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March 2004 Newsletter

Worst Case Housing Needs Not Any Better
Despite a 1990 directive from Congress that requires HUD to regularly report on A worst case  housing needs, the department only recently released the required report after former Secretary Mel Martinez resigned his position.   A Worsening shortages of housing affordable and available to extremely low income renters Y show the underlying gap between demand and supply continues, according to the latest worst case housing report issued in January.  Worst case household statistics are used to assess affordable housing shortages and needs for the general populace.  The last worst case report was released in 2001 as President Bush and Martinez took their respective offices.  The most recent report, using data from 2001, cites 5.07 million families in the United States as having worst case rental housing needs. The report analyzes trends in worst case housing needs and housing problems with information from the American Housing Survey from 1978 to 1999, and including an update on the worst case housing needs in 2001.

According to the recent report, the number of households qualifying as worst case needs increased by one-fifth in the nine years between 1978 to 1997, but decreased between 1997 and 1999 as a booming economy affected wages and employment opportunities for very low-income residents.  However, during that two year period, affordable housing units continued to decrease for very low-income renters. Over the next two years from 1999 to 2001, the number of worst case needs increased slightly, but availability of affordable units remained the same.  In March 2000, 5.38 million households had worst case housing needs and the number decreased to 4.86 million households by January 2001. 

Although the worst case report focuses on very low-income families, defined as households with the lowest income, the most problems, and the most likely to receive assistance, a trend in housing problems for low-income families became apparent.  The number of low-income families, defined as households who typically earned less than eighty percent of the median income in their area and used more than half of their income for housing were found to have increased by one million between 1999 and 2001.  Non-Hispanic whites were the most affected group, according to the report, with a ten percent increase in worst case housing needs.  In 2001, 2.8 million non-Hispanic white households had worst case needs while worst case needs among minorities did not change much.  

Housing Not Part of State's Focus
Although states have made good use of 1996 welfare reform legislation to expand access to supports for low income families, current fiscal problems are beginning to affect supportive programs, according to a recent General Accounting Office survey.  Although rental housing assistance was acknowledged as one of the important components of the overall set of supports for low income families,  it was not included in the six categories of supportive services for low income families surveyed.  The categories were the Temporary Assistance for Needy Families program, job training and retention, transportation services, utility assistance, health care assistance and child care.  Housing assistance is not usually included in supportive services for families because it is administered by a different agency, according to the survey.

HUD, RHS Secretaries Named
President Bush has officially sent his nomination of Alfonso Jackson to the Senate Banking Committee for nomination hearings for HUD secretary.  More paperwork is necessary before a date can be set for the nomination hearing. Until that time, Jackson will continue to serve as acting HUD secretary.  To fill Jackson's former position of deputy secretary, HUD officials have said that  Romolo A. Roy Bernardi, current assistant secretary for community planning and development, will be named officially when Jackson is appointed secretary.   The vacant position of acting deputy under secretary for rural development in the Department of Agriculture is expected to be filled by Gilbert Gonzalez Jr., the current deputy under secretary.  The under secretary administers the Section 515 rural rental housing program. Gonzalez replaces acting deputy Thomas Dorr, whose position on low income rural Americans and diversity was at odds with the administration. Dorr has been named as a special assistant to Secretary Ann M. Veneman at the USDA. 

Federal Register FR-4889-N-01 (December 19, 2003)
Difficult Development/Qualified Census Tracts
This document uses relevant data from the 2000 Census to announce annual A Difficult Development A and A Qualified Census Tracts  for the low-income housing tax credit program under section 42 of the Internal Revenue Code of 1986.

PIH Notice 2003-34 (December 19, 2003)
RIM Disallowed Costs Under the RHIIP Initiative
This notice highlights the importance of timely and accurate income and rent determinations by Public housing agencies and the consequences for failure to identify and correct income and rent determination deficiencies.  In order to meet the RHIIP goal of 50 percent error reduction by 2005 and establish consequences for failure to address deficiencies, the notice addresses:

• Incentives, disallowed costs and collection of excess subsidies paid;
• Sanctions for failure to timely respond to the RIM Review report and to implement a corrective action plan when required;
• Adjustment of Section 8 Management Assessment Program scores when inconsistent with the findings of RIM reviews;
• Self-assessment reviews.

The notice applies to public housing and housing choice voucher programs.

IRS Notice 9110 (January 6, 2004)
Section 42 Carryover and Stacking Rule Amendments
This notice announces final regulations amending existing regulations for the low-income housing tax credit program; primarily changes to the law made by the Community Renewal Tax Relief Act of 2000 and affecting owners of low-income housing projects who claim the credit and the state or local housing credit agencies who administer the credit.

HUD Notice 2004-02 (January 30, 2004)
Prepayment of Section 202/811 Direct Loans
This notice announces that HUD Notice H 2002-16 ,Revised Prepayment of Direct Loans on Section 202 and Section 202/8 Projects with Inclusion of FHA Mortgage Insurance Guidelines, issued August 23, 2002 and expiring August 31, 2003, is reinstated and extended to January 31, 2005.

HUD Notice 2004-03 (February 13, 2004)
Interest Rate for Section 202/811
This notice announces fiscal year 2004 the nominal interest rate for the Section 202 and Section 811 Capital Advance Programs. Based on the formula specified in the Housing and Community Development Act of 1987, the interest rate is 5 3/8 percent. The processing factors for the 5.375 percent rate: 

• 40-year LAMP Debt Service Rate: .060875110
• Monthly Amortization Factor: .005072926
• Initial Curtail Rate: .007125110

HOUSING ISSUES IN COURT
LIHPRHA Doesn't Apply to All Properties 
The California Superior Court has ruled that regulations from the Low Income Housing Preservation and Resident Homeownership Act do not apply to properties that were never funded under LIHPRHA and that the state's housing subsidy termination, opt-out and mortgage prepayment notice statutes are not preempted by the federal LIHPRHA program.  When property owners attempted to prepay the mortgage on apartments subsidized under the Section 236 program, the Superior Court stopped the notice of prepayment and prohibited the owners from immediately raising unit rents by as much as $300 per unit.  The owners asked to dissolve the ruling based on federal court decisions that found LIHPHRA's preemption provision also covered properties that had never been funded under LIHPHRA, but the judge found that the federal decisions were not applicable.  In his ruling, he claimed that the owners opted not to participate in LIHPRHA, and that their plan to prepay was distinct from LIHPRHA and without a preemption provision.  The LIHPHRA program originally provided more stringent regulations than state and local laws concerning the restriction for prepayment of federally insured mortgages, but Congress eliminated prepayment restrictions in 1996.  LIHPRHA provides preservation incentives and imposes specific requirements for owners of affordable housing who want to leave the program.
(College Gardens Preservation Committee, et al. v. Eugene Burger, et al.)

2004 Appropriations Bill Final
The first order of business for the 108^th Congress in January was passage of the Consolidated Appropriations Bill for 2004 that included a net appropriation of $36.1 billion for HUD.   

President Bush quickly signed the omnibus bill, H.R. 2673, which covered appropriations for seven departments. The Housing Choice Voucher program received full funding of $14.182 billion and provides $12.811 billion for renewal of all current vouchers. Of that total, $4.72 billion will go toward renewal of Section 8 project-based contracts.   Contract administration for Section 8 project-based assistance was funded at $100 million and family self-sufficiency coordinators will be provided at a cost of $48 million.

The Housing Certificate Fund received $136 million for a central fund allocated for amendments to Section 8 tenant-based annual contributions contracts and Section 8 rental assistance for relocation and replacement of housing units demolished or disposed was funded at $206 million. President Bush's budget proposal for 2004 included the elimination of the housing certificate fund and a proposal to block grant Section 8 voucher assistance to the states rather than have public housing agencies administer funds, but neither proposal was approved by Congress. The president's 2005 budget proposal is expected to place a cap on funds for vouchers (see related article on page 4).   The Office of Rural Housing and Economic Development was level-funded again at  $25 million.   

Funding for Section 202 elderly housing was set at $778 million, a $5 million decrease, while Section 811 housing for persons with disabilities received $1 million less at $250 million.   Fair housing activities was funded at $48 million and the lead hazard reduction program, received $175 million with $10 million of that going to the Healthy Homes Initiative.   

Recaptured Section 236 budget authority is expected to be $303 million from prepayment of mortgages. Reserve accounts for public housing agencies received $136 million for the central reserve fund and $1.235 billion for administration fees.

Military Spending Eating Up Housing Funds
As affordable housing advocates awaited the president's 2005 budget proposal, a Congressional Budget Office report of economic and budget projections for the next 10 years projected at found $2.9 trillion deficit instead of the $5.6 trillion surplus estimated in a 2001 report.

The House Budget Committee began hearing in January to discuss the report and suggest that President Bush lead the effort in reducing spending.  The expected $477 billion deficit is a result of military spending in Iran and Afghanistan, according to Rep. Jim Nussle (R-IA), house budget committee chairman.  Administration sources have said that the budget will contain less than a one percent increase in discretionary spending except for programs dealing with defense and homeland security, but generally more than one percent is required annually just to maintain existing housing assistance administered by HUD.

If the fiscal policy plays out, record budget deficits would result, according to CBO Director Douglas Holtz-Eakin, with future defense and homeland security funding increasing current projections. Increasing debt service leaves less and less in the budget for priorities like education, healthcare, and retirement security, Holtz-Eakin said.

According to the CBO report, following the current fiscal trend, projected entitlement costs and other mandatory programs will increase by an average of 5.5 percent annually, but economic growth would not alleviate significant long-term strains on the budget such as social security, Medicare, and Medicaid.  The government will not be able to grow out of the deficit without major cutbacks in domestic programs, cited the report.

The administration budget for 2005 provides $31.3 billion for HUD, but a renewed proposal to block grant the Section 8 program to states has resurfaced.  The proposal also suggests sweeping reform of the rental assistance voucher program to control costs by allowing more flexibility for local housing agencies to set rents using local market data.

The Housing Choice Voucher program would be funded at $11.8 billion, which is $1 billion less than what is necessary to provide for all current vouchers and could cause the loss of up to 250,000 vouchers.  Section 8 project-based renewals were set at $5.1 billion, while Section 202 and 811 also lost ground.

Encouraging housing agencies to use rental assistance vouchers for homeownership is also included in the budget proposal, as is an allocation of $21 million in grant funds to assist non-profit organizations with the Fair Housing Initiatives Program of education, enforcement and outreach.

Homeownership continued to be a focus with the zero down payment mortgage proposal that would allow an estimated 150,000 families to purchase a single-family home with no down payment required.  The American Dream Downpayment Initiative could receive $200 million to assist first time homebuyers.

Users To Be Dropped If No Reply
TRACSMail users who have not verified their account by February 27 will be automatically deactivated from their TRACSMail ID.

In an attempt to verify current use of TRACSMail accounts, TRACS officials are asking users to update or identify the owner of all accounts within the delegated administrator.  In order to maintain TRACS as a secure system, officials are asking for information such as first and last name, TRACMail ID number, contract/ project number, organization name, organization type, telephone and fax number, complete mailing address and alternative contact email address if applicable.

Users should respond by email to tracmhelp1@ tracsmail.hud.gov to acknowledge that their account is in use.  Users with email or software configuration that do not allow a response via their TRACMail account should send an email to tracs_hotline@hud.gov or fax a document with the correct information to 202-401-7984.

After February 27, 2004, account IDs that have not replied to the TRACSMail system will be deactivated.  Any user whose account that is deactivated must request a new account.

For questions or concerns about the deactivation, please call the TRACS Multi-Family Help Desk at 800-767-7588.

Non-Compliance Broadcast Messages
TRACS officials are implementing a new monthly broadcast message to users entities submitting vouchers for contracts and properties that are not in compliance in the submission of tenant data to the TRACS system.

The broadcast message will read: A review of your contract portfolio indicates that one or more contract/ project number(s) are NON-COMPLIANT with respect to Tenant Certification Reporting to TRACS.  Effective for the April 2004 Voucher, payments will be subject to suspension for any contract/ project number( s) within your portfolio identified as NON-COMPLIANT.  The following contract/ project number(s) is/are currently identified as NON-COMPLIANT: A

TRACS officials are asking that users review their portfolio using the TRACS Voucher Query function to research non-compliant contracts and update any tenant certification data as necessary.  Questions concerning the new broadcast message should be directed to the TRACS Helpdesk at 800-767-7588.

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