Tenant Choice in Section 8: The budget requests $20 million in new funds to help 13,000 low-income families receiving Section 8 vouchers find homes outside low-income neighborhoods through the Regional Opportunity Counseling program. Assistance may include education to families, outreach to landlords, help in paying security deposits and relocation expenses, and post-move problem solving.

Housing Counseling: The budget requests $5 million in increased funds for housing counseling to boost homeownership, for a total of $25 million - a 25 percent increase. Studies show that minority and immigrant households are the least likely to become homeowners because they lack knowledge about the homebuying process, lack credit histories to justify mortgage applications and lack information about financing.

• HUD's FY99 Budget