HUD Budget Shifts Rent Costs to Low-Income Elderly and Disabled

March 9, 2012

U.S. Department of Housing and Urban Development Secretary Shaun Donovan admits that his department’s proposed Fiscal Year 2013 budget includes “some very difficult choices we would not have made in a better fiscal environment.”

“Tough choices,” he continues, “include reforms to HUD rental assistance programs that save over $500 million in 2013 without reducing the number of families served.”

One of those reforms, as I earlier wrote, would require the very poorest of these families to pay a $75 per month minimum rent — unless they could get one of the rarely-granted hardship exemptions.

Another would change part of the complex formula used to calculate the income that’s used to set the 30% the rest pay.

A bit of background first.

The amount households must contribute to their rent is based on their adjusted income, not the total amount they receive in wages, cash benefits and the like.

Part of the formula excludes — or partly excludes — certain types of income. The other part consists of deductions.

Two related deductions address certain out-of-pocket costs that households with elderly and/or disabled members incur for medical care, attendant care and “auxiliary apparatus,” e.g., a wheelchair, a hearing aid.

The latter two are deductible only if they’re necessary for some member of the household — not necessarily the person with the disability — to work.

At this point, the expenses are deductible if they exceed 3% of the household’s income, after exclusions and the standard deduction the families receive if the elderly or disabled member is the head of the household or married to him/her.

The proposed HUD budget would raise the threshold to 10% of income.

This, of course, would increase the amount that many families with elderly and disabled members must contribute to their rent.

The more they pay, the less the public housing authority pays. The less the PHA pays, the less it costs HUD to renew rental assistance contracts. Also, the budget indicates, the less it will have to pay to subsidize public housing operating costs.

Voila! Estimated savings of $200 million* in the upcoming fiscal year — all shifted to vulnerable low-income families.

The 10% deduction threshold isn’t a new idea. As with the minimum rent proposal, HUD borrowed it from a housing assistance reform bill that’s been evolving in Congress for at least five years.

The bill seeks, among other things, to simplify the rules of setting tenant rent payments. As part of that, it raises the deduction threshold for the same types of costs the HUD budget would.

But the successive versions of the bill also raise the standard deduction for the households headed by seniors or people with disabilities. And they index it to inflation.

This would at least partly offset the impact on rent from the hike in the threshold for out-of-pocket deductions.

The proposed HUD budget would leave the standard deduction just where it is — $400 per month. No relief for households that will get stuck with higher rent because their medical co-pays, attendant fees and the like didn’t consume a full tenth of their income.

So HUD’s tough choice will mean tough choices for around 650,000 very low-income families — rent versus prescription renewals, for example.

I’m hard put to believe they’re necessary — fiscal environment notwithstanding.

If the President could find more than $525 billion for the Pentagon, surely some $350 million could have been found to sustain the low-income housing assistance programs without the punitive policy changes the HUD budget would make.

* HUD’s budget justification to Congress accounts only for savings in the Housing Choice voucher program, but clearly indicates that the higher deduction threshold would also apply to public housing and Section 8 project-based housing residents. The estimate I’m citing here comes from a Congressional Budget Office analysis of one version of the reform bill I refer to below.

What Would HUD’s Proposed Minimum Rent Mandate Mean for Extremely Poor DC Residents?

March 1, 2012

Researching the impacts of the mandatory minimum rent proposal in the President’s Fiscal Year 2013 budget, I asked myself what it would mean for extremely low-income District residents who benefit from the Department of Housing and Urban Development’s rental housing programs.

The answer, I think, is maybe less than for the poorest beneficiaries in most of the country. But it’s hard to be sure because we don’t know how broadly HUD would apply the new policy.

Here’s what we do know.

DCHA (the District’s public housing authority) doesn’t impose a minimum rent, as it could under the current law. It’s chosen — wisely I think — to let the lowest of low-income households conserve their cash for other needs.

These, recall, are households whose adjusted incomes are so low that the usual 30% they’d owe for rent is negligible, except to them.

In one scenario, they’d have to pay $75 a month, as would more than half a million of the poorest households nationwide, though DCHA could grant hardship exemptions for some of them.

But DCHA is one of the 34 public housing authorities that participate in HUD’s Moving to Work demonstration project. As such, it’s exempt from many of the rules most PHAs must comply with.

So it’s possible that DCHA could preserve its current rent policy for most residents who’d otherwise be affected.

According to DCHA’s latest annual report, 12,752 individuals and families had Housing Choice vouchers in its MTW program. It plans to increase the number to 12,784 by the end of this fiscal year.

DCHA says that close to 20,000 additional residents live in public housing units.

If the proposed policy change is like the one in a bill the House is considering — and it does seem that way — then the minimum mandatory rent wouldn’t automatically apply to either the voucher holders or the public housing residents.

Or so I gather from a bill analysis by the Center on Budget and Policy Priorities.

But the minimum mandatory would apply to residents of project-based Section 8 housing, i.e., units that have federally-funded vouchers attached to them.

That, says CBPP, would put 1,273 extremely low-income District households at risk of “serious hardship and even homelessness.”

Do we really need anything more to push up our homelessness rates?

Rental Housing Assistance Budget Balanced on Backs of Poorest

February 24, 2012

If you look at the President’s  Fiscal Year 2013 budget for low-income housing assistance as a whole, you’d think it’s pretty good — at least, considering the caps imposed by last fall’s debt ceiling/deficit reduction deal.

Or at least I did. But, as they say, the devil is in the details. And there are some very devilish details in the policy changes proposed to help make the numbers work.

One of them would raise monthly rents for the very poorest households that live in public housing or participate in any one of several programs the budget classifies as Tenant-Based Rental Assistance.

Current Minimum Rent Policy

Under current law, residents of public housing and people with housing vouchers generally must pay 30% of their adjusted income for rent. The same holds for residents of project-based Section 8 housing, i.e., units that have federally-funded vouchers attached to them.

The local public housing authority pays the rest, up to a cap based on the fair market rents the U.S. Department of Housing and Urban Development sets for the area.

For the very lowest-income households, however, 30% of adjusted income can be zero or pretty darn near. PHAs may, if they choose, require them to pay a minimum rent, but only up to $50 a month.

They can, but don’t have to also impose a minimum rent, up to the same maximum, on public housing residents. A $25 minimum rent is generally mandatory for residents of project-based Section 8 housing.

According to a 2010 study for HUD, 88% of PHAs have opted for a minimum rent. Not all of them, however, charge as much as $50 a month.

White House Proposal

For Fiscal Year 2013, the President proposes $4 million less to renew housing voucher contracts than Congress approved for this fiscal year.

Yet the White House fact sheet asserts that HUD’s rental assistance programs will serve as many families as they do now.

How can that be? In the past, increases have been needed just to keep up with rising rents.

Part of the answer is that PHAs would have to charge a minimum rent. And the minimum would be $75 a month, rather than the $50 that’s permissible now.

This may not seem like much, especially for households that are already paying the maximum minimum.

But to fall into the minimum rent category at the $50 rate, a household’s income, with adjustments, would have to be less than $167 a month. The new mandatory minimum would be nearly 45% of this.

Well, the fact sheet says, households would be eligible for hardship exemptions. Nothing new about these.

Under current law, PHAs must have policies for granting such exemptions. Most of the hardships their policies must include a significant loss of income, e.g., a job loss, the death of a family member.

But exemptions are also supposed to be granted if the minimum rent would result in an eviction — in other words, if the family simply couldn’t pay it.

Problem is that hardship exemptions are apparently few and far between. Of the PHAs the HUD study surveyed, 82% granted them to fewer than 1% of the households they served.

Maybe because $50 worked a hardship on only a few. Maybe because PHAs construe acceptable hardships too narrowly. Maybe, as the study suggests, because they don’t make sure that households know they can get exemptions.

Whatever the case, I see no reason to believe that PHAs will suddenly start granting more.

HUD apparently doesn’t think they will since Secretary Donovan has said that the new minimum rent requirement will save $150 million next year.

Households at Risk

The Center on Budget and Policy Priorities recently analyzed a bill already introduced in the House that would set a somewhat lower mandatory minimum rent.

It concluded that nearly 491,000 extremely low-income households would be exposed to “serious hardship and even homelessness.” The President’s proposal, it says, would affect about 15,000 more, bringing the total to well over half a million.

Nearly two-thirds of these households nationwide are families with children. As many as 40,000 include members who are elderly or have disabilities.

Seems to me the right hand doesn’t know what the left hand is doing — or maybe knows, but doesn’t care.

The President proposes a $330 million increase for homeless assistance grants to “continue progress” toward his administration’s goals for preventing and ending homelessness.

At the same time, he seeks savings in housing assistance that could well put more people on the streets — or into the already-stressed shelters and housing the homeless grants support.

NOTE: Fellow D.C. residents, I’ll have a separate post on what this proposal may mean for our HUD-funded rental assistance programs. So check back — or subscribe. You can now get my posts as e-mails just by clicking the Follow button.

Housing Crisis Voucher On the Horizon

September 25, 2009

The Center on Budget and Policy Priorities reports that tens of thousands of low-income households stand to lose their housing vouchers, pay higher rent or remain on the growing waiting lists for rental assistance unless Congress acts PDQ.

An estimated 400 local housing authorities face shortfalls in their housing voucher budgets. Every state has at least one agency in trouble. In 15 states, it’s 10 or more. CBPP estimates they’ll need a total of $130 million to get through the rest of the year without making further cutbacks.

The shortfalls are caused in part by the fact that Congress didn’t complete work on appropriations for the U.S. Department of Housing and Urban Development until March. Housing agencies, therefore, didn’t learn what their 2009 funding would be until May–five months into the program year. This left them little time to adjust their budgets in ways that would minimize impacts on low-income families who had–or expected to get–housing vouchers.

And they certainly did have to adjust their budgets because the funding Congress provided to renew vouchers was considerably less than what the agencies would have been eligible to receive, based on the funding formula Congress used for the 2008 HUD budget.

The recession is another big factor in the crisis. Families with vouchers generally have to pay 30% of their income for rent. The housing agency pays the rest. As tenants have lost their jobs or had their hours cut back, their 30% has become a smaller part of the rent costs. This, of course, means the agencies have to pay more.

Unless they do something about it. Under certain circumstances, agencies can reduce the portion they pay. This leaves voucher holders with higher–sometimes very considerably higher–rental costs. According to CBPP, at least a few agencies have already exercised this option.

Agencies can also stop issuing new vouchers and/or terminate existing vouchers, leaving families responsible for the totality of their rent. Some agencies have already done both. CBPP warns that many more will have to do so unless Congress authorizes HUD to use already-approved renewal funding to help them cope with their shortfalls.

According to CBPP estimates, more than 28,200 vouchers in use are currently unfunded due to the shortfalls. That’s a lot of families who could be left homeless or with rental costs they can meet only by cutting back on food, medications and other essential needs.

In the likely event that Congress doesn’t pass a Fiscal Year 2010 budget for HUD by October 1, it could put the needed authorization into the continuing resolution. Just a sentence or two is all it would take to avert the impending crisis.


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