NOTE: This article was originally written in 2013 and updated in 2017 to reflect changes mandated under the Housing Opportunity Through Modernization Act (HOTMA).
Many PHAs are turning to the project-based voucher (PBV) program to help improve their voucher utilization, expand special needs housing, and/or potentially increase neighborhood choice for families. A PHA may provide project-based assistance for existing housing that does not need rehabilitation, as well as for newly constructed or rehabilitated housing.
There’s often confusion about the differences between PBV and HCV, but the good news is that if you understand the housing choice voucher (HCV) program, PBV will seem very familiar to you. In both programs, the PHA has a contractual relationship with an owner and operates as a subsidy provider for families who pay income-based rent. Both programs follow regulations under 24 CFR 982, so eligibility and occupancy requirements are very similar. However, there are also some key differences.
#1: Tenant-based assistance vs. project-based assistance
The biggest difference between the two programs is that HCV is tenant-based assistance, which means that the subsidy is tied to the family, not the unit. Since tenant-based assistance is tied to the voucher holder, the assistance is portable, meaning it may be used within the jurisdiction where the family lives or within any jurisdiction with an HCV program.
With project-based vouchers, however, the subsidy is tied to the unit, not the family. An example of this type of assistance that may be familiar to you is public housing. After one year of assistance in a project-based unit, however, the family may switch to the tenant-based voucher program and exercise portability if they choose, with some restrictions.
Both PBV and HCV follow regulations at 24 CFR 982. As a result, the role of the PHA and owner in both programs is very similar. For example, in both programs the PHA maintains the waiting list and refers eligible families to the owner, who determines the family’s suitability as a tenant.
However, since PBV is project-based assistance, the regulations at 24 CFR 983 specifically describe the provisions of 982 that do not apply to PBV. For example, the regulations on portability only apply to HCV tenant-based assistance.
One of the key concepts in understanding project-based vouchers is understanding how they’re funded. Under the regulations, a PHA may project-base up to 20 percent of its authorized units. No additional funding is provided by HUD.
If you imagine your agency’s HCV funding as a pie, project-basing some of your vouchers is equivalent to setting aside up to a 20 percent slice towards particular units. Under the Housing Opportunity Through Modernization Act (HOTMA), the PHA may now project-base an additional 10 percent of their vouchers above the 20 percent program limitation for units for homeless families, families with veterans, supportive housing for persons with disabilities or elderly persons, or in areas where vouchers are difficult to use. Further, certain units do not count toward the 20 percent limitation such as units that convert to PBV under RAD and HUD-VASH PBV set-aside units.
#4: The HAP contract
In both programs, a HAP contract regulates the relationship between the PHA and the owner. However, HCV and PBV use different HAP contracts with different terms. In the HCV program, the effective date of the owner’s lease for a particular unit and the effective date of the HAP contract for that unit are the same. There is no limit on the length of that HAP contract, and if the lease terminates, so does the HAP contract.
In PBV, however, the PHA may initially enter into a PBV HAP contract for all units with an owner for 20 years, subject to the availability of funding. The HAP contract may further be extended for an additional 20 years. An owner’s lease with different families and the PBV HAP contract do not run concurrently.
#5: Rent reasonableness
While both programs have a rent reasonableness component, the process works slightly differently. In the tenant-based HCV program, reasonable rent is the maximum amount of the contract rent.
In PBV, rents cannot exceed the lower of a reasonable rent, or 110 percent of the FMR/SAFMR (unless an exception is granted), or, for units with tax credits, the tax credit rent (except under certain circumstances). So unlike the tenant-based program, rent reasonableness is a component of setting rents in PBV, rather than the only limit on those rents.
#6: Housing Quality Standards (HQS) inspections
The main difference between the PBV and HCV programs is that in HCV all units must be inspected annually/biennially, while in PBV only 20 percent of the contract units in each building must be inspected annually/biennially. This feature is attractive to many PHAs because it reduces their inspection burden.
Remember, while PBV and HCV follow some of the same regulations, and PBV is funded through the HCV program, understanding the key differences between the programs is essential to running a successful PBV program.
Senior trainer Samantha Sowards has been a part of the NMA team since 2008. As NMA’s manager of curriculum development, Samantha oversees publications from concept and creation through the ongoing revision process, including NMA Master Books, model policies, and handbooks. She co-designed NMA’s PBV class, Developing and Managing Project-Based Vouchers.