SUPPLEMENTAL FY 1977 SECTION 8 APPROPRIATION FOR Of utmost importance to the production of housing for lowand moderate-income persons is a well-developed, adequately-funded housing assistance program. Since the inception of the Section 8 Housing Assistance Program, State Housing Finance Agencies have provided mortgage financing for 75 percent of the actual construction starts for new rental housing. These construction starts in turn represent a very high proportion of all rental housing starts in the country in recent months. Under the HUD appropriations bill for FY 1977, there is a serious shortfall in the funding available to continue producing new units under the Section 8 program. What is urgently needed is a minimum of $140 million in a supplemental appropriation so that housing projects now suspended in limbo can be placed under construction. Perhaps the strongest reason for providing additional budget authority for the Section 8 new construction program is the immediate stimulus that these funds would provide to the economy. State Housing Finance Agencies have a backlog of projects in their pipeline; these projects could begin soon and have a significant impact on reducing the high level of unemployment in the nation's construction industry. The New Jersey Housing Finance Agency estimates that it could place 5,000 units under construction this year with the $140 million supplemental appropriation. Nationally, State Housing Finance Agencies could finance an additional 25,000 units upon which construction could start prior to October 1, 1977, if Section 8 contract authority is made available. The total development cost of these 25,000 units would be approximately $600 million, a very significant economic stimulus to the construction sector in terms of jobs created and materials utilized. A supplemental appropriation of $140 million will support approximately 35,000 units-- 25,000 of which will be placed under construction this fiscal year, with the remaining 10,000 units ready for construction during the first quarter of FY 1978. The authority for the additional 10,000 units will enable State Housing Finance Agencies to undertake long-range plans and keep their financing flowing at a steady rate for the construction of low- and moderate-income housing. The New Jersey Housing Finance Agency has financed approximately 4,000 units in the first two years of the Section 8 new construction program. This represents well over 80 percent of the Section 8 new construction starts in New Jersey. However, without a supplemental appropriation, there will be only a negligible amount of Section 8 funding for the New Jersey Housing Finance Agency. This translates into virtually no new multifamily construction for low- and moderate-income persons in a state with unemployment in the construction industry as high as 40 percent. It has taken more than two years for the Section 8 new construction program to begin working. The numerous administrative roadblocks compounded by the serious recession and uncertainty in the financial community have made it difficult, at best, to produce Section 8 housing. In spite of these obstacles, State Housing Finance Agencies have been the single most active producer of new housing under the Section 8 program. Last month, the New Jersey Housing Finance Agency sold $71.6 million of revenue bonds at an interest rate of 6.3 percent. The proceeds of the sale will finance the development of nine low- and moderate-income housing projects totalling 1,776 units. In September of 1976, the New Jersey Housing Finance Agency sold $65.9 million of revenue bonds at an interest rate of 7.6 percent. The proceeds of this sale financed the development of seven low- and moderate-income housing projects totalling 1,784 units. This bond issue was the first in the country for the Section 8 program, and the second issue was also the first of its kind for this program. With a proven capacity to finance Section 8 new construction projects, and with the favorable conditions which presently exist for borrowing in the tax-exempt bond market, State Housing Finance Agencies have the ability to continue producing at an increased rate in FY 1977, if they are provided with the necessary Section 8 contract and budget authority through a supplemental appropriation. 86-085 77 pt. 2 15 THE IMPORTANCE OF THE HUD 701 COMPREHENSIVE The HUD 701 program represents the only national commitment to comprehensive planning, and its continuation is vital to states and units of local government throughout our country. The 701 program has made substantial contributions to public planning and management development throughout the United States. Since its birth in 1954, the 701 program has been responsible for launching redevelopment planning in most communities; it has initiated the concept of intergovernmental cooperation through planning linkages; it has been the primary financial resource for expanding the concept of planning on an areawide basis; it has inaugurated transit planning; and it has helped introduce environmental considerations into development planning. The most important new application of 701 has been its use in helping states, areawide agencies, and localities work out short term and longer term strategies to cope with the recent energy crises. One of the more current arguments centering on the 701 program involves whether or not its functions can be fulfilled by the Community Development Block Grant Program. This issue requires some discussion. The most recent HUD regulations of January 17, 1977, which purport to allow block grant recipients to spend funds for comprehensive planning activities, do in fact, restrict the use of such funds for developing only a "comprehensive community development plan.' Quoting from these regulations, "The activities to develop a comprehensive community development plan may include: Data gathering and studies necessary for the development of the plan (community development) or its components, excluding the gathering of detailed data and preparing of analyses necessary for the engineering and design of facilities or activities ineligible for assistance under this part..." Thus, only eligible activities under the block grant program can have a planning component. If a community wanted to measure the impact or do a feasibility study of proposed development for a public works facility, a school, a library, or many other types of communitywide facilities, the community would be prohibited from using the planning funds provided by the block grant. However, the 701 program, as separately funded, could be used for these activities. Communities must have the ability to integrate all phases of proposed and actual development through the mechanism of comprehensive planning; only the 701 program, and not the block grant, allows for this type of planning. 701 funds can be expended for the purposes of reorganizing city or county governments, improvement of citywide services, such as a water system, and allowing for intergovernmental coordination among city, county and state governments. The Community Development Block Grant Program does not allow for these activities. In discussing the merits of the 701 program, we cannot overlook the thousands of units of local government all across the country which are not receiving a block grant but still need the financial resources to undertake essential planning activities. Without a separate, viable funding level for the 701 program, all of those communities of under 50,000 in population in both SMSA and non-SMSA areas are left outside the scope of any federal comprehensive planning program. State governments, too, depend heavily on an adequate level of funding for the 701 program. States receive no direct entitlement under the block grant program; however, in numerous instances, state governments have provided the technical assistance which has enabled units of local government to obtain funding under the block grant program. This assistance has been greatly aided by 701 funding. Many states, including New Jersey, have testified to the essential nature of the 701 program in providing for a statewide planning capability. No other federal program gives Governors the opportunity to address the specific planning needs of their individual states. His With approximately $60 billion in federal grant money available to units of state and local government on an annual basis, there must be a concomitant coordinating mechanism to assure that these limited resources are used effectively. torically, 701 has afforded the means to look at the "whole" picture and not simply at individual elements. Information collected through 701-funded activities has improved the decision-making capacity of officials at all government levels. This improved decision-making, resulting in part from the federal investment in the 701 program, yields a dollar savings which far surpasses the total amount of the national appropriation. The level of commitment made to the 701 Comprehensive Planning and Management Assistance Program is a clear expression of the value we place on managing our country's future growth and development. The authorization level for 701 has not been above $150 million for the last five years; during this same period 701 has never been funded at more than $100 million. At a time when states and units of local government face extreme pressure in determining the allocation of limited financial resources and providing for the most cost-efficient operation of government, there is an increasing need to continue the authorization of the 701 program at the highest possible level. APPENDIXES 1. 2. 3. 4. OVERVIEW OF ATTACHED URBAN COUNTY SURVEY These are results of a phone survey: -conducted in December 1976 -including 9 persons from eight urban counties in -one of the nine persons was from an urban county not -two of the nine persons were from an urban county -one urban county participating in the entitlement Should urban counties be continued as an entitlement category? Why? Yes 6; No 3. Without the urban county mechanism, most Should the hold harmless cities in your county be phased out of the Yes 4; No 3; No comment 2. Those saying yes still wanted How would you react (favorably or not) to increased stringency by Favorably 6; Unfavorably 1; No comment 2. Those favor- What legislative requirements would you like to see changed so as to improve the CDBG program for urban counties? Why? A variety of suggestions were made. See survey for replies. |