Project-Based Vouchers the Next Generation Opportunities and Challenges in 2007

1. Project-Based Vouchers the Next GenerationOpportunities and Challenges in 2007/2008********************Tony Ucciferri, SFHA Administrator, S8 HousingMatt Schwartz, California Housing Partnership Lihbin Shiao, Mosaic Development & Consulting

2. Project-Based Voucher “Program” Part of Section 8 Housing Voucher program Authorized by Section 8(o)(13) of U.S. Housing Act, 42 U.S.C. § 1437f(o)(13) Added by section 232 of FY 2002 VA-HUD appropriations act, October 2000 HUD Initial Guidance, Jan. 16, 2001 allowed program to operate but implementation hampered by old rules “Final” regulations issued Oct. 13, 2005

3. Impact of Final Rule Major improvement in most respects including greater clarify of PBV rules More PHAs likely to be willing to start PBV programs now that FY07 Appropriations counts committed PBVs for leasing/budgeting purposes But issues remain to be worked out

4. Potential Supply A PHA may project-base up to 20% of the budget authority in its voucher program at time of commitment. Note this is a change from prior calculation based on the authorized number of vouchers. Nationally, this means about 400,000 units could receive project-based voucher assistance.

5. What Types of Units Are Eligible? “Existing” housing as well as new construction and rehabilitated units. Existing units now defined as units that “substantially comply” with HQS at time of selection. (Judgment up to PHA; no dollar cap on work needed.) New tax credit units may qualify as “existing” housing if selected after construction or rehab nearly complete and PBVs not requested at development stage.

6. Uses of PBVs Final rules simplify use in supportive housing and other housing for people with disabilities Rules also make it more feasible to use for preservation (can combine w. 236 IRP or 515) Cannot be combined with HOPE VI (2000+) public housing units or units funded with public housing capital funds

7. Locating PBVs Must be consistent with “goal of deconcentrating poverty and expanding housing and economic opportunity” PHA no longer prohibited to select units in census tracts with poverty rate above 20%, must use own judgment based on standards in Admin Plan. Site/neighborhood standards largely unchanged for new construction, but no HUD approval required. All sites must be accessible (as defined by sec. 504 regs) to people w. disabilities

8. Promoting Income Mix and Market Discipline Limit of 25% of units in a building unless – 4 units or less, or elderly and/or disabled tenants, and/or other families receiving “supportive services.” PHA defines “supportive services” in its plan. Not limited to FSS. No limit on number of regular tenant-based vouchers or other project-based assistance that may be used in remaining units.

9. Resident Choice PHA must give tenant who wishes to move after one year next available voucher. Project-based voucher remains with the unit. Purpose: to promote market discipline and individual flexibility and choice. Implications: reduces number of tenant-based vouchers otherwise available to applicants. PHAs should choose desirable projects that will minimize turnover.

10. Contract Term Initial contract term 1 - 10 years Subject to tenant-based S8 appropriations In final year, may extend up to 5 years (and continue to renew for up to 5-year periods) Statute allows PHA to require owner to accept an offered extension.

11. Setting Rents for PBVs Tenant pays 30% of adjusted income for rent and utilities. With a tenant-based voucher, tenant may pay more if rent + utilities above payment standard. If “reasonable,” unit rent can be up to 110% of FMR (or higher HUD-approved exception) Determination of “rent reasonableness” is made in comparison with other unassisted units May exceed PHA’s payment standard

12. Rent in LIHTC Units Under PIH 2002-22 and 2005-20, regardless of location, rent could be up to 110% of FMR or HUD-approved exception, even if exceeds LIHTC rent (actual or maximum) and PHA’s payment standard Section 8 payments are not included in determining gross rent of tax credit units (Section 42(g)(2)) Outside of qualified census tracts, can exceed 110% of FMR up to other actual LIHTC rents in building. Final rule capped rents in all locations at tax credit rent maximum: issue in flux

13. Rent Adjustments Adjustments during term up to PHA, with same maximums (no AAFs) PHA generally must re-determine rent reasonableness only when owner requests rent increase or HUD reduces FMR by 5% Project-based contract may provide some insurance of rent stability in declining market If PHA reduces rent below initial level, owner may terminate HAP contract

14. Tenant Selection - Targeting PHAs must count PBVs toward goal of 75% of total vouchers serving ELI households (30%AMI) PHA can prefer disabled applicants with special need for services offered at project Can advertise project as offering services for people with particular types of disabilities but must admit other disabled people who may benefit from services 983.251(d)983.251(d)

15. Tenant Selection - Waiting Lists By owner based on referrals from PHA waiting list PHA can use regular tenant-based waiting list or separate list (for one or more PBV projects) Owner can refer applicants to PHA Eligible in-place tenants of “existing” housing units must be admitted Do not count for compliance w. 75% @30%AMI

16. Tenant Selection Separate list may be easier to administer or necessary if regular Section 8 list closed Applicants on Sec. 8 list must be given option to be on separate project-based list. Applicants on tenant-based list retain place if reject (or rejected for) project-based unit

17. Financial Incentives for Owners Higher rents initially and during term may be possible than with tenant-based vouchers Security of long-term contract in potentially changing market Vacancy payments 60 days at PHA option if not owner’s fault

18. Potential Benefits for Tenants No risk of having to pay more than 30% of income to use voucher No risk of loss of housing due to owner decision not to accept subsidy for unit for at least 10 years Often higher quality housing with more services (supportive housing too)

19. PHA Requirements Intent to project-base some vouchers must be included in PHA Plan and Admin. Plan Attachment to new plan or amendment If “significant” amendment must consult RAB and have public hearing Plan must state: why needed possible locations projected number advertising and selection policies

20. PHA Requirements Select units in accordance with criteria in plans (and PHA goals and strategy) Assure compliance with all HUD requirements for 3rd party approvals Environmental and subsidy layering reviews Manage budget to have units and funds available when required

21. Why PHAs Should Project-base Maximum Vouchers Improves voucher utilization in tight markets Expands special needs & supportive housing May improve access to opportunity-rich and improving neighborhoods Encourages additional new production After start-up, reduced administrative burden if opt for sample inspection

22. Role Of State Housing Finance Agencies In allocating LIHTC, HOME and McKinney funds, consider priority for proposals that are willing to accept project-based vouchers Projects selected through such competitions eligible for PBV without separate PHA process Coordinate with state-administered voucher program and/or local PHAs to make pool of vouchers potentially available Train local PHAs E.g., Ohio 2002 QAP grants 15 points; Illinois draft 2003 QAP gives 2 out of 85 points for a project that has a commitment of PBVs for at least 10% of units; 1 point for committing to seek PBVs. Illinois draft 2003 QAP also would award 2 points (out of 85) for project-based voucher commitment for at least 10% of units, see 9/16/02 HDR at 302. PHA would have up to one year after placed-in-service date to actually commit the vouchers. (Very smart to deal with turnover issues.) A developer could get one point for committing to seek PBA.E.g., Ohio 2002 QAP grants 15 points; Illinois draft 2003 QAP gives 2 out of 85 points for a project that has a commitment of PBVs for at least 10% of units; 1 point for committing to seek PBVs. Illinois draft 2003 QAP also would award 2 points (out of 85) for project-based voucher commitment for at least 10% of units, see 9/16/02 HDR at 302. PHA would have up to one year after placed-in-service date to actually commit the vouchers. (Very smart to deal with turnover issues.) A developer could get one point for committing to seek PBA.

23. Additional LIHTC-Related Issues Commitment to a contract for project-based vouchers may aid LIHTC owner in compliance monitoring For units placed in service after August 10, 1993, obligation not to discriminate against voucher holders. Owners must certify annually that they have complied with this requirement. IRC § 42(h)(6)(B)(iv); 26 C.F.R. § 1.42-5(c)(1)(xi).

24. The Section Eight Voucher Reform Act (SEVRA) HR 1851: A Vehicle for Changes To The Project-Based Voucher Program

25. Goals of PBV Changes Improve compatibility with other federal housing programs; Better support state and local housing priorities; Improve accessibility and services for disabled, elderly, homeless, and other populations for whom tenant-based vouchers may fall short; and Strengthen partnerships between PHAs and private-sector housing providers

26. PBV Changes Proposed Give PHAs the option to permit PBV assisted units in buildings assisted with LIHTCs to rent at the greater of FMR/Payment Standard, Comparable Rent or Tax Credit Rent. Give PHAs the option to set the HAP Contract Initial Rent as the Minimum Rent for the duration of HAP term.

27. PBV Changes Proposed (cont.) Increase initial term from 10 to 15 years to match LIHTC compliance period Increase cap on project-basing vouchers to 25% Allow an additional 5% (to 30% total) for units providing supportive housing to the homeless (McKinney definition) Set max number of PBVs for project, not building Create a small project exception for <25 units

28. PBV Changes Proposed (cont.) Allow PBVs in elevator buildings & co-ops Allow the Tax Credit Allocation Committee to conduct subsidy layering reviews Exempt existing buildings from environmental review Allow PHAs and owners to use their own contract form

29. PBV Changes Proposed (cont.) Permit owner-managed, site-based waiting lists subject to PHA supervision Permit the conversion of tenant protection vouchers (enhanced vouchers) into project-based vouchers for preservation purposes, not subject to the 25% cap on PBV units

30. Conversion of Expiring Project-Based Certificate Contracts Originally authorized for 15 Years Only No Renewal Options Vouchers Issued to Families and No Commitment remains Only Project-Based Program Not Renewable Technical Fix to Permit Renewal