As part of his FY13 budget request to Congress, President Obama asks for an increase, to $75, of the minimum monthly rent HUD-assisted households must pay. NLIHC strongly opposes this proposal.
Since the 1998 Quality Housing and Work Responsibility Act (QHWRA), public housing agencies (PHAs) have been allowed to set monthly minimum rents of up to $50 for public housing and voucher households. The same law allowed the HUD Secretary to set a minimum rent for project-based Section 8 residents, up to $50. After QHWRA, the HUD Secretary set the minimum monthly rent for project-based units at $25.
If a PHA sets a minimum rent above $0, it must also establish a hardship exemption policy. But, a 2011 HUD report shows that less than 1% of households impacted by minimum rents have requested a hardship exemption. NLIHC and other advocates contend that few eligible residents are aware of any hardship exemptions. Individual PHAs determine how their hardship exemptions will operate, including how cases are evaluated and residents are made aware of the exemption policies.
The President’s FY13 budget request would require all public housing, voucher and project-based Section 8 tenants to have minimum monthly rents of $75. Today, 27% of PHAs have chosen not to adopt minimum rents of $50; some have chosen not to have any minimum rent and some have adopted minimum rents of less than $50. The President’s request would remove any PHA discretion on minimum rents. The Center on Budget and Policy Priorities estimates that more than 500,000 households, predominantly families with children, would face rent increases under such a proposal. For these lowest income households, housing assistance is likely the only thing keeping them from becoming homeless.
The FY13 request would also extend the minimum rent law into the Section 202 supportive housing for the elderly, Section 811 housing for persons with disabilities, and Section 236 rent supplement programs. For these programs, the President’s request also establishes hardship exemption policies requiring the HUD Secretary to grant hardship exemptions when a family cannot pay the minimum rent because of financial hardship, including for when the family would be evicted as a result of inability to pay a minimum rent. But the FY13 request does not make any improvements to the hardship exemption requirements for the project-based Section 8, voucher, and public housing programs.
Each HUD-assisted household pays about 30% of its adjusted income toward rent. Federal appropriations make up the difference between tenant rent payments and what it costs to operate and maintain the unit, or to rent the private market apartment. Nationally, most HUD-assisted households pay rents somewhere in the $300 range each month. It is only the very lowest income households that are affected by minimum rent policies, because these are the households with incomes so low that their rent payment would be less than, say, the current $50 minimum rent. For a household to be captured by a minimum rent policy of $75 a month, its annual adjusted income would be around $3,000 a year.
According to HUD, raising the minimum rent and making it mandatory would generate about $150 million in new revenue in FY13, a paltry amount compared to the overall HUD budget but a massive amount to these lowest income households.
The request coincides with a debate in the House of Representatives on whether to raise the minimum rent. The latest draft of the House Financial Services Subcommittee on Insurance, Housing, and Community Opportunity Chair Judy Biggert’s (R-IL) housing reform bill, the Affordable Housing and Self-Sufficiency Improvement Act (AHSSIA), would also require an increase to the minimum rent for project-based Section 8, voucher, and public housing households, to $69.45. This bill, like the President’s request, would not make any improvements to the hardship exemptions for households in these programs. A tentative February 28 mark up in the House Committee on Financial Services of ASSHIA has been postponed.
The President’s budget proposes sponsor-based assistance to serve homeless families and individuals. The proposal would enable PHAs to provide voucher funding, through a competition, to “not-for profit service providers that leverage and deliver supportive services for homeless families.” Under the proposal, PHAs could sponsor-base up to 5% of their existing authorized vouchers. HUD proposes that the authority for the sponsor-basing of vouchers could be achieved through the waiving of “provisions of Section 8 that would otherwise impede sponsor-basing.” HUD does not specify which provisions would have to be waived for such a program to be implemented.
The FY13 request proposes a new Section 202 Housing for the Elderly Program Project Rental Authority, modeled after changes that were made to the Section 811 Housing for Persons with Disabilities Program in the Frank Melville Supportive Housing Investment Act. If adopted, Section 202 funds would be used to provide operating assistance only, and would be applied to multifamily housing complexes that are made affordable through other sources such as the Low Income Housing Tax Credit, HOME, or private financing. Under the proposal, states would administer and award Section 202 funds. The proposal would likely change the financing structure for new projects and it appears that statutory changes may be required for the proposal to be fully implemented.
Low Income Housing Tax Credits
The FY13 request includes four policy proposals from the Department of the Treasury regarding its low income housing tax credit program. In total, the requests would cost around $900 million to implement. Two of the proposals were also recommended in the President’s FY12 request. One proposal would allow for a third income targeting criteria in LIHTC properties. Instead of at least 20% of units housing tenants with incomes below 50% of area median or 40% of units serving tenants with incomes below 60% of area median, LIHTC properties could choose a new option, at least 40% of units served households with an income average of 60% of area median. This would allow LIHTC units to serve households up to 80% of area median income, while also serving lower income households and still meeting the 60% AMI average. In addition to the income averaging proposal, the request once again seeks a 30% basis boost for LIHTCs used to preserve federally-assisted housing.
Treasury also proposes making LIHTCs beneficial to Real Estate Investment Trusts (REITs) by permitting a REIT that receives LIHTCs to designate as tax exempt some of the dividends it distributes. In its budget request documents, the expansion to REITs would increase demand for LIHTC.
Finally, Treasury requests that protections similar to those in the Violence Against Women Act (VAWA) be required in all Long-Term Use Agreements. Such agreements are contracts between the owner of the property and the state’s LIHTC allocating agency and spell out certain requirements for the property, such as the prohibition on refusing to lease an LIHTC unit to a voucher holder simply because they are using a voucher to pay for their housing. The VAWA protections in the agreement would apply to both the low income and the market-rate units in the LIHTC building.
The Senate is current working on a bill to extend VAWA protections to nine federal housing programs, including the LIHTC program. Today, the VAWA housing discrimination provisions only apply to victims of domestic violence, dating violence, or stalking who live in public housing, project-based Section 8 properties, or who have a housing choice voucher. Housing-related VAWA legislation, S. 1892, sponsored by Senators Al Franken (D-MN), Susan Collins (R-ME), and Barbara Mikulski (D-MD) has been included in the broader VAWA reauthorization bill, S. 1925, which the Senate Committee on the Judiciary approved on February 2 (see Memo, 2/3).
The legislation, among other provisions, would allow for the bifurcation of leases to ensure that a victim who shares a lease with the abuser is allowed to remain in the subsidized housing unit. The measure would also require property owners or managers to develop emergency transfer policies for victims to move to different subsidized units.