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HUD Responds to PHAs Facing Shortfalls in FY09 Voucher Funding

In response to voucher funding shortfalls being experienced by a number of housing agencies in recent weeks, HUD has notified the 2,400 public housing agencies (PHAs) that administer vouchers that it will “continue to work with agencies that have shortfalls and determine if these agencies are eligible to receive extraordinary administrative fees for technical assistance to prevent the termination of families.” HUD’s actions are welcome news for voucher holders and the 15% of housing agencies that have been impacted by the shortfall in funds to renew existing vouchers in FY09, the current fiscal year.

In a letter to PHAs on July 31, HUD stated that it has approximately $30 million to address the issue. And if HUD’s actions to address voucher shortfalls are insufficient, the letter states, HUD will work with Congress on “legislative changes to minimize adverse consequences to families and to the other PHAs that are not experiencing shortfalls.”

The letter is from HUD Assistant Secretary for Public and Indian Housing Sandra Henriquez, who was the executive director of the Boston Housing Authority for 13 years prior to joining HUD. “It was only a few months ago that I was an executive director, and now I stand as a partner with my former colleagues so that we can work through this funding challenge together to continue helping families who need support to live in affordable housing,” Ms. Henriquez said.

According to HUD staff, HUD is aggressively scrubbing every individual housing agency’s finances to see where the shortfalls are, and why they are occurring. HUD is also in the process of looking at all of its accounts to determine whether there are funds that can be reprogrammed into the voucher program to address any crises that may exist. HUD is asking housing agencies facing voucher shortfalls not to terminate voucher holders from the program but instead to contact HUD for “triage” so that voucher assistance can be maintained. Housing agencies that believe families will have to be terminated from the housing choice voucher program due to insufficient funding should emailpih.financial.management.division@hud.gov no later than August 14.

Housing agencies’ voucher renewals are funded based on actual leasing and cost data from the previous calendar year, with various adjustments. The voucher program is funded on a calendar year basis. The FY09 HUD funding bill was not enacted until March 2009. HUD proceeded to notify agencies in early May of their 2009 allocations, when agencies were already into the fifth month of their voucher spending year.

To complicate matters, the FY09 HUD spending bill also included a “reserve-offset” policy, under which agencies with substantial reserves would receive reduced voucher funding allocations with the expectation that they would instead spend down their reserves to pay for voucher renewal costs. The FY09 HUD spending bill did include a $100 million pool of funds for HUD to allocate to meet unforeseen voucher renewal costs. As of July 24, HUD has awarded $89 million of these funds and expects to award the remaining $11 million in the next several weeks, according to the letter from HUD.  The $30 million that HUD references in the July 31 is in addition to the remaining $11 million.

To help shed light on the issue, the National Housing Law Project’s Housing Justice Network held a briefing call on July 24 with Doug Rice from the Center on Budget and Policy Priorities. Mr. Rice has been working to figure out the reasons for the renewal funding shortfall and the options housing agencies might have to address any shortfall.

Mr. Rice described a variety of reasons that agencies might be experiencing voucher funding shortfalls. One or more of these reasons could result in an agency experiencing voucher funding shortfalls:

• The FY09 HUD spending bill underfunded voucher renewals by about $250 million, which represents about 12 months of funding for about 30,000 vouchers.
• As described, the FY09 spending bill was late, which led to agencies not finding out until May their voucher allocations from HUD. A number of agencies fell into the reserve-offset category but did not know before May that they would be expected to use their reserves for existing renewals; some of these agencies had used their reserves to issue new vouchers earlier in 2009.
• Some areas have seen significant declines in tenant incomes as unemployment grows. The voucher rent subsidy represents the balance of what tenants pay toward rent, about 30% of their income, and what the rent is for the apartment. When a tenant’s share toward rent goes down, the voucher subsidy must go up. 
• Rents are increasing in some markets, again causing the cost of voucher renewals to increase.
• The economic downturn has created difficulties for agencies to manage their shortfalls. In a typical, non-recession year, voucher turnover might be 10%-12%. This rate has declined significantly as households keep their vouchers longer. Housing agencies cannot rely on saving money by shelving a voucher, as opposed to offering it to the next household on the waiting list, are now very limited in their ability to save funds by not reissuing vouchers because vouchers are not being turned in to be reissued.
• The data from housing agencies that HUD used to calculate renewal needs may not be accurate due to reporting errors and other administrative and technological problems.
• Some housing agencies might not have managed their programs well and might have, for example, significantly over-leased, resulting in more vouchers in use than were authorized.

In a June 30 webcast for housing agencies, HUD reviewed possible actions that agencies could take to reduce costs, including reducing the payment standard for all of its vouchers, reviewing utility allowances, restricting in-jurisdiction and portability moves that would result in higher costs, conducting a rent reasonableness assessment to ensure rents are in line with market rates, restricting the re-issuance of vouchers, and adjusting “overly generous” subsidy standards that might have provided larger apartments than are required by law, among other strategies. Of course, some of these actions would have immediate negative impacts on voucher families.

HUD has also acknowledged that agencies might try to access funds from the Homelessness Prevention and Rapid Re-housing Program, a much-needed $1.5 billion homelessness prevention program included in February’s economic recovery bill. NLIHC and other advocates object to the use of these or other housing funds to fill the gaps in a program that should have its own stable funding stream.

HUD is also looking to determine whether agencies experiencing shortfalls have administrative reserves to cover the shortfall, if state or local HOME funds are available to meet the shortfall, or if the agency has vacant public housing available to house voucher holders if necessary, among other checks on how agencies are responding.

The voucher shortfall issues are reminiscent of HUD’s 2004 voucher funding shortfall. At that time, however, HUD was unresponsive to the crisis, which ultimately resulted in the loss of more than 150,000 vouchers nationwide as housing agencies were forced to shrink their voucher programs. In response to the 2004 voucher funding crisis, the National Housing Law Project and the Center on Budget and Policy Priorities issued a chart on actions that can reduce agencies voucher costs. The chart includes “pros” and “cons” columns that highlight particular actions’ impact on voucher holders. The chart could be useful today as agencies and other advocates work to ensure that the voucher program is working well. This chart can be found at http://www.nlihc.org/doc/III.A.Possible-PHA-Strategies-Chart.pdf

Link to the June 30 webcast at
http://www.hud.gov/webcasts/archives/ph.cfm

and to the PowerPoint materials for that webcast at http://www.hud.gov/offices/pih/programs/hcv/webcasts/finman2009jun30.pdf

Link to HUD’s July 31 letter to housing agencies at http://www.nlihc.org/doc/Section-8-Shortfall-letter7-31.pdf

Link to HUD’s July 31 statement on its actions to address voucher shortfalls at http://www.nlihc.org/doc/HCV-Shortfall-pressrelease7-31.pdf