As Effects of Sequestration Begin to Impact Communities, HUD Issues 2012 McKinney Renewals

Over the past week the U.S. Department of Housing and Urban Development (HUD) notified funding recipients about how they are implementing the across-the-board budget cuts known as sequestration. Letters were sent to public housing agencies (PHAs), Continuums of Care (CoCs), property owners, community development organizations, and other stakeholders. As the letters make clear, the impact of the cuts will begin to be felt in earnest in the coming weeks and months and the affordable housing field and those who live in federally-assisted housing must prepare accordingly.  The notification letters can be viewed here.

CSH remains deeply concerned about the impact these cuts will have on the most vulnerable people, as well as the pressure it puts on our many key partners who are addressing the most complex problems in our communities.  Throughout the recession a massive increase in homelessness was averted thanks to strong government support for housing programs and the affordable housing community working overtime to help people find housing or stay housed.  But now we are now facing the most significant threat to our collective efforts.  We must not stop talking to our elected leaders, the media and anyone else who can influence public policy about why sequestration must be ended and funding restored for programs that help the most vulnerable among us find safe and affordable housing.

On March 13, HUD notified approximately 7,000 McKinney-Vento Homeless Assistance grantees that $1.5 billion in Fiscal Year 2012 money was being released to renew their programs.  This funding is not impacted by sequestration because it was obligated in 2012.  Recipients of Emergency Solutions Grants (ESG) funding will be the first to feel the impact of sequestration, and HUD notified these grantees to expect a five percent reduction from the FY 2013 level for which they are eligible.  Further, CoCs and recipients of McKinney-Vento CoC Program funding can expect to be impacted by sequestration later this year when the 2013 competition begins.

Letters to PHAs.  HUD’s letter to PHAs estimated that only 94.1% of the funding necessary to meet renewal needs will be available for the Housing Choice Voucher program, resulting in a shortfall for 125,000 program participants.  In addition to holding back any new vouchers that PHAs may have been offering, PHAs have been authorized to take a number of mitigation steps in order to address budget shortfalls.  These steps may include increasing payment standards, revising portability rules, increasing minimum rents, and trying to get those who live in larger units to move to smaller units.  Those looking to create supportive housing opportunities by counting on the allocation of Section 8 vouchers should work very closely with their PHA to make reasonable decisions about what level of support the agencies can give in this environment.  Targeting resources to the most needy in the community is as important as ever.

CSH was disappointed to learn that PHAs were advised that they will have their Section 8 Administrative funds pro-rated at 68.5% of what PHAs are due for their work.  We recognize the importance of our partnerships with PHAs to create supportive housing and the stress this cut places on PHA staff.  We will continue to work with our partners  including  national PHA associations in urging Congress to address these harmful cuts.

HUD also sent letters to owners and others interested in the Section 8 Project Based Rental Assistance Program. The steadiness of this account is an important driver of investor confidence for affordable housing.  HUD’s handling of this account in sequestration seems to be getting very good reviews, but trepidation among the industry continues.  HUD announced that all Section 8 contracts expiring in FY 2013 will be renewed if eligible under current program rules and will receive full twelve month funding. All existing multi-year contracts that expire after FY 2013 and have anniversary dates in the first quarter of FY 2013 (October-December) will receive full twelve month funding, assuring sufficient funding to carry them into the first quarter of FY 2014. All other multi-year Section 8 contracts will receive less than 12-month funding, but will be provided sufficient funding to carry them into the first quarter of FY 2014. There are about 11,000 Section 8 contracts that fall in this last category, and on average, they will receive roughly 8.5 months of funding.


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