AGENCY FINANCIAL REPORT FY 2013: Section I

 

FORWARD LOOKING INFORMATION

 

Understanding the external factors that shape HUD’s operating environment is crucial for identifying risks to future mission performance. External economic and legislative factors outside of HUD’s control affect its ability to influence key performance goals. These external factors include funding levels, economic conditions, unemployment rates, financial lending environment, tax regulations, as well as other federal, state and local conditions.

 

At this writing, sequesters in federal funding levels that affected HUD programs during FY 2013 remain in force during early FY 2014. Diminished and uncertain funding poses significant challenges and risk to HUD’s program partners such as cities and housing providers. For example, public housing authorities receive lower amounts of administrative fees, operating subsidies, and capital subsidies for addressing the capital needs backlog of the affordable housing stock.

 

Sustained unemployment remains a significant barrier to mitigating the foreclosure crisis and is subject to macroeconomic conditions that cannot be controlled by the Department. Unemployment puts pressure on household incomes and credit ratings. The weak job market thereby creates barriers to the ability of first-time home buyers to enter the housing market, weakens demand for home purchases, and reduces the ability of current homeowners to service their mortgages. However, the unemployment rate has gradually improved, and the residential construction market has substantially recovered, and home prices are increasing.

 

Financial markets anticipate that if unemployment rates improve further or signs of inflation appear, the Federal Reserve will slacken asset purchases and other policies that have kept interest rates low. As a result, interest rates for long-term debt and mortgage loans have begun to increase from the historic low levels that have prevailed over several years. Additionally, as federal agencies complete joint rulemaking during coming months to implement the Dodd- Frank Act, the definition of what types of mortgages require securitizers to retain risk might have significant effects on mortgage down payment requirements, loan to value ratios, and credit availability. Such factors intended to increase stability in the mortgage market exist in tension with affordability and access to credit for potential homebuyers.

 

Shrinking incomes and loss of homeownership have a direct effect on the growing need for affordable rental homes. Although the supply of affordable rental units is relatively fixed in the short run, the demand for these units is greatly increased by the number of former owners now requiring affordable rental housing and by shifts in household formation. This greater rental demand increases average rents and conversely reduces the availability of affordable units for renters with very low incomes. The most recent estimates from HUD’s Worst Case Housing Needs: Report to Congress shows that only 64.6 affordable rental units were available per 100 very low income renters in 2011. The shortage of affordable housing and prevalence of severe rent burdens increased rapidly during 2009 to 2011, building on record increases during 2007 to 2009. This unmet demand for affordable housing puts pressure on waiting lists for public and assisted housing, fair market rents, and HUD’s subsidy costs.

 

Shortages of affordable housing also contribute to doubling up and homelessness, especially for families. Homeless veterans are overrepresented in the homeless population and account for a substantial proportion of chronically homeless individuals. Causes of homelessness among Veterans are similar to causes of homelessness among non-veterans. The Administration has set an aggressive goal of eliminating veteran homelessness by 2015 and family homelessness by 2020, but a number of external factors including those listed above will affect HUD’s ability to meet these goals.

 



HUD wins 7th consecutive CEAR award.

FY 2013 Agency Financial Report
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