How will the new flat rent regulations impact PHAs? Part IV

As part of the 2014 appropriations act, Congress authorized several rule changes for both the public housing and housing choice voucher (HCV) programs intended to reduce program costs and administrative burdens for housing authorities. Perhaps the most widely discussed of these changes was the new requirement for PHAs to adjust public housing flat rents to no less than 80 percent of the local fair market rent (FMR) by October 31.

While the rule is expected to increase rent revenues and reduce the need for operating subsidies, industry groups and PHAs have also expressed concern about the impact of the new flat rent requirement, fearing that it could result in many families moving out of public housing rather than pay increased flat rents, thereby increasing vacancy rates and concentration of poverty. Concerned parties also fear that the rule may create an undue burden for low-income families.

In this blog series, we’ll take a look at the background of flat rents, HUD actions to date, and actions required of the PHA. We’ll also examine industry concerns surrounding the new rule.

Looking ahead—what’s next for our industry?

In discussing the changes to flat rent rules, PHA staff and industry groups frequently comment that residents currently paying flat rent cannot afford to pay 80 percent of FMR, and suggest that families may be forced to move out of public housing when faced with the large rent increases required under the new rule. However, as noted in both Notice PIH 2014-12 and the HUD FAQs, each resident will still be offered the choice between flat rent and income-based rent at each annual reexamination. If the new flat rent exceeds income-based rent, the family may decide to switch to income-based rent.

Income-based rent is most often 30 percent of a family’s monthly adjusted income, and housing costs which do not exceed 30 percent of income are considered affordable by definition. According to the 2010 study we discussed in Part I, virtually every family paying flat rent would pay a higher amount of income-based rent.

For example, an agency in Arizona currently charges $450 as flat rent for a one-bedroom unit. The one-bedroom FMR for the agency’s jurisdiction is $774, and 80 percent of FMR is $619. The increase from $450 to $619 is 38 percent, and flat rent increases cannot exceed 35 percent per year. At their next annual reexaminations, current residents will be offered a choice between income-based rent and a flat rent of $608 for a one-bedroom unit.

How will this affect residents currently paying flat rent? Imagine that a resident currently pays the flat rent of $450. The PHA determines that the income-based rent for this resident would be $575. At the next annual reexamination, the resident may choose to pay income-based rent of $575 (30 percent of monthly adjusted income) or the new flat rent of $608. Rental income to the PHA increases by at least $100.

But what if public housing units can’t compete with the private market? This is the second major area of concern for PHAs and industry groups. In the example above, what might happen at the time of the annual reexam if there’s comparable rental housing available in the community for $500? The resident might not be willing to pay an income-based rent of $575 and might decide to move to one of the private market units. What if a lot of residents move out of public housing under these conditions? Public housing developments could lose stability with the departure of large numbers of long-term residents, resulting in increased vacancy rates and high unit turn-over costs. Concentration of poverty could also increase if higher-income, flat rent-paying residents are replaced with lower-income waiting list applicants.

The likelihood of a mass exodus of flat rent-paying residents will probably vary by community. According to HUD’s Office of Policy Development and Research (PD&R), FMRs are intended to represent the 40th percentile of local rents. 80 percent of FMR, then, should equal the 32nd percentile (in other words, rent is higher for 68 percent of local rental units). One thing that every PHA can do today is compare the new flat rent levels to local market conditions. Consult local rental advertisements or the staff of your local HCV program. Is housing available in your jurisdiction at 80 percent of FMR? Is it comparable to your agency’s public housing units in location, size, and quality? The availability and quality of market-rate units may be an indicator of the willingness of current public housing residents to move.

What if the waiting list is long, and the PHA determines that there is plentiful, comparable housing available in the private market at or below the new flat rent rates? According to the 2010 HUD study, heads of household paying flat rent are more likely to be employed and less likely to be disabled than other public housing residents. Is it equitable, then, for a number of public housing units to be occupied by families who can afford to pay market rent on their own?

As noted in the introduction to this article, Congress enacted the flat rent changes as a way to increase rental revenues to PHAs and reduce the need for operating subsidy. If large numbers of residents paying flat rent leave public housing as a consequence of the change, they will most likely be replaced by lower-income applicant families. Should that happen, the change will have the opposite effect of what Congress intended and the need for operating subsidy could in fact increase.

Within the next four months, HUD will open formal rulemaking by publishing a proposed rule. PHAs and other stakeholders will have the opportunity to provide input and feedback at that time. For now, though, PHAs have no choice but to implement the changes as directed by HUD.

With over 25 years of experience in welfare and public housing, Annie Stevenson shares her expertise in many ways at NMA, serving as a trainer to thousands of housing authority staff every year; as a technical researcher who analyzes and deciphers new HUD regulations; and as a technical writer, contributing to NMA Master Books, seminars, and model policies as well as writing the popular daily PIH Alert. Say hi to Annie at the 2014 NMA and GoSection8 Housing Conference, where she’ll be presenting a hands-on session on administrative plan policies.

Does your agency have a proven methodology for setting flat rents? GoSection8.com can help. Specializing in rent reasonableness, Go8 has served tenants, landlords, and public housing agencies across the United States since 2004. To learn more about how you can bring Go8 to your agency, email sales@nanmckay.com.

The 2014 NMA Model Admin Plan has shipped!

Subscribers to our annual revision service can expect to receive the latest updates to the NMA Model Administrative Plan and Guide within the next week or so. If you have any questions about your subscription, please contact Janell Guilbeaux in our accounting department and she’ll be happy to assist you.

Most of the changes for the 2014 revision were made necessary by the publication of the Federal Register notice regarding the Violence Against Women Reauthorization Act of 2013 (VAWA), issued August 6, 2013. The notice stated that the provisions of VAWA 2013 were not self-implementing, and that HUD would issue rules or guidance at a later date. However, on September 30, 2013, HUD sent a letter to PHA executive directors which called for immediate policy development addressing certain provisions of VAWA 2013.

In response to HUD’s letter, NMA has developed transitional model policies to assist our subscribers in meeting this HUD requirement. Please note that once HUD issues the expected guidance, additional changes may be required.

In addition to the extensive VAWA changes, the 2014 revision has been brought current with all recent regulatory requirements and guidance and also includes:

  • Updates to account for the issuance of Notice PIH 2013-26, which extends the temporary compliance provisions of 2013-03
  • Updates to the list of federally mandated income exclusions as published in the Federal Register
  • Minor modifications for clarification and wording

Looking for further guidance? Don’t miss our upcoming hands-on admin plan session at the 2014 NMA Housing Conference. NMA senior trainer Annie Stevenson will discuss HUD guidance on HCV provisions in the 2014 appropriations act, including policy changes necessary for implementing biennial inspections.

NMA revision services provide a yearly update to your NMA Master Books and model policies with explanations and guidance regarding the most current HUD rules and regulations. To stay updated on the latest program information, try a free 30-day trial subscription to the PIH Alert. Email sales@nanmckay.com to get started.

ACOP: Hands-on Session

NMA trainer and consultant Cara Gillette will be presenting a hands-on ACOP workshop at this year's NMA Housing Conference

NMA trainer and consultant Cara Gillette will be presenting a hands-on ACOP workshop at this year’s NMA Housing Conference

Cara Gillette trains, consults, and provides technical assistance nationwide in fair housing, public housing management, hearings, economic self-sufficiency, and governing boards. Prior to joining NMA, she administered public housing and Section 8 waiting lists, served as hearing officer, managed public housing, and oversaw resident economic development programs at the San Diego Housing Commission. She has previously written for the NMA blog on how to work with sequestration in the public housing program. Cara will be presenting the following session at the 2014 NMA and GoSection8 Housing Conference.

Hands-on Learning for Active Solutions

ACOP: Hands-on Session
Presenter, Cara Gillette

Join us for this intensive hands-on ACOP workshop! We’ll review mandatory changes required under VAWA 2013, service animal and assistance animal policies, and the new changes to flat rent requirements.

We’ll also discuss some of the important discretionary policies that further the mandatory requirements. Are you struggling with your occupancy rate in public housing? What about your rent collection rate? Your community service program design? Are your termination actions meeting due process requirements? Compliant and specific policies are a critical factor in navigating these complex areas of public housing.

Bring your PHA’s ACOP to this session and be prepared to take notes. Time will be reserved for discussing your policies. Join us for this fast-paced session!

Cara and other industry experts are available for limited free one-hour consulting sessions at the 2014 NMA and GoSection8 Housing Conference to registered participants. Don’t delay, consulting signups are first-come, first-served! Register online or email sales@nanmckay.com for more information.

Castro sworn in as HUD secretary

Julián Castro greets HUD employees on his first day. (Photo credit: HUD)

Julián Castro greets HUD employees on his first day as secretary of the department. (Photo credit: HUD)

Today Julián Castro was sworn in as the new secretary of the Department of Housing and Urban Development (HUD). Castro replaces Shaun Donovan, who will be moving to the Office of Management and Budget (OMB) as director.

You can learn more about Secretary Castro in a press release issued by HUD this afternoon.

To receive updates and analysis on the latest HUD news, subscribe to NMA’s PIH Alert and receive a daily email with breaking stories and other important information for PHAs and housing professionals.

How will the new flat rent regulations impact PHAs? Part III

As part of the 2014 appropriations act, Congress authorized several rule changes for both the public housing and housing choice voucher (HCV) programs intended to reduce program costs and administrative burdens for housing authorities. Perhaps the most widely discussed of these changes was the new requirement for PHAs to adjust public housing flat rents to no less than 80 percent of the local fair market rent (FMR) by October 31.

While the rule is expected to increase rent revenues and reduce the need for operating subsidies, industry groups and PHAs have also expressed concern about the impact of the new flat rent requirement, fearing that it could result in many families moving out of public housing rather than pay increased flat rents, thereby increasing vacancy rates and concentration of poverty. Concerned parties also fear that the rule may create an undue burden for low-income families.

In this blog series, we’ll take a look at the background of flat rents, HUD actions to date, and actions required of the PHA. We’ll also examine industry concerns surrounding the new rule.

What does this mean for my PHA?

Unfortunately, the new rule does not relieve PHAs of establishing a market value for each public housing unit. PHAs must continue to calculate the market value for each unit, and must adopt flat rents which are the higher of market value or 80 percent of FMR. If a PHA’s flat rent is already at or above 80 percent of FMR, the PHA is considered to be in compliance and no further steps are necessary.

PHAs must also initiate the PHA plan amendment process, since HUD has determined that the change in flat rent rules constitutes a “significant amendment” to the PHA plan. Some smaller PHAs (“qualified” PHAs) are not required to submit an annual plan but must still conduct a public hearing, amend their admissions and continued occupancy policies (ACOP), and obtain board approval.

Your PHA must begin to offer the new flat rent amounts to all new admissions within 90 days of formally adopting them, but no later than October 31. New flat rents must be offered to current residents at the next annual reexamination (beginning within 90 days of adoption but no later than October 31). Rent increases must be phased in if the increase exceeds 35 percent, and may be phased in if the increase is 35 percent or less. For example, PHA policy could state that increases will take effect immediately, with no phase-in, unless the increase exceeds 35 percent. Alternatively, policy could state that all flat rent increases will be phased in over a three-year period.

After initial implementation, PHAs must revise flat rents annually based on market analysis and changes to the FMR. In the case of FMR decreases from the previous year, PHAs may, but are not required to, decrease flat rents to 80 percent of the new FMR amounts.

We’ll conclude our discussion later this week with a careful examination of what this all means for our industry in the months and years ahead.

With over 25 years of experience in welfare and public housing, Annie Stevenson shares her expertise in many ways at NMA, serving as a trainer to thousands of housing authority staff every year; as a technical researcher who analyzes and deciphers new HUD regulations; and as a technical writer, contributing to NMA Master Books, seminars, and model policies as well as writing the popular daily PIH Alert. Say hi to Annie at the 2014 NMA and GoSection8 Housing Conference, where she’ll be presenting a hands-on session on administrative plan policies.

Does your agency have a proven methodology for setting flat rents? GoSection8.com can help. Specializing in rent reasonableness, Go8 has served tenants, landlords, and public housing agencies across the United States since 2004. To learn more about how you can bring Go8 to your agency, email sales@nanmckay.com.

Friday news roundup 7/25/14

Affordable Housing Finance: New Jersey project becomes first Mod Rehab RAD deal

Harvard Joint Center for Housing Studies: A view from the National Healthy Homes Conference

Next City: “Housing First” helps keep ex-inmates off the streets (and out of prison)

Next City: In San Diego, the number of homeless families more than tripled between 2010 and 2013

Next City: The “poor door”: Segregation of people based on how much rent they can pay

NHC: Fair housing and the data paradox

Off the Charts: Fewer poor children under welfare law, but more very poor children

PBS (via Planetizen): Since 2001, the U.S. has lost nearly 13 percent of its low-income housing

Rooflines: The specific stumbling blocks getting in the way of vouchers fulfilling their promise of mobility

Rooflines: Subsidizing the upper middle class?

Boot Camp: GoSection8 for New and Current Users

Go8 owner and president Richard Cupelli, presenting a session at last year's NMA and GoSection8 Housing Conference

Go8 owner and president Richard Cupelli, presenting a session at last year’s NMA and GoSection8 Housing Conference

Nan McKay and Associates is a proud partner of GoSection8.com, the largest rental listing service for the Section 8 housing program, serving tenants, landlords, and public housing agencies across the United States since 2004. Go8’s rent reasonableness software experts will be presenting the following session at the 2014 NMA and GoSection8 Housing Conference.

Hands-on Learning for Active Solutions

Boot Camp: GoSection8 for New and Current Users
Session 1, Go8 Software Demonstration

GoSection8’s user-friendly software streamlines the rent reasonableness process by automatically integrating comparable data and generating HUD-compliant rent reasonableness reports. In this session, we’ll show you how Go8 software can save valuable time for your staff, eliminating the need to mine data or contract with an outside vendor to purchase comparables.

Boot Camp: GoSection8 for New and Current Users
Session 2, Go8 Current User Session

GoSection8 has been busy building new improvements to our website. Get the most out of your Go8 software by joining this session to review new features, upgrades, and reports. Our panel of GoSection8 experts will be available to answer all your questions about the Go8 software and help you maximize the benefits for your agency.

To learn more about how you can bring Go8 to your agency, email sales@nanmckay.com.

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