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.

• Part I: Some background on the history of flat rents
• Part II: HUD actions to implement the new flat rent rule
• Part III: What does this mean for my PHA?
• Part IV: Looking ahead—what’s next for our industry?

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.