Department Has Not Addressed Some Valid Concerns and Questions
PHADA President John T. Mahon.
PHADA, the National Association of Housing and Redevelopment Officials (NAHRO), the Council of Large of Public Housing Authorities (CLPHA) and the Moving to Work (MTW) Collaborative wrote to HUD in late November regarding its cash management plans. Our latest communication followed similar mid-September correspondence. The four groups repeated our view that a delay in the schedule was “essential,” particularly since HUD has not yet responded to many of our legitimate questions and concerns.
Overarching Concerns
I observed in this column over the summer that HUD’s notices effectively rewrite existing operating fund rules and procedures. Some of HUD’s plans run counter to its own regulations and congressional statutes. We believe the changes will result in large administrative burdens, increased costs, and cuts in resident services. Further, many HAs will be hampered in their ability to address unforeseen circumstances arising from skyrocketing insurance costs, Continuing Resolution uncertainties, government shutdowns, and other factors beyond our control.
Some Other Concerns About Cash Management
- Many HAs have used reserves and other funds for up-front repairs and modernization prior to their RAD conversions. Those dollars now may be jeopardized. On top of this, HUD’s own assessment rules mandate that HAs maintain certain levels of operating reserves, which is a basic tenet of property management. Still, the availability of those funds are now in question.
- Many HAs have long-term financial obligations, i.e., OPEB, pensions, and other benefits. This new guidance will severely hamper our ability to pay those obligations.
- HUD also states that inquiries from HAs are to be directed to HUD field offices, which are not able or equipped to manage such matters.
- Can HUD’s Information Technology systems be designed to handle such significant changes? All this starts in 2026—just days away. The Department has been trying to institute the Housing Information Portal for several years, and it is still not ready and accessible to HAs.
- Several accountants and finance experts have told PHADA that Notice PIH 2025-20 will dramatically increase the volume of accounting work. By changing the order of expenditures, it will require a higher level of tracking. This will result in huge burdens and more costs for HAs, at a time when operating funding is already inadequate.
- Requiring program income to be spent first will eliminate any interest or other earned income, which will mean HAs do not get to keep any of that money. This creates disincentives for HA to be entrepreneurial. Similarly, it will create counterproductive incentives for HAs to spend more money, more quickly, so they can access their operating funds.
Some of the most concerning provisions in HUD’s guidance include those requiring HAs to classify rental income and other revenue sources as “program income.” In Notice PIH 2025-20, HUD dictates that such program income must be expended first before operating subsidy. This makes little sense and unfairly ties our hands. The government is providing us with inadequate funding to begin with and then dictating the order in which we must spend those insufficient funds.
HUD’s Schedule is Unrealistic
The new reporting requirements are not slated to begin until early 2027, but in order to comply with the current timetable, HAs must start tracking and categorizing expenses in 2026, which begins in just a few days! At the same time, HUD has yet to fully explain how we should track the funds.
Think about this for a moment. HUD has had ten years to implement provisions in the Housing and Opportunity Through Modernization Act of 2016 (HOTMA), but it is still unable to move forward for a variety of reasons. Yet, HUD is mandating that we immediately comply with its directives, which the Department issued a few short months ago. “HUD’s expectations and its timeline are unreasonable and will be impossible for PHAs to execute,” we wrote to HUD’s leadership.
The Department fails to consider other recent developments that necessitate reconsideration. “A delay was warranted even before the recent 43-day government shutdown,” says the letter. Now, as both the Department and PHAs cope with serious challenges arising from the shutdown—especially the HCV shortfall crisis and a still unresolved FY 26 HUD budget—a delay is essential to avoid mass confusion and budgetary chaos within the Department and at thousands of local housing agencies,” we wrote.
Legal Questions
HUD has said its issuances “supersede any previous language conveyed to PHAs.” The groups have significant questions about whether HUD is adhering to legal rulemaking procedures. The Department has stated in its Unified Agenda of Regulatory and Deregulatory Actions that it intends to publish a proposed rule in the future concerning cash management. The publication date of that rule is not stated.
We requested in the letter that HUD defer further action until such a proposed rule is published and housing agencies, accounting professionals, software providers, and others have ample time to provide feedback and comment on new procedures. We would add this kind of process would be much more orderly, reduce potential confusion and adhere to the Administrative Procedures Act (APA). Indeed, we do not believe HUD’s present “rulemaking by notice” is consistent with legally required APA procedures.
PHADA and other organizations will continue to raise these issues with HUD-PIH’s Deputy Assistant Secretary Ben Hobbs and the Chief Financial Officer, Irving Dennis. We are also making key leaders in Congress aware of the situation. Using PHADA’s material, available at: https://bit.ly/48lPhtj, you can assist by sharing your concerns with your elected officials.
Merry Christmas and Happy Holidays
This issue is the last edition of the newsletter before Christmas, Hanukkah, Kwanzaa, and New Year’s. On behalf of PHADA, I wish you, your families, and loved ones a joyous holiday season.