The Obama Administration has called for a five-year domestic spending freeze in an attempt to cut the deficit by $400 billion over the next decade, and now it’s up to various federal agencies to do their part. For the U.S. Department of Housing and Urban Development, the mandate will likely translate into program cuts for community development block grants, and, to a lesser degree, supportive housing for the elderly and people with disabilities.

“The president has said that we need to live within our means to invest in the future. That has meant tough choices, including to programs that, absent the fiscal situation, we would not cut,” HUD Secretary Shaun Donovan said during the February 14 unveiling of HUD’s proposed budget for 2012. “American families are tightening their belts, and we need to do the same.”

Specifically, the budget cuts community development block grants by 7.5% ($300 million) and HOME Investment Partnerships by 9.5% ($175 million). It also seeks to simplify Section 8 rent, setting provisions in accordance with the “Section 8 Voucher Reform Act”—a move Donovan said could yield up to $1 billion in savings over the next five years.

Spending-wise, HUD says it will make the most of leaner resources by sharpening its focus on programs the administration believes will help lead the nation out of economic crisis and toward greater global competitiveness. Here are some of the key funding provisions.

Homeowner protection. The budget calls for $218 billion in FHA-backed mortgages to help families that are in danger of losing their homes, as well as $168 million for housing and homeowner counseling through HUD and the Neighborhood Reinvestment Corp. (NeighborWorks).

Affordable rental housing. Earmarks include $19.2 billion in rental assistance for low-income families, plus $9.4 billion in project-based rental assistance for the preservation and rehab of 1.3 million existing affordable rental units. FHA’s multifamily mortgage insurance programs remain a top priority, with an expected $12.8 billion commitment in 2012. Multifamily construction made possible with this backing is expected to generate 85,000 jobs annually.

Reversing homelessness. The proposed budget allocates $2.3 billion toward programs designed to end homelessness. That includes $145 million in new housing vouchers for the more than 19,000 homeless individuals receiving education, healthcare, and other services through the Departments of Education, Health and Human Services, and Veterans Affairs. It also designates $953 million for housing for the elderly and disabled.

Sustainable communities.  As a continuation of its Partnership for Sustainable Communities collaboration with the Department of Transportation and the EPA, HUD has proposed $150 million in incentives for communities that develop comprehensive housing and transportation plans to create jobs, shorten commutes, and promote economic growth.  The budget also includes $790 million for rural housing and economic development programs, as well as $250 million in continued funding for the Choice Neighborhoods Initiative, which seeks to transform high-poverty, distressed areas through public-private investment. 

“This budget reflects the Obama Administration’s recognition of the critical role the housing sector must play for the nation to experience a robust, long-term economic recovery,” Donovan said, noting that the proposed budget is targeted to serve 5.5 million U.S. households. “While it requires hard choices to reduce the deficit, this blueprint for fiscal year 2012 is one that will deliver results for the vulnerable people and often-distressed places that HUD helps.”

Jenny Sullivan is a senior editor for Builder