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September 23, 2016

Senate Examines HUD’s Physical Inspection Process On Thursday, September 22, the Senate Committee On Banking, Housing, And Urban Affairs, Subcommittee On Housing, Transportation, And Community Development conducted a hearing entitled “Oversight of the HUD Inspection Process” to highlight problems with HUD’s oversight of project-based rental assistance (PBRA) properties following investigations of troubled properties in Florida managed by Global Ministries Foundation. Two panels of witnesses included: Senator Bill Nelson (D-FL), Senator Marco Rubio (R-FL) on the first panel. The second panel witnesses included: Dr. Edgar Olsen, Professor of Economics and Public Policy, University of Virginia Batten School of Leadership and Public Policy; Ms. Tracy Grant, President, Eureka Garden Tenants’ Association, Jacksonville, Florida; Major Josh Lewis, Riviera Beach Police Department, Riviera Beach, Florida; and Vincent O’Donnell, Affordable Housing Consultant.  HUD was notably absent from the hearing. In his opening remarks, Subcommittee Chairman Tim Scott (R-SC) said that despite multiple attempts at reaching out to HUD, he was disappointed that “not one employee at HUD would make the time to come and explain what is not happening.” Senator Nelson even suggested the Chairman consider a subpoena to HUD. In the first panel, both Senators Nelson and Rubio discussed their site visits to the three Florida properties managed by Global Ministries Foundation. Both Senators testified to seeing deplorable conditions, including mold, exposed electrical wire, flooding, collapsed ceilings, and drug/crime. Senator Rubio called Global Ministries Foundation as “slumlord”. Both Senators raised significant concerns with HUD’s flawed inspections process and inconsistent property scores. In his written testimony, Senator Nelson stated “it would take too long for me to talk about every failing property in the country, but I think we can all agree that one is too many. So I introduced the Housing Accountability Act with Senator Rubio to give tenants a voice and to remove the overdependence on unscrupulous property managers and faulty inspections to clue HUD into what’s going on at these properties.” The “Housing Accountability Act of 2016” was introduced by the Florida Senators in July. The bill would codifies in law that subsidized property owners have to maintain safe and sanitary conditions at their properties; establishes a process for contract administrators to survey tenants twice a year in order to identify persistent problems relating to the physical condition of the properties or the performance of the building’s management; create a new penalty for owners that fail to maintain safe and sanitary conditions, or are repeatedly referred to HUD for remediation under the tenant survey previously mentioned; and requires HUD to issue a report examining the capitalization of all subsidized properties in the country. Panel 2 largely focused on the living conditions at the Florida properties from a tenant and law enforcement perspective, with Ms. Grant and Major Lewis sharing their experiences.  However, there was some notable discussion on the PBRA program, as a whole. Dr. Olsen, in his testimony, recommended that PBRA and LIHTC be phased out and replaced with vouchers. He recommended that HUD not renovated or renew existing PBRA properties and provide tenants with vouchers to relocate. Senator Bob Menendez, Ranking Committee Member, (D-NJ) and Mr. O’Donnell disagreed with Olsen’s voucher-only proposal, highlighting concerns with insufficient housing supply and the difficulty of using vouchers in high cost areas. Senator Menendez also stated that their needs to be mix of vouchers and project-based subsidy to meet the needs of the market. Senate Hearing Focuses Vouchers-Only For Rental Assistance, Eliminating PBRA On Wednesday, September 21, the Senate Appropriations Transportation, Housing and Urban Development (T-HUD) Subcommittee held a hearing titled “Housing Vulnerable Families and Individuals: Is There a Better Way?” The purpose of this hearing was to discuss the best policies to house families and individuals in need of assistance, and specifically, whether the current public housing structure or the Project-Based Section 8 (PBRA) program still have a beneficial role. The witnesses for this hearing included: Mr. Richard Gentry, President and CEO of the San Diego Housing Commission, Dr. Edgar Olsen, Professor of Economics and Public Policy at the University of Virginia, and Ms. Erika Poethig, Fellow and Director of Urban Policy Initiatives at with the Urban Institute. In her opening testimony, T-HUD Subcommittee Chair Susan Collins (R-ME) centered on the costs associated with HUD’s housing programs and the uncertainty of funding considering the national debt, lawfully-binding budget caps, and the Federal Housing Administration’s (FHA,) mortgage insurance premiums, which are used to offset spending for affordable housing programs. The cost of renewing rental assistance continues to grow each year and will consume 84 percent of HUD’s overall budget in fiscal year 2017. A solution that Senator Collins discussed during this hearing was a transition of all federally-assisted housing programs to a structure similar to the Housing Choice Voucher (HCV) program, wherein tenants may relocate themselves and their rental assistance rather than the assistance being tied to a specific property. She cited a 2015 Harvard study’s findings on the importance of healthy neighborhoods to improve a family’s well-being, and that with a voucher structure, families may move to better areas. Senator Collins also noted that it could be beneficial to divest in the current stock of PBRA housing and reinvest the money for in properties located in high-opportunity areas. Subcommittee Ranking Member Jack Reed (D-RI) used his opening testimony to highlight the housing affordability crisis in the US and his state, noting that the number of households paying more than 50 percent of their income on rent has increased by 49 percent in Rhode Island alone. He also praised the recent passage of the Housing Opportunities through Modernization Act (HOTMA) for its common sense reforms and he noted that more work could be done to improve HUD and better serve families with rental assistance needs. The witnesses provided a variety of different possibilities that could improve rental assistance programs. Richard Gentry, San Diego Housing Commission, began by stating that the traditional public housing program is no longer viable in its current form. His written testimony highlighted the benefits of the Moving to Work (MTW) initiative and how it improves the future of families receiving rental assistance. Erika Poethig, the Urban Institute, offered the advantages of PBRA in her testimony to the Subcommittee, noting that the program is better at aligning certain tenants (such as seniors) with the services that they require. She also mentioned in her written testimony that disinvestment in PBRA would be a mistake since the program preserves investments in low-income communities and helps deconcentrate poverty. She reemphasized the critical importance of preservation in the PBRA portfolio since 33 percent of active PBRA units are at risk of loss because of contracts that will expire in the next 24 months. Her written testimony also promoted the use of evidence-based research before they make major changes to funding models. In contrast, Dr. Edgar Olsen of the University of Virginia, talked about the type of investments Congress should make in the future. Dr. Olsen recommended that lawmakers do not make investments in future PBRA projects and instead focus their attention on voucher funding. He cited the cost effectiveness of the various programs in comparison to HCV and said that no more money should be committed to project-based programs, like PBRA and LIHTC. During the witness questioning period, Senators Reed and Collins asked about the challenges facing the public housing portfolio with particular focus on areas of high poverty. Some of the roadblocks affecting tenants that were discussed included: the high rental housing demand in certain cities and supply issues in particular areas of low poverty. Senator Collins did ask Erika Poethig of the Urban Institute if Congress should move in the direction of PBRA and HCV for units rather than public housing. She agreed that subsidy contracts to individual projects is a great tool for housing, but that it needs to be combined with other resources, ideally private market resources, to locate properties in lower poverty areas and address the needs of extremely low-income families. House Hearing Examines the Efficiencies of Housing Choice Vouchers On Wednesday, September 21, the House Financial Services’ Housing and Insurance Subcommittee held a hearing to examine the efficiencies of the Housing Choice Voucher program in comparison with other federally-assisted housing programs. Titled “The Future of Housing in America: A Better Way to Increase Efficiencies for Housing Vouchers and Create Upward Economic Mobility”, the hearing featured the following witnesses:
  • Dominique Blom, Deputy Assistant Secretary, Office of Public Housing Investments, HUD
  • Barbara Sard, Vice President for Housing Policy, Center on Budget and Policy Priorities
  • Deborah Thrope, Staff Attorney, National Housing Law Project
  • Ailrick Young, Executive Director, Laurel Housing Authority (Laurel, MS)
  • Cheryl Lovell, Executive Director, St. Louis Housing Authority
In his opening remarks, Subcommittee Chairman Blaine Luetkemeyer (R-MO) stated his desire to see more reforms to lower administrative burdens in housing assistance programs similar to what was achieved through the Housing Opportunities through Modernization Act (HOTMA). Ranking Member Emanuel Cleaver (D-MO) also promoted the progress on housing issues and stated his desire to learn more about the portability process so that families may move to areas of higher opportunity. He noted the recent the demonstration program proposed by the Obama Administration to evaluate the efficiency and effectiveness of regional mobility programs. Through this demonstration, HUD can approve up to 10 regional housing mobility programs established by public housing agencies (PHAs). The mobility programs will allow PHAs to collaborate on initiatives to help low-income families use existing vouchers to move to higher-opportunity neighborhoods. Voucher administration was touched on during the opening remarks of the five witnesses, some criticizing the fragmented network and varying size of PHAs. Others supported the current structure of PHAs since they can address specific challenges at the local level. During the questioning period, some Subcommittee members grew contentious with the panelists. Representative Maxine Waters (D-CA) was sharply critical of Ailrick Young from the Laurel, MS Housing Authority and his views on regulations governing public housing programs. Representative Steve Pearce (R-NM) lambasted Dominique Blom of HUD after she did not definitively state whether or not if the Department has too many burdensome regulations. Later, the proposed rule concerning the use of Small Area Fair Market Rents (SAFMRs) was discussed. Representative Nydia Velazquez (D-NY) asked Deborah Thrope of the National Housing Law Project how the rule would work in New York City (as well as other cities with low vacancies). She noted the possible negatives effects that could happen due to increased rents. Ms. Thrope replied that the SAFMR rule is meant to address the issues generated when HUD sets the FMR for a large area and to add more data on individual zip codes to help better inform the FMR decision. She noted that while SAFMRs could help new voucher recipients, those currently using a voucher and living in a high poverty area could see a subsidy reduction. Representative Keith Ellison (D-MN) agreed with the witnesses and other lawmakers that HUD needs to explore new initiatives that will help families move to areas of higher opportunity, but he stated that the major overriding issue is the general lack of affordable housing. He noted the federal expense related to tax deductions for single family home owners versus the amount spent on affordable rental housing subsidies. Legislation Introduced to Create a Middle-Income Housing Tax Credit On September 22, Senate Finance Committee Ranking Member Ron Wyden (D-OR) proposed legislation (discussion draft) that “would create a new tax credit to spur the development of rental homes affordable to Americans with moderate incomes. The new incentive, called the Middle-Income Housing Tax Credit (MIHTC) is carefully designed to work in conjunction with the Low-Income Housing Tax Credit (LIHTC).” Details from a one-page summary of the legislative proposal (here) include:
  • The MIHTC is aimed at developers – and administered by states – to encourage the building of affordable rental housing for middle-income Americans.
  • Under the bill, the federal government would allocate tax credits to the states based on population. For 2017, the allocation would be $1 per capita with a $1.14 million small state minimum. State housing authorities would then allocate the tax credits to developers through a competitive process. The tax credits would be provided to developers over a 15-year compliance period. The credit amount would equal 50 percent of the present value of the qualifying costs, or 5 percent a year on an undiscounted basis. However, state housing authorities would only allocate so much credit as makes a housing project feasible.
  • To qualify for the credit, a rental property would need to meet two affordability standards: 1) a property would have to include a minimum percentage of affordable units; and 2) rents for those units could not exceed maximum amounts based on average incomes in the area. Specifically, at least 60 percent of the property’s units must be occupied by individuals with incomes of 100 percent or less of Area Median Gross Income (AMGI). Furthermore, tenants’ rents must not exceed 30 percent of 100% of AMGI. The affordability restrictions would remain in place for up to an additional 15 years after the compliance period. Credits are discontinued to the developer if a project fails to meet these income/rent requirements.
  • A state’s unused MIHTC credits would go back into the state’s LIHTC allocation and then back to the national LIHTC allocation pool if not used by the state.
A longer, section-by-section summary can be found here and legislative text can be found here. Currently, the MIHTC is a discussion draft, a detailed legislative proposal, but it is not final. It is being circulated to stakeholders, members of Congress, federal officials and others for review and comment While NAHMA supports the expansion the rental housing, we work with the Federal Affairs Committee and Tax Credit Committees to formulate a position and recommendations for this discussion draft.    

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