Exploring Low-Income Housing Delivery Systems:

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Exploring Low-Income Housing Delivery Systems:

Roles of Nonprofit Organizations in the United States

미국의 저소득층 주거지원 프로그램 서비스전달체계에 관한 연구 비영리주택조직의 역할을 중심으로

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국토연 2010-03 ․ Exploring Low-Income Housing Delivery Systems:

Roles of Nonprofit Organizations in the United States

지은이최상옥 김혜승․ , , Max Stephenson, 전성제 /펴낸이박양호․ /펴낸곳국토연구원․ 출판등록제․ 2-22호 /인쇄․2010년 월4 20일 / 발행․2010년 월4 30일

주소경기도 안양시 동안구 관양동 1591-6 (431-712)․ 전화․031-380-0114(대표), 031-380-0426(배포) / 팩스․031-380-0470

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국토연구원 2010,

Ⓒ

이 연구보고서의 내용은 국토연구원의 자체 연구물로서

＊

정부의 정책이나 견해와는 관계없습니다.

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국토연 2010 03―

Exploring Low-Income Housing Delivery Systems:

Roles of Nonprofit Organizations in the United States

•

Sang Ok Choi Hye Seung Kim․ Max Stephenson Sung Je Jeon․

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Authors

Sang Ok Choi Hye Seung Kim Max Stephenson Sung Je Jeon

Assistant Professor, Virginia Tech

Research Fellow, Korea Research Institute for Human Settlements (KRIHS)

Associate Professor, Virginia Tech

Research Assistant, Korea Research Institute for Human Settlements (KRIHS)

The deliberation committee Kyung Hwan Sohn, KRIHS Geun Yong Kim, KRIHS Hyeon Sook Chun, KRIHS Mina Kang, KRIHS

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P ․ R ․ E ․ F ․ A ․ C ․ E

PREFACE

Current Korea government operates various low-income housing assistance programs, such as public housing rental services, support for housing costs, housing rehabilitation and housing purchase. These programs have affected positively aspects of reducing housing costs and promoting housing quality of low-income households.

Nevertheless, outcomes of these programs are not sufficient for low-income households, and it has been noted that many low-income households still suffer in places where some programs are not available, eligible, or even equitable.

To address the question, the authors examine major characteristics of low-income housing delivery systems and relevant programs in the United States. In the United States, low-income housing policies and programs have been moved from federal to local role. Different communities and regions have vastly different housing needs, and such changes underscore the need to fundamentally change the way government works by creating team-oriented, customer-centered organizations. Housing nonprofit assistance programs help housing nonprofits provide higher quality services to the nation’s communities. These characteristics and trends for supporting housing nonprofits in the United States imply that Korean government can apply into making feasible low-income housing delivery systems and specific programs.

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The authors introduce the concepts of collaborative governance and intersectoral networks which have been much paid to the housing literature. Specifically, the authors follow up with the arguments that low-income housing developed by nonprofit organizations generates significantly greater neighborhood spillover benefits than that developed by other providers, and that, however, some smaller and faith-based nonprofits have lacked access to information and critical networking contacts, and lack complete capacity to make themselves eligible to receive funding. From this understanding, the authors raise a fundamental questions about how Korean low-income housing services can be made a collaborative governance system with governmental and nongovernmental (nonprofit) organizations.

This report provides policy suggestions and implications for low-income housing services, and best practices for improving capacities of Korean government and promoting roles and functions of nonprofit organizations in the low-income housing delivery systems. Furthermore, this study contributes to developing a useful collaborative housing governance for low-income households.

I would like to give special thanks to the research team, Sang Ok Choi at Virginia Tech(VT), Hye Seung Kim at Korea Research Institute for Human Settlements(KRIHS), Max Stephenson at VT, and Sung Je Jeon at KRIHS. I appreciate the research team makes great efforts for this timely and useful research even with only three months.

Park Yangho, Ph. D.

President Korea Research Institute for Human Settlements April, 2010

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S ․ U ․ M ․ M ․ A ․ R ․ Y

SUMMARY

This study examines major characteristics of low-income housing delivery systems (housing network governance) and relevant programs in the United States, and provides suggestions for governmental officials and network managers to promote roles and functions of nonprofit organizations in the low-income housing delivery systems in Korea. Focusing on roles of housing nonprofits, this study understands that nonprofit organizations play a critical role in housing policies and programs which are typically justified by the claim that their housing investments produce significant neighborhood spillover benefits.

Nevertheless, outcomes of these programs are not sufficient for low-income households, and it has been noted that many low-income households still suffer in places where some programs are not available, eligible, or even equitable. Especially,

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housing delivery systems (housing network governance) appear to be a top-down hierarchical one which has difficulty reflecting customers-oriented housing services.

Nevertheless, problems with current housing policies and programs can be resolved even under current financial supports if the Korean government makes housing delivery systems more effective.

Meanwhile, much attention in the literature has been paid to partnership and collaborative governance, and intersectoral networks for delivery of housing.

Especially, low-income housing developed by nonprofit organizations generates significantly greater neighborhood spillover benefits than that developed by other providers. The benefits include renovating housing and revitalizing neighborhoods in the process, and rehabilitating rental housing leading to significant increases in the value of surrounding properties. This study overviews collaborative governance and describes concepts and a model related to public-nonprofit collaborative governance, and then introduces an analytical framework to account for the collaborative governance of the low-income housing services in the United States, such as the Low-Income Housing Tax Credit (LIHTC) program, the Housing Choice Voucher Program (HCVP) program, the Housing Opportunities for People Everywhere (HOPE VI) program, and the HOME Investment Partnership program. This study conducted a case of the State of New Jersey which the New Jersey State operates actively a collaborative governance system for the low income housing services.

From a review of documents and the case analysis, this study presents implications for Korean low-income housing services and programs. First, a collaborative governance form in the case of New Jersey, network administrative organization (NAO), needs to be considered for Korean government in the network formation process to share government resources with nonprofit housing, particularly to support operation costs as well as project costs. It would be advantages for Korean central and local governments to make up financial challenges to support low-income housing

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services. Second, the New Jersey’s collaborative housing network gives some ideas for Korean government and housing nonprofits to promote the ability of making effective collaborative housing partnerships with other sectors. These collaborative partnerships affect various activities from housing development to social services and economic development. Housing nonprofits collaborate with local police and other civic groups throughout activities of community capacity building and neighborhood watch programs. These activities in the communities have affected the affordability of housing and have joined with private enterprise to develop other social services (i.e., job training programs, or social welfare programs). These collaborative partnerships with other sectors can bring external benefits including higher quality of low-income housing services. Third, this study also argues that trust and goal consensus can be two critical contingency factors for a successful collaborative governance, although other factors such as size and the nature of the task might be possible. Finally, this study provides best practices for improving capacities of central and local governments as well as housing nonprofit organizations. Specifically, this study illustrates housing policy directions for low-income housing services and presents guideline for implementing low-income housing programs.

￭Key words _ housing nonprofit, housing policy, collaborative governance

￭Research Field Classification _ SE0601

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C ․ O ․ N ․ T ․ E ․ N ․ T ․ S

TABLE CONTENTS

<Table 2-1> Allocation of HUD Resources in FY 2005 by strategic Goal ··· 17

<Table 2-2> Housing Assistance Payment (HAP) Appropriations ··· 20

<Table 2-3> Homeownership Voucher Summary ··· 20

<Table 2-4> HOME and CDBG Fund Allocations in 2008~2010 ··· 23

<Table 2-5> HOPE IV Funding History in 2000~2009 ··· 25

<Table 3-1> Affordable Housing Partnership Program (AHPP) Elements ··· 33

<Table 3-2> California Homebuyer's Down payment Assistance Program Elements ··· 34

<Table 3-3> Characteristics of California Low Income Housing Service‐ ··· 43

<Table 3-4> Overall Resource for State and Federal Housing Spending in New York State ··· 46

<Table 3-5> Four Regional Offices of Weatherization Assistance Providers ··· 50

<Table 3-6> Characteristics of New York Low Income Housing Service‐ ··· 51

<Table 3-7> Description of the Individual Development Account(IDA) Program ·· 56

<Table 3-8> Characteristics of New Jersey Low Income Housing Service‐ ·· 59

<Table 3-9> Florida Small Cities Community Development Block Grant in FY2010 ·· 62

<Table 3-10> Characteristics of Florida Low Income Housing Service‐ ··· 68

<Table 3-11> Characteristics of Virginia Low Income Housing Service‐ ···· 75

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<Table 4-1> Network Members by County ··· 86

<Table 4-2> Centrality Measures ··· 92

<Table 4-3> Advocacy Teams by County ··· 93

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F ․ I ․ G ․ U ․ R ․ E ․ C ․ O ․ N ․ T ․ E ․ N ․ T ․ S

FIGURE CONTENTS

<Figure 1-1> Research Flow ··· 3

<Figure 3-1> California Low Income Housing Governance Structure‐ ··· 44

<Figure 3-2> New York Low Income Housing Governance Structure‐ ··· 53

<Figure 3-3> New York Low Income Housing Governance Structure‐ ··· 60

<Figure 3-4> Florida Low-Income Housing Governance Structure ··· 69

<Figure 3-5> Virginia Low Income Housing Governance Structure‐ ··· 76

<Figure 4-1> Three Modes of Collaborative Governance ··· 82

<Figure 4-2> Geographical Map by County ··· 87

<Figure 4-3> Three Geographical Distribution Map by County ··· 88

<Figure 4-4> Network Patterns of the Low-Income Housing Services in New Jersey ··· 90

<Figure 4-5> Network Patterns of the Low Income Housing Services between‐ counties ··· 91

<Figure 4-6> Advocacy Teams by County ··· 94

<Figure 4-7> Photos of Advocacy Teams Bus Tours ··· 95

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1

C ․ H ․ A ․ P ․ T ․ E ․ R ․ 1

Introduction

1. Research Background and Objectives

This study examines major characteristics of low-income housing delivery systems (housing network governance) and relevant programs in the United States, and proposes feasible low-income housing delivery systems and specific programs in Korea. This study also provides practical implications for governmental officials and network managers to promote roles and functions of nonprofit organizations in the low-income housing delivery systems.

Nevertheless, outcomes of these programs are not sufficient for low-income households, and it has been noted that many low-income households still suffer in places where some programs are not available, eligible, or even equitable. Especially, current housing delivery systems (housing network governance) are so top-down hierarchical that they have much difficulty in providing customers-oriented housing services. These problems and issues can be resolved even under current financial supports if the Korean government makes an effective collaborative housing services with other sectors.

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Much attention has been paid to partnership and collaborative governance, and intersectoral networks for delivery of housing (e.g., Koebel, 1998; Bratt, 2008; Wood, Turnham, and Mills, 2008). Especially, low-income housing developed by nonprofit organizations generates significantly greater neighborhood spillover benefits than that developed by other providers (Ellen and Voicu, 2006; O’Regan and Quigley, 2000).

Nonprofit organizations, faith-based and community organizations, large and small, can play a significant role in helping housing agencies to achieve its core goals and objectives (Bratt, 2008). Among other assets, many of these organizations have a detailed knowledge of the needs of low-income communities and have the trust of low-income residents. However, some smaller grassroots and faith-based institutions have lacked access to information and critical networking contacts, and lack complete capacity to make themselves eligible to receive federal funding (O’Regan and Quigley, 2000). The benefits include renovating housing and revitalizing neighborhoods in the process, and rehabilitating rental housing leading to significant increases in the value of surrounding properties. Thus, the lack of a deeper understanding of intersectoral networks, collaborative governance, and public-private partnerships for the delivery of low-income housing has contributed to the instability of low-income housing policy and its relevant programs.

2. Research Scope and Methods

This study reviews overview of low-income housing policies and programs in the United States, including the U.S. Department of Housing and Urban Development (HUD) and history and evolution of low-income housing policies. Then addressing forms and characteristics of low-income housing governance, roles of nonprofit organizations, and challenges and opportunities for nonprofit organizations, this study investigates low-income housing service delivery systems in selected states: California, New York, New Jersey, Florida, and Virginia.

With the review of low-income housing policies and programs in the United States, this

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study introduces a model of collaborative governance and analyzes specific low-income housing programs, such as the low-income Housing Tax Credit (LIHTC) program, the Housing Choice Voucher Program (HCVP) program, the Housing Opportunities for People Everywhere (HOPE VI) program, and the HOME Investment Partnership program.

This study uses a comprehensive literature view of the low-income housing policies and programs in the United States and also conducts interviews with state and local housing agencies and nonprofit organizations, for-profit developers, and low-income residents, including federal agency (i.e., HUD), state and local housing agencies, nonprofit organizations. low-income residents working to preserve and improve affordable multifamily housing are also interviewed. Then, this study employs social network analysis in order to examine low-income housing delivery systems (network governance) in the United States.

3. Research Flow

<Figure 1-1> Research Flow

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4. Potential Contributions

This study provides policy suggestions and guidelines for low-income housing services, and best practices for improving capacities of central and local governments as well as housing nonprofit organizations. Specifically, this study can provide housing policy directions for low-income housing services and present guideline for implementing low-income housing programs, as well as give best practices for fostering nonprofit organizations providing low-income housing services. Furthermore, this study contributes to developing a desirable collaborative housing governance system – including central and local governments, nonprofit organizations and profit developers – for low-income families. This study expects that Korean governments use low-income housing spending efficiently through the collaborative governance system.

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2

C ․ H ․ A ․ P ․ T ․ E ․ R ․ 2

Overview of low-income housing policies and programs in the United States

The history of housing policy in the United Sates helps a understanding of American low-income housing policies and programs. Generally, the history of housing policy will be reviewed chronologically in order to see how housing relevant Acts and statutes influence succeeding sets of housing programs and to understand how the institutional structure of low-income housing services evolved. More specifically, a substantial body of housing literature presents a review of that history as housing policy goals related to laws and regulations (Orlebeke, 2000; Rubin, Seneca and Stotsky, 1990; Stegman, 1995; Calavita, Grimes and Mallach, 1997), leadership role of federal government and the roles of nonprofit and for-profit agencies in affordable housing (Wallace, 1995; Haar, 1997; Basolo, 1999), and a progression shifting from liberal to conservative to liberal, depending on the political party (Marcuse, 2001).

First, reviewing housing policy goals in housing relevant Acts and statues helps understand changes of housing policy in the United States. Orlebeke (2000), for example, divides roughly into two periods to discuss the evolution of housing policy, and points out that the first period, 1949 to the 1973 Nixon moratorium on housing production subsidies, dominated federally enacted and administered housing production programs, but the second period (1973 to present) a much diminished federal role in

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housing programs. Even during the second period, Clinton Administration had more concern on housing issues such as homelessness and the expansion of low-income housing (Stegman 1995).

Second, the leadership role of federal government in housing policy and low-income housing changed especially in the 1980s and 1990s, due to funding uncertainty.

Federal financial support for low-income housing declined, while the roles of for-profit and nonprofit agencies increased (Wallace, 1995; Basolo, 1999). Basolo (1999) argues that city policy makers have an economic self-interest and little incentives to support low-income housing because of cost/benefit ratios, and that inter-city competition reduces the likelihood that cities will spend local dollars on housing programs. Lack of financial support and less incentive of low-income housing programs to public sector result in increasing the roles of profits and nonprofit agencies to provide housing provisions and low-income housing.

Third, the history of housing policy can be explored in terms of the difference between liberal and conservative housing policies. The range of differences in policy that have characterized governmental approaches to housing sees what conclusions might be drawn from the differences. Evidence on these points focuses on what are generally accepted as the more liberal housing policies put into effect in the US over the past 75 years (Marcuse, 2001).¹⁾

Following sections will discuss 1) a chronological history of housing policy in terms of housing relevant Acts and statutes, 2) government leadership role in

1) The New Deal and the anti-poverty-related policies of the Kennedy and Johnson administrations represent high points of the liberal approach. The US Housing Act of 1937 first established public housing as a permanent program and the Housing Act of 1949 established urban redevelopment according to conservative priorities. The Housing Act of 1968 represented the best of liberal urban policy thinking to that time. For contrast, the Housing Act of 1974 in the Nixon administration, after the moratorium on all housing proclaims, began conservative housing policy actions that was picked up and carried forward by the Reagan and Bush administrations and the provisions for the privatization of public housing in the Housing Act of 1990. (see details, Marcuse, 1986 and 2001).

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low-income housing, 3) contributions of nonprofits to low-income housing, and 4) a brief review of major federal low-income housing programs, including the U.S.

Housing and Urban Development Department.

1. Changes and Developments of Housing Acts: Chronological Review

Since National Housing Act was enacted in 1934, many changes and developments of housing policies and programs have been made in the United Stated. Various housing acts in the United States have been designed to promote homeownership and/or affordable housing (Sirmans and Macpherson, 2003). For example, the Housing Act of 1949 provided housing for low-income families through its public housing program and through its redevelopment program, and the National Affordable Act of 1990 and the low-income housing tax credit program provided incentives for private industry to work with state and local governments (i.e., Bast, 2002). The following is a brief summary of key statutes that define housing policies and programs in the United States²⁾:

1934 National Housing Act: Created the Federal Housing Administration “to

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encourage improvements in housing standards and conditions (and) to provide a system of mutual mortgage insurance.”

1937 United States Housing Act of 1937: Created the public housing program,

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through which local public housing authorities were given responsibility for constructing and operating housing projects, with program direction and financial support provided by the United States Housing Authority.

2) The summary of the major Housing Acts is abstracted from the HUD’s (2006) document (p.76-78), available at the website www.hud.gov/offices/cfo/reports/hud_strat_plan_2006-2011.pdf.

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1949 Housing Act of 1949: Established grant programs to assist state and local

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governments with community planning and urban renewal. It also established the national “ goal of a decent home and a suitable living environment for every… American family.”

1965 Department of Housing and Urban Development Act: Created the

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Department in order “ to achieve the best administration of the principal… programs of the federal government which provide assistance for housing and for the development of the Nation’s communities, to assist the President in achieving maximum coordination of the various federal activities which have a major effect upon urban community, suburban, or metropolitan developmen t and to provide for full and appropriate consideration, at the national level,… of the needs and interests of the Nation’s communities and of the people who live and work in them.”

1968 Housing and Urban Development Act: Established rental and

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homeownership programs for lower income families and created, within HUD, the Government National Mortgage Association (Ginnie Mae).

1974 Housing and Community Development Act of 1974: Created Community

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Development Block Grants for state and local governments “to promote the development of viable urban communities” and also established Section 8 rent subsidies for low-income families.

1983 Housing and Urban-Rural Recovery Act: Created the Section 8 voucher

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program, which provides tenants with rental subsidies that are more flexible and portable than the original Section 8 certificates.

1988 Housing and Community Development Act of 1988: Made housing

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vouchers a permanent program; allowed sale of public housing to resident management corporations, giving residents the ability to manage and buy their developments; and authorized enterprise zones.

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1990 National Affordable Housing Act of 1990 (a.k.a. Cranston-Gonzalez Act):

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Created programs to empower and help the most needy through a variety of economic incentives, low-income homeownership opportunities, and other housing and economic development programs. Created the HOME Investment Partnership, Housing Opportunities for Persons with AIDS (HOPWA) and Shelter Plus Care programs. Also established the Section 811 Supportive Housing for Persons with Disabilities program and the HOPE programs.

1998 Quality Housing and Work Responsibility Act of 1998 (a.k.a. Public

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Housing Reform Act): Made significant changes in the public housing and Section 8 tenant-based programs to deregulate high performing public housing agencies, promote mixed-income communities, establish targets for allocation of units and vouchers, and create incentives for residents to become self-sufficient.

2000 Community Renewal and New Markets Initiative of 2000: Encouraged

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economic development in low- and moderate-income rural and urban communities. Created the New Markets Tax Credit and the Renewal Communities program; expanded the Empowerment Zones program; and increased the supply of low-income Housing Tax Credits and Private Activity Bonds.

2003 American Dream Downpayment Act: Authorized up to $200 million

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annually for the American Dream Downpayment Initiative to provide downpayment assistance and home repair for low- income families to promote and increase homeownership.

2005 Gulf Opportunity Zone Act: Promoted reinvestment by businesses affected

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by Hurricane Katrina through tax provisions for business investment, hiring, and provision of employee housing.

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2009 American Recovery and Reinvestment Act (ARRA): Created an economic

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stimulus package to create jobs and promote investment and consumer spending during the recession. The Act includes federal tax cuts, expansion of unemployment benefits and other social welfare provisions, and domestic spending in education, health care, housing, and infrastructure, including the energy sector. Among housing support programs in the ARRA, HUD provides

$4 billion for repairing and modernizing public housing, $2.25 billion in tax credits for financing low-income housing construction, $2 billion for Section 8 housing rental assistance, $1.5 billion for rental assistance to prevent homelessness, $1 billion in community development block grants for state and local governments, and $250 million for energy efficient modernization of low-income housing.

Although there have been various acts to improve quality of housing provisions and services, some of these have had unintended consequences, such as the creation of slums and the reduction of affordable housing supply (Sirmans and Macpherson, 2003). It becomes evident that housing acts must consider the divergent interests of federal, state, and local governments (i.e., the requirements of the National Affordable Act of 1990).

2. Government Leadership Role in low-income Housing: From Federal to Local Role

It is generally accepted about government leadership role in American low-income housing that federal government played a key role in providing low-income housing during the 1940s through 1960s, but, after the 1970s and 1980s, the federal

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government leadership demised particularly due to impacts of Nixon administration’s moratorium in 1973 and Regan’s administration’s housing budget cut.

In the 1940s, low-income housing policies and programs were largely built, owned, and managed by federal government. For low-income housing advocates, the Housing Act of 1949 promised that the federal government made direct financial support for low-income housing to solve the nation’s housing problems with an eager housing industry and compliant local governments (Orlebeke, 2000). Regarding direct federal funding for low-income housing, the post-war adjustment period of the 1950s can be characterized as one of limited direct funding for affordable housing, and privatization of some previous, federally sponsored affordable housing. In the 1960s, extensive direct federal funding was secured for low-income housing during the peak of the liberal policies, symbolized by the Kennedy-Johnson "War on Poverty” (Sazama, 2000). Furthermore, in the 1940s through 1960s, the federal government, such as HUD, did not make efforts to work collaboratively with other federal and local partners. Through a top-down hierarchy that did not leverage local partnerships (Freeman, 2004), the federal government centralize controls and ubiquitous rules of housing policy and low-income programs.

However, in the 1970s, direct federal funding for low-income housing was phased out by 1981. In 1973, President Nixon abruptly imposed a moratorium on all new subsidy commitments, and the moratorium forced a reexamination of federally administered production programs and a search for better alternatives. In the 1980s and 1990s, the emphasis on private market solutions resulted in the virtual termination of federal direct financing of new affordable housing. Under the Reagan administration, budget authority for HUD-assisted housing, both new and existing, was cut from $26.7 billion in 1980 to $8.3 billion in 1988 (Rasey, 1993). These trends of budget cut and decentralization of housing services pushed other sector – including nonprofits and even private sector – wide burdens and resulted in

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decentralized actions by building residents and affordable housing organizers, some of these privatizations resulted in conversions to affordable housing providers. With the creation of Section 8 in the 1970s and the passage of the low-income Housing Tax Credit in 1986, the private sector took a lead role in affordable housing production.

Thus, during the Reagan administration and the 1980s, privatization of some of the federally sponsored multi-family housing was dominant.

Since the 1980s, these privatizations have been financed under Jack Kemp's HOPE program, the low-income Housing Preservation Act, HUD Section 220(3)(f).

Alternatively, they have involved the sale of multi-family properties owned by the federal government's Resolution Trust Corporation (RTC) as a result of the 1980s savings and loan crisis and banking crisis (Rohe and Stegman, 1992). This trend and movement encourages roles of nonprofits and nonprofit organization to get involvement in the low-income housing provisions and programs. More detailed discussion is followed in the next section.

In sum, the federal role for low-income housing began to diminish, while state and local governments became major drivers of the production and preservation of low-income housing policies and programs, a third sector of nonprofit community development corporations (CDCs) started to help solve problems at the local level.

Today, Americans’ attitudes about the role of government have evolved, and the emergence of technology has changed every facet of our lives including government.― We also recognize that different communities and regions have vastly different housing needs, and we see the interactions more clearly between housing and health, education, and energy use. Such changes underscore the need to fundamentally change the way government works by creating team-oriented, customer-centered organizations that reward results and nurture local innovation.

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3. Contributions of Nonprofits to low-income Housing

Nonprofit organizations can play a significant role in helping housing agencies to achieve its core goals and objectives (Bratt, 2008). Many of these nonprofit organizations have a detailed knowledge of the needs of low-income communities and have the trust of low-income residents. The cut-back of direct federal housing funds for low-income housing, coupled with the increased shortage of affordable housing during the real estate boom of the 1980s, stimulated nonprofit organizations to become involved in the supply of affordable housing, and these nonprofit organizations put together ad hoc packages of funding from many different federal, state, and local government sources, and from private sources (Davis, 1993). As a result of pressure from the housing market of the 1980s, and from housing activists, some states and large cities have appropriated their own funds to compensate for some of the decrease in federal funds for affordable housing. As part of this process, coalitions of nonprofit organizations worked in conjunction with their state departments of housing to develop state government limited equity cooperative programs (Angora Group, 1992; Willcox, 1994). The low-income housing tax credit, enacted in the 1986 tax code, is an important source of funding for nonprofit housing providers. This tax expenditure involves large tax breaks for corporate and high-income investors (Stegman, 1992). It is the current major source of federal government funds available for increasing the supply of affordable housing (Willcox, 1994). As a result, studies show that the combination of efforts by local nonprofits, and state and local departments of housing outside of New York City has resulted in the development of approximately 300,000 units of affordable housing between 1980 and 1996 (Gabriel, 1996; Rasey, 1993).

The decentralized housing movement is the spontaneous involvement by many organizations and people in developing affordable housing without extensive direct federal funding. Another advantage of this decentralized movement is that considerable

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knowledge is generated, and many people gain practical experience, due to the extent and wide variety of projects involved. It also provides a broad base of support for limiting further funding cuts, and, when appropriate, for organizing for direct public funding of the supply of new affordable housing.

There are, however, some limitations of a decentralized low-income housing policy, and many of the privatizations are being turned over to for-profit owners, and projects not directed to the poor or to housing are getting a larger portion of the urban grant funds. Without appropriate management of volunteers and financial supports to nonprofits, nonprofit housing nonprofit organizations have had many challenges. For example, many of the people involved are either volunteers or underpaid and, as a result, nonprofit staff frequently is inexperienced and has high turnover. Some smaller grassroots and faith-based institutions have lacked access to information and critical networking contacts, and lack complete capacity to make themselves eligible to receive federal funding (O’Regan and Quigley, 2000). At one extreme, some projects are left to sink or swim on their own. At the other extreme, some projects are over-regulated by state and city bureaucrats who have ventured into new territory and wish to prevent political embarrassment. Also, with a decentralized movement, most developers do not understand the real differences between limited equity cooperatives and rental properties.

In response, HUD’s Center for Faith-Based and Community Initiatives (CFBCI) will reach out to groups – especially the smaller grassroots organizations that tend to be excluded – and help them with educational seminars, technical assistance, and other services. By increasing the involvement of faith-based and community organizations in HUD’s programs, the Department intends to provide higher quality services to the nation’s communities. The goal of utilizing faith-based and community grassroots organizations to advance the mission of HUD ultimately hinges on the extent to which these organizations are able to access resources at the local level. HUD annually

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awards on the order of $2 billion in competitive grants for which nonprofit organizations are eligible. By comparison, $6 billion is potentially available through the CDBG and HOME programs – and more still through PHAs (Wood, Turnham, and Mills, 2008). HUD relies extensively on interagency partnerships to accomplish its mission (Bratt, 2008; O’Regan and Quigley, 2000; Teisman and Klijn, 2002).

While such partnerships may not be commonly recognized as resources supporting HUD’s mission, they are in fact resources, and many of HUD’s goals could not be met without the active participation of partners (Teisman and Klijn, 2002). HUD’s partners include numerous organizations in the private sector, including both for-profit and nonprofit organizations, as well as state and local governments. Other federal agencies also are critical to HUD’s success, while HUD likewise supports the missions of other agencies.

4. 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

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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,

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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.

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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)

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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.

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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)

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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

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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.

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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

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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

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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

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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

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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

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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

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the LIHTC rent limit. For example, project-based Section 8 contract rents can exceed the LIHTC limit, but tenant-based Section 8 contract rents cannot.

The LIHTC program requires a minimum affordability period of 30 years (i.e., a 15-year compliance period and subsequent 15-year extended use period). Some states require a longer affordability period for all LIHTC properties, and other states may negotiate longer affordability periods on a property-specific basis. Tenant incomes are recertified annually to ensure their continued eligibility. The allocating agency is responsible for monitoring compliance with the provisions during the affordability period and must report the results of monitoring to the IRS.

3) Household Income Limitations and LIHTC Rents Determination: Household income limitations are determined based on the area's median gross income (AMGI) as determined by HUD. Each year, HUD adjusts the area's median household income based on a variety of factors such as the area economy and household growth. Income restrictions are determined on a Metropolitan Statistical Area or county level, and are determined for a household of 4 people.⁵⁾

A household may live in an LIHTC unit if the household income is no greater than the maximum allowed for that size household. If a two-person household making the maximum for Columbus ($24,288) wished to live in a three-bedroom unit set at the maximum allowable rent ($789), it is allowable under program guidelines. Ultimately,

5) For example, Columbus in Ohio MSA is an example to determine who can live in a project at the 60%

income level. To get to the 60% level, we must start with the HUD-determined Very low-income (VLI, 50%) number for the area. Because HUD sometimes adjusts eligible incomes based on area incomes and their relation to area housing costs, it is not always accurate to work backwards from the AMGI. Maximum rents are based on tenants at maximum income paying no more than 30% of their income for housing.

Maximum rents for unit type are set by the expected occupancy, regardless of the number of people who actually live in the unit. It is important to note that adjusting the maximum incomes to expected occupancy totals requires additional calculation. To determine the maximum income for a one-bedroom unit with an expected occupancy of 1.5 persons (as in the chart above), one can either multiply the unadjusted four-person rate by 75% (*0.75) or add the one-person and two-person incomes and then divide by two to get the average. Likewise, to calculate the 4.5 person limit, one can either multiply the four-person limit by 104%

(*1.04) or take the average of the four- and five-person totals.