Prepared Remarks of Secretary Shaun Donovan During a Media Conference Call on the FY 2012 Budget

Monday, February 14, 2011

Thank you all for joining. Today, I'm pleased to unveil the President's Fiscal Year 2012 Budget proposal for HUD -- to create strong, sustainable, inclusive communities and quality affordable homes for all Americans.

The budget provides a roadmap for HUD to work with our local partners -- and to win the future by investing in innovation, building neighborhoods that are connected to jobs and providing greater access to opportunity. It also makes tough choices to reduce our debt.

Winning the Future

Let me begin by saying a few words about the context of this budget.

To be sure, we submit this budget in an economic environment that is significantly improved from when the President took office. An economy that was shrinking is growing again -- and instead of rapid job loss, more than a million private sector jobs were created last year.

But we know there's still more work to be done to ensure that America and its workers can compete and win in the 21st century.

HUD's FY 2012 budget tackles these challenges head on:

By helping responsible families at risk of losing their homes and meeting the need for quality affordable rental housing,

By transforming neighborhoods of poverty and ensuring that children there have access to the quality education we need to compete in the 21st century,

By rebuilding our federally-assisted public housing stock and ensuring that its tenants are part of the mobile, skilled workforce our new global economy requires, and,

By leveraging private sector investments in communities to create jobs and generate the economic growth we need to out-innovate, out-educate and out-build the rest of the world.

Tough Choices

This budget also reflects the need to ensure that America's future isn't built on a mountain of debt.

As a down payment toward reducing the deficit, the President has proposed a freeze on domestic spending for the next five years, cutting the deficit by $400 billion over 10 years and bringing non-security discretionary spending to the lowest share of the economy since President Eisenhower.  Every department shares a responsibility to make tough cuts so there's room for investments to speed economic growth.

That has meant difficult choices, including reductions to programs that, absent the fiscal situation, we would not cut. But American families are tightening their belts -- and we need to do the same.

HUD's $48 billion in gross budget authority is offset by $5 billion in projected FHA and Ginnie Mae receipts credited to HUD's appropriations accounts, leaving net budget authority of $41.7 billion, or 2.8 percent below the fiscal year 2010 actual level of $42.9 billion.

To maintain this commitment to fiscal discipline, we have protected existing residents and made the difficult choice to reduce funding for new units and projects, including cuts to the Community Development Block Grant, HOME Investment Partnerships, and new construction components of the Supportive Housing Programs for the Elderly and Disabled -- 202 and 811.

And because winning the future also means reforming government so it's leaner, more transparent, and ready for the 21st century, we are not only reforming the administrative infrastructure that oversees those programs -- we are also again asking Congress for the funding and programmatic flexibility to help conduct the kinds of research and demonstrations that will ensure we are funding what works and identifying what doesn't and what we need to do better.

Why HUD's Investments are Vital

The majority of HUD's budget is required each year simply to hold ground -- keeping current families in their homes and providing basic upkeep to the public housing stock.

80 percent of our budget is used for renewing homeless and rental assistance, and providing capital needs funding for HUD's public housing stock. 

The need for homeless and rental assistance is growing as a result of the recession.

Over 7 million very low income renters pay more than half of their income in rent.

Over 650,000 people were homeless on a single night in January 2010.

HUD also serves an extraordinarily vulnerable population.

Extremely low income families make up 72 percent of HUD-assisted households.

More than half--54 percent--of HUD-assisted households are elderly or disabled.

While the median family income last year was over $60,000, the average adjusted income of a family receiving rental assistance was $10,200.

Achieving Results

These families are among the folks hardest hit by the recession. They need to be protected -- and with the President's budget, we have made a commitment to do so.

The budget serves almost 2.5 million families living in public housing and project-based Section 8 developments -- nearly two-thirds of whom are elderly and disabled.

It supports tenant-based vouchers for over 2.2 million families -- nearly half of whom are elderly and disabled.

To help realize Opening Doors, the first federal strategic plan to end homeless, it more than doubles the annual rate at which HUD assistance creates new permanent supportive housing for the homeless, provides funding for vouchers targeted to the chronically homeless, homeless families and veterans -- which will be complemented by services provided by the Departments of Health and Human Services and the VA, and enables FHA and Ginnie Mae to continue their temporary role supporting the housing market, while at the same time taking important steps to bring back private capital.

In all, this budget assists nearly 5.5 million households--over 86,000 more than at the end of fiscal year 2010--and doubles the number of new supporting housing units to meet rising demand -- even in this tight budget environment in which we've had to make tough choices.

Most important of all, it supports our economic recovery, creating or retaining 650,000 jobs.

What It Takes to Win the Future

Let me go over a few additional specifics to highlight some of the choices we made -- and provide some background on why we made them.

First, we did reduce funding for the Community Development Block Grant -- but at 7.5 percent, less drastically than I think many anticipate.

CDBG is an important catalyst for economic growth. In fact, results from the Recovery Act show that it creates twice as many jobs per dollar as other Recovery Act programs. That's real bang for the buck. 

The President and I are committed to providing localities with the tools they need to make the strategic investments that ensure the economic future of this country -- and this funding level recognizes that CDBG is one of them.

So, too, is the $150 million we've requested for additional Sustainable Communities grants, which help regions plan and innovate to jumpstart their economies, attract private investment and become more globally competitive.

Secondly, we are providing crucial rental assistance to our nation's most vulnerable families.

We are keeping our promise to resume funding new construction for the Section 202 and 811 programs once Congress reformed those programs--which they have--and by fully funding the public housing capital and operating funds. The operating fund is funded at $187 million above last year's levels -- which we accomplished by proposing to recapture $1 billion in operating reserves from public housing authorities. 

We think 4-to-6 months in reserves, is the appropriate range and right now, some PHAs have more than that. Given the President's preference for targeted strategies to address the budget rather than across-the-board cuts, we couldn't justify PHAs holding excess reserves -- when the only real alternative would have been to cut funding for existing families of rental or homeless assistance.

These resources were appropriated so that our PHAs could continue operating public housing during a rainy day. Well, that rainy day is here -- so that is precisely what these funds will be doing. 

The budget also includes a $200 million demonstration for 250,000 public housing units to convert to long-term project-based rental assistance contracts, which PHAs can use to leverage private capital.

Third, our budget continues the unprecedented partnerships to ensure that we are aligning investments and getting more bang for the buck.

I have already mentioned our work with HHS and the VA on homelessness. To out-educate the rest of the world, we are revitalizing neighborhoods of concentrated poverty through our $250 million Choice Neighborhoods initiative, aligning interagency investments particularly around education.

Lastly, our budget request helps win the future by building an agency that's leaner, smarter, more transparent, and ready for the 21st Century -- building on the success of Transformation Initiative with $120 million for:

A National Resource Bank that reinvests in distressed economies,

A "One CPD" initiative that provides comprehensive technical assistance to build grantees' long-term capacity and,

Investments in R&D like our HUD Stat accountability process and streamlined IT systems so that we can do more with less.

Ultimately, the choices we have made in this budget reflect the Obama Administration's recognition of the critical role housing must play for the nation to experience a robust, long-term economic recovery. 

Equally important, it expresses the confidence of the President in the capacity of HUD's programs and the Department to meet a high standard of performance. 

And while it requires hard choices to reduce the deficit, this blueprint is one that will deliver results for the people and places that HUD helps.

And with that, I'd like to take some of your questions.

###