The majority staff of the House Committee on Financial Services released a discussion draft of the Section Eight Savings Act of 2011 (SESA) on June 16. This is the latest iteration of what has previously been known as SEVRA, the Section Eight Voucher Reform Act. The Subcommittee on Insurance, Housing, and Community Opportunity of the Financial Services Committee will hold a hearing on the discussion draft on June 23 at 9:30 am in room 2128 of the Rayburn House office building.
The hearing will include two panels of witnesses. On the first panel will be HUD Assistant Secretary for Public and Indian Housing Sandra Henriquez. The second panel of stakeholders will include Linda Couch, NLIHC Senior Vice President for Policy and representatives of the National Association of Housing and Redevelopment Officials, Quadel Consulting, the Council of Large Public Housing Authorities, the Public Housing Authorities Directors Association, the National Leased Housing Association, and the Center on Budget and Policy Priorities.
The legislation as drafted would make various reforms to the housing choice voucher program, as well as the public housing and project-based Section 8 programs. The impetus for the original SEVRA legislation was HUD’s action in 2004 to change the distribution of voucher renewal funding to housing agencies, causing many housing agencies to have insufficient funds to renew their vouchers and others to have more money than they were authorized to spend. The attrition of vouchers during the 2004 to 2007 period due to this change resulted in the loss of more than 150,000 vouchers.
The newest version of the bill includes many provisions from earlier versions, adds new provisions, and drops others. Notably, the bill does not include time limits on housing assistance nor work requirements for residents of public and assisted housing that advocates had feared would be new additions.
Provisions Included from Previous Versions
The draft bill includes provisions, or variations on provisions from previous SEVRA bills. Discussed in detail below, these provisions include reforms and improvements to inspections, rent calculation and income review simplifications, changes to housing programs’ consideration of assets and incomes, targeting of assistance, voucher funding, the family self-sufficiency program, enhanced vouchers, project-based vouchers, fair market rents, screening of applicants, utility data, and HUD programs for persons with limited English proficiency.
The bill requires annual inspection of apartments, following current law, before any housing assistance payment from the voucher program can be made. The PHA can move forward and make such payments on apartments that do not meet HUD’s housing quality standards (HQS) if the reason for failure is non-life threatening conditions, which would be established by the HUD Secretary. PHAs would be allowed to withhold payments if the unit continued to be in noncompliance with HQS and would resume them after deficiencies were remedied. PHAs would be authorized to rely on “alternative” inspection methods besides HUD’s HQS that are at least as rigorous as HUD’s.
After the initial inspection, the bill would allow inspections to be done every other year, but a voucher holder could trigger an inspection by notifying the PHA of possible HQS violations. Life-threatening violations would have to be remedied within 24 hours and non-life threatening conditions would have to be remedied within 15 days. If failure to comply with inspection standards continues, the PHA may withhold assistance and could make the needed repairs itself. The draft bill requires the PHA to provide the household with at least 90 days to move with its voucher if the owner fails to address the HQS problems. After this period, the PHA must offer the household a public housing unit. The bill would allow, though not require as in previous drafts, the PHA to provide various forms of assistance in finding a new home, including using abated funds for a new security deposit.
Rent Calculation and Income Review Simplifications
The draft bill would make a number of changes to how rents are set and incomes are calculated for the voucher, public housing and project-based Section 8 programs. The bill would streamline how incomes are calculated by increasing the annual standard deduction for an elderly or disabled family from $400 to $675, and from $480 to $525 for dependent children. The draft bill would also increase the threshold above which households could take medical and attendant care deductions from 3% to 10% of income and would limit child care expenses that could be deducted from income to only the amount that such costs exceed 5% of income.
Incomes at initial occupancy would continue to be based on the estimated income of the family for the upcoming year. But PHAs and owners would base subsequent annual income levels on prior year income rather than anticipated income. The draft will would allow any family to request a review of its income when it estimates its adjusted gross income will decrease by 10% or more. A household with an increase in earned income will not be required to undergo a new income review, but other income increases above 10% would be subject to an income review. The current Earned Income Disregard, available to a limited number of public housing residents, would be eliminated.
To further simplify rent setting, the bill would allow PHAs to recertify incomes of households with fixed incomes only once every three years. “Fixed income” is defined as having at least 90% of income from SSI, Social Security, or other similar payments. Such families will have their incomes adjusted annually by an inflationary factor. The draft bill would also allow the PHA or owner to use income determinations from other means-tested Federal public assistance programs to determine the family’s income.
Incomes and Assets
The draft bill would also define “income” and “assets” for the purposes of determining eligibility and rents in the voucher, public housing, and project-based Section 8 programs. In the draft bill, PHAs and owners would have discretion whether to enforce a prohibition on initial and continued eligibility for households with incomes above 80% of area median. Currently, public housing and multifamily residents are only subject to income limits at initial occupancy. The draft bill would also require compliance with income limitations for initial and continued occupancy in the voucher program, but PHAs would have the ability to delay termination for not meeting income limits for six months. Otherwise, PHAs with over-income voucher holders would have to terminate these households from the program. Over-income is defined as having incomes above 80% of median, or in some cases above 95% of median.
Regarding assets, the draft bill would limit net family assets to $100,000 for applicants and current tenants, while authorizing PHAs to set their own exceptions to this limitation in their PHA Plans. PHAs and project-based owners can delay eviction or termination from the public housing or project-based Section 8 program for six months, but PHAs have no such discretion over the treatment of voucher holders exceeding these limits.
Like earlier SEVRA bills, the draft bill would also revise the definition of “extremely low income” to mean the higher of 30% of area median income (the current definition) or the federal poverty line issued by the Department of Health and Human Services. This provision was also included in the President’s budget request for FY12.
The SESA draft bill calls for determining annual allocations of voucher funding for PHAs based on the leasing rate in the PHA’s prior calendar year. The draft bill stops short of dictating that annual voucher funding allocations be based on leasing and cost data, but does lay out what the leasing rate shall include. The leasing rate would be the number of vouchers under lease, including vouchers that exceed an agency’s authorized voucher level if they are funded through the allocation for the agency for the prior year, with adjustments for incremental and new tenant protection and enhanced vouchers.
The lack of a consistent and reliable voucher renewal funding system is the primary reason SEVRA was initiated in 2005. When HUD changed the way it distributed what otherwise would have been sufficient voucher renewal funds appropriated by Congress, many agencies received less funding than they needed and had to take measures to reduce costs, from freezing waiting lists upon voucher turnover to pulling back vouchers from households that were actively trying to lease a home.
The draft bill would also prohibit PHAs from retaining voucher reserves of 6% or more than the amount it was allocated in the prior calendar year. Over the last several years, Congress’s policies on reserves have allowed reserves equaling one week of funding to 7%. The bill would also allow reserves to be used for over-leasing in any year, regardless of whether such use is eligible for renewal funding in the subsequent calendar year.
Unlike previous versions, the current draft bill does not include a reallocation policy for reserves that advocates believe would encourage higher lease-up rates by PHAs. In previous versions, HUD was authorized to reallocate amounts above agencies’ reserve requirements to avoid or reduce any prorations of renewal funding or to allow other agencies to meet unforeseen voucher funding needs, and for other purposes.
Family Self Sufficiency
The draft bill includes changes to HUD’s Family Self Sufficiency (FSS) program, which allows some voucher holders and public housing residents to save funds that would have otherwise gone to increased rent payments as their incomes increased, among other benefits. The draft bill would merge the voucher and public housing FSS programs and would expand eligibility to FSS for project-based multifamily residents. These are changes long-sought by FSS advocates.
The draft bill keeps a provision that would provide enhanced vouchers to tenants in a property with a mortgage that has matured, but if the owner of the property had prepaid the mortgage instead of allowing it to mature, the tenants would be eligible for enhanced vouchers upon the prepayment. This provision will protect tenants from increased rents when the project-based subsidy contract expires for their buildings. Enhanced vouchers are vouchers whose values are increased, up to a reasonable rent level, and stay with the tenant as long as the tenant remains in the unit. Enhanced vouchers allow tenants to remain in their homes when the mortgage expires or is prepaid.
The June 16 draft bill maintains an important change to the project-based voucher rules. Advocates are hopeful that other changes included in previous versions can be added as the bill moves forward. The draft bill includes a provision to allow the maximum contract term for a project-based voucher to be extended from the current 15 years to 20 years.
Left out of the June 16 draft is a provision allowing PHAs to base the existing 20% cap for project-basing on either the number of its vouchers or its voucher budget authority. In addition, earlier versions would have authorized an additional 5% of vouchers or voucher funds for project-basing in units housing homeless families, for supportive housing for disabled persons, or for units in tight rental markets. Earlier versions also would have authorized site-based waiting lists for properties with project-based vouchers.
In anticipation of the draft bill’s release, several homelessness and disability rights organizations issued a statement in support of project-based provisions from earlier SEVRA bills. “People who are homeless, or who are very low income and living with physical disabilities or mental illness, often have difficulty obtaining housing in the private marketplace with a tenant-based voucher. Identifying suitable apartments, negotiating lease agreements, and competing with other voucher holders often proves difficult when these populations try to utilize a tenant-based voucher. Project-basing solves this problem by offering the rental subsidy tied to a unit,” said the statement, signed by the Corporation for Supportive Housing, the National Alliance to End Homelessness, the National Law Center on Homelessness & Poverty, the Consortium for Citizens with Disabilities, the National Center on Family Homelessness, the National Alliance on Mental Illness, and the Technical Assistance Collaborative.
Fair Market Rents
The draft bill follows recent versions of SEVRA to require that HUD publish fair market rents “not less than annually.” The bill would end the current practice of HUD publishing proposed FMRs, but would require HUD to establish a procedure for PHAs and others to comment on and request a reevaluation of a jurisdiction’s FMRs. HUD would also be required to publish for public comment any material changes in the methodology for establishing FMRs.
In the new bill, if a PHA elects to screen prospective voucher holders, such screening would have to be limited to criteria directly related to an applicant’s ability to fulfill the obligations of an assisted lease. The bill would also require the PHA to consider mitigating circumstances offered by the voucher applicant. In addition, the bill would prohibit existing public and assisted housing families who receive enhanced vouchers or tenant-based vouchers because of demolition or disposition, or because of a termination of a HUD subsidy contract, from being re-screened by the PHA.
Earlier versions of this section in SEVRA required denials of readmission to be based on evidence that is “credible and objective.”
The draft SESA bill would require the HUD Secretary to collect and regularly publish data on utility consumption and costs in local areas that the Secretary determines will be useful for the establishment of utility allowances for tenant-paid utilities.
Limited English Proficiency
The bill includes earlier SEVRA language related to access to HUD programs for persons with limited English proficiency. Now HUD would be required to establish a task force, including community-based organizations that serve individuals with limited English proficiency, civil rights groups, and other stakeholders, to periodically identify a list of vital documents to be competently translated to improve access to federal housing programs. HUD would also be required to produce translations of such documents and to develop and maintain a housing information resource center, interpretation services telephone lines, and written translation services.
New in SESA
The draft bill also includes new provisions never formally introduced in Congress as part of SEVRA, including an alternative rent demonstration and the reauthorization of the Mark to Market program.
Rent Policy Demonstration
The draft bill’s rent policy demonstration would allow the HUD Secretary to carry out a demonstration project for a “limited” number of families to determine the effectiveness of different rent policies, including ceiling rents, tiered rents, and an earned income disregard. While other rent simplification provisions of the draft bill stay firmly within the Brooke framework, this section would allow HUD to conduct a rent demonstration project that is not based on the Brooke rule that each household’s rent must be no more that 30% of the household’s adjusted income.
The goals of these demonstration projects are to encourage families to obtain employment, to increase their incomes, and to achieve self-sufficiency. The draft demonstration has no evaluation component and no hardship exemptions.
The draft bill does not include provisions related to HUD’s Moving to Work demonstration, which has provided more than 30 PHAs with freedom from federal requirements around rent affordability, income targeting and other key housing guidelines. Some earlier versions of SEVRA would have expanded MTW to many more agencies than currently hold such freedoms. The rent policy demonstration is limited to freedom from the Brooke standard.
Extension of the Mark to Market Program
HUD’s authority to restructure FHA-insured multifamily loans and project-based assisted contracts to conform with rents that have been brought down to market levels will expire on October 1, 2011. The Mark to Market program was authorized by the Multifamily Assisted Housing Reform and Affordability Act of 1997. A provision in the draft SESA bill authorizes HUD to extend the Mark to Market program for four years, through October 2, 2015.
Provisions Deleted from Previous Versions of SEVRA
The draft SESA bill does not include entire sections from the most recent versions of SEVRA. These include the use of voucher assistance in manufactured housing and for home ownership, new policies around rent burdens, authorization of the Veterans Affairs Supportive Housing program, and turnover vouchers for people with disabilities and homeless veterans.
Vouchers in Manufactured Housing
The draft bill does not include any language regarding the use of vouchers in manufactured housing. Currently, people with manufactured homes can only use voucher assistance to pay to rent the land on which their homes are placed. Under previous versions of SEVRA, voucher holders would have been permitted to use voucher assistance to cover a much broader array of their actual housing costs, including rent on the land, payments on the home, and utility costs.
Previous SEVRA bills would have authorized PHAs to provide up to $10,000 in down payment assistance for families using voucher assistance for homeownership, an increase over the program’s current maximum of one year’s worth of voucher payments to be used as a down payment.
Earlier versions of SEVRA included sections dictating how HUD and PHAs must evaluate and respond to rent burdens and clustering of vouchers in higher poverty neighborhoods. These provisions would have also allowed PHAs to increase the voucher payment standards to 120% of fair market rent as a reasonable accommodation for people with disabilities without having to seek HUD approval to do so.
Veterans Affairs Supportive Housing (VASH) Program
The draft bill would not make changes to the VASH program that were in recent versions of SEVRA, including a more lengthy description of the program to provide rental assistance for veterans and their families and codifying that the program must “ensure coordinated health services and appropriate case management for each veteran receiving such assistance.” The language would have also allowed the HUD Secretary to make VASH funding available both competitively and non-competitively to PHAs that partner with eligible VA Medical Centers.
Vouchers for People with Disabilities and Homeless Veterans Upon Turnover
The June 16 draft does not include language from earlier versions that would require the HUD Secretary to develop and issue guidance to ensure that vouchers authorized for non-elderly disabled families or for homeless veterans continue to be provided to such households upon turnover of these targeted vouchers.
Access the draft bill at http://www.nlihc.org/doc/SESA_Discussion_Draft_6-16-11.pdf
Read the statement on project-based vouchers at http://www.nlihc.org/doc/PBV-Statement.pdf