House Financial Services Subcommittee Issues Testimony From National Association of Housing & Redevelopment Officials

WASHINGTON, April 25 -- The House Financial Services subcommittee on Housing and Insurance issued the following testimony by Adrianne Todman, CEO of the National Association of Housing and Redevelopment Officials, at a hearing entitled "HUD's Role in Rental Assistance: An Oversight and Review of Legislative Proposals on Rent Reform":

"Good afternoon, Chairman Duffy, Ranking Member Cleaver and Members of the U.S. House Committee on Financial Services: Housing and Insurance Subcommittee. My name is Adrianne Todman, and I am the CEO of the National Association of Housing and Redevelopment Officials (NAHRO). Thank you for inviting me to testify today on the important topic of rent reform.

"This year, NAHRO celebrates its 85th anniversary as a membership organization for the affordable housing and community development industry. In 1933, the founders of NAHRO created the association to address their common concern for the nation's housing needs and were determined to develop programs to address those needs; and that remains our charge today. Our 20,000 members provide homes for more than 7.6 million people across the country in urban, rural, and suburban America.

"Rent reform is a concept that has been discussed and debated for decades. The current approach to rent was established in the 1960s. As a response to rent increases in public housing, Senator Edward Brooke passed an amendment which capped public housing rent at 25 percent of a resident's income. In the early 1980s, Congress raised the rental cap to 30 percent. Additionally, Congress provided the option for PHAs to provide their public housing residents with the choice of paying an income-based rent or a flat rent. While income-based rents are a well-intentioned measure, an unintended side effect - especially in times of uncertain and limited federal funding - is that this rent structure deprives housing authorities of the financial support needed to operate and maintain their buildings. This is why operating subsidy is so important to housing agencies.

"While various important rent initiatives were authorized in the Housing Opportunity Through Modernization Act of 2016 (HOTMA), these were not all encompassing, nor did they provide any alternative rent determination structures for PHAs. Rent provisions addressed within HOTMA include:

* The requirement that HUD continue to provide hardship exemptions for housing program participants impacted by minimum rents;

* The elimination of the Earned Income Disregard, which prevented rent increases for tenants who had gained additional income through work;

* The ability to allow agencies to rely on determinations of income conducted for other federal means-tested public-assistance programs; and

* Increases in the standard deduction for households with persons with disabilities or households with the elderly.

"While PHAs appreciate Congress's efforts in streamlining the current rent recertification process through HOTMA, most PHAs are still extremely limited in how they are allowed to charge their tenants rent. This significantly limits PHAs' ability to determine rent structures that work best for their communities and the residents they serve.

"This week, at our Washington Conference, we asked our members about their thoughts on rent reform.

"The Director of the Belding (Mich.) Housing Commission said that "[a]ll agencies, but especially small agencies, need the flexibility and local control to meet the needs of their low-income families and the unique needs of their local community."

"A senior housing official of a Texas housing authority focused on consistency and complexity. He said, "Real rent reform needs to address the two biggest issues with the current system - lack of transparency and consistency, and errors caused by regulatory complexity. A sensible proposal would simplify the calculation while ensuring that the subsidy is adequate for the local market."

"Currently, the only agencies allowed to shape and implement rent reform initiatives are Moving to Work agencies.

"The Moving to Work demonstration gives PHAs the flexibility to serve their varied communities by implementing locally designed solutions in an environment free from the red tape and bureaucratic barriers that face most agencies within HUD's regulatory framework. By allowing housers to focus on housing, the program has created several innovative models that HUD has attempted to replicate nationally. Since its implementation in 1996, additional agencies have been added, bringing the current total of Moving to Work agencies to 39. In 2016, Congress authorized an expansion of Moving to Work by an additional 100 agencies.

"While some Moving to Work Demonstration PHAs have implemented rent reform, it is important to note that they have done so "gradually and cautiously."1 This includes many years of policy development, consensus building, and community and resident buy-in. As these rent reform proposals must be included within the Moving to Work Plan, they must undergo a public comment process allowing community and resident involvement. This acts as a safeguard in ensuring the rent reform policy is appropriate for the community.

"It is also critical to note that any rent reform policy be voluntary, so that PHAs and their communities can decide what best works for their residents.

"The subcommittee has charged the panel today with answering four questions regarding rent reform.

"What safeguards should the Subcommittee consider to ensure that families affected by the legislative proposal will be protected from discrimination or unintentional adverse impacts with the goal of achieving self-sufficiency or greater access to employment or career opportunities?

"Moving to Work agencies provide examples for how hardship exemptions can be incorporated into rent reforms and other eligibility requirements. They acknowledge these hardship provisions are critical in ensuring the protection and success of their residents, especially when circumstances arise that are beyond the resident's control.

"According to the Innovations in the Moving to Work Demonstration report, one Moving to Work agency, which has a seven-year time limit for all participants, allows for an extension of assistance beyond those seven years due to extenuating circumstances (e.g., medical issues, job availability, under-employment, or histories of participation in other programs). Another Moving to Work agency that has implemented six-year time limits among non-elderly, non-disabled residents has a provision allowing for continued assistance if the residents in question are able to show continued progress toward their goals.

"In order to help residents achieve self-sufficiency and give them greater access to employment or career opportunities, many Moving to Work agencies to provide case management services to their residents to ensure their success. Some Moving to Work agencies require program participants to meet with life coaches at least annually to connect residents to resources and track progress on their plan. One Moving to Work agency set up an Achievement Academy, which allows them to refer their clients to case workers who make referrals to group and one-on-one employment training and coaching, financial counseling, benefits screening, and tax preparation. Another Moving to Work agency has a voluntary program where case managers and residents can meet one-on-one and residents can be referred to community services provided by partners. The common theme between all of these Moving to Work agencies is case management.

"Does HUD's current rental housing construct for its main rental assistance programs contribute to an over-reliance on government assistance, making it difficult for low-income families to change their economic circumstances for the better?

"According to HUD's Picture of Subsidized Housing dataset, the vast majority of Public Housing Program participants and Housing Choice Voucher recipients are either already working or are households headed by disabled or elderly individuals. Thirty percent of public housing households, 31 percent of Housing Choice Voucher recipients, and 19 percent of Project-Based Voucher recipients had wages as a major source of income. Sixty-three percent of public housing households, 61 percent of Housing Choice Voucher households, and 81 percent of Project-Based Voucher households were headed by an individual with a disability age 61 or younger, or were headed by an individual age 62 or older. Just four percent of Public Housing Program participants and four percent of Housing Choice Voucher recipients include some form of welfare assistance as a major source of income, while only three percent of Project Based Voucher recipients do.

"What steps can policymakers take to ease regulatory burdens on housing providers, residents, and property owners when implementing rental housing assistance?

"As in many policy areas, increased regulatory burdens have had an adverse impact on the ability of affordable housing providers to maximize their dollars spent to provide safe and decent affordable housing to households. In these times of maximizing limited resources, a streamlined regulatory environment is necessary to ensure as much money as possible is being spent toward housing families, as opposed to complying with regulations with dubious benefits.

"Although regulatory streamlining will help, no amount of regulatory streamlining will make up for the extremely deep cuts to programs that help support our nation's most vulnerable people and help to develop and revitalize communities. While NAHRO is committed to regulatory reform, NAHRO notes that this reform does not replace the need for adequate funding for these essential programs.

"Some key regulatory reforms include:

"Reduced Reliance on Guidance - NAHRO laments HUD's excessive reliance on guidance documents. Many of these documents have the same effect as regulation and are given deference by local courts, but have not gone through the informal rulemaking process. The informal rulemaking process guarantees that all HUD stakeholders have the opportunity to comment on the rules that affect them and the families they serve.

"Annual and Interim Income Recertifications - Annual and Interim Income recertifications, while necessary under the current rent structure, are time consuming. The Housing Choice Voucher Administrative Fee Study found that ongoing occupancy activities are a category of activities that take the greatest amount of time. According to the study, on average, housing agency staff spend half their time performing this task. While the study only looked at the Housing Choice Voucher Program, NAHRO and its membership believe that these interim income recertifications are similarly time consuming for the Public Housing Program.

"Income Targeting - Although the intention of income targeting is admirable, many housing agencies find it to be a burdensome process that results in wasted time for both housing agency administration and the applicants themselves. Often applicants do not list all sources of income and assets accurately on their applications. As such, when a housing authority pulls an applicant from the waiting list, PHA staff spend upwards of two hours per applicant for intake and eligibility, ensuring all necessary income and assets are correctly listed. PHAs routinely have to place applicants back on the waiting list if those applicants ultimately do not meet the income targeting requirement, which is often determined during the intake process. This requires PHA staff to spend time explaining the purpose of income targeting to the applicant, and can even result in an applicant quitting their place of employment in order to become eligible. Ultimately, this defeats the purpose of income targeting. According to our members, applicants have complained of expending valuable time and resources obtaining copies of requested documentation needed for the eligibility process. Housing agencies should be able to pull applicants from their waiting list in a way that best addresses local housing concerns.

"Please find a longer list of our recommendations attached to my testimony. (See attached NAHRO Regulatory Reform Letter, June 14, 2017.)

(Attachment omitted)

"Do housing providers have the flexibility and choice to structure rent calculations and programs that work best with their local priorities and families they serve?

"Although most housing agencies are limited in their ability to structure rent calculations, one existing 22-year old demonstration program has provided a handful of housing agencies with the ability to create policies and programs that work best with the communities and families they serve. As noted earlier in this testimony, Moving to Work agencies are allowed to obtain exemptions from many regulatory and statutory provisions that apply to the Public Housing and Housing Choice Voucher Programs with HUD approval. This allows these agencies to craft and structure policies with input from their local communities to best address local priorities and the families they serve.

"A report by the Public and Affordable Housing Research Corporation (PAHRC) and Abt Associates found that Moving to Work agencies "tend to outperform their peers on outcomes related to the goals of the Moving to Work program such as self-sufficiency and housing choice."2

"NAHRO was extremely pleased that the 2016 Consolidated Appropriations Act authorized HUD to expand the Moving to Work demonstration program by an additional 100 high-performing housing agencies over a period of seven years. This is a step in the right direction. NAHRO has long called for meaningful expansion of the Moving to Work demonstration and is deeply supportive of Congress's efforts to move the expansion forward.

"Many of the proposed rent determination methods included within this legislation were tested and proved effective at Moving to Work agencies across the country. Although rent reform would provide housing agencies with additional flexibility and choice to structure rent determinations that work best with their local priorities and the families they serve, allowing all housing agencies interested in joining the Moving to Work Demonstration would be even more impactful, given their ability to use resources to help families become successful.

"Thank you, Chairman Duffy for inviting me to testify today. I am happy to answer any questions you may have."

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Footnotes:

1 Innovations in the Moving to Work Demonstration, Khadduri et. al., Abt Associates, 2014, p. 45.

2 Testing Performance Measures for the Moving to Work Program, Buron et. al., PAHRC, Abt Associates, 2017, pgs. 6 - 7.