Maximizing lease-up to maximize fees in the HCV program: Part II
In these times of reduced budgets, it's more important than ever to understand our funding, learn how to maximize our earnings, and share ideas on how we can do more with less. Follow our four-part series on HCV administrative fees.
Part I: How did we get here? A brief history of changes in admin fee allocations, and how circumstances created the "perfect storm" for housing authorities
Part II: Why it's so important to manage our leasing to voucher allocations
Part III: What agencies can do to better lease to voucher allocations
Part IV: Streamlining operations to reduce the strain on admin fees
Why it's so important to manage our leasing to voucher allocations, and what we can do to proactively manage to the administrative fee reductions
In 2011, agencies received approximately 83% of earned administrative fees. In 2012, it's predicted to be closer to 75%.
Although potential legislation is in the works to help simplify the program, no one knows when this legislation will be enacted. Nor do we know at this time how helpful it will really be in streamlining operations. Regardless, it's important to approach running our programs as a business, seeking ways to maximize revenue (fees) and reduce costs.
The first step is to conduct an in-depth analysis of your agency's financial situation. This analysis should address administrative fees, HAP funding, voucher utilization, net restricted assets, and administrative fee reserves. Project your needs for 2012 and compare with 2012 anticipated expenditures. Identify funding shortfalls and forecast SEMAP outcomes.
A key component of your analysis is determining how much your agency would earn in administrative fees if you achieved full voucher utilization in 2012. Compare this to the amount your agency is projected to earn based on anticipated leasing, and determine whether you're leaving any money on the table.
Failure to lease up to voucher allocations sends an inaccurate message to Congress. It implies that vouchers aren't needed, and that administrative fees can continue to be cut. This sets the stage for ongoing program funding decreases.
Let's take a look at some examples of an administrative fee analysis. Here's some information on Our Fictitious Housing Authority (OFHA):
Annual Budget Authority (ABA) = $12,000,000
Vouchers = 2,500
- 2,500 x 12 = 30,000 Unit Months Leased (UML)
HUD-funded Per Unit Cost (PUC) = $400
- $12,000,000 / 30,000 = $400
Column B administrative fee amount = $61.11
OFHA is achieving 95% lease-up in HAP, meaning they will expend $11,400,000 ($12,000,000 x 95%) and receive 15 points in SEMAP indicator: Lease-up.
OFHA is at 80% of voucher utilization, meaning they'll have 24,000 UML (30,000 x 80%).
OFHA's actual PUC is $475 PUC ($11,400,000 / 24,000).
As a result of the above, OFHA is:
- Underspending by $600,000
- Underleasing by 6,000 UML
- Over the HUD-funded PUC by $75 per family
What if OFHA spent the additional $600,000? At $475 actual PUC, that would help an additional 105 families. An additional 105 families assisted would result in 1,260 more UMLs. 1,260 more UMLs at $61.11 per month/per unit in administrative fees would result in the agency earning an additional $76,999 in admin fees (before proration).
What if OFHA was able to reduce their average PUC to the HUD-funded amount? Reducing the PUC to $400 per family would allow OFHA to assist 500 more families -- or 6,000 more UMLs. 6,000 more UMLs at $61.11 per month/per unit in administrative fees would result in the agency earning an additional $366,660 (before proration) in admin fees!
Are you leaving any admin fee dollars on the table? If so, what might those unearned fees cover in your agency?
NMA senior consultant Teri Robertson is nationally recognized as a leading expert in HCV and public housing rent calculation, including HUD RIM review requirements. She specializes in helping agencies improve program utilization to maximize funding.