[Hpn] [nlihcstates] Update on FY05 Funding for Housing Voucher Program and Related Items

Morgan W. Brown Morgan W. Brown" <morganbrown@gmail.com
Tue, 30 Nov 2004 06:51:11 -0800

Below is a forwarded copy of an e-mail concerning "FY05 Funding for
Housing Voucher Program and Related Items", which originates from
Barbara Sard, Director of Housing Policy for the Center on Budget and
Policy Priorities (CBPP):

For additional information regarding such matters, visit the Websites
of both the CBPP (listed above) and the National Low Income Housing
Coalition (NLIHC):

Morgan <morganbrown@gmail.com>
Morgan W. Brown
Montpelier Vermont USA
Norsehorse's Home Turf:


-------Forwarded FYI-------

---------- Forwarded message ----------
From: Erhard Mahnke <erhardm@vtaffordablehousing.org>
Date: Wed, 24 Nov 2004 10:02:26 -0500
Subject: Fw: [nlihcstates] Update on FY05 Funding for Housing Voucher
Program and Related Items
To: Affordable Housing Coalition Members & Friends

More on the HUD budget is attached below. --snip--
Erhard Mahnke
Vermont Affordable Housing Coalition
294 N. Winooski Ave., Suite 109
Burlington, VT  05401
802-651-4179 (fx)
802-233-2902 (cell)
----- Original Message ----- 
From: Barbara Sard 
To: housing coalitions State 
Cc: housing@cbpp.org 
Sent: Tuesday, November 23, 2004 7:21 PM
Subject: [nlihcstates] Update on FY05 Funding for Housing Voucher
Program and Related Items

Voucher Renewal Funding Overview

The FY05 omnibus appropriations bill passed both the House and Senate
on Saturday November 20, and is expected to be signed by the President
in early December.  Full text of the bill, H.R. 4818, is available
online at http://www.house.gov/rules/h4818crfulltext.htm.

The Administration's proposal to make deep cuts in Section 8 voucher
funding and convert the program to a block grant was not included in
the bill.   Congress chose instead to preserve funding for existing
vouchers, and to continue to provide housing agencies with funding
levels linked to the number and cost of vouchers in use.  On a
national basis, however, the funding level will likely lock in the
voucher cuts that occurred during 2004, including a reduction of
60,000 or more in the number of families assisted.  Locally, some
agencies will receive adequate funding (and some may be able to
increase the number of families receiving vouchers) while others will
have to reduce the number of families they assist or shift rent costs
to tenants.

It is important to recognize that despite the enormous pressures on
discretionary spending overall, the outpouring of concern about
maintaining the voucher program led Congress to preserve funding for
existing vouchers based on their actual costs.  This is a far better
result than a block grant without basic federal requirements on the
income of families to be served and how much families can be required
to pay.  Such a block grant would set funding levels on an
ever-downward path and severely weaken the role of vouchers in helping
low-income families, senior citizens, and people with disabilities
make ends meet.

The bottom line?  Many state and local agencies will continue to face
budget pressures, and end up shelving vouchers, reducing voucher
payment standards, imposing minimum rents, and taking other
cost-cutting measures which inevitably hurt families and make it more
to difficult to achieve program goals like the deconcentration of
poverty.  Agencies should, however, be able to honor their commitments
to landlords and not have to take the types of precipitous actions
that made some owners unwilling to continue to participate in the
program this year. Local support for the voucher program will be
strengthened if agencies work together with a broad range of
stakeholders and use a public planning process to make these difficult

Other HUD Programs 

Funding for the project-based Section 8 program, including renewal and
administration of Moderate Rehabilitation contracts, is moved into a
separate account (as proposed by the House), funded at $5.3 billion
(after the across-the-board reduction of .80%).  This is an increase
of $227 million compared with funding for the same programs in FY04. 
Insufficient information is available to determine how much of this
increase is due to renewal of additional expiring contracts and how
much to an increase in per-unit costs.  Unlike the House bill, the
final bill retains HUD's ability to use recaptures of project-based
funding to amend existing project-based contracts or for contract
administration.  In future years, the separation of project-based from
tenant-based funding will put a premium on HUD and Congress correctly
estimating the number of project-based and Mod. Rehab. renewals and
the number that will shift to tenant-based funding.

We have not analyzed the rest of the bill in detail, but it cuts
funding for most HUD programs other than Section 8 3 – 5 percent below
last year's level, despite the one-time "savings" of about $1 billion
from the shift in public housing operating funds to a calendar year
rather than fiscal year basis. It is unfortunate, to say the least,
that the Administration and Congress set their overall budget at a
level that forced harmful cuts to these and many other programs.

Voucher Funding Details

Specifically, the bill provides $13.355 billion for voucher renewals
(this is the figure after the 0.8% across-the-board cut is applied). 
This is an increase of $634 million over FY04 voucher renewal funding,
and $1.54 billion more than the Administration requested.  (See chart
below.)  The funding is sufficient to support 94.6% of authorized
vouchers if the average cost of vouchers in 2005 is $6,830 (roughly
2-3 percent above the May-July 2004 level).  HUD has reported that
utilization fell from about 97% at the end of last year to 94% in
mid-2004, and agencies may have further reduced utilization since that
time, so it appears that the funding will be sufficient to support all
of the vouchers currently in use.  Administrative fees were funded at
$10 million below last year's level and funding for Family
Self-Sufficiency program coordinators was reduced by $2 million (after
applying the across-the-board cut).  HUD is directed to distribute all
but $25 million of the funding for administrative fees based on fees
earned in 2004. (It is not clear exactly what this will mean.)  Like
last year, administrative fees may only be used for the voucher
program and "related development activities."

The bill continues a fixed "budget-based" approach to funding state
and local housing agencies that HUD implemented this year, but with
some modifications.  (The directives in the bill and report on how HUD
should fund voucher renewals are different from both the House and
Senate bills, though conceptually closer to the House approach.) 
Annual renewal funding for each agency will be determined by
multiplying the average number of vouchers in use in May-July 2004 by
the average cost of vouchers in the same period, adjusted by the
regional 2005 Annual Adjustment Factor (AAF).  The only adjustment to
this amount will be for the initial renewal of tenant protection or
HOPE VI vouchers.  (Agencies that submitted incorrect or incomplete
data for the May-July 2004 period will have their funding determined
using earlier data.)  It appears that agencies will receive funding
based on this calculation regardless of the number of vouchers
actually in use in 2005, although funds not used during the year would
likely be subject to recapture.

HUD is prohibited from using recaptured funds to supplement the
funding provided in the bill, and if by chance the total appropriation
is not enough to fund each agency based on this formula, HUD is
directed to reduce each agency's budget below the formula level on a
pro rata basis.  But Congress appears to have pegged the overall
funding level to actual voucher cost and utilization data from
May-July 2004, so even if HUD invokes the pro rata reduction mechanism
it appears very unlikely that an agency's funding will be cut
significantly below the formula level.  Agencies with Moving to Work
agreements are funded pursuant to their agreements unless a pro rata
reduction is required.

Unlike 2004, it appears that there is no mechanism to adjust the
inflation factor based on local circumstances.  As a result, some
agencies (those whose costs rise more than the AAF) will receive
insufficient funds to cover their vouchers in use.  Agencies that
start the year serving more families than in the May – July 2004
period also will face a potential funding shortfall.  Agencies with
increased costs or utilization rates will have to shelve vouchers as
families leave the program rather than serving families on the waiting
list or adopt policy changes designed to reduce average voucher costs
during the year.  Agencies serving areas where HUD substantially
increased the Fair Market Rent may be unable to implement the increase
without reducing the number of families served.

Many agencies were able to avoid making such program changes in 2004
by drawing on reserves.  This strategy is unlikely to work in 2005. 
It is unlikely that HUD will restore reserves depleted this year, and
the bill directs HUD to reduce program reserves for all agencies from
one month to one week no later than September 30, 2005.  On the other
hand, agencies with costs below the level used in the formula will
have room in their budgets to increase utilization, up to the
authorized level of vouchers.  (The bill continues the prohibition on
use of funds for "overleasing.")

HUD is instructed to issue guidance on its interpretation of the
renewal funding and administrative fee provisions of the bill within
30 days of the President signing the bill – which should occur by
early December – and to notify each agency of its budget within 45
days, which would be some time in mid-January.  This should avoid the
severe problems caused by HUD's belated notice of its interpretation
of the FY04 appropriation bill.  (HUD also could alleviate some of the
challenges posed by this rigid funding method by making clear in the
guidance that agency funding will be determined for the calendar year,
without regard to the agency fiscal year.  This will give all agencies
the full 12 months to adjust leasing and costs, rather than requiring
agencies with March 30 or June 30 fiscal year end dates to take
extreme action, as occurred this year.)  It is also important that HUD
publish 2005 AAFs as soon as possible, so that agencies can use their
May-July 2004 leasing and cost data to estimate their 2005 voucher
funding levels.  Delays of the type that occurred this year in the
release of proposed 2005 FMRs would be extremely disruptive.  Agencies
could make preliminary estimates of the likely adequacy of program
funding in 2005 by comparing current leasing and costs and likely
trends to their May-July 2004 data.  In 2004, AAFs ranged from 0.0% to

The report accompanying the bill also instructs HUD to give
under-funded agencies flexibility to adjust payment standards and
restrict "portability" rights to move to other areas, but directs
agencies to protect current elderly and disabled tenants from
"significant impacts" of such changes.  It is not clear what HUD will
do in response.  HUD may take steps to change the regulation that now
protects families from an immediate rent increase when agencies reduce
the voucher payment standard.   Portability rights are statutory,
however, and cannot be overridden by legislative report language.  It
also is unclear what effect, if any, the exhortation in the report to
protect elderly and disabled tenants will have.  Decisions by HUD and
PHAs must be guided by the Fair Housing Act, which also protects
families with children and members of racial and ethnic minority
groups from disproportionate adverse impacts.

Components of Voucher Program Funding

FY04 Enacted (inc. 0.59% ATB cut)

FY05 Proposed

FY05 Final (inc. 0.80% ATB cut)

Voucher Renewals




Administrative Fees

$  1,210,107,000

$  1,155,938,000

$  1,200,426,144

FSS Coordinators

$       47,716,800

$   0

$        45,632,000

Tenant Protection Vouchers

$     205,276,680

$     163,000,000

$     163,000,000

Other related provisions

We had previously circulated information on two related issues: a
restriction in the Senate VA-HUD appropriations bill on public housing
agencies' ability to support voter registration and get-out-the-vote
efforts and a Senate funding level for the American Community Survey
(ACS) that could have derailed this data-gathering mechanism that is
of great importance to housing programs and policy.  We are pleased to
report that the final bill does not include any provision concerning
PHAs and voting rights and includes adequate funding for the ACS.

Barbara Sard

Director of Housing Policy

Center on Budget and Policy Priorities

Local Phone: 617-566-1154

Local Fax: 617-879-0856

-------End of forward-------

Morgan <morganbrown@gmail.com>
Morgan W. Brown
Montpelier Vermont USA
Norsehorse's Home Turf: