HUD published a final rule on May 17 to implement changes to the Family Self-Sufficiency (FSS) program made by the “Economic Growth, Regulatory Relief, and Consumer Protection Act” (“Economic Growth Act”) signed into law on May 24, 2018. The changes include permanently expanding the definition of an eligible family to include tenants of privately owned multifamily properties subsidized with Project-Based Rental Assistance (PBRA).
The FSS program helps public housing, Housing Choice Voucher (HCV), and Multifamily Project-Based Rental Assistance households increase their earnings and build assets that may be used for any purpose, such as buying a home or pursuing education. Participating public housing agencies (PHA) or Multifamily owners rely on FSS program coordinators to help create household-specific plans that form the basis of five-year contracts agreed to by participating households. Program coordinators connect households to supportive services and provide ongoing case management. As a participating household’s income increases, the difference between the household’s original rent and the increased rent that would result due to a household’s increased income is credited to an interest-bearing escrow account on behalf of the household. FSS is voluntary and allows participants up to five years to achieve their goals and “graduate” from the program.
FSS has existed and been funded for the Public Housing and HCV programs since the “Cranston-Gonzalez National Affordable Housing Act of 1990.” The fiscal year (FY) 2015 “Appropriations Act” authorized a demonstration program for HUD’s Multifamily program, and the “Economic Growth Act” enabled private owners of HUD-assisted Multifamily properties to establish their own FSS programs or coordinate with other owners or PHAs to offer FSS to their residents. The Economic Growth Act required HUD to issue regulations to update its program requirements and provide new provisions for private owners of multifamily assisted housing to set up their own FSS programs. HUD published a proposed rule in September 2020 to implement the changes required by the Economic Growth Act and streamline the FSS program (see Memo, 9/28).
Congress appropriated $109 million for FSS for FY22 – a $4 million increase over FY21-enacted levels. President Biden’s proposed FY23 budget request includes $120 million for FSS.
Selected Regulations in the Final Rule
The final rule implements a number of changes, including the following:
Minimum Program Size (Section 984.105)
The proposed rule revised the provisions regarding determining minimum program size (i.e., the minimum number of families that a PHA must serve in its FSS program), clarifying that the relevant figure is the total number of public housing units plus the total number of HCV and Project-Based Vouchers (PBVs). The final rule states that HUD will calculate each PHA’s minimum program size as of May 24, 2018, by calculating the original minimum program size (including public housing and Section 8) and reducing that number by the number of graduations reflected in PIC since October 21, 1998, to date.
Additionally, the final rule maintains the proposed change to extend the duration of any HUD-approved exception from three to five years. HUD will not leave the time period of an exception up to each PHA.
Cooperative Agreements (Section 984.106 and 887.107)
The Economic Growth Act allows owners to enter into Cooperative Agreements with one or more owners of Multifamily properties to voluntarily offer an FSS program to their tenants. The final rule specifies that Cooperative Agreements between PHAs and owners of Multifamily properties must include processes for the entities to communicate with each other about changes in their Action Plans to ensure coordination between the parties in administering their program. HUD notes that if a PBRA property is being served through a Cooperative Agreement, then at least one participant with assistance through PBRA must be a member of the Program Coordinating Committee (PCC).
FSS Appropriated Funds (Section 984.302)
HUD may award FSS appropriated funds directly to PBRA owners operating FSS programs independently or in partnership with another PBRA owner. The final rule revises Section 984.302 to clarify that FSS appropriated funds may be used by PHAs or owners for eligible FSS costs, including when an owner operates an FSS program through a Cooperative Agreement or on its own.
HUD added a regulatory provision at Section 887.113(a) that states that owners may also use residual receipts to pay for reasonable FSS program operation costs, including hiring an FSS Program Coordinator for their program.
Contract of Participation (Section 984.303)
The contracts that households voluntarily sign in order to participate in FSS are formally called Contracts of Participation (CoPs). The final rule makes several changes and revisions to Section 984.303, which covers CoPs.
Allowing an Adult Member to Execute the CoP
The final rule allows family members other than the Head of Household for rental assistance purposes to sign the CoP and to meet the employment obligation. This change is more inclusive of households in which the Head of Household is unable to work or increase work activity due to issues like health conditions, disabilities, or family caretaking responsibilities. The final rule will reflect a change to clarify that there will be only one CoP per household at any one time.
Revising Graduation Requirements (Section 984.303(b)(2))
The final rule implements HUD’s proposal to eliminate the requirement that households be independent from welfare assistance for 12 months prior to graduation. The final rule requires a household to be independent from welfare at the time of graduation from FSS, but not independent for a specified period before graduating from the program. This change ensures that a household can successfully graduate and access its escrow funds if they do not meet the 12-month time period.
Determination of Suitable Employment
The final rule revises paragraph (b)(4)(iii) to note that participants must be involved in the determination of suitable employment, so that the participant can provide input into the determination along with the PHA or owner. HUD expanded the regulation to state that the determination of suitable employment will involve consideration of the participant’s other benefits to ensure that new employment will not result in the loss of necessary resources.
Expanding the Definition of “Good Cause” (Section 984.303(d))
The CoP regulations at Section 984.303(d) state that “good cause” to extend the CoP is determined on a case-by-case basis by the PHA or owner. The final rule expands the definition of “good cause” for a contract extension to include more than circumstances beyond the participant’s control, including the active pursuit of a goal that will further self-sufficiency during the extension period, such as a college degree or credit repair program.
Among other changes to FSS escrow regulations, the final rule provides that a CoP will be terminated but escrow can be disbursed to the family rather than forfeited if an FSS family in good standing moves outside the jurisdiction of the PHA for good cause and continuing the CoP after the move or completing the CoP before the move is not feasible.
Removal of the Automatic FSS Graduation Provision
The final rule removes the provision that automatically completes the FSS contract when 30% of the family’s adjusted monthly income equals or exceeds the Fair Market Rent (FMR). Removing this provision will allow FSS families to use the program to its full potential.
Housing Choice Voucher (HCV) Portability Requirement (Section 984.306)
Since PBVs are allocated to a specific unit, a family with a PBV does not have the right to take the rental assistance and move. Generally, after having a PBV for 12 months, the family may apply for Tenant-Based Rental Assistance. The final rule clarifies that a household with a PBV that has been enrolled in the FSS program for 12 months and that transfers from the PBV unit to tenant-based rental assistance may move outside of the jurisdiction of the initial PHA in accordance with standard portability regulations.
Additionally, the final rule states that a receiving PHA that is already serving the number of families in its FSS Action Plan and determines that it does not have the resources to manage an additional FSS contract is not required to enroll a porting family.
Under the proposed rule, a family that was not an FSS participant at the initial PHA would not have been able to enroll in the receiving PHA’s FSS program. The final rule allows a family that was not an FSS participant at the initial PHA to enroll in a receiving PHA’s program when the receiving PHA bills the initial PHA and the initial PHA manages an FSS program.
Delayed Compliance Date
The final rule provides PHAs and owners with up to six months from the publication of the rule to comply with its provision, which means that all FSS Action Plans must be updated by the compliance date. HUD intends to provide guidance on that process and encourages PHAs and owners to visit the FSS Resources webpage.
The final rule adds a new 24 CFR part 887 to address the FSS program for owners of HUD-assisted Multifamily housing. A few of the key features are listed here.
Permanently Expanding FSS to Multifamily Owners
The final rule permanently expands the FSS program to Multifamily owners and allows them to compete directly for services funding. HUD revised the definition of Section 8 programs to include Multifamily assisted housing, tenant-based and project-based rental assistance, the HCV Homeownership Program, Family Unification Program assistance, and Moderate Rehabilitation and Moderate Rehabilitation Single Room Occupancy for people experiencing homelessness. Tenant-based and project-based rental assistance includes any applicable special purpose voucher, such as Veterans Affairs Supportive Housing (VASH) and Mainstream Vouchers.
Extending FSS eligibility to residents of PBRA properties and eligibility for FSS Program Coordinator funding to PBRA FSS programs is permitted by the statute. HUD streamlined the final rule regulations to apply all PIH FSS regulations to PBRA owners with several exceptions outlined in 24 CFR part 887. HUD notes that all FSS programs are voluntary for participants and administering an FSS program is voluntary for PBRA owners.
The final rule allows PBRA residents in RAD-converted properties to be served by PHAs with FSS appropriated funds if the PBRA owner enters into a Cooperative Agreement with the PHA. This will be reflected in a future Notice of Funding Opportunities (NOFO).
Basic Requirements for Multifamily FSS Programs (Section 887.105)
The final rule makes the FSS program requirements for Multifamily housing consistent with PHA requirements. Where a Program Coordinating Committee (PCC) is available, owners can either work with that PCC or create their own, either by themselves or in conjunction with other owners. This adds flexibility to language included in the proposed rule that explained that owners must work with a PCC and that did not mention an option for owners to create their own PCCs.
Under the final rule, Multifamily owners are no longer exempt from the family selection procedures in Section 984.203. This change provides owners the option to use certain selection preferences and motivational screening factors and makes it easier for an owner to operate an FSS program through a Cooperative Agreement with a PHA that uses selection preferences or motivational screening procedures.
Tenant participation in an FSS program is voluntary, and an owner must not delay or terminate assistance for a family that elects not to participate in an FSS program.
Read the proposed rule at: https://bit.ly/3sItl6c
Read HUD’s press release about the final rule at: https://bit.ly/3a2T5DT
Visit HUD’s FSS Program webpage at: https://bit.ly/38GeiTI
More information about FSS is on page 7-61 of NLIHC’s 2022 Advocates’ Guide.