Housing Opportunity Through Modernization Act of 2016 HOTMA

Housing Opportunity Through Modernization Act of 2016 (HOTMA) Section 8 Voucher Provisions Federal Register Implementation Notice 1/18/17 U. S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT February 23, 2017

What is HOTMA? • The Housing Opportunity through Modernization Act of 2016 (HOTMA) – Passed House 427 -0 on 2/2/16 – Passed Senate by Unanimous Consent on 7/14/16 – Signed into law on 7/29/16 • HOTMA amends the U. S. Housing Act of 1937 and other housing laws to modify multiple HUD programs. – A majority of HOTMA provisions affect public housing and HCV • Some HOTMA provisions are effective immediately, some can be implemented by Notice, and others require rulemaking. 2

HOTMA Impact on PIH Programs • HOTMA makes numerous changes to the Housing Choice Voucher (HCV) and Public Housing Programs. • Main areas impacted by the HOTMA provisions: – Unit inspections in the HCV Program – Income and rent calculations for Public Housing, HCV, and Multifamily Housing – Project-based Voucher (PBV) assistance in HCV Program – Operating Fund/Capital Fund in Public Housing 3

What has HUD done to date? • HOTMA Notice 1: FR-5976 -N-01 (published 10/24/16) announced provisions impacting HUD programs that were effective immediately, three of which made modest changes to the Housing Choice Voucher (HCV program). • HOTMA Notice 2: FR-5976 -N-02 (published 11/29/16) seeks comment on proposed new income limit requirement to address issue of over-income families in public housing. – Comments were due 1/30/17. • HOTMA Notice 3: FR-5976 -N-03 (published 1/18/17) implements and seeks comment on provisions related to the HCV program. – Comments are due March 20, 2017. – Provisions take effect on April 18, 2017. 4

HOTMA Notice 3 • General Objectives of HOTMA Notice 3 Provisions: – Increase PHA administrative flexibility and reduce burden to better address local needs and priorities. – Support and expand the use of PBV for development and preservation of affordable housing. – Help improve voucher leasing rates in challenging rental markets. • HOTMA Notice 3 implements provisions covering four main areas: – – Inspection of dwelling units (Housing Quality Standards, HQS) Definition of PHA-owned units Project-based vouchers HCV assistance for families that own manufactured housing • Vast majority of these provisions are discretionary (i. e. , PHA may decide whether or not to implement). • Industry groups and stakeholders widely supportive of implementing HQS and PBV flexibilities as quickly as possible. 5

HCV Program Basics • HCV is HUD’s largest rental assistance program – $21. 4 billion annual budget (FY 2016 Appropriations Act) – Assists over 2 million families – Administered locally by 2, 200 public housing agencies (PHAs) • Provides monthly rental assistance to assist low-income families rent privately-owned housing • Primarily tenant-based assistance, meaning that the subsidy moves with the family – PHAs may project-based up to 20% of their HCV funding (effective April 18, 2017, changes to 20% of HCV units) 6

HCV Program Basics • PHAs created by State law to administer Federal housing programs within a specific area or jurisdiction • 2, 200 PHAs administer active HCV programs – The top 12 PHAs administer approximately 26 percent of the funding – The top 100 PHAs administer approximately 60% of the funding – Approximately 175 PHAs administer 50 or fewer units 7

How the Program Works • Admissions – A family applies to a PHA and is selected from waiting list • Generally must be very low-income family (at or below 50% of area median income) • 75% of PHA new admissions during PHA fiscal year must be extremely low-income families (at or below 30% of area median income) • Eligibility determination – PHA determines the family’s initial eligibility and issues family a voucher • Housing search – Family searches for eligible unit and owner willing to participate in the program. – Family may choose unit anywhere in the PHA’s jurisdiction or may “port” with their voucher to another jurisdiction 8

How the Program Works • PHA determines unit eligibility – Unit has reasonable rent (i. e. , does not exceed comparable unassisted units in the market area) – Unit meets the program’s Housing Quality Standards (PHA inspects the unit) – Unit is affordable (families may not pay more than 40% of adjusted monthly income when initially leasing any unit) • Family and owner execute a lease (including HUD Tenancy Addendum) • PHA and owner execute Housing Assistance Payments (HAP) contract • PHA makes monthly assistance payments directly to the owner • Family pays their share of the rent directly to owner 9

HCV Subsidy Calculation • Payment Standard caps the maximum subsidy that may be paid on behalf of a family – Established by PHA based on HUD published Fair Market Rent (FMR) for area based on bedroom size (basic range between 110 and 90% of FMR) – Exception Payment Standards • Housing assistance payment (HAP) is the lower of: – Payment standard minus family total tenant payment (TTP) – Gross rent of unit minus family (TTP) • Gross rent = rent to owner plus PHA utility allowance for tenant-paid utilities • Family TTP is highest of: – – • 30 percent of adjusted monthly income 10 percent of monthly income PHA minimum rent ($0 to $50) Welfare rent in “as-paid” states Family Share is gross rent minus TTP – If gross rent is above payment standard, family pays the difference in addition to TTP – Family may not pay more than 40% of ami when initially assisted in the unit if gross rent exceeds PS 10

HOTMA Provisions Related to Inspections • Occupancy prior to meeting HQS: Allows PHAs to authorize initial occupancy for units that fail HQS with non-lifethreatening conditions only. – PHAs must adopt HUD’s list of life-threatening conditions as provided in the Notice. • Alternative inspections: Allows PHAs to authorize occupancy prior to PHA’s initial HQS inspection for units on properties that have passed an alternative inspection in past 24 months. – Notice specifies what qualifies as an alternative inspection. – PHA still needs to conduct its own initial inspection within 15 days of the family’s submission of the Request for Tenancy Approval (RFTA). 11

HOTMA: PHA-Owned Units • New definition of what qualifies as a PHA-owned unit – Narrows the applicability of the definition to reduce the number of units that are considered PHA-owned. – Consequently reduces PHA cost and burden because if a unit is determined to be PHA-owned, the PHA is required to obtain services of an independent entity to perform certain PHA administrative functions (e. g. , unit inspections). • Noncompetitive selection of PHA projects for PBV assistance – Permitted if PHA has an ownership interest in the project and PHA is improving, developing, or replacing a public housing property or site. – Reduces PHA burden and streamlines PBV process for these projects. 12

Project-based Vouchers • HOTMA makes a number of significant changes to PBV, mostly designed to help facilitate and increase the use of PBVs • PHA is attaching HCV subsidy to a particular unit and project, subsidy will continue even if family leaves the unit – After initial year of assistance, family has right to move with tenant-based assistance (HCV or comparable tenantbased assistance) • PBV can be attached to existing housing or used for rehabilitation or new construction 13

Project-based Voucher Basics • Rehabilitation or New Construction – PHA and owner enter into an Agreement to Enter into a HAP Contract (AHAP) that covers rehab or construction phase • Description of the features of the housing – Site, location, number of contract units, size of contract units, accessibility requirements, estimated initial rents, description of the work, timing of completion of work, etc. • Applicable Federal Requirements – Section 3 training/employment opportunities, equal employment opportunity, Davis-Bacon requirements, health and safety, subsidy layering restrictions, uniform relocation, protection of inplace tenants, etc. 14

Project-based Voucher Basics • Rehabilitation, New Construction, and Existing Housing – PHA and owner execute HAP contract • HAP contract for the project, unlike tenant-based assistance, not one HAP contract for each unit – PHA refers eligible families from PHA waiting list to owner – Makes payments to owner for units under HAP • PHA may at its discretion make vacancy payments (may not exceed two full months following the move-out month 15

Project-Based Vouchers • PBV Rents – Rent to owner limited by the lowest of: • • 110 percent of FMR Exception Payment Standard if applicable Rent reasonableness determination Rent requested by owner – If all utilities are not included in rent, the maximum rent to owner is further reduced by the applicable tenant utility allowance – Family pays Total Tenant Payment (in most cases 30 percent of adjusted monthly income) 16

Project-Based Vouchers • Current Use of PBV by PHAs – Close to 600 PHAs administer PBV (out of approximately 2200 PHAs) – Approximately 160, 000 PBV units • About 7% of all vouchers under lease out of 2. 1 million non-MTW units – Program Cap Impact • About 70 PHAs have more than 18 percent of HCV units under PBV 17

Provisions Related to PBV Program Limits • PHA program limit on PBV: – Prior to HOTMA: PHA may project-base up to 20% of PHA’s Housing Assistance Payment (HAP) funding – HOTMA: PHA may project-base up to 20% of PHA’s authorized units – Additional 10% of units may be project-based if units are for: • • homeless families veterans supportive housing for elderly and disabled projects located in low-poverty areas – Low-poverty area is a census tract where with a poverty rate of 20 percent or less. 18

Provisions Related to PBV Project Limits • Income mixing requirement (number of units within a project that may be PBV): – Prior to HOTMA: No more than 25% of project units may receive PBV • Limit does not apply to single family housing or units made available for elderly, disabled, or families receiving supportive services – HOTMA: PHA may project-base greater of 25 units or 25% of units in project • Limit does not apply to units made available for the elderly or families eligible for supportive services at the project • If project in low-poverty area, PHA may PBV up to 40% of units (not 25%) 19

Formerly HUD assisted Projects Not Subject to Program Cap or Income Mixing Requirement • Neither the PBV PHA program limit or income mixing requirement apply to projects that were previously assisted under certain HUD programs – Previously assisted within last 5 years – HUD-assisted Housing • • Public housing MF Housing receiving project-based Section 8, Rent Supp or RAP Section 8 mod rehab (including SRO) Section 202 Section 811 Section 236 Section 221(d)(3) or (d)(4) BMIR 20

Other PBV Provisions Implemented in Notice 3 • Increasing the length of the term of the PBV HAP contract – The initial term and any extensions may now be up to 20 years, for a maximum contract term (initial plus extensions) of 40 years (vs. 30 years pre-HOTMA). • Facilitating the project-basing of vouchers targeted for homeless veterans and families/youth aging out of foster care – PHAs may project base HUD-VASH and Family Unification Program (FUP) vouchers without additional HUD approval. • Preference for families that qualify for specific services, including disability-specific services 21

Provisions Related to Manufactured Housing • HOTMA allows PHA to assist families that own manufactured homes with housing costs that include: – Monthly payments for the purchase of the manufactured home – Utilities – Rent for the space on which their home is located • Previously the HCV program could only subsidize the rent for the space and the utilities. • Change will increase viability of manufactured homes as a potential affordable housing resource for those PHAs that choose to use their vouchers for this purpose. 22

Next Steps • Develop guidance on HOTMA Notice #3 in anticipation of the Notice’s effective date • Evaluate comments received on Notice #3 to determine whether changes need to be made to the Notice, either via a technical correction or other Federal Register Notice • Determine implementation strategy for the remaining HOTMA provisions that impact PIH programs, including: – – Income and rent provisions Additional HQS and PBV provisions Operating/Capital Fund flexibility Capital Fund Reserves for Replacement Account 23