House Subcommittee Holds Mark-Up of Affordable Housing and Self Sufficiency Improvement Act of 2012

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1 House Subcommittee Holds Mark-Up of Affordable Housing and Self Sufficiency Improvement Act of 2012 If Enacted, New Law Would Expand Moving to Work Program By Sharon Wilson Géno, Amy M. Glassman, and Nydia M. Pouyes On February 7, 2012, the Insurance Housing and Community Opportunity Subcommittee of the House Financial Services Committee marked up a discussion draft of the Affordable Housing and Self Sufficiency Improvement Act of 2012 (AHSSIA). AHSSIA enacts significant changes to the Section 8 Tenant-Based, Project-Based programs and Public Housing Programs. The bill includes components of earlier reform attempts through the Section 8 Savings Act (SESA) and the Section 8 Voucher Reform Act (SEVRA) plus several new components. The bill also expands the Moving to Work Program and modifies the Rental Assistance Demonstration (RAD), which HUD is in the process of implementing. To move forward in the House, a mark-up of AHSSIA will need to be held by the full House Financial Services Committee, followed by consideration on the House floor. Below are summaries of the bill s key proposals. Moving to Work Program The bill expands the Moving to Work (MTW) Program by directing HUD to establish an application process to admit additional public housing agencies (PHA) into the MTW program. No cap is placed on the number of agencies that may participate in MTW. Various changes to the program include the following: The bill imposes new reporting requirements for MTW participants, aimed at assessing the number of families that have achieved self-sufficiency and economic independence annually, the number of new families PHAs assist from waiting lists, the percentage of change in per voucher cost for household receiving supportive services, and the percentage of the change in a family s income. HUD is required to assess the impact of various strategies or programs employed by PHAs to determine which programs should be duplicated. The bill permits PHAs to participate in MTW perpetually, so long as they remain compliant in their MTW agreement. HUD may, however, terminate MTW contracts if PHAs are found to be in material default of the conditions and obligations of their agreement, to have misused or misappropriated funds, or are not making a good faith effort to advance the goals of MTW. PHAs must not be terminated without just cause. The bill provides specific protections for current MTW PHAs, by allowing their agreements with HUD to remain in effect through their expiration unless the PHA opts out. PHAs may also opt into the new MTW program set forth in the bill. Changes to Admissions, Rent, and Continued Occupancy Policies DMEAST # v2

2 The bill proposes several income and rent provisions applicable to calculating adjusted incomes for tenants in the Section 8 Tenant-Based, Project-Based and Public Housing Programs. Overall, the bill seeks to reduce program costs substantially compared to current law. This reduction is partly attributable to changes to minimum rent contributions and standard deductions for elderly and disabled households. A. Definition of Adjusted Income The bill proposes several changes for defining adjusted income, including increasing certain deductions and creating administrative efficiencies as follows: Increases standard deduction for elderly and disabled families from $400 to $525 a year, with inflation adjustments for future years; Increases the standard deduction for each minor, full-time student, or person with disabilities from $480 to $525 a year, with inflation adjustments for future years; Increases the threshold for calculating un-reimbursed medical and handicapped assistance expense deductions from over 3 percent to over 10 percent of gross household income; and Includes provisions to achieve administrative efficiencies, including 1) relieving PHAs of the responsibility of maintaining records of HUD-required miscellaneous income exclusions, 2) permitting PHA safe harbor reliance on determinations of income conducted for other federal means-tested public assistance programs, including Medicaid, TANF and Food Stamps, and 3) permitting PHAs to make other appropriate adjustments when using prior year s calculations of other types of income. B. Recertification and Rent Changes Under current law, all households, other than public housing tenants paying flat rents, must be recertified annually with interim recertifications conducted at a tenant s request or in accordance with a PHA s policy. The bill changes the recertification schedule for certain types of tenants as follows: To determine household income for first-time admission to the Section 8 Tenant-Based, Project- Based, and Public Housing programs, a PHA or owner must use a household s anticipated income, as estimated for the coming year. For fixed income households, where at least ninety 90 percent of income comes from Social Security, SSI, governmental or private pensions, recertifications must be conducted at least every 3 years and a PHA or owner must use the household s income from the prior year. For fixed income households, PHAs may conduct interim recertifications at the household s request for any decrease or increase in adjusted income exceeding 10 percent. PHAs may elect not to conduct such a recertification for income decreases exceeding 10 percent in the last 3 months of a household s annual recertification. For earned income households, recertifications must be conducted annually and a PHA or owner must use the household s income from the prior year. For earned income households, interim rent increases based on a household s increase in earned income are not permitted, unless the household received an interim rent reduction based on their reported decreases in earned income and/or decreased deductions. Where households experience a decrease in earned income, however, PHAs or owners must lower rent in accordingly. DMEAST # v2 2

3 The bill also eliminates the current Earned Income Disregard for public housing households. C. Minimum Rents The bill increases the minimum rent contribution from up to $50 to $69.45, indexed to inflation annually. D. Eligibility for Assistance Based on Assets and Income The bill establishes a new asset limit and residency ownership prohibition, as it pertains to initial eligibility and ongoing annual recertifications for the Section 8 Tenant-Based, Project-Based and Public Housing Programs as follows: Actual income from assets is counted when determining rents, however calculated/imputed income is only counted to the extent that net household assets exceed $50,000. PHAs or owners may determine a household s net assets at or below $50,000 with a selfcertification by the household. The bill makes applicants and current households ineligible for assistance if they have more than $100,000 in net assets, inflated annually, or have a present ownership in a suitable home, in which they have a legal right to reside and the legal authority to sell. The bill provides several new exclusions from assets. The bill gives PHAs and owners the discretion to adopt a policy of not enforcing the asset limitations, to establish exceptions, or to delay up to 6 months evictions or terminations of assistance of households above the asset limit. Extends the 80 percent of local median income (AMI) limitation that applies at initial occupancy to an annual recertification for ongoing eligibility. PHAs and owners have the discretion not to enforce the income limitation for public housing or project-based Section 8 tenants and may delay eviction or termination for up to 6 months. E. Income Targeting The bill adjusts the basic income targeting threshold for the Housing Choice Voucher and Public Housing Programs. Currently, 75 percent of new vouchers and 40 percent of new public housing residents must have adjusted incomes below 30 percent of AMI. The bill modifies the foregoing threshold to the higher of 30 percent of AMI calculation or the Federal poverty level, adjusted according to household size. This change does not apply to Puerto Rico and other federal territories. Voucher Funding The bill establishes new guidelines for funding the Section 8 Housing Choice Voucher program starting in fiscal year 2012 and after. The bill provides that HUD s funding allocations to PHAs will include HAP contract renewals of Section 8 Tenant-Based and Project-Based voucher programs and adjustments for incremental and new tenant protection and enhanced voucher programs. The HAP renewal formula is based on a PHA s leasing and voucher cost data from the previous calendar year. Other changes to voucher funding include: DMEAST # v2 3

4 Authority for temporary annual over-leasing where there is budget authority and available HAP reserves. However, vouchers above a PHA s authorized level will not be counted when calculating renewal funding for the following year. PHAs may retain unobligated carryover voucher HAP funds (previously referred to as Net Restricted HAP Assets and now referred to as HAP Reserves) equal to no less than 6 percent of their current year s annual budget authority and this amount of HAP reserves would be exempt from any offsets imposed by HUD. Project-Based Vouchers Under current law, a PHA may only project-base up to 20 percent of its authorized Housing Choice Vouchers. The bill would permit project-basing of an additional 5 percent of budget authority for vouchers serving certain populations, including the homeless (as defined in the McKinney-Vento Act), disabled persons who need supportive services, and units located in areas where vouchers are difficult to use. Additionally, the bill modifies the current limitation on project-basing up to 25 percent of units in a project. It provides for project-basing up to the greater of 25 percent of units in the project or 25 units. Existing exceptions to the 25 percent limitations are retained, and the bill adds an additional exception in areas where the poverty rate is 20 percent or less or in areas where vouchers are difficult to use, in which case PHAs may project-base the greater of 25 units or 40 percent of the units in a project. The bill also provides for owner-managed site-based waiting lists, subject to PHA oversight and increases the maximum housing assistance payment contract term from 15 to 20 years. Rental Assistance Demonstration Congress authorized a Rental Assistance Demonstration Program in the Fiscal Year 2012 appropriations bill, and HUD is moving forward with the implementation of RAD, with a request for applications to be published soon by HUD. The bill authorizes and funds a revised version of RAD. Similar to the enacted RAD, the AHSSIA rental assistance conversion demonstration program (referred to below as AHSSIA RAD) develops and evaluates new approaches to preserve affordable rental housing. Participation in the program is voluntary, however, it is open only to owners of properties that are currently assisted under the Public Housing and Section 8 Moderate Rehabilitation programs. Key provisions of the AHSSIA RAD are as follows: As in RAD, under AHSSIA RAD, properties will convert their public housing or moderate rehabilitation assistance to a new, long-term rental assistance contract under the Project-Based Voucher program or under the Project-Based Section 8 Program. In the latter case, the contract would be eligible for renewal under section 524 of the Multifamily Assisted Housing Reform and Affordability Act of 1997 (MAHRAA). AHSSIA RAD makes explicit that the new assistance contract will survive foreclosure or bankruptcy, so that units redeveloped for affordable housing purposes will remain affordable. Similar to RAD, participating properties must be owned or controlled by a public or notfor-profit entity, except as determined to be necessary pursuant to a foreclosure, bankruptcy, or termination and transfer of assistance. DMEAST # v2 4

5 Similar to RAD, HUD must provide an opportunity for public comment on the eligibility and selection criteria to be implemented at participating properties. Similar to RAD, consultation with residents must be a part of the conversion process. Similar to RAD, HUD must assess the impact of the demonstration program on both properties and residents and publish such findings. The bill authorizes $40,000,000 annually for the first five years of the AHSSIA RAD for the costs of implementation and technical assistance. The bill would also change a number of other provisions in the public housing and Housing Choice Voucher programs. Over the next several weeks, negotiations will take place regarding AHSSIA, prior to the mark-up by the full House Financial Services Committee. A mark-up is not anticipated to occur before the end of February. Following mark-up by the full House Financial Services Committee, the bill would then need to be considered on the House floor. At present, there is no indication that the Senate is considering AHSSIA or drafting its version of the bill. For more information, please contact Sharon Wilson Géno at genos@ballardspahr.com or , Amy M. Glassman at glassmana@ballardspahr.com or , or Nydia M. Pouyes at pouyesn@ballardspahr.com or , or any member of the Ballard Spahr s Housing Practice. DMEAST # v2 5