CLPHA Press Room

This Worst Case Housing Needs report is the sixteenth in a longstanding series providing national data and analysis of the critical problems facing very low-income renting families. Households with worst case needs are defined as very low-income renters who do not receive government housing assistance and who paid more than one-half of their income for rent, lived in severely inadequate conditions, or both. The report draws on data from the 2015 American Housing Survey (AHS), which debuted a major redesign that included a new national and metropolitan area longitudinal sample. We find that benefits of the strengthening national economy are not adequately flowing to renter households at the lowest income levels and severe housing problems are on the rise.

Public housing agencies (PHAs) have struggled heroically to maintain the country’s 1.1 million public housing units, but the backlog of capital needs has grown to $26 billion, and there is little hope today that federal resources will rise to meet it. Congress authorized the Rental Assistance Demonstration (RAD) in 2012 to meet this funding challenge. RAD enables PHAs to convert public housing properties to project-based Section 8 contracts and, in so doing, permit an infusion of private capital to address the project’s repair and rehabilitation needs and to put the property on a path of financial stability over the long term. RAD makes it easier for PHAs to leverage additional funding sources, such as low-income housing tax credits and private mortgage debt.

This interim report provides insight into how RAD is being implemented across the country. The program is extremely popular. More than 400 PHAs have submitted more than 1,000 applications for project conversion. HUD has already reached the cap set by Congress of 185,000 units that may be converted, and other projects are waiting for the cap to be lifted. This report explores why participating PHAs are eager to implement RAD, why others have chosen not to pursue it, the kinds of properties that are making it more quickly to closing, and how rehabilitation and in some cases entirely new construction are being financed.

So far, RAD has been extremely successful in attracting capital to help stabilize affordable housing developments. As of October 2015, 185 public housing developments had completed the conversion process. They raised a total of $2.5 billion in funding, of which $2.25 billion came from sources external to the PHAs, for a leverage ratio of nearly 9:1. RAD appears to strengthen the long-term financial stability of converting properties, including those conducting nonfinancial deals that do not access external capital. Many important questions remain, however, regarding RAD’s potential to meet the long-term challenge to preserve, improve, and stabilize public housing. The second phase of this evaluation will examine precisely how RAD impacts the physical and financial condition of properties being converted and how project residents are affected. The final report is expected to be published by December 2018.

Executive Summary

Public housing occupies a unique and essential place on the affordable housing spectrum. It is home to about 2.2 million lowincome families, seniors and people with disabilities. A multibillion dollar asset, public housing authorities’ (PHAs) spending on operations and capital improvements also generates significant economic activity.

On February 17, 2009, President Obama signed the Recovery Act, which included $4 billion in public housing capital funds. A significant reason for that provision was the finding from a 2007 Econsult study -- as cited in language accompanying the legislation – that every dollar that public housing agencies spend on capital and maintenance produces $2.12 in local economic activity.

In addition to providing badly needed funding to housing agencies across the country, this investment provided an opportunity to build on the 2007 report by examining the impact of large-scale capital spending on the national economy. While the 2007 study assessed the local and regional economic impact of capital repairs and maintenance spending by PHAs, this study focuses on the national economic impact of Recovery Act capital spending by PHAs. The report also measures the long-term physical and operating impact on the public housing portfolios of 20 agencies. The study accomplishes this by using data provided by these agencies on the types of projects being completed, the number of jobs being created, and the estimated impact on utilities consumption and spending.

PHAs spent the money quickly, ahead of a shorter than normal obligation period, despite additional reporting requirements and regulations regarding the use of the funds. They created thousands of jobs, brought thousands of new or rehabbed units online and leveraged billions more in additional funds.

Small Area Fair Market Rents (SAFMR) were first conceived as a demonstration program to test the policy in five cities around the country over a five-year period.

While CLPHA strongly supports the policy goals of SAFMR to improve low-income tenants’ access to higher opportunity areas, local housing authorities need the flexibility to create rent structures based on variations in their local housing markets. SAFMRs do not produce the same results for all housing authorities, which is why CLPHA has argued against making the one-size-fits-all policy mandatory. HUD should continue supporting local flexibilities for PHAs to address their unique market conditions through programs like Moving to Work (MTW). MTW agencies, including King County Housing Authority, San Diego Housing Commission, and Seattle Housing Authority, have successfully created tiered ZIP code based rent systems to account for cost variations in their submarkets. But, if presented as a one-size-fits-all policy, SAFMRs will not work.

The Trump Administration’s August 2017 decision to make SAFMRs voluntary was a direct response to mixed findings from that evaluation, which troublingly reported that the SAFMRs produced a 3.4 percent net loss of units that would otherwise be available to current HCV voucher holders. Even more concerning is the finding that low-income tenants in low-rent ZIP codes experiences a 22 percent increase to their rents.

• Small Area FMRs Final Rule
• Small Area Fair Market Rent Demonstration Interim Report
• CLPHA Comments on SAFMRs

Administrative Fees are payments from HUD to housing authorities for their administration of the HCV program. Much like the Operating Subsidy for public housing, administrative fees support PHA staff to help low-income families find and move into affordable housing. Administrative fees also cover the administrative costs of providing critical supportive services that help the most vulnerable low-income families move towards self-sufficiency. The ongoing administrative fee is paid by HUD to PHAs each month, and is based on the number of housing units a PHA currently has under contract.

Administrative fees have been historically underfunded as congressional appropriations fail to meet the need. Chronic underfunding has forced some agencies to utilize their reserve funds so they can maintain their already-short staff capacity.

On July 6, 2016, HUD published a proposed rule to change the methodology for calculating administrative fees. CLPHA strongly opposed HUD’s proposed changes because of its basis on a statistically unreliable Administrative Fee Study which, furthermore, was not authorized by Congress to calculate.

Without additional funding, HUD’s proposed administrative fee formula would do little improve the efficiency and effectiveness of the HCV program. Rather, the proposed administrative fee formula simply reallocates fees among PHAs without reducing cost burdens or rewarding innovation. Instead of altering the current methodology, CLPHA encourages HUD to implement an administrative fee formula that is more flexible using supplemental fees. Supplemental fees are a critical component if HUD is to address administrative functions not identified as cost-drivers in the Administrative Fee Study.

• Proposed Admin Fee Rule
• CLPHA Comments on Proposed Admin Fee Rule