Funding Not Keeping Pace with Demands
PHADA President David A. Northern, Sr.
Happy 2023 to all. Along with the new year comes a new congressional session with some Capitol Hill personnel changes that will affect our government’s policies in all areas including assisted housing programs. We have elaborated on those changes in recent editions of this newsletter. This time around, I wanted to lay out PHADA’s legislative approach in the 118th Congress.
The Current Environment
To provide some context, it is important to examine the budgetary and political environment. Throughout the past year, PHADA raised concerns regarding the difficult budget situation many HAs are confronting because of pandemic induced outcomes.
We wrote to the Department in a November 4 letter to outline our concerns. Among other things, PHADA noted that many HAs have lost significant revenue to rising Tenant Accounts Receivable (TARs). In addition, HUD’s operating fund formula includes an inflation factor that is considerably below real costs in the U.S. economy. At the same time, supplies, insurance, utilities and staffing are much more expensive compared to recent history.
The impact of all this is best illustrated in the results of the operating fund shortfall competition HUD oversaw last summer. The Department had $25 million available for needy HAs, but total demand was almost $400 million. In short, many HAs are struggling as a consequence of the problems mentioned above.
The FY 23 HUD appropriations package includes some notable increases for HUD and Section 8 programs (see page 1 for more details). Unfortunately, the new law does not address some of the major problems PHADA identified in its letter. Indeed, public housing operating and capital funding is essentially flatlined through FY 23. This is really a cut given that high inflation persists.
The Next Two Years
Looking at the situation realistically, we do not see prospects for much improvement over the next two years. The newly constituted House and Senate are led by different political parties that have their own priorities. Because of this, and the country’s growing debt and continuing concerns about inflation, it is not likely we will see increases in domestic spending. This leaves us in a situation where costs are continuing to rise, and funding is stagnant.
Further compounding the problem, HUD continues to add regulatory burdens that PHADA has documented in recent months. These include new inspection requirements and costs, a new “buy American” requirement, possible Annual Contributions Contract (ACC) changes that may impede our legal remedies, and new unrealistic assessment program changes.
A Different Approach is Needed
To be sure, some HAs have been able to thrive through conversions under the Rental Assistance Demonstration (RAD) as well as voluntary conversions for small HAs. For a variety of reasons, those programs do not work for many HAs, however.
The situation is untenable for many agencies and the millions of people we serve. If HAs are going to succeed, then we will need an approach that allows local housing authorities to better operate within the context of their local conditions. There is already a successful model in place that the Biden Administration and Congress should look to – the original Moving to Work (MTW) program.
There should be a great expansion of MTW or a “Local Flexibility Option.” Essential ingredients include provisions that free HAs from burdensome regulations and red tape while still ensuring accountability to taxpayers. Also needed is the ability to use all funds flexibly, again with requisite oversight, of course. This is a theme PHADA will promote with more specificity in the coming weeks and months.
Considering current budget challenges, the need for broad regulatory relief and changes to oversight and accountability mechanisms for public housing authorities is urgent. The current housing market and operating environment is drastically different than that which existed prior to the pandemic.
Reducing federal micromanagement of HAs, which are also accountable to state and local entities and constituencies, is the only way to ensure continued and effective operation and HA administration of rental housing assistance.
Failure to provide this relief could lead to insolvency for many HAs, acceleration of the loss of existing affordable housing units at a time when we desperately need more, and the continued decline and deterioration of the shrinking stock of publicly supported safe and decent housing.