HUD PIH Notice § 2011-28

                       U.S. Department of Housing and Urban Development
                            Office of Public and Indian Housing
________________________________________________________________________
Special Attention of: Section 8 Public
Housing Agencies; HUD Office of         Notice PIH 2011-28 (HA)
Public Housing Directors; Section 8
Financial Management Center       Issued:  May 27, 2011

                                  Expires:  Effective until amended,
                                  superseded, or rescinded
                                  __________________________
                                  Cross References:
                                  PIH 2009-44 (HA)
                                  PIH 2008-43 (HA)
                                  PIH 2005-9 (HA)
                                  PIH 2006-32 (HA)
________________________________________________________________________
Subject: Cost- Savings Measures in the Housing Choice Voucher (HCV) Program


1. Purpose.  This notice extends and revises Notice PIH 2009-44 which
   provided:  (1) guidance on actions public housing agencies (PHA) may take
   to address financial shortfalls by reducing costs in the HCV program; and
   (2) information on the circumstances under which a PHA may deny a move
   under 24 CFR § 982.314(e)(1) or terminate a housing assistance payments
   (HAP) contract under 24 CFR §982.454 as a result of insufficient funding.
    The revisions to Notice PIH 2009-44 are bolded.

2.  Background.  Every year HUD receives annual appropriations from
   Congress.  HUD implements the Appropriations Act and obligates funds to
   PHAs in accordance with the formula required by the Appropriations Act.
   PHAs must manage and monitor their programs within the amounts allocated
   for the calendar year (CY) to ensure that costs remain within
   appropriated amounts (including unspent funds from prior years, i.e., the
   Net Restricted Assets – HAP Equity Account (NRA)).

Specifically, PHAs monitor monthly per unit HAP costs, the number of leased
units and attrition rates.   If it appears that a PHA will have
insufficient funds to support families through the end of the CY, then cost-
savings measures may be taken.  In determining which actions to take, a PHA
should carefully consider the impact such actions will have on program
applicants and participants.  HUD shall provide support and guidance as
needed to assist the PHA in making sound cost-savings determinations.  PHAs
should contact their local field offices for such assistance.

In any given fiscal or calendar year a PHA is not required or expected to
lease up to its authorized baseline units contracted under a Consolidated
Annual Contributions Contract (CACC) if it does not have the funding to do
so.  Under the Section Eight Management Assessment Program (SEMAP) the
score for the lease-up indicator is determined by taking the higher of the
percent of the units leased or the percent of allocated budget authority
expended.  There is no penalty for not maximizing the percentage of
baseline units leased if the PHA does not have sufficient funding to do so
(see 24 CFR § 985.3(n) (2) (ii)).  Note, however, that since PHA
administrative fees are based on the number of authorized units under HAP,
PHAs that lease a greater number of their authorized vouchers receive more
administrative fees.

3. PHA Plan Requirements.  Any cost-savings measures referenced in this
   notice that constitute a significant amendment or modification as defined
   in 24 CFR                     § 903.7(r)(2) are subject to the
   requirements of  §§ 903.13, 903.15 and 903.17, which include a public
   hearing and comment period.  However, not all cost-savings measures
   constitute a significant amendment; that determination must be made by
   the PHA.

4.    PHA Actions to Reduce HCV Program Costs.  Some of the actions noted
below relate to program compliance issues (e.g., ensuring rents are
reasonable, incomes are verified correctly, and utility allowances are
accurate).  Although PHAs must comply with such requirements, regardless of
whether the PHA is experiencing financial difficulties, this notice serves
as a reminder of more proactive steps PHAs may take within the context of
these requirements to better manage HAP expenses.

Cost-savings measures are optional and have varying degrees of impact on
applicant and participant families.  The impact of each action should be
considered prior to implementation.  If an action adversely impacts program
participants, particularly a family’s rent burden, HUD strongly recommends
that the PHA first consider taking other actions having no impact or less
impact on families, including the use of administrative fee reserves to pay
for HAP expenses.

 The following is a non-exclusive list of PHA cost-savings actions.

   a. Family Income Matching/Verification and Other Anti-Fraud Efforts.
      PHAs should accelerate efforts concerning income matching and income
      verification.  PHAs should notify families that enforcement action
      could be taken where underreporting of income is discovered.  Also,
      the PHA may want to consider which actions should lead to a repayment
      agreement and which should lead to termination – particularly where a
      family may have intentionally misrepresented its income.  PHAs may
      also take action to collect money owed after the family has been
      terminated from the program.


     b. Ensuring Reasonable Rents.  PHAs do not have to wait until the HAP
        contract anniversary date to review owner rents and reduce them if
        warranted.  The PHA must determine whether the rent to owner is a
        reasonable rent in comparison to rent for other comparable
        unassisted units in accordance with the regulation at 24 CFR §
        982.507(b) and the HAP contract.  The PHA should ensure that owner
        rents do not exceed amounts charged for unassisted units in the
        same building or complex.  The initial rent and all rent increases
        must comply with any State or local rent control limits.  Further,
        any owner leasing promotions for unassisted tenants (e.g., the
        initial two months of occupancy are "rent free") must be taken into
        consideration in determining rent reasonableness.  In regard to
        reasonable rents for certain types of federally subsidized
        projects, please reference Notice PIH 2011-1.


        In accordance with the HAP contract, the PHA must provide written
        notice to owners before reducing unreasonable rents.  Rents may be
        reduced as early as the first of the following month.  If the rent
        to owner is not reasonable as most recently determined by the PHA,
        the owner must reduce the rent to the reasonable amount or the HAP
        contract must be terminated.  In such cases, the family will be
        issued a HCV to find a new unit.  (Movers, like new participants,
        are subject to a PHA’s current payment and occupancy standards.)




        Even if an owner’s rent is reasonable, a PHA could request owners
        to voluntarily agree to a temporary rent reduction or defer rent
        increases to help the PHA avoid the termination of HAP contracts
        due to shortfalls in HCV funding.  It is the owner’s option to
        agree to such measures.  However, a PHA may not “freeze” rents due
        to insufficient funding when an owner requests an increase, if the
        PHA determines the increased rent to be reasonable, and the owner
        does not agree to defer a rent increase.


   c. Ensuring Accurate Utility Allowances.  The PHA may always review its
      utility allowances more than annually to determine if they are too
      high.  Changes in utility allowances may be implemented immediately,
      but not later than the next regularly scheduled reexamination of
      family income.  Please note that in accordance with 24 CFR §
      982.517(c), a utility allowance category must only be changed if there
      is an increase of ten percent or more in the utility rate since the
      last time the utility allowance schedule was revised.


   d. Portability Absorption.  A receiving PHA can always immediately stop
      absorbing new portable families and elect to bill the initial PHA as a
      cost-savings measure.  An initial PHA may also request that a
      receiving PHA absorb portable families for which the initial PHA is
      being billed.  This may include the receiving PHA retroactively
      absorbing families for which the initial PHA was already billed and
      made payments.  In these cases, the receiving PHA reimburses the
      initial PHA for payments made back to the effective date of the
      absorption, but only for the current calendar year.  Both the
      receiving PHA and initial PHAs must agree to this arrangement.  Please
      reference section 10 of Notice PIH  2011-3.


      A receiving PHA cannot “absorb” a family into its HCV program until it
      executes a HAP contract on behalf of the family that moves to a new
      unit.  PHAs may not engage in sham or fake portability paperwork
      exercises in an attempt to address their utilization or leasing
      problems.  If the family is not placed under a HAP contract for a new
      unit in the receiving PHA’s jurisdiction, the receiving PHA cannot
      absorb the family.



   e. Portability and Moves within the PHA Jurisdiction.  The HCV program
      regulations at 24 CFR § 982.314(e)(1) provide that the PHA may deny a
      family permission to move if the PHA does not have sufficient funding
      for continued assistance.  However, PHAs must notify their local HUD
      field office before denying moves due to insufficient funding.  Denial
      of requests to move under this regulation may cover both portability
      moves to a higher cost area as well as moves within the PHA
      jurisdiction to higher cost units.


      In order to deny a move, the PHA must determine and demonstrate that
      based on the current funding available, it has insufficient funds to
      pay for higher subsidy amounts without having to terminate assistance
      of current program participants during the current CY.  In projecting
      whether there is sufficient funding available for the remainder of the
      CY, the PHA may use reasonable estimates to factor in conditions such
      as pending rent increases and attrition rates for families leaving the
      program.  If this insufficient funding condition exists, the PHA does
      not need a regulatory waiver from HUD to deny a request to move.


      In determining if the PHA has sufficient funding available to approve
      a move, the PHA must take into consideration its available budget
      authority (including any available NRA).


      A PHA may only deny a move where the requested move is voluntary
      (i.e., the family elects to move but is not required to move because
      of unaddressed Housing Quality Standards (HQS) violations, owner re-
      occupancy of the unit, etc.).  A PHA may not deny a move under 24 CFR
      § 982.314(e)(1) if the move would reduce the family’s subsidy cost to
      the PHA (e.g., a family wished to move under portability to a lower
      cost area).  A PHA may not deny a move to a higher cost area or unit
      as a cost-savings measure in order to admit additional families from
      its waiting list into the HCV program, regardless of whether the PHA
      has unit months available to do so.

      A higher cost area is defined as an area where a higher subsidy amount
      will be paid for a family because of higher payment standard amounts
      or more generous subsidy standards (e.g., the receiving PHA issues a 3-
      bedroom voucher to a family that received a 2-bedroom voucher from the
      initial PHA).  In the case of portability moves, the PHA needs to
      contact the receiving PHA before denying the move to confirm that the
      receiving PHA (a) will not absorb the family and (b) that the HAP
      costs would be higher.  If the receiving PHA is willing to absorb the
      family, there are no grounds to deny the portability move under 24 CFR
      § 982.314(e) (1).


   f. Interim Reexaminations.  The PHA could revise its current polices, if
      necessary, to require families to report all increases in income
      between reexaminations and conduct more frequent interim income
      reviews for families reporting no income.  The effective date of an
      annual or interim reexamination of family income is dependent upon PHA
      policies.


   g. Minimum Rent.  The PHA may increase the minimum rent to $50.  The
      effective date for the increased minimum rent is dependent upon PHA
      policy.  A PHA could institute a policy for increases in family
      contribution to be effective immediately, rather than at the next
      annual reexamination.


   h. Voucher Issuance.  The PHA may stop issuing turnover vouchers to new
      applicants and consider pulling back outstanding vouchers for
      applicants searching for housing that have not yet resulted in an
      executed HAP contract.


   i. Subsidy Standards.  The PHA may revise subsidy standards that exceed
      minimum HUD requirements to reduce bedroom size eligibility in
      accordance with 24 CFR § 982.402.  Subsidy standards must be
      consistent with the HQS space requirements in 24 CFR § 982.401(d).
      PHAs are reminded that under
      24 CFR § 982.401(d)(2)(ii), a dwelling unit must have at least one
      bedroom or living sleeping area for each two persons.  Children of the
      opposite sex, other than the very young, may not be required to occupy
      the same bedroom or living/sleeping room.


      If a family leases a unit larger than the unit size on the voucher,
      the PHA must ensure that the payment standard used to calculate the
      tenant share is based on the lower of the voucher unit size for which
      the family is eligible or the actual unit size leased.  If the family
      size is reduced after admission, the PHA must ensure that the correct
      payment standard is used in calculating the family rent portion.  An
      “empty nester” single individual (or any household with similarly
      reduced member size) living in a 3-bedroom unit should have a 0- or 1-
      bedroom payment standard, not a 3-bedroom payment standard.  If the
      unit size for which the family is eligible changes during the term of
      the HAP contract, the new unit size is applicable at the first regular
      reexamination following the change in accordance with 24 CFR  §
      982.505(c)(5).


   j. Payment Standards.  A PHA may opt to lower payment standards for all
      or some unit sizes.  In the tenant-based HCV program, a lower payment
      standard applies immediately to all new admissions, all movers, and
      families remaining in their units with a new HAP contract (e.g., when
      the owner offers or requires a new lease).  For all other HCV
      participants, decreased payment standard amounts are not applied until
      the second regular reexamination after the payment standard is lowered
      (see 24 CFR § 982.505(c)(3)).  The delayed applicability of a lower
      payment standard is a regulatory, not statutory, requirement.  PHAs
      experiencing financial difficulties may request a regulatory waiver
      for good cause so that reduced payment standards may be applied
      immediately with notice to the family in accordance with its
      administrative plan policies.


      PHA waiver requests should, at a minimum, include the calculation used
      to arrive at the projected shortfall in funding and cost-savings
      measures the PHA has already taken or will take in the future.

      PHA requests for approval of payment standards below 90 percent of the
      published fair market rent (FMR) for any unit size may be approved by
      HUD field offices.  However, 24 CFR  § 982.503(d) states that HUD will
      not approve such payment standard amounts if the family share for more
      than 40 percent of voucher participants exceeds 30 percent of monthly
      adjusted income.  This is a regulatory, not statutory, requirement.
      PHAs experiencing financial difficulties may request that HUD
      Headquarters waive this requirement for good cause, such as the
      inability of a PHA to avoid terminating the HAP contracts of current
      participants or withdrawing vouchers from families searching for
      housing without the proposed reduction in payment standards.


      In determining whether to approve PHA requests for payment standard
      waivers of 24 CFR § 982.503(d) or § 982.505(c)(3), HUD will review and
      take into consideration the PHA’s current rent burden and the impact
      of the proposed change on the PHA’s participants.  In addition, as a
      condition of the waiver approval, HUD may require the PHA to raise
      payment standards and apply the new payment standard amounts
      immediately at such time that the PHA receives additional funding.


      PHAs should note that they are not required to increase (or decrease)
      the dollar amount of their payment standards based on changes in
      applicable FMRs that take effect each Federal Fiscal Year on October
      1st unless the change in FMR results in the PHA’s payment standard
      being outside the basic range of 90 – 110 percent of FMR by bedroom
      size.  A PHA that anticipates that any of its current payment
      standards will be below 90 percent of the new final FMRs and that does
      not wish to increase its payment standard for that bedroom size must
      request a waiver in advance per the procedure in the prior paragraph.


   k. Utility Allowances.  According to 24 CFR § 982.517(d)(1), the PHA must
      use the appropriate utility allowance for the size of dwelling unit
      actually leased by the family rather than the family unit size as
      determined under the PHA subsidy standards.  A PHA may request a
      waiver of this regulation to apply the utility allowances for the
      bedroom size for which the family was eligible under the PHA’s subsidy
      standards, rather than for the unit size the family is leasing if it
      is larger.  However, if more than one cost-savings waiver is
      requested, the PHA must demonstrate how both/all waivers are necessary
      to avoid a shortfall that would result in the termination of families.




   5. Termination of Assistance Due to Insufficient Funding.  The regulation
      at 24 CFR § 982.454 provides that a PHA may terminate HAP contracts,
      in accordance with HUD requirements, if the PHA determines that
      funding under the CACC is insufficient to support continued assistance
      for families in the program.

In determining if funding under the CACC is insufficient to support
continued assistance for families in the program, the PHA must take into
consideration all of  its available budget authority (which includes
unspent prior year HAP funds in the PHA’s NRA account).


Before terminating HAP contracts on the basis of insufficient funding, the
PHA must ensure that it has carefully considered all cost-savings measures
and the impact such terminations will likely have on program applicants and
participants.  In addition, the PHA is encouraged to utilize alternative
sources of unrestricted non-Federal funding that may be available to
prevent the termination of rental assistance.  The PHA must notify the HUD
field office and its financial analyst at the Financial Management Center
(FMC) prior to issuing notices of termination actions due to insufficient
funding.
The notice must be in writing and must include all measures taken to date
to reduce or eliminate the shortfall and the number and date(s) of proposed
termination.

PHA termination policies due to insufficient funding must be included in
the administrative plan.  Such policies should describe how the PHA will
determine which HAP contracts will be terminated.  Any PHA policies with
respect to the resumption of assistance for the impacted families must also
be included in the administrative plan.  In setting such policies, a PHA
should be mindful of its obligation to affirmatively further fair housing
pursuant to 24 CFR 982.53(c) and 24 CFR 903.7 (o).

 6.      Reasonable Accommodations.  Notwithstanding a PHA’s adoption of
 policies noted above to deny portability or moves within a PHA’s
 jurisdiction or revision of payment or subsidy standards, reasonable
 accommodation requests for a person’s disability must still be evaluated in
 accordance with HUD’s Section 504 implementing regulations at 24 CFR part
 8.  Such requests must be granted when an accommodation may be necessary to
 afford persons with disabilities an equal opportunity to use and enjoy a
 dwelling, unless it would impose an undue financial and administrative
 burden on the PHA or fundamentally alter the nature of the PHA’s
 operations.


 7.  PHA Requests for Regulatory Waivers.  The regulatory waiver process in
 Public and Indian Housing requires PHAs to first send their request to the
 appropriate field office; the field office the forwards the waiver request
 to the appropriate program office at HUD Headquarters along with a field
 office recommendation (See Notice PIH 2009-41).

8.  Further Information.  Any questions regarding this notice should be
directed to Phyllis Smelkinson, Housing Program Specialist, Housing Voucher
Management and Operations Division, Office of Public Housing and Voucher
Programs, at (202) 402-4138 (this is not a toll-free number) or by
electronic mail at Phyllis.A.Smelkinson@hud.gov.  Persons with hearing or
speech impairments may access this telephone number via TTY by calling the
Federal Information Relay Service at 1-800-877-8339.  In addition, PHAs
that are experiencing funding difficulties, or that believe they may
experience funding difficulties in the future, should contact their
Financial Analyst at the FMC.

9.  Paperwork Reduction Act.  The information collection requirements
contained in this notice have been approved by the Office of Management and
Budget (OMB) under the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C.
3520).  In accordance with the PRA, HUD may not conduct or sponsor, and a
person is not required to respond to, a collection of information unless
the collection displays a currently valid OMB control number.  The
information collection contained in this notice has been approved under the
PRA OMB Control Number 2577-0169.




                                                   /s/

                                  Sandra B. Henriquez, Assistant Secretary
                                  for Public and Indian Housing

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