Notice PIH 2020-29 “Guidance for Running an Optimized Housing Choice Voucher Program”
HUD has published a notice that offers guidance to HAs in balancing the conflicting interests and goals of the Housing Choice Voucher (HCV) program. These include utilizing as much of an agency’s budget to support as many vouchers as possible while controlling the housing costs paid by participating households. Although HUD begins this notice discussing the development of what it characterizes as “excess” Housing Assistance Payment (HAP) reserves, the notice quickly acknowledges that, “there are a wide range of variables determining both HCV upon which leasing and spending rest, some of which are in the PHA’s control, though many of which are not.”
The HAP Reserves Issue
HUD has been concerned with “excess” HAP reserves for some time. However it isn’t clear how serious the problem of excess reserves is, based on data the department makes available on its Housing Choice Voucher Program Dashboard. As of August 2020, the national level of HUD-held HAP reserves among non-MTW HAs was 6.9 percent of budget authority. HUD defines recommended reserve levels for HAs of different sizes, ranging from 12 percent for agencies with fewer than 250 vouchers to 6 percent for HAs with more than 500 vouchers. Of almost 2,200 HAs managing voucher programs, only 18, or 0.8 percent have HUD-held HAP reserves higher than that national average. Although the number of agencies with high HUD-held reserve levels is small, in aggregate those HAs hold more than approximately $288 million in reserves.
Factors Influencing Program Success
In the notice, HUD identifies a series of factors that can influence a program’s effectiveness, including:
- Current funding,
- Next year’s HAP proration and inflation factors,
- Potential reserve offsets,
- Success rate and speed of leasing,
- Per Unit Cost (PUC) changes
- Due to rent increases, and
- Due to household income changes,
- Vouchers reserved for new project-based voucher developments,
- Changing payment standards impacts
- On program budget, and
- On rent burdens, and
- Future funding.
Notably, only two of these factors, changing payment standards and reserving vouchers for project basing, are subject to significant HA control.
The notice acknowledges the yet-to-be-known impacts of the COVID-19 pandemic. Supplemental unemployment insurance benefits and payroll supports made available through the CARES Act and the Payroll Protection Program may have moderated participants’ loss of earnings, but expiration of those initiatives in July and expiration of unemployment insurance benefits in subsequent months, may have exacerbated those losses. Programs may face more significant demands for HAP as a result. Pandemic influences on program attrition, on participants’ success rates and on local rental housing markets and rental rates all remain unknown. According to HUD’s dashboard, per unit costs (PUC) rose from $723 at the end of 2019 to $760 at the end of August 2020, an annualized increase of 7.9 percent.
Systemic issues that have contributed to the HCV program’s increasingly complex management requirements: (1) [changed] renewal funding approach from a unit-based to a dollar-based system; (2)the impact of deep, chronic underfunding of HCV admin fees; (3) the methods it uses to set Fair Market Rents [and] complicated, technical, expensive standards for FMR appeals.
Uncertainties Also Adversely Affect HUD
In addition to increasing the complexity of managing an HCV program for HAs, program uncertainties complicate HUD’s responsibilities. The factors affecting HAs management also impact the department’s ability to inform the administration’s development of budgets and appropriators’ development of appropriation bills. This year in particular has complicated the task of providing appropriations sufficient to assure renewal funding for all vouchers in use. Uncertainties also influence HUD’s ability to monitor individual agencies’ risks of encountering shortfalls in HAP resources to meet immediate needs for landlord payments. Although Congress has a strong track record of supporting renewal funding for all vouchers in use, that support has often come at the expense in particular of administrative fees, Operating Fund, and Capital Fund appropriations.
The notice includes detailed descriptions of tools the department has made available that can help with program management, including:
- The Two Year Forecasting Tool and a detailed guide for that tool,
- The Payment Standards Tool that includes Rent Burden and Per Unit Cost charts, and Subsidy Standard Analysis that can be tied to the Two- Year Forecasting Tool,
- The HCV Analysis Tool and a PIC Drill Down module, and
- The HCV Guidebook that HUD is publishing chapter by chapter.
HUD has also provided a detailed description of the timeline from the end of a federal fiscal year through the finalization of HAP funding, usually early in the subsequent calendar year, that offers suggestions to help HAs maintain voucher issuance and utilization during these periods of particularly high funding uncertainty and a description of key steps HAs can use to maintain or improve participants’ success rates as they receive HCVs and search for housing in which to use their housing assistance.
Best Practices to Improve Program Effectiveness
Finally, the notice includes a discussion of the following best practices designed to help HAs use their funding to maintain or increase funding and voucher utilization:
- Ensure payment standards and subsidy standards are set at appropriate levels,
- Conduct high quality participating landlord outreach and support,
- Offer high quality participant briefings and continue to communicate with voucher holders during their housing searches, and
- In communities with a dearth of affordable good quality housing, consider project basing as an alternative that will increase the inventory of affordable housing.
Systemic Issues Unaddressed
HUD’s new notice offers HAs detailed, helpful discussions of a variety of tools and approaches that may help some agencies maintain or increase voucher and funding utilization and participant success rates. However, the notice does not address certain systemic issues that have contributed to the HCV program’s increasingly complex management requirements.
- It has been one and a half decades since Congress changed the HCV program’s renewal funding approach from a unit-based to a dollar-based system. This change resulted from concerns over growing appropriations requirements of the HCV program, but the change has also resulted in significantly more complicated program management requirements and resulting funding constraints have contributed to the loss of approximately 200,000 vouchers in use. The renewal funding system has also made the recovery of these authorized but unused vouchers much more difficult for HAs.
- The notice does not consider the impact of deep, chronic underfunding of HCV administrative fees or the combined effects of increasingly complicated administrative requirements and increasingly constrained financial support for HAs carrying out those requirements.
- Finally, although the department is beginning a study of the methods it uses to set Fair Market Rents (FMRs), some jurisdictions find that annual published FMRs continue to lag the behavior of their rental markets, making it difficult or impossible to establish payment standards that can support high utilization levels. HUD’s complicated, technical, expensive standards for FMR appeals make it difficult for local HAs to correct FMRs poorly associated with local rental housing markets and adversely affect participants’ success rates and HA voucher and funding utilization.
In addition to the detailed management approaches to optimizing the management of HCV programs, it would be helpful for HUD to address problems caused by the current renewal funding system, to request adequate funding of administrative fees to support quality program management, expedite changes to methods for setting annual FMRs, and simplify requirements for HAs to appeal FMRs that fail to reflect their local rental housing markets.