GAO Finds Numerous Issues with Moving to Work Demonstration

At the request of House Committee on Financial Services Ranking Member Maxine Waters (D-CA), the Government Accountability Office (GAO) undertook an additional review of the Moving to Work Demonstration (MTW), with a focus on how the demonstration affected public housing and voucher tenants. The GAO’s report, Improvements Needed to Better the Moving to Work Demonstration, Including Effects on Tenants (GAO-18-150), found significant issues in a number of areas. 

The GAO report provides findings in four areas:

  • HUD is limited in its ability to evaluate the effect of MTW rent-reform, work-requirement, and time-limit policies on tenants.
  • Due to limited data, HUD cannot fully determine the extent to which the flexibilities MTW affords public housing agencies (PHAs) affected their efforts, especially regarding the number of tenants served.
  • HUD has not implemented a process to monitor MTW reserves or PHA plans for such reserves.
  • HUD has taken steps to address staffing deficiencies needed to oversee the current 39 MTW agencies, but it has not finalized its staffing plans in preparation for an expansion to an additional 100 PHAs.

The “Appropriations Act of 1996,” which authorized the demonstration, states that the purpose of MTW is to give PHAs and HUD the flexibility to design and test various approaches for providing and administering housing assistance that reduce costs, provide incentives for economic self-sufficiency, and increase housing choice. The Act requires MTW PHAs to continue to assist substantially the same total number of families and to maintain a comparable mix of families, by family size, as would have been assisted without the MTW demonstration. In addition, at least 75% of the families assisted must have incomes less than 50% of area median income.

The demonstration program provides PHAs with enormous flexibility from most public housing and voucher program statutory and regulatory requirements. For example, MTW PHAs may merge public housing capital and operating funds with voucher funds in order to use those funds interchangeably. They may also impose higher rents, work requirements, and time limits for public housing and voucher households. Each of the current 39 MTW PHAs sought different statutory and regulatory waivers, which are spelled out in their MTW Standard Agreements.

HUD Does Not Have a Framework for Monitoring the Effects of Certain Policies on Tenants

The GAO concluded that HUD does not have a framework for monitoring the effects of rent-reform, work-requirement, and time-limit policies.

Rent reform. HUD defines a rent reform as “any change in the regulations on how rent is calculated for a household.” The GAO found HUD’s definition to be unclear, leading to MTW agencies inconsistently categorizing some policies and not reporting required information for rent-reform policies. MTW agencies can propose rent-reform policies such as changing how often tenants are recertified, eliminating certain exclusions or deductions, or changing the approach agencies use to determine a household’s tenant contribution.

HUD has 15 categories of activities it considers to be rent reform under the MTW demonstration, but does not further define the activities under each category. Based on the GAO’s review of MTW agencies’ 2011–2016 annual plans, it found that some agencies did not report required information when proposing a rent-reform activity in their annual plans. And, based on its review of the 2015 annual reports, the GAO found that 83 of the 194 policies identified as rent reform did not include any of the hardship data HUD requires agencies to report for rent-reform activities.

Self-sufficiency. Although one of the requirements of the MTW demonstration is to establish a reasonable rent policy to encourage employment and self-sufficiency, HUD has not defined self-sufficiency. Instead, HUD has allowed each agency to develop its own definition. MTW agencies’ definitions of self-sufficiency can vary widely and sometimes are inconsistent within an MTW agency.

According to HUD officials, the Department has not defined self-sufficiency for MTW agencies because HUD wants to give MTW agencies the ability to address local needs. However, the GAO concludes that the individualized definitions have led to measurements of self-sufficiency that cannot be consistently evaluated across activities or agencies. Without a more standardized definition of self-sufficiency for the MTW demonstration, HUD cannot collect consistent information that would allow for the evaluation of the effect of MTW rent-reform and occupancy policies on tenants.

Work requirements and time limits. HUD’s requirements for MTW agencies related to work requirements and time limits are largely inconsistent with requirements pertaining to rent-reform activities. Although HUD has said it considers work-requirement and time-limit activities to have a great and direct impact on tenants, MTW agencies are not subject to the same reporting requirements when proposing those policies as when proposing rent-reform activities. For example, HUD guidance in Attachment B of the Standard Agreement requires agencies to include an impact analysis, annual reevaluation, and hardship policy for rent-reform activities in their annual plans (see subsection below). However, Attachment B does not include similar requirements for proposed work-requirement or time-limit policies.

In addition, Attachment C of the Standard Agreement requires MTW agencies to create a hardship policy if they establish a time-limit policy for public housing assistance. However, HUD did not develop guidance requiring agencies to report on their hardship policies for time-limit policies for public housing assistance. Furthermore, HUD does not have a similar requirement for time-limit policies established for voucher assistance.

Guidance for Analyses and Reevaluations of Rent-Reform and Hardship Policies Not Detailed

HUD’s guidance regarding how MTW agencies are to perform impact analyses, reevaluate activities, and establish hardship policies has not described the elements of the analysis, required submission of reevaluations, or described elements of hardship policies.

Impact analyses. Attachment B to the MTW Standard Agreement suggests agencies take four steps when developing an impact analysis and include the results, including describing the rent-reform activity and identifying the intended and possible unintended effects of the activity. However, Attachment B does not provide any explanation or suggestions for how agencies should approach each step. According to HUD officials, these steps are not required and the only other guidance provided to agencies to monitor the effect of rent-reform activities is draft guidance from 2009. That 2009 draft guidance reiterates the four suggested steps of an impact analysis and provides a narrative explanation of the purpose of each step along with examples, but MTW agencies are not required to follow the guidance and HUD never finalized it.

The GAO reviewed the impact analyses MTW agencies reported in their annual plans from 2011 through 2016 and found that agencies’ impact analyses for their rent-reform policies varied widely in the type of information and level of detail provided. For example, a majority of impact analyses included whether the activity would increase or decrease tenants’ rent burdens, and a majority included other benefits or costs to tenants. But analyses less often discussed possible unintended consequences of their rent-reform policies. By framing the steps in Attachment B as suggestions and not prescribing the elements of impact analyses, HUD cannot consistently collect the type of information it needs to assess the effect of MTW activities on tenants across agencies.

Annual reevaluations. According to Attachment B, when MTW agencies propose a rent-reform activity in their annual plan, they should provide an overview of how they will annually reevaluate the proposed activity and revise the activity as necessary to mitigate the negative effects of any unintended consequences. HUD guidance does not require MTW agencies to report the results of their annual reevaluations.

Based on the GAO’s review of MTW agencies’ annual plans submitted from 2011 through 2016, only about one-third of the rent-reform policies proposed by agencies included a description of how agencies planned to annually reevaluate the policies. The remaining proposals either did not include a description or agencies stated that they would evaluate the activity annually without providing further description of how they would perform the evaluation.

Because HUD allows agencies to determine the process for reevaluating their activities, most MTW agencies have not collected or reported additional information on rent-reform activities (including effects or unintended consequences) outside of the requirements of their annual reports. This leaves HUD and the agencies themselves less able to assess the effects of MTW activities on tenants.

Hardship policies. While MTW agencies must establish a hardship policy to define the circumstances under which households may be exempted or receive temporary waivers from a new rent-reform activity, Attachment B of the Standard Agreement does not define what elements must be included in the hardship policy. The nonbinding draft guidance from 2009 suggested four questions hardship policies should address (including the process households would use to request an exemption or waiver and how hardship cases would be resolved). Because HUD does not provide more specific direction to MTW agencies about what to include in their hardship policies, and therefore what is communicated to tenants, MTW agencies may not be adequately communicating all of the information tenants need to understand the circumstances in which they may be exempted from rent-reform activities.

MTW Agencies Had Lower Public Housing Occupancy and Voucher Utilization Rates and Higher Expenses than Comparable Non-MTW Agencies

The GAO found statistically significant differences between MTW agencies and comparable non-MTW agencies in key outcomes of the public housing and voucher programs, possibly affecting the number of tenants MTW agencies served. MTW agencies had lower yearly median public housing occupancy rates in fiscal years 2009–2015 than comparable non-MTW agencies. MTW agencies also had lower rates of voucher unit utilization than comparable non-MTW agencies in each year during 2009–2015.

In addition, median public housing operating expenses for MTW agencies in each year during 2009–2015 were $7,853 per household and $6,622 for non-MTW agencies, a difference of about 19%. Also, median public housing operating expenses related to the central office cost center for MTW agencies were about 9% higher than comparable non-MTW agencies in each year during 2009–2015 ($2,745 per household and $2,520, respectively).

For the voucher program, the GAO separately examined expenses in 2009–2015 related to administration and subsidy (housing assistance payments). Median yearly administrative expenses for MTW agencies were $922 per household and $642 for comparable non-MTW agencies, a difference of about 43%. The yearly median voucher subsidy expenses for MTW agencies were about 25% higher than for comparable non-MTW agencies ($8,295 per household for MTW agencies and $6,629 per household for non-MTW agencies).

MTW Reserve Levels Raise Questions

MTW agencies have accumulated relatively large reserves of voucher funding. The MTW agencies are able to accumulate more reserves because their voucher funding formula differs from the formula used for the traditional voucher program. The voucher formula for MTW agencies is generally based on the actual, per-unit costs in the year prior to the agency joining the MTW demonstration. Because their voucher allocation formula is not tied to prior-year subsidy expenses, MTW agencies do not have the same incentive that non-MTW agencies have to use all their voucher funds in a given year.

The GAO compared the voucher reserves held by MTW agencies to the reserves held by comparable non-MTW agencies. As of December 31, 2016, the median amount of reserves per household held by MTW agencies was $2,462 compared to $480 for comparable non-MTW agencies (a difference of $1,982 or about five times higher). As of June 30, 2017, the 39 MTW agencies had a total of about $808 million in reserves while all 2,166 non-MTW agencies had reserves of about $737 million.

Read the full GAO report at: