HUD’s Office of Public Housing (PIH) informed stakeholders on May 7 that ten public housing agencies (PHAs) were selected to participate in Cohort 2 (Alternative Rent Policies) of the Moving to Work (MTW) Demonstration Expansion. A list of the ten PHAs and a brief summary of their MTW alternative rent policy is posted on the MTW Expansion Cohort 2 webpage. NLIHC has a summary of the MTW Rent Reform Notice PIH 2020-21 inviting PHAs to apply.
NLIHC sent a memorandum on February 23 urging HUD to pause implementing the Moving to Work (MTW) Demonstration expansion and consider concerns NLIHC has with the Cohort 2 Cohort 3, Work Requirements (see Memo, 1/25), as well as the final MTW Operations Notice (see Memo, 8/31/20) that can harm residents.
Tiered Rents
Four PHAs will test “tiered rents,” which use “income bands” or “tiers” to determine a household’s rent. Notice PIH 2020-21 set the income bands or tiers at $2,500. The lowest tier includes households with gross income (not adjusted income, as it typical) between $0 and $2,499, the next tier includes households with gross income between $2,500 and $4,999, and so on. The number of tiers would vary by PHA, with the maximum tier going up to a PHA’s area median income.
Rents are fixed within the different income ranges (bands) and all households in the range of the band pay the same fixed rent. An example in Notice PIH 2020-21, shows a household’s monthly rent would be $344 in an income tier between $12,500 and $14,999. The rent burden for a household with $13,000 income would be greater than one with income of $14,250. Household income will be recertified every three years, and a household’s rent would not change unless its income moved into a different tier.
One PHA will test “alternative tiered rents” set at increments of $2,000 instead of $2,500 resulting in more tiers, ostensibly to minimize the negative financial impact for residents.
Congress has three MTW statutory objectives: reduce costs, give households incentives to achieve economic self-sufficiency, and increase housing choice. It is not obvious that requiring residents to pay more rent will increase resident self-sufficiency or housing choice.
Stepped Rents
Five PHAs will test “stepped rents,” a form of time limit with a household’s rent payment starting at 35% of adjusted income and growing each year. After the first year a household’s rent increases annually by a specific dollar amount unrelated to each household’s income. In other words, even if a household’s income does not grow, its rent will increase every year. A PHA can set the stepped rent increase anywhere between 2% and 4% of the Fair Market Rent (FMR). A PHA can choose whether to review and adjust a stepped rent increase each year, or leave it fixed for the 6-year study period of the MTW study. It is not obvious that requiring residents to pay more rent will increase resident self-sufficiency or housing choice.
Background on MTW Expansion
The “Consolidated Appropriations Act of 2016” authorized HUD to expand the MTW demonstration to an additional 100 high performing PHAs over a seven-year period to end in 2022. PHAs will be added to the MTW demonstration in groups (cohorts), each of which will be overseen by a research advisory committee to ensure the demonstrations are evaluated with rigorous research protocols, quantitative analysis, and comparisons to control groups. Each cohort of MTW sites will be directed by HUD to test one specific policy change.
The MTW statutory objectives are to reduce costs, give households incentives to achieve economic self-sufficiency, and to increase housing choice. The statute requires MTW agencies to: 1) serve the same number of low-income families as they would without MTW funding flexibility; 2) serve a mix of families by size comparable to the mix they would have served if they were not in MTW; 3) ensure that 75% of the families they assist have income at or below 50% of area median income; 4) ensure that assisted units meet housing quality standards; and 5) establish a reasonable rent policy.
The program includes five cohorts:
- Cohort 1: evaluating the overall impact of MTW flexibilities on PHAs with fewer than 1,000 units
- Cohort 2: evaluating the impact of different rent structures
- Cohort 3: evaluating the impact of work requirements
- Cohort 4: evaluating incentives to landlords to participate in the HCV program
- Cohort 5: evaluating the overall impact of MTW flexibility on PHAs with fewer than 27,000 units
The list of the ten MTW Expansion Cohort 2 PHAs and summaries of their alternative rent policies is at: https://bit.ly/2RMrfmr
The MTW Expansion Cohort 2 webpage is at: https://bit.ly/2ROXIIu
NLIHC’s Summary of Notice PIH 2020-21 inviting PHAs to apply for Cohort 2 is at: https://bit.ly/3eGvQzq
NLIHC’s Summary of Key Provisions of the Moving to Work (MTW) Demonstration Operations Notice is at: https://bit.ly/3ocxCvk
NLIHC’s memorandum to HUD is at: https://bit.ly/2ROdXFR
More information about the MTW expansion is on NLIHC’s Public Housing webpage at: https://bit.ly/3y4QvEV