AHMA-NCN Touchstone / Newsletter July 2002

July, 2002 Newsletter

Report Evaluates HUD Goals
Although housing for extremely low-income families has gotten worse, an increasing homeownership rate and the improved physical condition of HUD-assisted rental housing are two indicators that HUD has made progress in meeting its strategic goals, according to HUD Secretary Mel Martinez. In a report issued recently by HUD officials, the objectives and outcome indicators for the department's strategic goals are detailed and explained. The report, A Performance and Accountability Report for FY2001, lists the department's five goals as:

to increase the availability of decent, safe and affordable housing;
to ensure equal opportunity in housing;
to promote self-sufficiency of and asset development by families and individuals;
to improve community quality of life and economic vitality;
to ensure public trust in HUD.

While admitting that the supply of HUD-assisted rental housing is inadequate for current needs, HUD officials cite the cause as loss of affordable housing stock and the lack of sufficient replacement housing for units lost. Homeownership has been the main focus of HUDs mission since Martinez was appointed, with rental housing and homelessness taking a back seat. In his proposal for the 2003 budget, the secretary announced that funding would triple for programs assisting low-income families to become first-time homebuyers. The Self-Help Opportunity Program could receive up to $65 million, up from $22 million in the last budget, and a new "American Dream" down payment assistance program would funnel $200 million into the HOME program to assist up to 40,000 families a year with down payments, closing costs, and/or reduction of mortgage interest rates. For 2003, funding for affordable housing was mentioned in connection with expanding opportunities for faith-based and community-based programs to assist low-income families with housing.

Although the department claims credit for the reduction in worst case housing needs of renters between 1997 and 1999, goals for increasing housing availability will no longer be measured by the ratio of assisted households to households with worst case needs. HUD officials claim that only Congress and the economy can reduce worst case housing needs. The report is available on HUD's website on the web page of the Chief Financial Officer.

The final 2003 Annual Performance Plan released by HUD in April is also available on the HUD web site. Although keeping the same mission statement, the plan makes interim adjustments to HUD's six-year strategic plan with eight goals that reflect the department's attention to homeownership, faith-based initiatives, homelessness and improved housing management. The eight goals include:

Simplify the home buying process;
Help families become homeowners;
Improve public and assisted housing and give residents more choices;
Strengthen faith-based and community partnerships;
Effectively address the challenge of homelessness;
Embrace high standards of ethics, management and accountability;
Ensure equal opportunity and access to housing;
Support community and economic development.

The first portion of HUD's overall strategic plan, the 2020 Management Reform Plan, was released in the summer of 1998. Departmental functions were streamlined into specialized centers such as the Real Estate Assessment Center and more department business was handled electronically. The second portion of the six-year plan was released in 2000, but HUD Secretary Mel Martinez announced last winter that the department would return to the old system of regional management.

Section 515 Housing Needs Attention
Approximately 300,000 low-income rural housing units are in danger of being converted to market rate properties as the housing shortage continues, and immediate measures must be taken to ensure housing for the rural poor, according to a report by the Housing Assistance Council.

The report, A Rural Rental Housing Preservation and Nonprofit Capacity to Purchase and Preserve Section 515 Projects, claims that non-metropolitan counties adjacent to metropolitan areas would benefit greatly from low-income preservation. Although rents are increasing in these areas, a large number of nonprofit companies are available to buy and manage rental properties that would otherwise be lost to market rate units. The report provides several case studies of buyouts involving Section 515 projects by nonprofit companies that were prosperous, along with maps of project locations by state, county-by-county information on projects and markets, and a county-by-county list of housing nonprofits. The report is available on HAC's web site www.ruralhome.org

New Freedom Initiative Boosts Disabled Services
Access to housing services are improving under HUD's New Freedom Initiative for persons with disabilities. After the president issued an executive order to the department to improve disabled services, HUD began a campaign to improve and implement access to services for people with disabilities. Initiatives include:

revision of the Section 8 program to allow the use of vouchers for mortgage payments and purchase of homes for people with disabilities;
a pilot project in eleven states that would allow HUD and the Department of Health and Human Services to work together to facilitate the transition of non-elderly persons with disabilities from nursing homes into community living;
technical assistance to housing authorities that experience difficulty when using housing vouchers, and preference to housing authorities that use a specified percentage of vouchers for persons with disabilities;

HUD Official Serves Short Term; OMHAR Gets Director;
HUD's third highest-ranking official has decided to leave the department after only three months. Robert L. Woodson Jr., who served as chief of staff, was appointed February 2002. Woodson has not announced his future plans.

Charles Williams, a consultant from Salt Lake City, Utah, has begun work as director of the Office of Multifamily Housing Assistance Restructuring OMHAR. Former director Ira Peppercorn resigned last winter after serving since October 1998. Barbara Chiapella, deputy director of operations for the Office of Multifamily Housing Assistance Restructuring, had been appointed interim acting director.

Report Requests More Housing from Congress
A recent report concerning the one-strike rule makes a requests that Congress subsidized more affordable housing units to ease housing crisis and assist the housing needs of parents after imprisonment. The challenges of obtaining housing assistance after leaving the criminal justice system are among the topics and policy recommendations addressed in a joint report from the Community Legal Services and the Center on Law and Social Policy. Although problems with employment, housing and public assistance experienced by former prison inmates are documented, the report also focuses on the difficulties caused by HUD's one-strike policy of termination for housing assistance. The report is available at www.clasp.org

HUD Notice 2002-20 (May 17, 2002)
Project-Based AAFs
This notice announces updated procedures for annual adjustment or pre-renewal contract rent for Section 8 projects, describes procedures for applying statutory comparability requirements and provides guidance concerning rent comparability studies.

Federal Register FR-4741-N-01 (May 24, 2002)
FMRs for Mod Rehab
This notice announces revised fair market rents for the Section 8 Housing Choice Voucher Program to reflect estimated 40^th and 50^th percentile levels trended to April 1, 2003.

HUD Notice 2002-08 (May 6, 2002)
Reinstatement of QHWRA
This notice announces the reinstatement and extension until May 31, 2003, of HUD Notice 2000-18, Admission and Occupancy Provisions of the Quality Housing and Work Responsibility Act of 1998 for Multifamily Housing Programs, issued September 7, 2000.

HUD Notice 2002-09 (May 10, 2002)
Corrections to Section 236 Guidelines
This notice announces technical corrections and clarifications to HUD Notice 2001-07, guidelines for Calculating and Retaining Section 236 Excess Income, published July 27, 2001.

HUD Notice 2002-11 (May 29, 2002)
Reinstatement of Section 235 Recapture
This notice announces the reinstatement and extension of HUD Notice 1994-66, Recapture of Section 235 Assistance Guide, issued September 2, 1994.

HUD Notice 2002-14 (June 7, 2002)
Procedures for Reduction of Baseline Units
This notice announces procedures for voluntary reduction of housing choice voucher baseline units which have not been leased up and utilized in the public housing agency jurisdiction.

HUD Notice 2002-15 (June 7, 2002)
Reinstatement of Discrimination in the Voucher Program
This notice announces the reinstatement of HUD Notice 2001-02, Prohibition of Discrimination against Families with Housing Choice Vouchers by Owners of Low-Income Tax Credit and HOME Developments., issued January 31, 2002.

Omnibus Housing Bill To Undergo Major Alteration
Efforts by housing advocates and Congress have been responsible for several changes in the omnibus housing bull since its introduction last March and more changes are on the way. Housing and Community Opportunity Subcommittee Chair Marge Roukema (R-NJ), who introduced H.R. 3995, will be making a manager's amendment to the bill at the subcommittee hearing and other subcommittee members are expected to proposed their own changes.

Amendments to be included by Roukema are:

Recaptured Section 8 funds would not be used for the affordable rental housing production program for very low and extremely low income people under HOME and funding for the program would be authorized.
The administration's request for a down payment assistance initiative would be met by incorporating H.R. 4446.
Risk-based capital levels for the Mutual Mortgage Insurance Fund would be deleted.
C H.R. 4817, the Elderly Housing Quality Improvement Act of 2002, would be incorporated instead of the modernization demonstration for Section 236 elderly properties.
A demonstration program with 5,000 incremental vouchers for extremely low income people in new or substantially rehabilitated properties would be substituted for "thrifty production vouchers" for units produced with full capital subsidies for extremely low income.
Authorization for a change of rent levels for new voucher tenants from forty percent of adjusted income to forty percent of gross income.
Public housing agencies would use two percent of their funds on efforts that help families find places to use their vouchers instead of the proposed five percent.
The addition of a provision to allow voucher holders to move into units prior to PHA inspection in certain circumstances.
The prohibition of the waiver of PHAs' resident commissioner requirement.
Suspension of plans for small public housing agencies that would provide for tenant participation.
Discarding language from the administration's request to privately finance public housing rehabilitation with the conversion of public housing to project-based vouchers and also the provisions for religious organizations engaging in housing development.
Incorporation of the National Housing Trust Fund bill. Proposed changes from other subcommittee members include:
1. An expansion of the use of enhanced vouchers in cases where the property is changing use.
2. An amendment concerning ways to end homelessness.
3. Authorization for increased housing assistance for victims of domestic violence.
4. An amendment on Section 3, the federal law that requires agencies receiving federal housing and community development funds to employ and contract with low income people.
5. Predatory lending legislation.
6. Protection for innocent tenants of the "one-strike" provision that would allow eviction only if they knew or should have known about the criminal activity, along with an eviction exemption for victims of crime.

A major amendment including the National Affordable Housing Trust Fund Act of 2002 is expected to be offered by Rep. Bernie Sanders (I-VT), who sponsored the fund in H.R. 2349. The national trust fund has garnered 176 cosponsors in the House and 2,650 sponsoring organizations from the housing industry and other advocacy groups. Changes to the fund that would be included in the omnibus bill but are absent from the trust fund bill include:

H.R. 2349 and the proposed changes are expected to be offered first, with an alternative trust fund amendment less the provisions that do not identify the FHA and Ginnie Mae surpluses as the main source of funding and uses appropriations when necessary beyond 2003. A final amendment would provide matching funds from federal sources for state and local trust funds, with the matching funds subject to the same income targeting.

Housing Issues Are Crux Point for Economy
Good, safe, affordable housing is the underpinning of all other domestic concerns affecting economics, social policy and community life, according to a report of the Millennial Housing Commission. Commission co-chairmen Susan Molinari and Richard Ravitch expressed their hope that Congress take a serious look at the commission's report over the next few years because of housing's enormous impact on economic well-being. The report, Meeting Our Nation's Housing Challenges, is a result of a 17-month study into the housing industry. Recommendations for improving government housing regulations are listed in four areas: strengthening communities; devolving decision-making; involving the private sector, and ensuring sustainability. Budgetary needs were not addressed in the report.

Because the commission did not reach a unified overall consensus, the report lists 13 primary and 15 secondary recommendations for reforms to assist low-income families and what used to be considered middle income, according to Molinari, that are currently caught up in the housing crisis.

The report requests that the government spend more money on capital subsidies for very low-income families; waive rent levels to keep them thirty percent of income; provide exit tax relief legislation to preserve existing affordable housing; expand the ability of states to issue tax-exempt debt to reduce occupancy costs; a homeownership tax credit; and a multifamily rental production program to attract private capital. Although the report also recommended ways to improve the housing voucher program, it should not be the main source of housing subsidies.

A major reform of public housing involving a project-based, privatized system is proposed in the report, along with requests for new public housing properties for the very poor and a transfer of subsidies to the housing certificate fund. Because preservation of housing units as contracts expire is another serious housing concern, a production program with a one-time, 100 percent capital grant to assist very low-income families is outlined in the report. Although the commission briefly discussed the issue of how vouchers are issued annually, many families remain in affordable housing for years. A solution was not fully addressed in the report because of the enormity of the issue, according to Molinari. However, expansion and/or improvement of the housing choice voucher, HOME program, and low income housing tax credit were mentioned.

Ravitch said there are few new ideas in housing and much of that is under development in just combinations and permutations of old ideas. In his 40 years in housing, he said he has seen much work left undone in housing despite the United States providing more housing as a society than anywhere else in the world. Despite the production of 5.5 million units nationwide over the past four years, there is a growing affordability problem and 14 million families pay more than 50 percent of their income on housing, Ravitch said. Although Ravitch acknowledged that governmental rules and regulations sometimes increase the cost of affordable housing, they are necessary in a democracy to protect the rights of some groups of people.

According to Ravitch, housing is twenty percent of the national wealth, the biggest expenditure an American family incurs, and has such an enormous impact on family stability, housing is often overlooked by politicians for three reasons: a large portion of the country is well housed; housing is a complex issue that necessarily involves discussion of more controversial issues; and a significant change in housing policy would most likely come with a big price tag.

Commissioner Cushing Dolbeare said she felt several more pages could be included in the report, such as suggestions to include information on civil rights and specific endorsement of the National Housing Trust Fund.

Commissioner Bart Harvey, CEO of the Enterprise Foundation, said that the recommendations was meant to be used on the federal level, but were equally applicable on the state and local level as well, although the commission's report does not have any authority over the actions of these governments.

The lone dissenting opinion came from Robert Rector, a senior research fellow at the Heritage Foundation. Rector said that he disagreed reluctantly with the final report because it ignored the underlying causes of high housing costs and focused more on the superficial symptoms, such as insufficient hours worked by the head of household for poor families; erosion of the sanctity of marriage; and government regulations that lead to increased housing costs. The way to deal with high housing costs is through an increased wage, Rector said. He also cited faulty data that could lead to improper conclusions and policies.

In response, Molinari said the commission recommended removing regulations penalizing married couples, but did not want to encourage women in abusive relationships to remain just to retain housing.

Several members of the twenty-member commission said that they did not participate in partisan sniping and were proud that the group was able to obtain a useful consensus between so many members.

The bipartisan commission was authorized by the Congressional 2000 HUD budget in an effort to find ways to expand affordable housing needs for low-income families. Commission members were appointed by members of the appropriations and banking committees of both houses and from the appropriate subcommittees. Members include representatives from various state housing and finance agencies; real estate and development; Harvard University; the banking community; several foundations and the affordable housing industry.

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