Administration Proposed Reorg-USDA Housing Programs to HUD; Senate Votes Down FY18 Proposed Rescission; RD Announces FY19 Management Fees

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CARH'S BROADCAST E-MAIL – Legislative & Regulatory Update

June 22, 2018

  1. Administration Proposes Wide Scale Reorganization of the Government—USDA Housing Programs to be Merged into HUD
  2. Administration’s Fiscal Year (FY) 2018 Proposed Rescission Voted Down by Senate
  3. RD Announces Increases in Management Fees for Fiscal Year (FY) 2019

1) Administration Proposes Wide Scale Reorganization of the Government—USDA Housing Programs to be Merged into HUD

Yesterday, the Administration unveiled a 132 page report entitled: “Delivering Government Solutions in the 21st Century. Reform Plan and Reorganization Recommendations.” Contained in this report are many recommendations that would consolidate, transfer, and substantially change the delivery system of many programs from existing agencies to other government entities. Among the programs to be moved would be Rural Development’s (RD) housing programs, USDA’s business and community facility business rural grants, and HUD’s Community Development Block (CDBG) program. The federal charter of the Government Sponsored Enterprises (GSEs) would be eliminated from statute and Fannie Mae and Freddie Mac would be fully privatized.

Under the proposal, RD’s single family and multi-family housing programs would be merged into HUD. USDA’s community facility and rural business loan programs and HUD’s Community Development Block Grant (CDBG) would be moved to a new section within the Department of Commerce, the Bureau of Economic Growth. The merger of the RD housing programs to HUD is of major concern to CARH. As CARH members may recall, we have heard similar proposals and language in different bills over the past several years from the House Financial Services Committee. These proposals did not have the support to become law, in whole or part.

CARH is very concerned and apprehensive regarding the proposed reorganization. CARH raised similar concerns when Secretary Perdue announced the elimination of the USDA Under Secretary position for RD last year. We believe that most of the changes envisioned in the report would require Congress to pass comprehensive legislation. Any responsible reorganization would need approval from both the House and Senate Appropriations and Authorization Committees, a task that in recent times was only accomplished when the Department of Homeland Security was created after the September 11, 2001, attack on the country.

CARH will continue to communicate with RD, HUD, and the House and Senate Appropriations and Authorization Committees about this proposal and its merits and the concerns it raises. This is an initial proposal in an early form that we expect will go through more analysis and revisions before moving forward. The proposal contains some incongruous language, for example, omitting direct loans and farm labor housing from the RD section. It is unclear if this was an oversight or if somehow those programs would stay at USDA. We will also continue to reach out to fellow stakeholders in the rural housing community.

In the past, this issue has generated tremendous interest among CARH members. Therefore, please email carh@carh.org with any feedback and thoughts. We will also provide updates on any developments and we are, and will be, reviewing these matters with the CARH Board of Directors.

2) Administration’s Fiscal Year (FY) 2018 Proposed Rescission Voted Down by Senate

On another front, we have encouraging news that the rescission package, that would have stripped $40 million from the Section 521 Rental Assistance (RA) program, went down to defeat in the Senate this week. The June 20th vote was 50 to 48 against rescission. CARH will work to get that money used by the agency for existing RA needs across the country. Also, we heard from the RD Administrator, Joel Baxley, at the CARH Annual Meeting this week that approximately 2,700 units of RA will be released to meet servicing needs. Administrator Baxley and National RD Office staff spent significant time with CARH members during the Annual Meeting reviewing a number of issues that we expect to make progress on shortly and we will provide updates as we receive more information.

3) RD Announces Increase in Management Fees for Fiscal Year (FY) 2019

Yesterday, Rural Development (RD) published a Special Procedural Notice (SPN) announcing final management fees for Fiscal Year (FY) 2019. Management fees will vary from state to state because RD has based the increase on HUD’s Operating Cost Adjustment Factor (OCAF) which varies based on location in the country and is applied to each state’s current maximum fee. (View Attachment 3-F, Chapter 3 of HB-2-3560 (page 55-56 in the link) for the chart that provides each state’s management fee adjustment for FY 2019.)

As a reminder of the background on this issue, CARH proposed that OCAF should be the base and that additional add-on fees should also be part of the management fee calculation. The additional add-on fees have not yet been agreed to by RD. Although management fees for FYs 2016-2019 have been based on OCAF, we will continue to advocate for CARH’s entire proposal. We believe that the proposal will provide some certainty and consistency on fees in the future. Further we continue to recommend that a survey be conducted every five years to determine if the OCAF needed some further adjustment.

If you have any questions or comments, please contact CARH at 703-837-9001 or carh@carh.org.


Don't miss CARH's 2019 Midyear Meeting on January 28-30 at the Ocean Reef Club in Key Largo, Florida!