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President’s Forum: Almost 1 in 5 HAs “Severely Impacted” by Rental Income Losses

HUD Provides Data, Meets with Industry Representatives

PHADA President David A. Northern, Sr.

For quite some time now, and first in the industry, PHADA has raised the issue of rising tenant accounts receivable (TARs) and rental income losses with HUD and Congress. The problem stems from the pandemic as federal, state, and local eviction moratoriums and the economic shutdown affected the income of many residents and HAs. These circumstances have also raised the troubling prospect for more nonpayment-related evictions in some communities.

 

PHADA’s Survey

To help quantify the extent of the problem, PHADA conducted a survey earlier this year. The survey results confirmed that some HAs have lost almost 20 percent of their budgeted rental income while their TARs rose by more than 40 percent in some cases. Some respondents reported they would reluctantly have to commence evictions for residents who did not apply for income recertifications or emergency rental assistance (who nonetheless opted not to pay their rent).

We communicated the results of our survey to HUD’s leadership and Congress in a March 29 letter, which was included in this publication. We pointed out that present operating fund allocations are not sufficient to address the problem. This is because those allocations assume HAs have collected all the rents owed, and the inflation factor used in the present formula is significantly below the real rate of almost 9 percent.

 

A Review of HUD’s Data

Because our survey was limited and HUD has access to the totality of industry data, we asked the Department for more information. Department staff provided some analysis and met with industry group representatives to discuss the matter in mid-June. HUD’s full slide show presentation is available here.

HUD’s data confirmed what PHADA had been hearing from members for several months. That is, the TARs problem is not uniform across the industry and is not isolated to certain regions. Still, HUD confirmed that almost 20 percent of agencies have been “severely impacted” by rental income losses.

HUD’s information is helpful but a bit dated. It covers the 2020–21 period while PHADA’s survey includes more up-to-date information. Also, it does not take into the account the losses of the New York City Housing Authority (NYCHA), which now has TARs totaling almost $400 million.

In addition, it is important to note that, while many HAs may not be “severely impacted,” they may still feel some significant effects even though HUD categorizes them as “less impacted.” This is so because more than 1,000 HAs have seen their TARs increase, but their cash reserves rose too. The problem is HUD’s data does not reveal how much either TARs or cash levels actually increased.

An agency that experiences a doubling of TARs but a minor increase in cash might not necessarily feel as if it is “less impacted.”

 

Other Concerns

Aside from significant rental income shortfalls, some HAs face other challenges including the fact they cannot forgive or write off unpaid rents without pursuing evictions, which are still very time consuming and almost impossible to execute in some regions of the country. In addition, even if HAs had been able to write off their debts, they face growing inflationary costs that will further erode their operating reserves, which may be needed for other short- and long-term expenses.

There is $25 million available in the FY 22 appropriations statute to address housing authority operating fund shortfalls. The Department recently issued a notice on this funding with applications due soon. This money will no doubt help some HAs get through the fiscal year, but it is only a temporary band aid, and, according to HUD’s own data, is inadequate to meet all HA needs.

PHADA is also concerned that HUD is minimizing the operational challenges HAs have been facing because of the rent problem. HUD has made some adjustment in TARs scoring under the Public Housing Assessment System (PHAS) to account for rental income losses, but it has refused so far to grant any scoring waivers even though dozens of HAs have applied for such waivers along with requests that some physical inspections be deferred.

 

Conclusion

The present situation requires the serious attention of HUD, Congress, the industry, and residents. The rent system in public and assisted housing is based on the premise that residents pay 30 percent of their income towards their rent and the federal government makes up the difference. During the pandemic, many residents experienced job losses and/or declines in their income. HAs rightly adjusted the rents of those affected residents and helped them access emergency funding available through a few temporary measures. Those programs and the funding they provided are now winding down.

At the same time, a worrisome new trend developed by which some residents opted not to pay their rent, a factor which could have long term consequences for the fiscal solvency of housing agencies and the residents they serve. Many of these agencies have already been “severely impacted” and the possibility is that even more could be affected as a result of declining rental income and rapidly rising costs.

With this in mind, PHADA has called on HUD to address the nonpayment problem head on and clearly state that residents who can afford to pay their rent need to do just that. The Department should also undertake a serious review of its FY 23 budget request to Congress, especially the Operating Fund. That request includes assumptions about inflation that are clearly dated and will not keep pace with true costs. PHADA will continue to raise these concerns with both the Department and Congress. 

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