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Aug 27

HUD Establishes Cost-Saving Measures for Housing Assistance Programs

Posted on August 27, 2014 at 2:46 pm by Dawn Corrigan

The 2014 Appropriations Act that defined the federal budget for Fiscal Year 2014 included several statutory changes to the Housing Act of 1937. Their purpose was to reduce the administrative and program costs of certain housing assistance programs while allowing public housing agencies to assist low-income households more efficiently.

After a period of analysis, on June 25, 2014, HUD published a notice establishing the terms and conditions under which HUD and public housing agencies are to implement these changes.

Some of the changes are mandatory, and others may be used at the housing agency’s discretion. This article outlines two changes that Pensacola Housing has implemented in its Housing Choice Voucher Program.

1. Definition of “Extremely Low Income”

What is it?
The Housing Choice Voucher Program assists “very low” and “extremely low” income families. “Very low income” is defined as 50% or less of the area median income for the household size, and “extremely low income” has historically been defined as 30% or less of area median income. Federal guidelines stipulate that at least 75% of the families newly assisted by Pensacola Housing each calendar year must be “extremely low income” families.

The 2014 Act amended the definition of “extremely low income” to include households whose incomes do not exceed 30% of area median income or the federal poverty level, whichever is higher.

What does that mean?
The federal poverty level exceeds 30% of area median income for most household sizes in the Pensacola metropolitan area, typically falling between 30 and 40 percent of area median. Therefore, using the federal poverty level allows Pensacola Housing to assist families more quickly whose incomes are just above 30% of area median and who previously were caught at the low end of the “very low income” spectrum.

Why is it a cost-saving measure?
HUD projects that the new extremely low income definition will generate approximately $155 million in Housing Assistance Payments savings in Fiscal Year 2014, and increase access to HUD rental assistance for approximately eight percent more working poor families. Savings will be achieved because the additional working families assisted will have somewhat higher incomes, and therefore require lower rental subsidies. In some cases, higher tenant incomes may also allow public housing agencies to increase leasing during the year, thus assisting more families.

When does it go into effect locally?
Pensacola Housing began using the new definition of extremely low income in July 2014.

2. Limited Utility Allowance Payments (UAP)

What is it?
Public housing agencies are required to produce and maintain a utility cost schedule showing the average cost of essential utilities (electric, water, sewer, trash, and natural gas) in their area. This schedule is then used to project the cost of utilities for voucher tenants, and to determine whether a particular unit is affordable for the family. Voucher families can only select a unit that is affordable for their household.

Previously, if a voucher family selected a unit larger than the bedroom size on their voucher, the utility cost schedule for the actual unit selected was used. However, the 2014 Act limits the utility allowance to the lower of the schedule for the voucher size or the schedule for the size of the actual unit selected.

What does that mean?
Families who select units larger than their voucher will only be subsidized for the cost of utilities for their voucher size.

Why is it a cost-saving measure?
Since household income is applied to utility costs first, then toward rent, this change will result in higher rent portions paid by the tenant, and lower rental subsidies. HUD estimated that this change would result in $50 million in rental assistance savings in 2014.

When does it go into effect locally?
The new rule about utility allowances will go into effect for active HCV program participants on their annual reexamination date, starting effective December 1, 2014 (after HUD’s mandatory 60-day notification period). For new admissions to the program, and for movers, it will be in effect for all clients who received vouchers from Pensacola Housing on or after August 1, 2014.