Subsidized Tenant Protections
The Senate’s T-HUD appropriations bill would allow HUD to provide enhanced vouchers to tenants in expiring use buildings who are not now eligible for them. An “enhanced voucher” is a housing choice voucher whose value is augmented or enhanced to allow the tenant to remain in the project after affordability requirements end. This takes place when affordability restrictions tied to the maturing mortgage expire, frequently setting off steep rent increases.
The bill would provide $10 million for enhanced vouchers for tenants in low vacancy areas “who may have to pay rents greater than 30% of household income” as a result of a maturing loan, expiring rental assistance contracts that are not eligible for enhanced or tenant protection vouchers, or expiring affordability restrictions accompanying a HUD mortgage or preservation program. The HUD Secretary would issue guidance to implement the authority, including requirements to define “at-risk households,” within 120 days of the bill’s enactment.
Many organizations, including NLIHC, the National Alliance of HUD Tenants, National Housing Law Project, and National Housing Trust (NHT) have supported enhanced voucher protections. The Preservation Working Group, coordinated by NHT, has included them in its policy priorities.
The bill targets properties that do not have Section 8 project-based contracts, but instead have expiring affordability restrictions. Using the Section 236 and Section 221(d)(3) Below Market Interest Rate programs, HUD has provided subsidized financing on private 40-year mortgages to developers that agree to maintain affordable rental units for the full length of the mortgage.
In 2010, NHT estimated that mortgages had expired for about 25,000 units, with an additional 50,000 units projected for the following five years. It is estimated that almost 13,000 units with subsidized mortgages will mature in 2012 and that their associated use restrictions will expire.
Tenants receive enhanced vouchers if their project owners prepay the mortgages, not when the mortgages reach their natural maturity. S. 1596 ensures that tenants in properties with maturing mortgages would receive enhanced vouchers, too. Representative Barney Frank (D-MA) included this protection in his assisted housing preservation bill during the 111th Congress.
Rental Assistance Demonstration
The Senate bill would allow HUD to conduct a RAD, which the department sought in its FY12 funding request. HUD circulated draft language to carry out the demonstration in August.
Stakeholders, including NLIHC, worked extensively with HUD for many months on its RAD iterations, and NLIHC endorsed the August draft language. However, S. 1596 diverts significantly from the positions of NLIHC, which does not support the Senate proposal. NLIHC will work to amend the language so that RAD protects residents’ rights, ensures perpetual contract renewals with associated affordability and targeting requirements, provides residents with choice, and ensures mission-driven stewardship of converted units. The House Subcommittee’s T-HUD appropriations bill does not include a RAD proposal.
The Senate proposal would allow PHAs to convert public housing to project-based Section 8 contracts or project-based vouchers. The demonstration would be limited to 60,000 units. Applications to convert would need to be received by September 30, 2015.
Given that public housing has a massive $26 billion capital needs backlog, decreasing annual appropriations, annual losses of more than 10,000 units, and no viable way to preserve this housing, a RAD program with the right parameters could greatly benefit communities and protect the public’s investment in this stock.
NLIHC has identified key conditions that any conversion proposal must include. HUD’s August RAD proposal had them:
- It must protect renewing contracts with long-term affordability and public ownership, including in the event of foreclosure or when low income housing tax credits are used.
- It must ensure that tenants’ participation, organizing, and procedural rights are protected.
- It must include a “choice option,” where public housing residents in converted housing units would be able to move with a voucher.
Although the Senate’s RAD proposal would allow the Secretary to enter into contracts for the converted units, it does not require that the contracts and their associated use and affordability restrictions be offered for renewal. Nor does it provide for the owner to accept these mandatory renewal offers. HUD’s August proposal had both.
Both the Senate bill and HUD’s proposal would require public or nonprofit ownership. However, the Senate bill would not require public or nonprofit ownership following foreclosure, bankruptcy, or material violations, as the HUD proposal would.
According to the bill’s report language, “all residents living in converted properties will maintain their existing rights,” but the bill itself only transfers rights described in Section 9 of the U.S. Housing Act. That section covers operating and capital funds; it does not include resident rights except for diverting $25 per unit annually from public housing subsidies to tenant participation efforts. HUD’s proposal transfers rights equivalent to those in Section 6 of the Act. That section has rights connected to admissions, evictions, and terminations of assistance, as well as requirements to establish effective tenant-management relationships.
Regarding resident participation, HUD’s proposal would require HUD to publish for public comment eligibility and selection criteria for the selection of PHAs, which include “reasonable requirements for consultation with residents of the properties to be proposed for participation and with the resident advisory boards.” The Senate bill does not provide for consultation with resident advisory boards.
HUD’s proposal would require participating PHAs to test options to provide at least 90% of converted public housing residents the opportunity to move with a housing choice voucher. Public housing residents do not have that choice. Under the proposal, residents would have this mobility option; the project-based subsidy would stay with the unit.
In contrast, the Senate bill does not provide any choice option whatsoever. The accompanying report notes that, “The Committee supports the objective of offering public housing choice mobility as an important component of this demonstration in a manner that serves residents and provides flexibility for PHAs to work with HUD, to determine how to meet this objective.” Report language does not have the force of law; instead, it simply encourages HUD to work with PHAs, not residents, on how—or if—any choice option would be included.
PHAs could convert, but the Senate bill would provide no additional funding through their project-based voucher or Section 8 contract. The Secretary would shift the subsidy from one account to another. Under the Senate proposal, PHAs would receive additional flexibilities that come with project-based voucher and contract models.
Unlike HUD’s proposal, the Senate bill only would allow for converting public housing units, not Moderate Rehab properties. Another section of the HUD proposal, authorizing conversion of Rent Supplement and Rental Assistance Program contracts, is not included in S. 1596.
To read NLIHC’s August endorsement of HUD’s RAD proposal, go to: http://www.nlihc.org/template/page.cfm?id=281
To view a National Housing Law Project chart comparing HUD’s August proposal with S. 1596, go to: http://nlihc.org/doc/NHLP_RAD_Bill_Comparison_9-22-11.pdf
Savings from Section 8 Voucher Legislation
S. 1596 has provisions that would produce $150 million in Section 8 voucher savings in FY 12 and more than $1 billion over the next five years. NLIHC supports these provisions and will work to enact additional Section 8 voucher reform.
The cost-saving measures would change income eligibility thresholds and simplify rent setting for all public and assisted housing households, not only voucher households. One provision would define “extremely low income” as the greater of federal poverty guidelines or 30% of area median income, thus expanding eligibility to more households in low income and rural areas. Another provision would increase the standard deduction for elderly and disabled families from $400 to $675 and increase the medical deduction threshold from 3% to 10% of annual income. It would allow PHAs to recertify families’ fixed incomes every three years, not annually.
S. 1596 would authorize PHAs to increase payment standards to up to 120% of fair market rent (FMR) without the Secretary’s approval, or above 120% with approval, to accommodate a disabled family or family with a disabled person. At least annually, HUD would publish on its website and elsewhere its notice of FMR publication in the Federal Register and ensure that FMRs become effective no earlier than 30 days following publication. Further, the Secretary must establish procedures for stakeholder comment on the FMRs and a process for reevaluating them upon request. Material changes in the methodology used for FMR estimates must be published, as well.
Assisted Housing Preservation Provisions
S. 1596 would reauthorize HUD’s Mark to Market program until October 1, 2015. This extension would allow owners of assisted housing the opportunity to restructure their mortgages when rents are marked down to market levels. Following September 30, 2011, the requirement to mark rents to market will remain, but the authority to restructure mortgage loans so rents can cover the new mortgage will expire. The House’s draft Section 8 Savings Act includes similar language.
In addition, the bill would allow HUD to transfer project-based assistance and use restrictions from obsolete housing projects to housing that “better meets the needs of the assisted tenants.” New language in the FY12 bill would allow the transfer of such assistance in phases.
The bill also includes the “Schumer Amendment,” which would require HUD to maintain project-based assistance when it manages or disposes of a multifamily property that it owns or for which it holds a mortgage. This requirement also pertains to foreclosures. In consultation with tenants, the Secretary could contract for project-based rental assistance payments to other properties should rehabilitation costs or environmental conditions not be solved. When ensuring that a project-based subsidy remains prior to foreclosure, the Secretary must give written notice, receive informed consent, and pursue alternatives when considering relocation or other remedies due to major threats to health and safety.