Copyright 2004 Ansel Publications. All rights reserved.

Three main problems of the budget proposal were identified and targeted by Barbara Sard of the Center on Budget and Policy Priorities:

1. the voucher program is $1.6 billion short of the funding needed to maintain the current level of service, resulting in the loss 250,000 vouchers;
2. proposed block granting would threaten the program's ability to keep up with inflation and rent increases;
3. the removal of income targeting and other resident protections would hinder the program's ability to serving extremely low-income families.

The CBPP recently released three reports that also refuted the president's ascertains concerning the voucher program. The first report, The Local Impact of Proposed Cuts in Federal Housing Assistance, states that local housing agencies would have to decrease assistance by twelve percent next year and thirty percent by 2009 to deal with projected funding cuts. This report estimates how the elimination of vouchers will affect families and projects increases in annual. The bulk of funding for reduced vouchers would be shifted to state and local agencies, according to the report, Passing the Buck. Eliminating vouchers, raising rent and targeting voucher use away from poorer families would some of the options agencies had to pick from without adequate funding. One report directly targets HUD officials' use of a New York Times article to argue that voucher costs are rising faster than they should be. In A HUD's Reliance on Rent Trends for High End Apartments to Criticize the Housing Voucher Program is Mistaken, the report claims that the Times article uses data for high-end apartments and did not take into account affordable housing statistics. This CBPP also claims that the accuracy of the fair market rents HUD uses for local market conditions is a better way to guarantee actual market conditions. Advocates of services for the homeless stated that the loss of stable Section 8 housing, homeless people will not be able to fully utilize the other services provided for them such as job skills and training.

The impromptu briefing was arranged by the National Association of Housing and Redevelopment Officials, the National Low-Income Housing Coalition, American Association of Homes and Services for the Aging and the National AIDS Housing Coalition. Housing advocates aren't the only ones concerned over the budget's effect on the Section 8 program. Several members of Congress including Sen. Paul Sarbanes (D MD) and Rep. Lydia Velazquez (D NY) are drafting letters that request full funding for existing vouchers and eliminating the flexible voucher program. The letters are making the rounds of Congress for members to sign in support.

Industry and State Officials Band Together Against HUD Policy
Housing industry leaders and one state governor are vehemently opposing HUD's renewal formula for the voucher program. As a result of HUD's renewal formula set forth in the 2004 appropriations bill, public housing authorities are expected to be left short-funded when it comes to renewing all vouchers currently in use. HUD officials are expected to issue payments based on the number of vouchers under lease as of August 1, 2003, adjusted for inflation, instead of fully reimbursing PHAs for actual voucher costs in 2004. Officials from several affordable housing organizations signed on to a letter sent to HUD Secretary Alphonso Jackson detaining their concerns about the reimbursement policy and the insufficient funding necessary for PHAs to support the current number of voucher-assisted families. Many families would lose vouchers and many more will suddenly be required to pay more for rent than they can handle.

Governor Mitt Romney (R) of Massachusetts has already appealed to HUD on behalf of the 3,700 families and individuals who are expected to lose their housing assistance. His letter stated that HUD's renewal formula would seriously affect his state's ability to meet the needs of current voucher users and the change would mean a $3 million gap in Section 8 funds. Romney said his state could be forced to terminate existing voucher clients. The loss of funding in Massachusetts is similar to a recent problem faced by the Housing Authority of the City of Los Angeles last month, in which HUD officials threatened to put the housing authority into receivership after funding shortfalls in their voucher program.

Rep. Barney Frank (D-MA), the Ranking Member of the House Financial Service Committee and a long-time proponent of affordable housing, spoke out at a hearing of the Department of Housing and Community Development on the voucher funding problem attended by more than 2,000 people in Massachusetts. Frank criticized the Bush Administration and said that HUD's new policy would kill the Section 8 program. "Since taking office, the Bush Administration has made a series of policy decisions that appear designed to dismantle the Section 8 program one piece at a time," Frank said. "In a nation that is as wealthy and powerful as ours it is morally unacceptable and outrageous for low income and working poor families to lack affordable housing." A measure to offset the loss of funding is only a short term solution, according to Frank. He was referring to a plan in which HUD is expected to release $2.6 million to Massachusetts, with $2 million of that coming from the Moving to Work Program and $600,000 tapped from the mainstream voucher program.

Potential Fraud Cited HUD Programs
A General Accounting Office report has found that $16.3 million in HUD payments to contractors were questionable and $181,450 in payments were potentially fraudulent. The audit, HUD Single-Family and Multifamily Property Programs: Inadequate Controls Resulted in Questionable Payments and Potential Fraud, stated that "significant internal control weaknesses" were present in the process used to pay contractors for work on HUD single-family properties. The fraudulent payments had been made to the same contractor that the GAO previously cited for similar practices in a review of the multifamily property program. In ten years of the single-family property program, actual costs have tripled to a total of more than $500 million over the original development budget. In similar news, the Washington Post published a story that questioned departmental trips using HUD funds made by former HUD Secretary Mel Martinez while he was in office. According to the article, twelve of the 25 stops made by Martinez while on HUD business using HUD funds in 2003 were to cities in Florida, where he is currently running for the U.S. Senate.

Project-Based Regulations Proposal Published
As part of the statutory merger of the certificate and voucher tenant-based assistance program included in the Quality Housing and Work Responsibility Act of 1998, HUD has released final comprehensive proposed regulations for the project-based voucher program. To encourage more participation by owners and managers, the project selection policy has been modified for previously approved projects that have gone through a competitive selection process to be eligible for the project-based program. According to the new regulations, the specific standard of twenty percent poverty rate is not part of the rule and PHAs will be able to determine their own standard and insure that a project is consistent with the goal of deconcentrating poverty. PHAs will also be allowed to project base up to twenty percent of their baseline units compared to the current regulation of twenty percent of the total funding currently permitted. Project-based vouchers would also be attached to existing housing unit that meet housing quality standards and a 25 percent cap would be placed on assisted housing in each multifamily housing building regardless of whether it was project-based or not. PHAs would also have authority over site selection for project-based vouchers and the responsibility to determine that HUD site-selection criteria are met instead of HUD, which currently oversees that criteria. Until the new regulations are final, the rules set forth in 2001 will remain in effect.

New HUD Secretary Named
Alphonso Jackson has been confirmed by the Senate as new HUD Secretary. Jackson served as Deputy Secretary of HUD under Mel Martinez and had been serving as acting secretary since Martinez resigned to run for the U.S. Senate. Previously, he presided over operations at local housing authorities in Texas, Georgia, and Washington DC.

Copyright 2004 Ansel Publications. All rights reserved.

HUD Notice 2004 02 (January 30, 2004)
Revised Prepayment on Section 202/8 Projects
This notice reinstates 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 extends it to January 31, 2005.

HUD 2004 03 (February 13, 2004)
2004 Interest Rate for Section 202/811 Capital Advance Projects
This notice announces the Fiscal Year 2004 nominal interest rate of 5 3/8 percent for the Section 202 and Section 811 Capital Advance Programs.

Federal Register FR 4881 P 01 (March 3, 2004)
Equal Participation of Faith Based Organizations
This proposed rule would implement executive branch policy that, within the framework of constitutional church state guidelines, faith based organizations should be able to compete on an equal footing with other organizations for federal funding in HUD programs and activities. Executive Order 13279, AEqual Protection of the Laws for Faith Based and Community Organizations, establishes fundamental principles and policymaking criteria to guide federal agencies in formulating and developing policies that have implications for faith based and community organizations to ensure the equal protection of the laws for these organizations in federally assisted social service programs. In addition, this proposed rule would amend the regulations for the State Community Development Block Grant (CDBG) program to clarify that the requirements contained in HUD's September 30, 2003, final rule regarding the equal participation of faith based organizations in certain HUD programs apply to the State CDBG program.

PIH 2004 01 (March 9, 2004)
Verification Guidance
This notice announces instructions on the HUD established verification policies as for administrators of public housing and Section 8 programs who are required to implement procedures to ensure compliance with these verification policies during mandatory interim and reexaminations of family income under existing regulations. The implementation of these verification policies will assist in the reduction of income and rent errors.

PIH Notice 2004 02 (March 15, 2004)
Excess Utility Consumption Charges
This notice announces HUD=s position on Public housing agencies charging for excess utility consumption under the flat rent option for public housing. The flat rent is based on the market rent charged for comparable units in the private unassisted rental market including the utilities provided by the PHA. Section 3(a)(2)(B) of the United States Housing Act directs PHAs to establish flat rents for their units based on the rental value of the unit as determined by the PHA and in compliance with 24 CFR Section 960.253(b)(2) which specifies the factors that must be considered when determining a flat rent. Further, pursuant to 24 CFR '960.253, a PHA must give public housing families the opportunity to choose between a flat rent or an income based rent, annually. Families choosing the flat rent option are not provided any utility reimbursement or utility allowance.

Federal Register FR 4636 P 01 (March 18, 2004)
Project Based Voucher Program
This notice announces a proposal for comprehensive regulations for the new project based voucher program which would replace the current regulations for the project based certificate program.

Federal Register FR-4902-N-01 (March 1, 2004)
Statutory Mortgage Limits
This notice announces HUD adjustment of the FHA Multifamily Loan Limit Adjustment Act of 2003 to certain maximum mortgage amount limits consistent with the new law.

Federal Register FR-4881-P-01 (March 3, 2004)
Equal Participation of Faith-Based Organizations
This proposed rule would implement executive branch policy that Faith-based organizations should be able to compete on an equal footing with other organizations for federal funding and establishes fundamental principles and policymaking criteria to guide agencies in formulating and developing policies for faith-based and community organizations to ensure the equal protection of the laws for these organizations in federally-assisted social service programs.

Federal Register FR-4913_F-01 (March 3, 2004)
Changes in Maximum Mortgage Limits for Multifamily Housing
This rule conforms HUD's regulations to a recent statutory increase in the amount by which HUD may increase the dollar amount limitations on insured mortgages for multifamily housing.

Federal Register FR-4922-N-01 (March 9, 2004)
Matching Tenant Data in Assisted Housing Programs
This notice provides an overview of the Computer Matching and Privacy Protection Act of 1988 involving comparisons between income data provided by participants in HUD's assisted housing programs and independent sources of income information. The matching program will be carried out to detect inappropriate housing assistance and provides verification of the matching results and the initiation of appropriate administrative or legal actions.

FR_4720-F-02 (March 10, 2004)
FHA Inspector Roster
This notice announces regulations to govern the Federal Housing Administration Inspector Roster that provide for placement of inspectors, recertification of inspectors, and removal of inspectors from the roster, and also identifies when a mortgagee must use an inspector listed on the roster.

Federal Register FR-4896-N-01 (March 16, 2004)
PHAS Physical Condition Inspection Changes
This notice provides information to public housing agencies and multifamily owners and agents regarding proposed changes to the 47 definitions in the physical condition Dictionary of Deficiency Definitions that is an appendix to the PHAS notice on the physical condition scoring process that affect the physical condition inspection process for both multifamily and public housing properties.

Federal Register FR-4636-P-01 (March 18, 2004)
Project-Based Voucher Program
This notice proposes comprehensive regulations for the new project-_based voucher program which replaces the project-based certificate program and current regulations in which HUD pays rental assistance for eligible families who live in specific housing developments or units. According to the new regulations, a public housing agency that runs the tenant-based housing choice voucher program may "project-base'' up to 20 percent of voucher units funded by HUD.

Federal Register FR-4920-N-01 (April 1, 2004)
Multifamily Inventory for the Elderly and Persons With Disabilities
This notice announces HUD's "Multifamily Inventory of Units for the Elderly and Persons with Disabilities'' designed to assist prospective applicants with locating units in certain projects with FHA insured financing and HUD subsidized multifamily properties that serve the elderly or persons with disabilities. HUD will update the Inventory on an annual basis to reflect changes in property status and to reflect new projects available for occupancy.

Environmental Protection Agency FRL-7648-9 (April 1, 2004)
Protecting the Health of Older Adults
This notice announces a new $200,000 grant and cooperative agreement opportunity for protecting the health of older adults by improving their environment.

Federal Register FR-4870-P-01 (April 19, 2004)
Revised Guidelines for Previous Participation Certification
His proposed rule would revise the regulations that require all participants in HUD's multifamily housing programs to file their previous participation certificates by a specified date using the active partner performance system on HUD's secure Internet site.

Copyright 2004 Ansel Publications. All rights reserved.

Deja Vu All Over Again
In what looks like a rerun of the 2004 budget blueprint, President Bush has asked Congress to cut funding to the housing choice voucher program along with policy changes that are more destructive than changes proposed last year. The Housing Certificate Fund received only $18.465 billion in the president's budget with $16.920 billion going toward Section 8 renewals. Although project based renewals are fully funded, current vouchers were short-changed by $1 billion less than what is necessary, precipitating a loss of 250,000 vouchers.

In a slight shift, the president also wants to restructure the housing choice voucher program as a block grant to public housing agencies. In the 2004 budget proposal, he had suggested that vouchers be a block grant program to the states Domestic programs received increases of about .5 percent above 2004 funding and 65 discretionary programs were scheduled termination, but the departments of Defense and Homeland Security were lavishly treated to a combined increase of seventeen percent. The overall HUD discretionary budget request was bumped up by .8 percent to $31.264 billion. Administrative fees for public housing agencies dropped by $59 million less than the 2004 budget, which will greatly affect how PHAs maintain programs and staffing.

The budget also has a cap for administrative fees that is seven percent of total funding. The Family Self Sufficiency coordinators program, which provides funding for job training, child care, and other supportive services, received $48 million last year, was zero funded for 2005. Section 202 elderly housing was level funded $773 million as was Section 811 for people with disabilities, which received $249 million. Fair Housing activities was also level funding at $48 million, while lead Hazard reduction was down $35 million to only $139 million, down from $174 million in FY04.

Although he has been shot down twice before for this request, the president has once again asked that the Rural Housing and Economic Development program be zero-funded. Congress has consistently kept funding the program despite the president's and HUD's attempts to eliminate it. Section 515 rural housing was slashed from $116 million to $60 million for 2005 with no allowance for new construction, a provision from the 2004 budget that Congress also rejected. Repairs and rehabilitation only would be funded although rural rental housing is the most under-served area of affordable housing and units are consistently being lost to prepayment. Section 521 rental assistance received a small boost from $584 million to $592 million, but the numbers are still below 2003 levels. The Community Development Fund receives $4.6 billion, down $.6 billion from 2004. And the HOPE VI program was zero funded again since Congress refused the request last year.

Vouchers To PHAs Instead
Some of the names have been changed, but the general idea behind President Bush's policy toward the housing choice voucher program is to make the responsibility of someone other than the federal government. In his 2004 budget proposal, the president asked to block grant vouchers to the states, a measure that was rejected by Congress. In the 2005 budget, the president has asked that vouchers become the responsibility of public housing agencies even as he cut administrative fees for PHAs by $59 million. Although the administration has said it is responding to requests and suggestions from the PHAs, adding duties and responsibilities to an already under-staffed, under-funded industry while further cutting their funding does not add up.

Called the Flexible Voucher Program, the president's proposal, vouchers would no longer be portable, PHAs could use them for homeownership and PHAs would not be required to abide by several rules and features of the current program.
Specific changes include:

• PHAs could use all of their vouchers for homeownership. In an effort to deal with what the administration call the Arising costs of the voucher program, this provision would target families with higher incomes who require less rental assistance instead of families with the most serious housing problems be low-income or extremely low-income families.
• Vouchers would no longer be portable and families could no longer move outside of the jurisdiction of the PHA issuing the voucher during the first year of assistance, not even for jobs or transportation.
• PHAs would have more latitude to use voucher dollars and many current regulations would no longer be mandatory, such as the repeal of income targeting requirements that focus 75 percent of new vouchers toward extremely low income households (30 percent of area median income or less). Flexible voucher rules would allow all new vouchers to be issued to households with income up to 80 percent of area median income.
• PHAs could develop their own rent systems, including elimination of the Brooke Rule that limits a tenant's portion of rent to 30 percent of their adjusted income.
• To promote the idea that vouchers are a transition program, PHAs would receive financial incentives for graduating tenants out of the voucher program.
• Enhanced vouchers that are provided to families who live in a project based unit that is converting to market rate, would only be valid for one year. After that, families would come under current PHA rules that would allow them to remain in the converted unit indefinitely at the rate of thirty percent of their adjusted income in rent.
• Since PHAs would determine the maximum amount of rent deemed reasonable based on the market instead of fair market rents, vouchers could lose value. With a limited choice of neighborhoods, segregation and a concentration of poverty could be created.
• Instead of a unit based system, funding would be contingent on a dollar based system. Annual appropriations would be a set amount distributed to PHAs by a formula instead of determining the appropriation annually based on the actual cost of housing.

Senate Budget Resolution Even Tighter
One month after the president released his budget for 2005, the Senate Budget Committee passed their overall 2005 budget that is even more restrictive. The housing choice voucher program may have avoided much of the funding decreases when the committee claimed that "sufficient budget authority and outlays are provided to renew all utilized Section 8 housing contracts." The president's second attempt to block grant the voucher program, to public housing agencies this time, was not echoed in the Senate's resolution.

PHA Operating Changes Proposed
Public housing agencies would receive operating funds based on their individual properties as opposed to the current funded method at a PHA-level if a committee proposal becomes effective. The move from a formula-based method to a project-expense reimbursement was proposed by a committee charged with changing the way public housing authorities receive funding for their operating costs. The committee used a report commissioned by HUD from the Harvard University's Graduate School of Design to make recommendations for making PHAs operate more closely to the model used by FHA multifamily properties and the conventional real estate market. The transition to the new operating method would take place over five years after the issuance of the final rule.

PHAs should be relieved of many of the "regulatory burdens" that are unique to them to ease the transition from one method to another, according to the Harvard report used by the committee. Because the method works on the premise that PHAs do not provide additional services to residents, the new model could cause a loss of funding for residential services including resident participation programs. To combat the lost funding, the committee, voted to maintain resident participation funding as an add-on to the operating subsidy formula.

Advocates for affordable housing residents have expressed interest in the proposition to allow PHAs to increase rent and keep the excess. The plan could cause PHAs to begin favoring higher income families who apply for housing or even to evict low-income families for minor lease violations in an attempt to make money. Deregulation laws that remove income targeting and rent restructuring might also become common if the proposal is adopted and are another concern of housing advocates.

Conference Committee Stuck On One Provision
The proper way to handle tax cuts has become a sticking point as both houses of Congress attempt to draft a 2005 budget resolution. Called the pay-as-you-go provision, the Senate requires that tax cuts and increases in entitlement spending must be paid for by other spending cuts or an increase in taxes. The House committee does not want to require future tax cuts to be subject to offsets, so the pay-as-you-go provision is stuck in a House and Senate conference committee. A joint statement released last month by the Center on Budget and Policy Priorities, the Concord Coalition, the Committee for Economic Development and the Committee for a Responsible Federal Budget asking Congress to adopt a pay-as-you-go resolution that would apply to tax cuts and entitlement spending with no exemptions.

Bill Shifts $1 Billion To Low Income Housing
Low-income housing for extremely low income households received a boost from the Senate Banking, Housing and Urban Affairs Committee that could bring in a half billion dollars for production and preservation of affordable housing units. The committee wants to require Fannie Mae and Freddie Mac programs to spend 2.5 percent of pre-tax profits on capital grants to support production and preservation of rental low-income housing with another 2.5 percent of profits funding a loan loss reserve fund. Five percent of pre-tax earnings from both programs was approximately $1 billion last year. Several amendments to the bill were offered including the creation of goals for multifamily housing and low income first time homebuyers, and the requirements for sub-goals activities to be included in annual reports and for investment in affordable housing preservation and manufactured housing for enterprises that invest in under-served markets. Successful passage of the bill this year is uncertain since Congress is split along party lines concerning receivership for failed companies.

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