A Brief Review of Major Low Income Housing Programs ‐

In 1965 the U.S. Department of Housing and Urban Development was created to be responsible for the implementation and enforcement of federal housing and community development statutes. HUD’s mission is to create strong, sustainable, inclusive communities and quality affordable homes (HUD, 2010). By working closely with other federal agencies and branches, as well as with local governments, faith based and community organizations, and the private sector, HUD provides a coordinated and comprehensive response to America’s housing and community development needs (Teisman and Klijn, 2002). HUD’s key activities directly support the strategic goals as follows:

• Increase homeownership opportunities by fighting predatory lending, simplifying

the home buying process, helping HUD-assisted renters become homeowners, and insuring loans for first-time and low-income homebuyers to increase access to the benefits of homeownership;

• Promote decent affordable housing by expanding access to affordable rental housing, improving the physical quality and management of public housing, and providing housing opportunities for populations with special needs;

• Strengthen communities by eliminating chronic homelessness, mitigating housing conditions that threaten health, and providing grants to communities to help meet locally defined needs for housing, economic development, and public infrastructure;

• Ensure equal opportunities in housing by resolving discrimination complaints swiftly, promoting awareness of fair housing laws, improving housing accessibility for persons with disabilities, and ensuring that HUD assisted programs provide equal opportunity;

• Promote participation of faith-based community organizations by removing the regulatory barriers that discourage these organizations from partnering with HUD.

As of 2006, HUD has about 9,000 employees and 81 field offices, with a presence in all 50 states, the nation’s capital, and Puerto Rico (HUD, 2006). For FY 2006, Congress approved a budget of more than $36 billion for HUD programs. The more than $36 billion reflects rescissions, but does not include the $11.5 billion provided in the disaster assistance supplemental appropriation (HUD, 2006).

The allocation of HUD’s resources toward each of the strategic goals in FY 2005 is summarized in the table above. For FY 2006, Congress passed an $11.5 billion supplemental appropriation for the Community Development fund in support of Gulf Coast recovery. In the absence of the Gulf recovery funding, the majority of HUD’s budget authority is designated for affordable housing and strengthening communities,

reflecting the resource-intensive nature of rental assistance and CDBG funding for communities. HUD has attempted to focus on its activities to expand homeownership opportunities for minorities, low-income families, and other American. HUD’s activities will help to make homeownership more accessible, affordable, and secure for millions of families. Since its creation in 1934, FHA (Federal Housing Administration) has insured more than 33 million single-family mortgages totaling $1.6 trillion, and has served as a model for housing finance around the world (HUD, 2010). While the overall homeownership rate at the end of FY 2005 was 68.8 percent – constituting a record number of homeowners – the homeownership rate for low- and moderate income families was only 52.8 percent (HUD, 2010). Following is to briefly review major low-income housing programs in the United States.³⁾

<Table 2-1> Allocation of HUD Resources in FY 2005 by strategic Goal

Source: HUD Strategic Plan 2006-2011 (HUD, 2006)

Housing Choice Voucher Program. The housing choice voucher program is a type of federal subsidized assistance for low-income families and individuals. There are a variety of housing choice vouchers (i.e., housing rental assistance vouchers⁴⁾,

3) Description of each low-income housing program and relevant statistics are mainly from the HUD’s documents and website, unless specific documents are not cited.

homeownership vouchers, vouchers for people with disabilities, and etc.) and programs (family self-sufficiency and section eight management assessment program). Housing rental assistant vouchers will be focused.

1) Program Purpose and Definition: Housing choice vouchers allow very low-income families to choose and lease or purchase safe, decent, and affordable privately owned rental housing. The housing choice voucher program is the federal government's major program for assisting very low-income families, the elderly, and the disabled to afford decent, safe, and sanitary housing in the private market. Housing choice vouchers are administered locally by public housing agencies (PHAs). The PHAs receive federal funds from the HUD to administer the voucher program. A family that is issued a housing voucher is responsible for finding a suitable housing unit of the family's choice where the owner agrees to rent under the program. This unit may include the family's present residence. Rental units must meet minimum standards of health and safety, as determined by the PHA. A housing subsidy is paid to the landlord directly by the PHA on behalf of the participating family. The family then pays the difference between the actual rent charged by the landlord and the amount subsidized by the program. Under certain circumstances, if authorized by the PHA, a family may use its voucher to purchase a modest home.

2) Eligibility and Application: Eligibility for a housing voucher is determined by the PHA based on the total annual gross income and family size and is limited to US citizens and specified categories of non-citizens who have eligible immigration status. In general, the family's income may not exceed 50% of the median income for the county or metropolitan area in which the family chooses to live. By law, a PHA

4) There exist several housing rental assistance vouchers, including 1) Project Based Vouchers encourages property owners to construct, rehabilitate, or make available existing housing units to lease to very low-income families; and 2) Tenant Based Vouchers enables very low-income families to lease safe, decent, and affordable privately owned and rental housing (see more details at the following website, http://www.hud.gov/offices/pih/programs/hcv/about/list.cfm)

must provide 75 percent of its voucher to applicants whose incomes do not exceed 30% of the area median income. Median income levels are published by HUD and vary by location. The PHA serving the community can provide the people with the income limits for their area and family size. During the application process, the PHA will collect information on family income, assets, and family composition. The PHA will verify this information with other local agencies, employer and bank, and will use the information to determine program eligibility and the amount of the housing assistance payment. If the PHA determines that the family is eligible, the PHA will put applicant’s name on a waiting list, unless it is able to assist you immediately.

Once applicant’s name is reached on the waiting list, the PHA will contact applicants and issue to them a housing voucher, application, and rent subsidy information, in addition to a description of the tenant, landlord, housing authority, and HUD's roles.

The PHA determines a payment standard that is the amount generally needed to rent a moderately-priced dwelling unit in the local housing market and that is used to calculate the amount of housing assistance a family will receive. However the payment standard does not limit and does not affect the amount of rent a landlord may charge or the family may pay. A family which receives a housing voucher can select a unit with a rent that is below or above the payment standard. The housing voucher family must pay 30% of its monthly adjusted gross income for rent and utilities, and if the unit rent is greater than the payment standard the family is required to pay the additional amount. By law, whenever a family moves to a new unit where the rent exceeds the payment standard, the family may not pay more than 40 percent of its adjusted monthly income for rent. The PHA calculates the maximum amount of housing assistance allowable. The maximum housing assistance is generally the lesser of the payment standard minus 30% of the family's monthly adjusted income or the gross rent for the unit minus 30% of monthly adjusted income.

3) Funding and Vouchers: According to HUD’s documents, $16 billion for housing assistant payment is allocated in CY 2010, which increase $2 billion from CY 2009 (Table 2-2).

<Table 2-2> Housing Assistance Payment (HAP) - Appropriations

2010 2009 2008

Total Renewal $16,339,200,000 $15,034,071,000 $14,694,506,000 Set-Aside (Deduct) $150,000,000 $100,000,000 $50,000,000

Offset(deduct) 0 $750,000,000 $723,257,000

Budget Authority $16,189,200,000 $14,184,071,000 $13,921,249,000

Note: HAP Set-Aside is eligible to use for adjusting allocations for PHAs that experienced a significant increase in renewal costs, resulting from unforeseen circumstances or portability under section 8(r). HAP Offset is based on Net Restricted Assets (NRA) offset calculation – Total NRA divided into Usable NRA and Unusable NRA (Usable NRA = Amount of the total that would be required for the PHA to reach 100% utilization of baseline unit months; Unusable NRA = Difference between Total NRA and Usable NRA) Sources: modified from Office of Housing Voucher Program of HUD (2010, 2009)

<Table 2-3> Homeownership Voucher Summary

Prior 2005 2006 2007 2008 2009 Total Homeownership

Voucher (HVO) 52 2,778 1,573 1,813 1,943 1,801 9,960 Family

self-Sufficiency (FSS) 885 516 543 523 497 281 3,245 Moving to Work

(MTW) 67 99 53 9 66 134 428

Total 1,004 3,393 2,169 2,345 2,506 2,216 13,633

Note: The data in this report is current as of 07/18/2010.

Sources: modified from Office of Housing Voucher Program of HUD (2010)

As shown in Table 2-3, as of July 2010 a total 9,960 units have been provided for homeownership vouchers during prior 2005 through 2009. In addition to the housing vouchers, family self-sufficiency and moving to work vouchers are 3,245 and 428 during the period, respectively.

The HOME Investment Partnerships program. Promoting decent affordable housing is a central part of low-income housing policies and programs. To this end, HUD seeks to expand access to availability and quality of affordable rental housing, improve the management accountability of public and assisted housing, improve housing opportunities for the elderly and persons with disabilities, and promote housing self-sufficiency (Abravanel and Johnson, 2000). Most of these severe needs consisted solely of severe rent burdens: rents exceeding half of household incomes. In most metropolitan areas, a high demand for housing means that the market does not yield monthly rents reasonable for families with modest incomes. For meeting the needs, HUD implements the HOME Investment Partnership program (HOME), which is authorized under Title II of the Cranston-Gonzalez National Affordable Housing Act.

The HOME provides formula grants to States and localities that communities use-often in partnership with local nonprofit groups-to fund a wide range of activities that build, buy, and/or rehabilitate affordable housing for rent or homeownership or provide direct rental assistance to low-income people.

1) Program Purpose and Definition: HOME is the largest Federal block grant to State and local governments designed exclusively to create affordable housing for low-income households. The program was designed to reinforce several important values and principles of community development: a) HOME's flexibility empowers people and communities to design and implement strategies tailored to their own needs and priorities; b) HOME's emphasis on consolidated planning expands and strengthens partnerships among all levels of government and the private sector in the development

of affordable housing; c) HOME's technical assistance activities and set-aside for qualified community-based nonprofit housing groups builds the capacity of these partners; and d) HOME's requirement that participating jurisdictions (PJs) match 25 cents of every dollar in program funds mobilizes community resources in support of affordable housing.

2) Eligibility and Application: HOME funds are awarded annually as formula grants to participating jurisdictions. The program's flexibility allows States and local governments to use HOME funds for grants, direct loans, loan guarantees or other forms of credit enhancement, or rental assistance or security deposits. States are automatically eligible for HOME funds and receive either their formula allocation or

$3 million, whichever is greater. Local jurisdictions eligible for at least $500,000 under the formula ($335,000 in years when Congress appropriates less than $1.5 billion for HOME) also can receive an allocation. Communities that do not qualify for an individual allocation under the formula can join with one or more neighboring localities in a legally binding consortium whose members' combined allocation would meet the threshold for direct funding. Other localities may participate in HOME by applying for program funds made available by their State. Congress sets aside a pool of funding, equivalent to the greater of $750,000 or 0.2 percent of appropriated funds, which HUD distributes among insular areas.

The eligibility of households for HOME assistance varies with the nature of the funded activity. For rental housing and rental assistance, at least 90 percent of benefiting families must have incomes that are no more than 60 percent of the HUD-adjusted median family income for the area. In rental projects with five or more assisted units, at least 20% of the units must be occupied by families with incomes that do not exceed 50% of the HUD-adjusted median. The incomes of households receiving HUD assistance must not exceed 80 percent of the area median. HOME income limits are published each year by HUD.

Program funds are allocated to units of general local government on the basis of a formula that considers the relative inadequacy of each jurisdiction's housing supply, its incidence of poverty, its fiscal distress, and other factors. Shortly after HOME funds become available each year, HUD informs eligible jurisdictions of the amounts earmarked for them. Participating jurisdictions must have a current and approved Consolidated Plan, which will include an action plan that describes how the jurisdiction will use its HOME funds. A newly eligible jurisdiction also must formally notify HUD of its intent to participate in the program.

3) Funding: Table 2-4 shows full-year allocations for HOME Investment Partnerships (HOME), and Community Development Block Grants (CDBG). In 2010, a total of $1.8 billion is allocated for the HOME programs and $3.9 billion for the CDBG programs. The HOME allocations shows slightly over 50 other participating jurisdictions received an increase averaging $40 per $100,000 allocated for FY 2009 while most other participating jurisdictions were decreased on average $53 per

$100,000. The CDBG allocations have been reduced an average of $434 per $1 million of what was allocated for 2009. The FY 2010 amounts for all other entitled community grantees were increased an average $28 per $1 million of what was allocated for 2009.

<Table 2-4> HOME and CDBG Fund Allocations in 2008~2010

2010 2009 2008

HOME $1,813,568,921 $1,816,947,050 $1,633,227,931 CDBG $3,949,540,514 $3,643,985,331 $3,595,096,980

Sources: modified from Community Planning and Development of HUD (2010, 2009, 2008)

The Housing Opportunities for People Everywhere (HOPE VI) program. HOPE VI was a direct result of the report of the National Commission on Severely Distressed

Public Housing, submitted to Congress on August 10, 1992. The Commission estimated the cost of removing and replacing the 86,000 units at $7.5 billion in 1992 dollars, and recommended that Congress fund a 10-year program at approximately

$750 million per year. Congress responded immediately to the Commission’s report, and on October 6, 1992, appropriated the first $300 million for what was originally called the “Urban Revitalization Demonstration” and which is now known as HOPE VI. Whereas most programs are both authorized and appropriated by Congress, HOPE VI has operated through appropriations only. Accordingly, HUD administered those grants not by program regulation but by each Fiscal Year’s Notice of Funding Availability (NOFA), as published in the Federal Register, and the Grant Agreement executed between each recipient and HUD. As a result, HOPE VI was authorized for the first time in FY 1999, when the Quality Housing and Work Responsibility Act of 1998 (Public Housing Reform Act) amended section 24 of the 1937 Act. Most of the provisions of the Public Housing Reform Act were incorporated into the FY 1999 NOFA, and the FY 2000 fully incorporated the provisions of the authorization.

1) Program Purpose and Definition: The HOPE VI program serves a vital role in the HUD’s efforts to transform public housing. The specific elements of public housing transformation include: a) changing the physical shape of public housing; b) establishing positive incentives for resident self-sufficiency and comprehensive services that empower residents; c) lessening concentrations of poverty by placing public housing in non-poverty neighborhoods and promoting mixed-income communities; and d) forging partnerships with other agencies, local governments, nonprofit organizations, and private businesses to leverage support and resources.

2) Eligibility and Application: Any Public Housing Authority that has severely distressed public housing units in its inventory is eligible to apply. Indian Housing Authorities and Public Housing Authorities that only administer the Housing Choice Vouchers (Section 8) Program are NOT eligible to apply. Individuals are also not

eligible to apply. HOPE VI Revitalization grants fund capital costs of major rehabilitation, new construction and other physical improvements, demolition of severely distressed public housing, acquisition of sites for off-site construction, and community and supportive service programs for residents, including those relocated as a result of revitalization efforts. HOPE VI Main Street grants provide assistance to smaller communities in the development of affordable housing that is undertaken in connection with a Main Street revitalization effort.

<Table 2-5> HOPE IV Funding History in 2000~2009

FY Revitalization Demolition Total

Dollars Number Dollars Number Dollars Number

2000 $513,805,464 18 $49,994,536 26 $563,800,000 44 2001 $491,774,238 16 $74,964,992 43 $566,739,230 59 2002 $494,267,265 28 $42,379,319 41 $536,646,584 69 2003 $447,750,000 24 $59,634,870 69 $507,384,870 93

2004 $126,884,932 7 $126,884,932 7

2005 $156,895,528 8 $156,895,528 8

2006 $71,900,000 4 $71,900,000 4

2007 $88,855,000 5 $88,855,000 5

2008 $97,246,691 6 $97,246,691 6

2009 $113,600,000 6 $113,600,000 6

Sources: modified from Public and Indian Housing of HUD (2010)

3) Fund and Operation: HOPE VI operated solely by congressional appropriation from FY 1993~1999. The FY 1999 appropriation included the congressional authorization of HOPE VI as Section 24 of the U.S. Housing Act of 1937. Section 24 was implemented in the FY 2000 NOFA, and was reauthorized in conjunction with the American Dream Downpayment Act of 2003. Grants are governed by each Fiscal

Year's Notice of Funding Availability (NOFA), as published in the Federal Register, and the Grant Agreement executed between each recipient and HUD. Table 2-5 shows a history of HOPE IV funding during 2000 through 2009. Overall, it appears the HOPE IV funding had declined continuously until 2006 and then increased slightly.

The FY 2009 HOPE VI Revitalization fund is approximately $113 million. Eligible applicants are only public housing authorities (PHAs) that have severely distressed housing in their inventory and that are otherwise in conformance with the threshold requirements of the NOFA.

The Low-Income Housing Tax Credit (LIHTC) program. The LIHTC Program is an indirect Federal subsidy used to finance the development of affordable rental housing for low-income households. The LIHTC Program may seem complicated, but many local housing and community development agencies are effectively using these tax credits to increase the supply of affordable housing in their communities. The LIHTC Program, which is based on Section 42 of the Internal Revenue Code, was enacted by Congress in 1986 to provide the private market with an incentive to invest in affordable rental housing. Federal housing tax credits are awarded to developers of qualified projects. Developers then sell these credits to investors to raise capital (or equity) for their projects, which reduces the debt that the developer would otherwise have to borrow. Because the debt is lower, a tax credit property can in turn offer lower, more affordable rents. Provided the property maintains compliance with the program requirements, investors receive a dollar-for-dollar credit against their Federal tax liability each year over a period of 10 years. The amount of the annual credit is based on the amount invested in the affordable housing.

1) Program Purpose and Definition: The IRS allocates housing tax credits to designated state agencies-typically state housing finance agencies - which in turn award the credits to developers of qualified projects. Each state is limited to a total annual housing tax credit allocation of $1.75 per resident, with only the first year of

the 10 years of tax credits counting against the allocation. Beginning in 2003, this limit will be adjusted for inflation. States allocate housing tax credits through a competitive process. The state allocating agency must develop a plan for allocating the credits consistent with the state's Consolidated Plan. Federal law requires that the allocation plan give priority to projects that (a) serve the lowest income families; and (b) are structured to remain affordable for the longest period of time. Federal law also requires that 10 percent of each state's annual housing tax credit allocation be set aside for projects owned by nonprofit organizations. For additional information, people can contact their state tax credit allocating agency for a copy of its Qualified Allocation Plan (QAP). The credit amount for a project is calculated based on the costs of development and the number of qualified low-income units, and cannot exceed the amount needed to make the project feasible. A State has two years to award housing tax credits to projects. Tax credits not awarded in a year may be carried forward to the next year. If a state is unable to use its tax credits over a two-year period, they are returned to a national pool for re-allocation. If a state awards tax credits to a project that is not completed and the tax credits are returned, the state has an additional two years to award the tax credits to another project within that state.

2) Eligibility and Application: To be eligible for consideration under the LIHTC Program, a proposed project must be a residential rental property, and commit to one of two possible low-income occupancy threshold requirements, restrict rents, including utility charges, in low-income units, and operate under the rent and income restrictions for 30 years or longer, pursuant to written agreements with the agency issuing the tax credits.

Typical rental properties that are eligible under HOME will also be eligible under LIHTC. However, the LIHTC program is not as flexible as the HOME program concerning service-enriched housing, or concerning group homes and transitional housing. The LIHTC program requires that rehab be performed, if the developer is

acquiring an existing building. Tax credits may be earned on the acquisition of an existing development provided the owner meets the 10-year previous ownership rule.

This rule states that the property to be acquired must not have changed ownership and been placed in service during a 10-year period prior to the acquisition. A building not used in ten or more years can claim the acquisition credit even if its ownership has changed, given that it has not been placed in service during that period.

Projects eligible for housing tax credits must meet low-income occupancy threshold requirements. Project owners may elect one of the following two thresholds: 20-50 Rule: At least 20 percent of the units must be rent restricted and occupied by households with incomes at or below 50 percent of the HUD-determined area median income (adjusted for household size); 40-60 Rule: At least 40 percent of the units must be rent restricted and occupied by households with incomes at or below 60 percent of the HUD-determined area median income (adjusted for household size). The 20-50 Rule is conceptually similar to - although not exactly the same as - a 20 percent Low HOME requirement. Similarly, the 40-60 Rule is comparable to a 40 percent High HOME requirement.

Typical State QAPs encourage applicants to provide more than the minimum number of affordable units, and to provide greater than the minimum level of affordability. Moreover, credits are available only for the affordable units. As a result, many applications provide for 100 percent of the units to be affordable, and many applications provide for some units to be affordable well below 50 percent of AMI.

The rent for each unit is established so that tenant monthly housing costs, including a utility allowance, do not exceed the applicable LIHTC rent limit. These limits are based on a percentage of area median income, as adjusted by unit size. Of course, rents cannot exceed local market limits. It is important to note that the LIHTC Program restricts only the portion of the rent paid by the tenant, not the total rent.

As a result, certain rental assistance programs can be used to raise the total rent above