We Have Identified Formula Problems, Other Issues to HUD
PHADA President David A. Northern, Sr.
PHADA has lately been focusing on rental income matters because of serious concerns some members have raised about HUD’s operating fund formula as well as lost revenues and inflation. The association has broached the problem with HUD and suggested ways the Department could help mitigate it.
The March 3 edition of the Advocate noted concerns with the Operating Fund. First, national tenant account receivables rose by about 42 percent from 2020 to 2021. This resulted from the fact that some residents lost jobs or saw their incomes affected by the pandemic. In addition, the Department changed the formula, employing unrealistically low inflation factors at a time when inflation has reached almost 8 percent.
Many HAs and private property owners have also had a tough time collecting rents. Still, under the formula, HUD uses rents charged, not actual rents collected to determine our operating subsidies. This has caused a “perfect storm” resulting in lost rental income for many HAs.
On a more positive note, Congress recently adopted a final FY 22 appropriations package, which President Biden sign into law. Please see the latest Advocate for more information. The new law includes a four percent increase in the Operating Fund, which will help but still not keep pace with inflation.
Now that Congress has completed FY 22 appropriations, HUD will be able to allocate more operating funds to HAs. Previously, the Department had to be conservative because it did not know the final allocation even though the fiscal year began more than five months ago.
More Lost Rental Income
The lost rental income situation is troubling and is a dynamic felt in all rental housing programs, both public and private. A small, but still considerable, number of residents nationwide have taken a misguided position they do not have to pay rent. Certainly, residents should not be expected to pay if they lose jobs and income. Those residents, however, had the option all through the pandemic to report lost wages to HAs, which can then recertify income and adjust rents.
My own agency in Houston took in about $1.7 million less than what we expected. Fortunately, we and our residents were able to make up losses from local government and some charitable sources. Just a few hours west of us in San Antonio, the HA reported that about 4,000 families owe $5 million in rent.
We cited other examples in the March 16 Advocate including Richmond, VA, and the Oklahoma City HA. PHADA’s Sr. Vice President Mark Gillett and his staff collaborated successfully there with residents to access some Emergency Rental Assistance Program (ERAP) funds that Congress appropriated last year.
PHADA Executive Director Tim Kaiser recently attended the state association meeting in Pennsylvania where several HAs recounted they were also able to help make up shortfalls through ERAP. Oklahoma City and the Pennsylvania HAs indicated the process was laborious and time-consuming.
Not surprisingly, the most astounding and illustrative example of the problem is in our nation’s biggest city. Former PHADA President Greg Russ heads up the New York City HA where 42 percent of its residents owe $360 million in back rent.
Troubled by these reports and what they may portend for our industry, PHADA decided to undertake a survey of all HAs. We are hoping to use responses to inform discussions concerning steps to alleviate HA difficulties with unpaid rents, the impacts on our revenues, and our rising tenant accounts receivable. We are also genuinely concerned that many HAs will have no choice but to pursue evictions in the coming weeks and months, potentially clogging local courts because of rising evictions in the private market. We would like to avoid this kind of dreaded scenario at all costs.
We have asked HUD to communicate with the Treasury Department concerning the large amount of ERAP funding that is still available in a fair number of states. Indeed, there is still more than $20 billion in unspent ERAP money that could help address the back rents residents owe to HAs. HUD and the Treasury Department should make assisted housing residents a priority. This would help the residents and HAs with our finances while preventing potential evictions.
Depending on our survey results, we may need to go to Congress and ask for supplemental appropriations. We would hope the Biden Administration would be supportive of this approach if it is necessary.
Lastly, HUD should adjust its regulatory framework considering the lost income many HAs have experienced. Specifically, PHADA believes it is unfair for the Department to “grade” our performance in the present context and has suggested making its assessment programs advisory only. Unfortunately, HUD has rejected this approach but is at least allowing individual HAs to make a case for relief (see PHADA’s Advocate Special Editions for more information on seeking PHAS and SEMAP waivers).
We distributed the PHADA survey earlier this month and are asking for responses by March 25. If your agency has rent-related problems, please take the brief time it takes to complete the survey and help us make our case in Washington. Thank you