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Working with sequestration in the HCV program: Part I

Posted by NMA on Mar 28, 2013 4:23:37 PM

Teri RobertsonSequester or no sequester, housing authorities have a business to run. And a complicated business it is! The HCV and public housing programs have so many moving parts — and so many regulatory requirements — that it has to be one of the most demanding businesses to be in. Reduced funding simply makes a challenging job that much more challenging.

One of the challenges in working at a housing authority is finding the balance: How large should caseload sizes be to ensure efficiency without sacrificing effectiveness? How often should we purge our waiting list to offset the cost of the work with the benefit of having only people still interested in the program at the top of the waiting list? And, critical in these times, how do we maintain a healthy program size while dealing with reduced administrative fees?

Reducing our per-unit costs (PUC)

Why should we reduce PUC? Because, despite sequestration, we still need to lease up as many families as we can afford, with "afford" meaning we have implemented actions that reduce PUC as appropriate. It's a fact that, for the average agency, Congress has not been allocating enough in HAP funding to allow leasing up to full voucher allocation. Local rents are simply too high. But good business management requires us to look at all the means we have at our disposal to legally (in accordance with regulations) decrease costs so that we can lease up as close to our voucher allocation as possible.

The survival of any business depends on healthy revenues. In the voucher program, our revenue stream is our administrative fees. We all know that our administrative fees are earned based on the number of units under lease as of the first of each month. So speaking from a purely financial perspective, we need to enter into as many HAP contracts as we can within our voucher allocation.

From a nonfinancial viewpoint, the question is whether we would like to provide fewer families with more assistance or more families with less assistance. Personally, I prefer to help more families in my community. Knowing that this approach supports the financial viability of my agency through the earning of more administrative fees simply strengthens my resolve to do what I can to lower my average PUC.

Here are a few things to think about that could have a nice impact on reducing your HAP costs.

Idea #1: Revise PHA interim policy.

Some PHAs have eliminated PHA-initiated interims altogether so as to ease administrative burden. Others set a dollar threshold, but acknowledge that determining whether an interim needs to take place is often as time-consuming as actually conducting an interim.

Here's a suggestion we've begun making to agencies when they contract with us to spend three days with them to facilitate a complete administrative plan or ACOP revision: consider adopting an interim policy that the family must report, and the PHA must conduct an interim, when the family begins receiving income from a new income source.

Typically, changes in the amounts of existing income sources are small and don't generate enough savings in HAP to be worth the time to complete the interim action. On the other hand, income from a new source is usually significant enough that the PHA will experience sufficient HAP savings to justify the time spent completing the interim.

Idea #2: Review both your subsidy standards and your payment standards.

If they need to be adjusted, change them both at the same time. Review your subsidy standards and determine if they're too generous. As you do so, think about how family members share bedrooms in unassisted families. You may not need to be as strict as "two people per bedroom regardless of age, gender, or relationship," but be aware that that is as strict as you are permitted to be. Perhaps you will allow a head of household or an elderly family member to have his or her own bedroom. Whatever you decide, make sure that you state your policy clearly and train your staff so that all apply it equally.

Review your payment standards. A PHA may establish its payment standards as anywhere from 90 percent to 110 percent of HUD's fair market rent (FMR). The payment standard for a given unit size represents the maximum possible subsidy that your agency will pay on behalf of a family. So, lowering the payment standard will result in reducing HAP. The rules on when you apply a lowered payment standard are complicated, though.

Once lowered, a payment standard applies equally to all new admissions, all families that move, and all families for which you enter into a new HAP contract. Families already under a HAP contract receive "payment standard protection." This means that the reduced payment standard generally does not apply to these families until their second annual reexamination after the reduction. That's not the case, however, if their voucher size has also changed, regardless of the reason.

For example, suppose I'm the head of an assisted household that includes my 21-year-old granddaughter and her 2-year-old child. There are two ways that my voucher size could change:

  1. Let's say that your agency issued me a two-bedroom voucher and we have been living in a two-bedroom unit. Now my granddaughter and her child move out, and you issue me a one-bedroom voucher. Payment standard protection no longer applies to me. At my next annual reexam, you will apply your one-bedroom payment standard — even if you've just lowered that payment standard.
  2. Instead, let's say that your agency issued me a three-bedroom voucher and we have been living in a three-bedroom unit. You decide to change your subsidy standards, and under the new standards I qualify only for a two-bedroom voucher. Again, payment standard protection no longer applies to me. At my next annual reexam, you will apply your two-bedroom payment standard — even if you've just lowered that payment standard.

I'll provide more for you to think about in Part II. In the meantime, did you sit in on one of NMA's free "Ask the Experts" sessions on 2013 HCV Funding: How to Respond to Sequestration? If not, and you would like us to repeat the session, email teri@nanmckay.com. With enough requests, we'll schedule another session. Although the session was focused on HCV, there were many ideas that could be adopted for public housing, as well.

NMA senior consultant Teri Robertson is nationally recognized as a leading expert in HCV/Section 8 and public housing. She has previously written for the NMA blog about HCV administrative fees and how to maximize your agency’s performance rating.

If you find that you need staffing help during sequestration, NMA can assist your agency with recertifications (done remotely), quality control, hearing officer staff, HQS inspections, and more. Email sales@nanmckay.com for more information.

Topics: Ask the Experts, Budget Cuts, FMR, Recertification, Seniors and Elderly, Sequestration

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