Housing Choice Voucher Program Cuyahoga Metropolitan Housing Authority

1. Rent Determination Parma Library September 30, 2014 Housing Choice Voucher ProgramCuyahoga Metropolitan Housing Authority

2. Denita Johnson, Deputy Director of HCVP Topics of Discussion, Putting all the pieces together • Voucher Term & Size • Briefing Packet • Request for Tenancy Approval {intake process} • Important Facts • Rent Affordability Calculator

3. Voucher Term Voucher Term • Valid for a period of: • New Admissions-60 days from the date the voucher was issued • Movers-120 days from the date of issuance • Extensions may be granted by the Housing Authority for reasonable accommodations purposes

4. Voucher Size • Voucher Size • The number of bedrooms the family is eligible to receive • A family can go up a voucher size or down a voucher size • Final rent is determined on the lower of the two

5. Briefing Packet The Briefing Packet is an informational packet of forms that the family uses to request the HCVP’s approval for assisted tenancy

6. Briefing PacketThe packet consists of the following: • Landlord Instructions • Request for Tenancy Approval (RFTA) • Landlord Certification • W-9 • Agent Form • Sample Lease (lease is on the CMHA website) • Lead based paint disclosure • Property built before Jan 1, 1978 • 30 day notice of intent to vacate • Building Rent Form • Addendum for Drug Free Housing • Tenancy Addendum • Landlord Fraud Letter

7. When the Family Finds A Unit… what happens? • The owner and the family must complete the RFTA packet in its entirety, inconsistent information will cause delay in the process. • The completed RFTA packet is submitted to the HCVP, Room 101 (8:00 a.m. – 6:00 p.m.) • RFTA process begins

8. RFTA

9. RFTA intake process • HCVP WILL: • Review the RFTA packet; all forms must be signed. • Check to confirm that the unit isn’t in foreclosure • HCVP WILL NOT: • Provide a preliminary rent offer • Provide an inspection date

10. Important Facts: • Submitting multiple RFTA packets • We will only accept one(1) RFTA packet • If the unit is a double or multi-family, please indicate UP or DOWN or the unit number • Submitting multiple RFTA’s could lead to all RFTA’s being cancelled • Inspections • Unit must be ready for HQS inspections • If the unit fails HQS inspections twice, the RFTA will be cancelled

11. Important Facts cont.: • Contract signing days are held twice a month • Move-in Date • Is established by the Contract Specialist, Owner, and Tenant • If the Tenant moves into the unit prior to the Contract Specialist establishing the move-in date, the tenant is responsible for ALL rent until the contract goes into effect. You MUST submit a signed lease before the contract can go into effect

12. Important Facts cont.: • New Landlord Briefing • All new landlords must attend the briefing before signing the housing assistance contract with HCVP. • The workshops are held three or more times a month: • Morning • Afternoon • Saturday

13. Important Facts cont.: • BREAKING THE CONTRACT EARLY? • The Housing Assistance Payment (HAP) Contract is for a 1-year term. • Mutual agreements between the landlord and tenant to break the lease early will not be honored by the HCVP. • A change in ownership requires assumption of the existing contract in the first year of the contract.

14. Three-Way Partnership Voucher FAMILY CMHA HAP Contract Lease OWNER

15. Three-Way Partnership • HCVP Responsibilities: • Determine if the family is eligible to participate in the HCVP. • Determine the rental amount of the unit. • Determine the family’s portion of the rent to owner. • Inspect the subsidized unit annually. • Issue housing assistance payments.

16. Three-Way Partnership Cont. • Owner’s Responsibilities: • Screen families to determine their suitability as a renter • Maintain the housing unit by making necessary repairs • Comply with the terms of the Housing Assistance Payment (HAP) Contract • Enforce the lease • CMHA is not a party to the lease

17. Three-Way Partnership Cont. • Family’s Responsibilities: • Abide by the terms of the lease • Pay rent on time and take care of the housing unit • Provide any utilities and maintain appliances which are not furnished by the owner • The family is responsible for damages to the unit or premises beyond normal wear and tear which results in a breach of the HQS.

18. Rent Affordability Calculator Interactive tool to determine affordability. Available on the CMHA website, www.cmha.net

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22. Rent DeterminationAva Decembly

23. Overview Before the Public Housing Authority (PHA) establishes a Housing Assistance Payment (HAP) contract with a landlord, the following must occur: • Unit must pass an inspection; • Rent reasonableness test must be conducted; and • Final rent has to be affordable

24. Rent Determination Factors Rent determination process reflects: Fair Market Rent Payment Standards Utility Allowances Income Reasonable Rent Affordability

25. Fair Market Rents24 CFR § 888.111 • Developed by HUD and published annually around October 1 • Rent estimates which allow rental of modest housing within specific geographic area • Represents housing costs which are comprised of the rent plus tenant-paid utilities • CMHA permitted to use the 50th percentile rent estimates • Provides broader range of housing opportunities • Low-poverty areas

26. Fair Market Rents24 CFR § 888.111 • Are not reasonable rent • Primary function is to control costs • Published by bedroom size • Basis for determining the payment standards

27. Payment Standards24 CFR § 982.402 • Based on the FMRs • Established by PHA • Individual payment standard created for each bedroom size • Must fall within 90% - 110% of the FMRs • Represents maximum allowable amount PHA can contribute towards the rent • Entire amount may not necessarily be contributed.

28. Applicable Payment Standard • Payment standard used to determine who contributes what towards the rent • PHA subsidy standards used to determine eligible voucher size • Once unit selected, applicable payment standard comes into play • Compare unit size to eligible voucher size • Lower of the two determines applicable payment standard used in the rent calculation

29. Applicable Payment Standard Important affordability concept • Lesser of unit and eligible voucher sizes prevail Unit size 3 $1,026 Voucher size 2 $ 783 • Factor in determining portions contributed towards the final rent • (HAP) + (Tenant Rent to Landlord) = (Contract Rent) • PHA portion +Tenant portion= Final Rent

30. FMR’s and Payment Standards • PHAs must change if outside of HUD’s 90%-110% guidelines • FY2014 payment standards have remained the same • PHA’s decision to change payment standards based on: • Budget constraints • Utilization • Create housing opportunities

31. Utility Allowances (UA) • Represents tenant-paid utilities • Includes heating, electricity, water, sewer, trash collection fee, stove, and refrigerator • Unit size, fuel sources, structure type taken into consideration Consumption*Rates

32. Utility Allowance Schedule • HUD requirement • Must revise whenever local rates change +/- 10% • Factor in determining reasonable rent, gross rent, and tenant rent to owner • Recent change in how determined for rent calculation • Previously unit size determined which allowances to use • Changes to the LOWER of the unit versus voucher size will determine which allowances to use

33. Utility Allowance Schedule CONTINUED… CMHA updates annually regardless • January 2014 schedule reflects: • Slight decrease in natural gas rates • Slight increase in electric rates • Increase in water and sewer rates • Increase in range & refrigerator rental rates • An updated schedule will be effective on January 1, 2015

34. Utility Allowance ScheduleEffective January 1, 2014 1 2 3 How to read: Step 1: Unit size Step 2: Fuel source Step 3: Structure type

35. Utility Reimbursement (UAP) Who’s eligible Based on income • Usually very low income • Not automatic, must reside in a unit to receive How determined • Amount by which the UA exceeds the TTP Participant’s TTP MinusUtility Allowance • Less any additional monies tenant is required to contribute towards the rent (Gross Rent Minus Payment Standard)

36. Change in Utility Responsibility Requirements for changing: • Landlord must submit formal request • PHA must conduct a new rent reasonableness test taking the revised utility responsibility into consideration • May result in revised rent, • Will result in new HAP contract • In most cases owner request shifts their responsibility over to tenant • More than likely will result in rent decrease due to: • Change in responsibility • Market changes • Utility allowances revisions • Affordability

37. Household Income • Could change during life of contract • Client’s annual recertification • Interim changes (reduction in work hours, no longer employed, promotion, new job, etc.) • Another factor in determining rent portions • Very low income may trigger $50 minimum rent or utility reimbursement

38. Initial Family Contribution Gross Income = $10,000 (($10,000 * .10) ÷ 12) $1,000 ÷ 12) = $83 2. Adjusted Income = $9,200 (($9,200 * .30) ÷ 12 ($2,760 ÷ 12) = $230 3. Minimum Rent = $50 The $230 is the greater of the three and therefore becomes the initial family contribution. • 10% of Gross Annual Income • 30% of Annual Adjusted Income • Minimum Rent Greater of the 3

39. Reasonable Rent (RR) Units rated based on: • Comparable unassisted rents • Unit attributes • Structure type • Unit size • Condition • Location • Utility responsibility

40. Reasonable Rent (RR) Sources for comparables • Advertisements • Local newspapers • Internet • Online rental websites • Real estate and apartment associations • Apartment complexes

41. Reasonable Rent24 CFR §982.507 PHA must determine if rent is reasonable before lease approval Must be re-determined: • At HUD’s direction • Prior to rent adjustments • If 5% decrease in FMRs in effect 60 days before contract anniversary • PHA may re-determine at any other time. At all times during the assisted tenancy, the rent to owner may not exceed the reasonable rent as most recently determined or re-determined by the PHA.

42. Gross Rent Rent to Owner PLUS Tenant-paid utilities Example: Rent to Owner $1,000 Tenant-paid Utilities + 200 Gross Rent= $ 1,200 Factor in determining if tenant must contribute additional dollars towards the contract rent.

43. Affordability • Only applies to new contracts • Rent Burden • Household’s total contribution towards housing costs as percentage of household’s TTP • Cannot exceed 40% • Initial year of contract • Amount gross rent exceeds payment standard • Represents additional amount for which tenant’s responsible

44. Affordability Example Gross rent [$1,000 (rent) + $200 (UA)] $1,200 Payment Standard [3BR]- $1,026 (Additional Tenant Payment) [(($9,200 (adjusted income)* 0.30) + ($174 * 12))] = ($2,760 + $2,088) = $4,848 $4,848 ÷ $9,200 = 52.7% Rent Burden = 53% $174 TTP In this example, the household’s rent burden exceeds 40% and is not affordable. In order to make it affordable, the owner would have to agree to a $903 rent, a decrease of $97.

45. Affordability Factors • Tenant- vs. Landlord-paid utilities • Payment standards • Applicable • Income • Low-income rental assistance program • 84% of the new admissions to program at extremely low income level. • Over-housed (In unit with more bedrooms than eligible for) • Rents high in comparison to tenant income

46. Rent Determination • Final rent determined by PHA • Establishes HAP and Tenant Rent to Owner Housing Assistance Payment (HAP) + Tenant Rent to Owner (TR) = Contract Rent (CR) Landlord requests seeking additional monies from tenants beyond that approved by the PHA are forbidden according to HUD regulations.

47. Rent Determination Rents will change for: • New contracts (Movers) • Change in utility responsibility • Requested rent adjustments • Could be less than the current rent based on rent reasonableness test results • Required based on HUD’s 5% rule

48. Building Rent Building serves as the market • Must have: • Minimum3unassisted units paying requested rents • Similarly sized units • Within same property/complex • If doesn’t meet the above criteria will have to conduct regular rent reasonableness test.

49. Building Rent • Landlord must provide requested information • CMHA Building Rent Form • Rent roll/schedule (proof of rents charged) • PHA must have this documentation to substantiate rents [On HAP Contract under item 8. Owner Certification (page 4 of 10)] By executing a HAP contract the owner is certifying that the “…rent to owner does not exceed rents charged by the owner for rental of comparable unassisted units in the premises.” • Same affordability rule applies for initial year of contract

50. In summary: Contract rent determined using a combination of unit and client related data. • Rent reasonableness based upon: • Utilities • Unit attributes • Comparables • Client data • Income • Voucher size