Compendium Page 1 SECTION 2.1.72 RENTAL SUBSIDY 1978 7th session (February/March): The Commission decided, under article 11 of its statute, to approve the introduction of the following rental subsidy scheme for field staff as a part of the post adjustment system: (a) subsidies should be available only to staff serving in locations outside Europe and North America; (b) no subsidy should be payable with respect to that part of rent which fell within 20 per cent of the staff member's income (defined as net salary plus post adjustment plus assignment allowance); (c) as a disincentive to acquiring unnecessarily expensive lodging because subsidies existed, no subsidy should exceed the value of 40 per cent of the rent, i.e., the staff member would always be responsible for at least 60 per cent of the rent; (d) for reasons of administrative economy, any calculated subsidy of less than $30 per month should be disregarded; (e) within these overall limits, there would be two formulae: (i) the generally applicable provision would be a subsidy of 80 per cent of the rent which was in excess of a threshold amount to be established by ICSC, as at present, for each duty station and size of dwelling, calculated normally at about 130 to 135 per cent of the level of rent on which the post adjustment class was based; (ii) the subsidy payable to staff members at grades P-1/I through P-3/VII (the step below P- 4/I), would be the higher of: either the amount computed as per (i) above, or 80 per cent of that part of the rent which exceeded 25 per cent of income; (f) the subsidy would be payable upon certification by the senior UN official in the locality that a rental on which subsidy was claimed was for accommodation which was "reasonable" in relation to the staff member's needs and to the conditions of the local market; (g) some exceptions to the general rule would be necessary at those duty stations where the majority of staff members were in government-provided housing and where the rental component of the post adjustment index, based exclusively on government rents, was relatively low, while commercial rents were considerably higher; (h) post adjustment indexes would have to be adjusted to take account of subsidy payments wherever applicable, in order to avoid double counting; (i) some transitional arrangements would he necessary whenever the new system resulted in reduction or elimination of a subsidy already being paid [A/33/30, para. 255]. ICSC agreed to the introduction of the scheme on an experimental basis for an initial period of one year beginning on 1 July 1978. It decided to review its operation at its 10th session (July 1979) with a view to reporting to the GA at its 34th session (1979) on the first 12 months' experience of the functioning of the new scheme [A/33/30, para. 260].
Compendium Page 2 1979 9th session (February/March): ICSC decided that the information available from the operation of the experimental subsidy scheme should first be examined by ACPAQ. ACPAQ agreed at its 4th session (May 1979) that the rental subsidy scheme had proved to be a necessary feature of the post adjustment system and should be continued on a more permanent basis. The Committee, however, felt that in its experimental form the scheme had a number of shortcomings and should be somewhat modified and improved [A/35/30, paras. 229-231]. 1980 11th session (February):/March): ICSC approved, for implementation with effect from 1 July 1980, a revised rental subsidy scheme with the following essential features: (a) subsidies should continue to be available only to staff in the P and higher categories serving in locations outside Europe and North America; (b) as a disincentive to acquiring unnecessarily expensive lodging, in general, subsidies should not exceed 40 per cent of the actual rent, i.e., the staff member should always be responsible for at least 60 per cent. Some exceptions would be necessary at duty stations where the majority of staff members were in government-provided housing and where the rental component of the post adjustment index, based exclusively on government rents, was relatively low, while commercial rents were considerably higher; (c) for reasons of administrative convenience, any calculated subsidy of less than $10 per month should be disregarded; (d) subsidies should be payable only on certification by a senior official of the UN common system in the locality that a rental on which subsidy was claimed was for lodging which was "reasonable" in relation to the staff member's needs and the conditions of the market; (e) within these overall limits the subsidy would amount to 80 per cent of the rent in excess of a threshold amount, calculated individually for each staff member, based on the threshold percentage figure to be established by ICSC for each duty station; (f) post adjustment indices should be adjusted to take account of subsidy payments, wherever applicable, in order to avoid double counting; (g) the essential facts about each subsidy authorized must be reported to ICSC on a continuing basis until further instructions; (h) some transitional measures would be necessary whenever the new system resulted in reduction or elimination of subsidy; ICSC agreed to transitional measures for a period of one year and decided to examine the question at its 13th session; (i) staff members whose housing was provided by the organization, by the Government or by a related institution either free of charge or at rents substantially lower than the average rents used in calculating the post adjustment index for the duty station should be subject to payroll deductions from their salaries so as to maintain equity in the application of the post adjustment system [A/35/30, para. 232]. 1981 14th session (July): ICSC noted that there were several proposals concerning the treatment of housing costs in post adjustment placed before it by CCAQ. FICSA had advanced a proposal whereby the rental subsidy scheme at present operational at field duty stations would be extended to all duty stations. As to the study requested by
Compendium Page 3 1981 CCAQ, ICSC noted that it would be some time before its secretariat could make an indepth study of this type. Concerning the FICSA proposal, ICSC noted that the extension of the rental subsidy scheme to all duty stations including New York could possibly affect the margin between UN and US remuneration at the base of the system. It agreed, therefore, to take a step-by-step approach and requested its secretariat to prepare a study of the distribution of rents in major duty stations according to certain parameters [A/36/30, para. 106]. 1982 16th session (July): ICSC approved a number of ACPAQ recommendations regarding the treatment of housing costs in post adjustment. Both ACPAQ and ICSC considered the problem of housing costs faced by newcomers at some of the duty stations which were excluded from the application of the rental subsidy scheme. ICSC agreed that a working group of two members of ACPAQ together with its Chairman should study the effects of extension of the rental subsidy scheme to duty stations excluded at that time, as regards both the post adjustment index of the base of the system (New York) and the post adjustment of other duty stations and report to ICSC at its 17th session (March 1983) [A/37/30, para. 131]. In resolution 37/126, the GA requested ICSC to complete on an urgent basis its study of the need for a rental subsidy arrangement in HQ duty stations, particularly with regard to newcomers and staff transfers, and to report on action taken to the GA at its 38th session. 1983 17th session (March): On the basis of a report submitted by an ICSC Working Group (ICSC/I7/R.9), ICSC considered the extension of the rental subsidy scheme to duty stations currently excluded from its application; the Working Group, inter alia, had examined the effects of a proposed scheme on the post adjustment indices at various duty stations. The cost benefits of the extension of the rental subsidy scheme were also considered [A/38/30, para. 40]. Following a discussion on the report of the Working Group (ICSC/I7/R.28, paras. 71 to 79), ICSC agreed to the introduction of a rental subsidy scheme for duty stations not currently covered along the lines recommended by the Working Group in its report and, in particular, that: (a) the scheme should be applicable to newcomers and force majeure cases only, newcomers being defined as newly appointed staff members with the exception of those holding short-term appointments, as well as staff members transferred from other duty stations. Staff members who had arrived at one of these duty stations within a period of five years prior to the introduction of the rental subsidy scheme would be considered eligible; (b) situations of force majeure must be determined solely on the basis of whether the staff member was obliged to seek new lodgings in the rental market for reasons and circumstances beyond his or her control.
Compendium Page 4 1983 The situations that would qualify as force majeure must be limited to: (i) demolition of the building; (ii) forced eviction/repossession by the landlord; (iii) conversion of the dwelling from rental to cooperative or condominium. Cases of relocation resulting from normal rental increases by the landlord and negligence or abuse of the premises by the staff member would not qualify for rental subsidy. Organizations must require appropriate documentation attesting to the circumstances listed in (i) to (iii) above in order to determine force majeure eligibility; (c) the subsidy representing the difference between the actual rent and the threshold rent should be paid according to the following formula: Newcomers Force maieure Year 1: 80 per cent Year 1: 80 per cent Year 2: 80 per cent Year 2: 40 per cent Year 3: 60 per cent Year 3: 20 per cent Year 4: 40 per cent Year 4 onwards: no subsidy Year 5: 20 per cent (d) other definitions and modalities to be used in the administration of the subsidy scheme should be as for the current field subsidy scheme; (e) the date of implementation of the scheme would be 1 April 1983 [A/38/30, para. 44]. ICSC noted that the scheme would not result in additional financial implications for the common system in view of its impact upon the PA system and could actually result in savings. ICSC requested organizations to send to its secretariat all relevant information relating to rental subsidies at the group of duty stations in question. The data provided would form the basis of a report analysing the operation of the scheme to be submitted to ACPAQ at its 10th session. The question raised by CCAQ of which scheme to apply to certain European duty stations was considered a matter for the normal operation of the scheme as delegated to the Chairman [A/38/30, paras. 45 and 46]. In resolution 38/232, the GA: (a) noted the introduction by ICSC, with effect from 1 April 1983, of a rental subsidy scheme for staff in the P and higher categories at HQ and other duty stations not previously covered by a subsidy scheme; (b) requested ICSC to monitor this rental subsidy scheme with a view to ensuring both its equity and its effectiveness. 1985 22nd session (July): As recommended by ACPAQ, ICSC approved the establishment of a separate rental deduction threshold at 64 per cent of the rental subsidy threshold [A/40/30, para. 141].
Compendium Page 5 1987 26th session (July): ICSC noted that, during the period of a freeze on remuneration levels, the regressive formula on rental subsidy reimbursement levels at HQ locations had meant loss of take-home pay to newcomers whose rents were substantially higher than the average rent taken into account in determining post adjustment. At field duty stations, extremely high rents had inflated threshold levels. ICSC decided that: (a) for determining rental subsidy thresholds at field duty stations, all extreme rents should be excluded by using only those rents defined in the interval as the average rent plus or minus two standard deviations. For the calculation of average rent in determining rental subsidy thresholds at duty stations in Canada, the US, as well as HQ locations and some of the other duty stations in Europe, the rents of staff members who had been at the duty station for less than five years should be excluded; (b) in all locations, a maximum margin of 20 per cent should be applied to rent-to-income ratios on a graduated scale in order to arrive at rental subsidy thresholds; (c) at duty stations in Canada, the US, as well as at HQ locations and some of the other duty stations in Europe, the reimbursement rates should be frozen during the period of a freeze on the post adjustment in New York. As long as the current freeze on the New York post adjustment continued, the rate of reimbursement should be reinstated as at the date of implementation of these recommendations (1 August 1987) at the level applicable either when the freeze was applied (1 December 1984) or when the officials concerned entered in service, whichever comes later. When the freeze ended in New York, the normal operation of the scheme should be resumed at all duty stations affected and the level of reimbursement below the restored level should be applied for 12 months. Normal phasing-out procedures should be applied thereafter. There should be no retroactive payments [A/42/30, paras. 161 and 162]. ICSC noted that within the framework of the rental subsidy scheme, there were two disincentives that worked against the acquisition of expensive housing only because rental subsidies were available: (a) the average rent-to-income ratios at all duty stations were increased by a regressive margin formula to arrive at the rental subsidy threshold; (b) only 80 per cent of the difference between the actual rent and the threshold rent was reimbursed. To provide relief to staff members at duty stations where low PACs applied, and where staff members paid substantially higher rates than the average rent taken into account in the post adjustment, ICSC decided that, in the case of duty stations where the PAC was equal to the remuneration in New York less the 15 per cent margin, the actual rent-to-income ratios without any adjustment should be used with effect from 1 August 1987 as rental thresholds for the determination of rental subsidies [A/42/30, para. 198]. 1990 31st session (March) and 32nd session (July/August): ICSC invited the GA to note that, under its statutory authority, it was empowered to take decisions concerning PA and rental subsidy matters. However, its proposals in this area formed an integral part of the overall conditions of service arising from the comprehensive review of conditions
Compendium Page 6 1990 of service of the P and higher categories and significant financial implications were associated with these proposals. ICSC therefore considered that it would be appropriate to make recommendations to the GA concerning the treatment of housing within the remuneration system and the revised rental subsidy scheme [see also section 2.1.130: remuneration structure]. ICSC recommended that the treatment of housing within the remuneration system should be improved by a series of measures distinguishing between duty stations where housing could be maintained within the PA system and those where housing should be separated from the PA system. Housing should be maintained in the PA system in Group A duty stations covering HQ locations, North America and Europe and field duty stations where housing comparisons could be made without difficulty. Housing would be excluded from the PA system for duty stations in the field where valid housing comparisons were difficult or impossible. These would constitute Group B duty stations [A/45/30, para. 95]. ICSC proposed a unified revised rental subsidy scheme that would apply at Group A duty stations, both HQ and field locations (at HQ locations, however, the revised scheme would be applied on an experimental basis subject to a full review and modifications as appropriate after 3 years of operation). The following arrangements would apply under the revised scheme: (a) the current regressive reimbursement formula at HQ locations (80, 60, 40, 20 per cent) would be replaced by a uniform 80 per cent reimbursement rate. This rate would remain applicable until the rent/income ratio of a staff member fell to the level of the threshold. Hence, no predefined timelimit would be attached to this benefit and the current 5-year limitation period would be discontinued. The revised entitlements would be instituted for HQ and other North American and European duty stations on an experimental basis and would not be deemed to constitute acquired rights; (b) rental subsidy payments for staff from P-l to D-2 would be subject to maximum reasonable rents which would be set at a point equivalent to three quarters of the range of rents applicable for the duty station as determined by external sources using specifications based upon the duty station housing standard (see (c) below). Application of this disincentive to acquiring unnecessary and luxurious accommodation would mean the present rule limiting the maximum subsidy to 40 per cent of gross rent would no longer be necessary; (c) housing standards would be developed by the ICSC secretariat for use in connection with the time-to-time updating of housing costs as well as for determining maximum reasonable rents for the housing schemes. The elements of these for each duty station would be based on the following: (i) application of an appropriate housing standard to relate dwelling size to family size; (ii) type of facilities - furnished/unfurnished; (iii) type of dwelling - house/apartment; (iv) location defined to ensure that the ACPAQ criteria as regards security, commuting time, adequacy of public services, etc., were adequately met; (v) quality defined to
Compendium Page 7 1991 ensure that any sub-standard dwellings were excluded; (d) a simplified method would be used to calculate threshold levels in the future by adding 2 percentage points to average gross rent-to-income ratios; (e) eligible for rental subsidy payments would be: (i) those already in receipt of rental subsidy at the time of introduction of the new scheme; (ii) newcomers to the duty station; (iii) those forced to change accommodation owing to changes in the family size; (iv) those forced to move as a result of the deterioration of security in the current location; (v) those wishing to move to housing of an acceptable standard from their current accommodation below the defined standard; (vi) force majeure situations, including forced eviction, demolition, conversion to cooperative/condominium and a combination of unreasonable rent increases linked with a resulting rent/income ratio above threshold levels [A/45/30, para. 95]. By resolution 45/241, the GA requested ICSC to examine the functioning of the current rental subsidy scheme for HQ duty stations and to review its proposals for a revised rental subsidy scheme taking into account views expressed by Member States in the Fifth Committee on the need to improve the scheme, without losing sight of its purpose of facilitating the resettlement of new staff members and of encouraging mobility within the common system, and to submit its conclusions and recommendations on the subject to the GA at its 46th session. The GA decided to introduce, with effect from 1 January 1991, as a provisional arrangement, a revision to the current rental subsidy scheme at HQ locations that provided for reimbursement over a 7-year period at the rate of 80 per cent for the first four years and 60 per cent, 40 per cent and 20 per cent, respectively, for the three years thereafter. 1991 34th session (August): ICSC reported to the GA that since the changes which the GA had introduced to the rental subsidy scheme would have a significant impact on the total emoluments of staff benefiting from the HQ scheme, it would seem preferable that the report to the GA should also take the impact of those revisions into account. In order for ICSC to be in a position to evaluate experience with the revised scheme with the changes approved by the GA, the scheme should be allowed to operate for at least one year [A/46/30, vol. I, para. 14]. By resolution 46/191, the GA noted the revisions which it had been necessary for ICSC to make to its work programme, thereby delaying the report requested by the GA in respect of a revised rental subsidy scheme, the measurement of the housing element in the remuneration package and the establishment of a pilot project to simulate the operation of ICSC's proposals in a limited number of field duty stations where valid housing comparisons were difficult or impossible. It requested these reports at the earliest opportunity.
Compendium Page 8 1992 35th session (March): In response to the request by the GA in resolution 45/241, ICSC undertook a review of the operation of the rental subsidy scheme at HQ duty stations during the period 1983-1991 (ICSC/35/R.5). The review included consideration of proposals for discontinuing the regressive formula and the time-limitation on benefits, as well as a review of eligibility provisions. ICSC took a number of decisions (as reflected in para. 47 of ICSC/35/R.17), but decided to review eligibility conditions in the light of views expressed at the current session and such additional information as may be provided to the 36th session [ICSC/35/R.17, paras. 38-47]. 36th session (JuIy/August): Following the receipt of further information (ICSC/36/R.5), ICSC decided to report the following conclusions to the GA: (a) the HQ rental subsidy scheme focused resources on the lower-graded staff in the P and higher categories; (b) the scheme had been of particular benefit to the field-oriented organizations; (c) the threshold and maximum reasonable rent controls had served to ensure that the scheme operated with due regard to the need for efficient use of resources; (d) the direct costs of the scheme had been modest and the benefits for affected staff and organizations appeared fully to have justified the operation of the scheme; (e) the 7-year limitation period for payment of housing subsidy at HQ duty stations and the related regressive reimbursement formula (80, 60, 40 and 20 per cent) should be maintained as necessary controls in the system; (f) the existing eligibility conditions for rental subsidy payments at HQ duty stations should remain unchanged [A/47/30, para. 130]. In resolution 47/216, the GA: (a) concurred with the ICSC conclusions; (b) requested ICSC to ensure that the modalities for implementation of the rental subsidy scheme were conveyed to common-system organizations. 1997 45th session (April-May): ICSC considered document ICSC/45/R.4 which dealt with the rental subsidy scheme at HQ duty stations. The extended rental subsidy scheme at duty stations in Europe and North America was intended to provide, for a defined period, relief to newcomers to a duty station who were facing much higher rents relative to those paid by staff already settled at the duty station. Over time these subsidy payments were phased out and, in situations of increasing market rents, the system functioned as intended. However, this underlying assumption of monotonic increases in rents was being defied in some duty stations where rents were declining. This decline in rents had resulted in lower rental subsidy thresholds, which, if implemented would increase the subsidy amounts paid to some staff. In view of this development, ACPAQ had felt that there was a need for a system to be devised which could handle increases as well as decreases in market rents.
Compendium Page 9 1997 ICSC approved the following ACPAQ recommendations: (a) in view of the upward and downward movement of rents at some duty stations, ICSC should review the basic principles and elements of the rental subsidy scheme, taking into account its primary purpose, and submit a report to ICSC as soon as possible; (b) in the case of declining rents, rental subsidy thresholds should be frozen at their current levels [ICSC/46/R.l0, para. 54]. 2000 52nd Session (July/August): ICSC reviewed the rental subsidy scheme in response to a number of problem areas in the scheme's operation. ICSC had at its fifty-first session requested the secretariat to report on progress regarding this matter at this session. ICSC decided: (a) To take note of the information provided by the secretariat; (b) To take note that CCAQ would continue to work with the organizations to resolve pending problems regarding the determination and application of maximum reasonable rents at headquarters duty stations; and (c) To request its secretariat, in cooperation with the secretariat of CCAQ, to complete as soon as possible the collection and consolidation of data on the application and cost of the scheme in the common system and to present detailed information in this regard at an early date. 2003 56th Session (Mar/Apr): The Commission considered document ICSC/56/R.6 which dealt with the issue of implementation of rental subsidy thresholds and recommendations thereof by the Advisory Committee at its 25 th session. At the Committee session, the secretariat pointed out that the current practice of establishing final rental subsidy thresholds was based on the assumption that any change in the threshold should not completely offset the effect of the increase in the multiplier for an average staff member. That approach prevented implementation of the new thresholds until an increase in the multiplier had been realized. Even then it would only be a partial implementation of the rental subsidy. The practice led to situations, limited to a number of group II duty stations, where more that 90 per cent of staff were receiving rental subsidy. The secretariat suggested that new procedures should be developed to address the problem. The Committee noted that the problem described existed only at a few group II duty stations and was not widespread. The Committee recommended that the secretariat should further study the methodology for determining and implementing rental subsidy thresholds and report its findings and recommendations at the next session of the Committee. The Commission approved the above recommendations of the Advisory Committee (ICSC/56/R.11).
Compendium Page 10 2004 58th Session (Mar/Apr): ICSC considered document ICSC/58/R.6 which included the continued review by the Advisory Committee, in its 26 th session, of issues related to the procedures for calculating and implementing rental subsidy thresholds. As noted in the previous session of the Committee, the establishment of final rental subsidy thresholds was subject to the requirement that any change in the thresholds should not completely offset the effect of an increase in the multiplier for an average staff member. It was pointed out that this approach did not allow the implementation of new thresholds that were higher than the existing thresholds, unless they were accompanied by a substantial increase in the multiplier. When an increase in the thresholds was accompanied by a minor increase in the multiplier, a partial implementation of rental subsidy thresholds was made to ensure that there was no loss in net income caused by an increase in rental subsidy thresholds. The secretariat presented the results of a simulation study designed to test some of the aspects of the rental subsidy thresholds calculation for a duty station, in particular, the sensitivity of the calculated thresholds to the composition of staff at the duty station. The results of the study clearly showed that rental subsidy thresholds vary considerably from one survey to another depending on the composition of the staff members present at the duty station. On the other hand, the variation in the post adjustment index was found to be minimal. The sensitivity of the rental subsidy thresholds to staff composition was found to be more pronounced in small duty stations. The secretariat pointed out that the low sensitivity of the post adjustment index to staff composition was due to the fact that its calculation was based on an average staff member assumed to be at the P-4, step VI, level with dependants. On the other hand, rental subsidy calculations are based on individual thresholds, which could vary from one survey to another due to changes in rental costs, post adjustment classification of a duty station and, particularly, the composition of staff. If rental subsidy thresholds decrease, the number of staff eligible for rental subsidy, as well as the amount of subsidy, will increase, but any increase in the thresholds has the effect of reducing takehome pay, which is considered an unwelcome outcome by staff members, given the common perception that rental subsidy is part of the so-called take-home pay. It was also pointed out that in the absence of justifiable rules for implementing rental subsidy thresholds that are higher than the existing ones, the number of staff receiving rental subsidies at a duty station could easily be much more than half of the total number of staff at the duty station. In view of the demonstrated sensitivity of the rental subsidy threshold calculations to the composition of staff, the secretariat suggested the following modifications to the existing methodology, which are designed to introduce
Compendium Page 11 stability into the calculations and a measure of equity in the purchasing power of Professional staff members: (a) For small duty stations (with less than 50 staff members), calculate the rental subsidy thresholds assuming that all staff members are at the P-4, step VI, level with dependants. That would be consistent with the basic assumption of post adjustment index calculations and would reduce the fluctuations in rental subsidy thresholds; (b) Implement new rental subsidy thresholds not at the time of implementation of the place-to-place survey results, but at the time of implementation of the results of the housing survey, usually conducted one year later; and (c) Introduce an additional constraint in the implementation of rental subsidy thresholds, limiting the proportion of eligible rental subsidy recipients to not more than 50 per cent of the international Professional staff at a duty station. The Committee decided to recommend to the Commission that the secretariat should conduct further analysis of the methodology of rental subsidy calculations, having regard to the objectives of the scheme, and with the specific aim of determining the full implications of the proposed changes to the rental subsidy scheme, and to report its findings and recommendations at the next session of the Committee. Organizations were also requested to provide to the secretariat data needed for the analysis. The Commission decided to endorse the above recommendations of the Advisory Committee in respect to rules and procedures for reviewing rental subsidy thresholds (ICSC/58/R.12).