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HomeMy WebLinkAboutMINUTES - 03012005 - HA.1 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA TO: BOARD OF COMMISSIONERS FROM: Robert McEwan, Executive Director DATE: March 1, 2005 SUBJECT: ACCEPT REPORT ON THE HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA'S PROJECT BASED SECTION 8 PROGRAM SPECIFIC REQUEST(S) OR RECOMMENDATION(S) & BACKGROUND AND JUSTIFICATION I. RECOMMENDED ACTION: ACCEPT the attached report providing information regarding the Housing Authority's Project Based Section 8 Program. II. FINANCIAL IMPACT: None. III. REASONS FOR RECOMMENDATION/BACKGROUND This report is provided to the Board of Commissioners to provide background on the Project Based Voucher program and its implications for several pending affordable housing developments. CONTINUED ON ATTACHMENT: X YES SIGNATURE ' RECOMMENDATION OF EXECUTIVE DIRECTOR RECOMMENDATION OF BOARD COMMITTEE APPROVE OTHER SIGNATURE(S): ACTION OF BOARD ON APPROVED OVED AS RECOMMENDED O ER VOTE OF COMMISSIONERS I HEREBY CERTIFY THAT THIS IS A (*/ UNANIMOUS (ASSENT ) TRUE AND CORRECT COPY OF AN AYES: NOES: ACTION TAKEN AND ENTERED ON THE ABSENT: ABSTAIN: MINUTES OF THE BOARD OF COMMISSIONERS ON THE DATE SHOWN. r ATTESTED .)1/1 avit JOHN S WE TEN, CLERK OF THE BOARD OF COMMISSIONERS AND COUNTY ADMINISTRATOR cc: Jim Kennedy,Community Development Department Kara Douglas,Community Development Department BY ,DEPUTY H:1JudyHayes\MSOFFICEIWINWORDIBOARDIBO-Accept Report.doc HOUSING AUTHORITY Of THE COUNTY Of CONTRA COSTA affordable kousing solutions March 1, 2005 Project Based Section 8 At the Board of Supervisors meeting of February 15, 2005, a Board Order (D.2) was approved reallocating HOME funds for several affordable housing developments expecting Project Based Section 8 Vouchers be attached to those developments in order to enhance the revenue for the development and provide greater housing choice for Section 8 voucher holders. The purpose of this report is to provide information regarding the Housing Authority's Project Based Section 8 Program in regard these developments. Background: The Housing Authority initiated a Project Based Section 8 Program under its approved 2003 Annual Plan. The plan allocated 150 vouchers to eligible projects under a competitive proposal process. HUD regulations provide for a local housing authority to use Project Basing of tenant based vouchers to help achieve local affordable housing objectives. This Housing Authority chose to use this strategy in order to: 1. Promote affordable housing development. 2. Provide greater housing choice for Section 8 participants, especially during peak rental markets. Under the Project Based program, local housing authorities must operate the program out of their existing allocation of tenant based vouchers. Contra Costa County Housing Authority currently assists around 6800 low-income families, seniors, and disabled under Section 8. These vouchers are portable, i.e. the family may move from one rental unit to another (and, in some cases, to other jurisdictions) and take their voucher with them. Conversely, Project Based vouchers are targeted to a specific development. The ownership is required to lease the unit to eligible Section 8 families but, upon the family moving from the rental unit, the voucher assistance to that family terminates and the voucher is then used by the subsequent resident family at that development. Usually Developers using Project Based vouchers are using several subsidized loan programs to fund the capital costs of development. These funds may include Low-Income Housing Tax Credits, HOME funds, and/or CDBG funds. All of these programs restrict occupancy to low-income families and restrict rent levels. When combined with Project Based vouchers, higher rents 3133 ESTUDILLO STREET•P.O.BOX 2759•MARTINEZ,CALIFORNIA 94553•PHONE (925)957-8000•FAX(925)372-0236 www.contracostahousing.org Housing Authority of the County of Contra Costa Project Based Section 8 March 1, 2005 Page 2 of 4 may be charged for the Section 8 units while still being in compliance with the funding restrictions. This provision allows for leveraging higher loan amounts and contributes positively to the project economics. Process — Project Based Vouchers: In September 2003, Contra Costa Housing Authority issued a Request for Proposals and ten developers submitted proposals that were reviewed under the criteria stated in the RFP. Five affordable housing developments sponsored by five non-profits were selected for the program. The Housing Authority issued letters in January 2004 notifying the non-profit developers that they had been selected for the Project Based Section 8 Program. These letters also advised the developers that the award was contingent upon HUD site inspection, compliance with the terms and requirements of the Administrative plans, and the execution of the Agreement to Enter into a Housing Assistance Payment Contract. Letters were issued in March 2004 and the Housing Authority anticipated no problem funding the needed vouchers in time to meet the occupancy schedules for all five of the developments. The program's attrition rate is approximately 16 per month — i.e, sixteen families drop off the program, on average, per month and the agency planned to curtail issuance of new vouchers at a point in time that would generate the vouchers in time to meet the project construction and occupancy schedules. d%.0 HUD Section 8 Funding Change. A few months after we notified the five non-profits of their selection for the Project Based Voucher program, HUD changed the way of allocating funds for Housing Assistance Payments or HAPs for all housing authorities. HAPs are the payments housing authorities make to landlords on behalf of eligible low- income families. Previously housing authorities were reimbursed by HUD for their actual costs of issuing a voucher. If we paid $950 on behalf of a low income family to the landlord, we would get reimbursed $950. After the funding change, we were notified that we would be funded at a fixed dollar amount per voucher. At the time, the rate of reimbursement from HUD was about $40 less per voucher than it cost the agency to support a voucher. This translated into a shortfall of over$250,000 per month. To help stabilize this deficit without removing families from the program, the Housing Authority implemented a variety of administrative steps to reduce the Per Unit Cost (PUC). These steps have not generated the savings hoped for. One of the factors that dampened the expected cost reduction was the fact that many assisted families took advantage of the 2 Housing Authority of the County of Contra Costa Project Based Section 8 March 1, 2005 Page 3 of 4 softening rental market and moved to more expensive units which generated a higher HAPs. The steps taken to date are: • Reduced the Payment Standard to the lowest allowable level, 90 percent of Fair Market Rents • Amended its Subsidy Standard to effectively reduce the bedroom size of vouchers for approximately 1200 families • Stopped issuance of new vouchers • Instituted "interim" rent recertifications upon increase in family income • Restricted family moves within the jurisdiction to one per year • Restricted portability or family moves to jurisdictions with higher costs • Froze rent increases since September 2004 Housing authorities were also notified that funding for 2005 would be based on a snapshot of the number of units under lease during a portion of 2004. Hence it was imperative that this agency maintain high numbers of units leased under the program or face a significant reduction in funding for 2005. This Housing Authority maintained full leasing for the remainder of 2004, using reserve funds to cover the deficit. On January 21, 20051 HUD gave notice of the final 2005 Calendar Year HAP funding for HAPs. The new formula generated level of funding was $3.2 million or 4% less than anticipated. Had the 2004 leasing rate not been maintained at a high level, this funding reduction would have been even greater. To date, the pending funding shortfall has been discussed with all of the Project Based Voucher sponsors. We have been working with these organizations and the County Community Development Department to explore ways to keep these developments moving. Projections: The Housing Authority has been in the process of analyzing the impact of the HUD funding. This analysis focuses on both stabilizing the current Section 8 HAP's, i.e. lowering our actual PUC's to the reimbursement level, and estimating if there is sufficient capacity to provide the vouchers for the developments selected for the Project Based Vouchers. Assuming estimated savings from the administrative and policy actions taken and maintaining the existing leasing levels, a deficit of$635,000 would be generated by the end of 2005. This translates to 54 families that would have to be removed from the program or 988 unit months of program reduction. To the extent leasing levels are reduced due to attrition (we are not currently leasing), a 3 w A Y Housing Authority of the County of Contra Costa Project Based Section 8 March 1, 2005 Page 4of4 portion, and possibly all, of this shortfall could be recouped by early 2006. Please note that these projections are based upon the best information available. However, many of the variables are not predictable at a high confidence level, notably the attrition rate, the effect of the reduction in the subsidy standard (effective upon annual recertification), and the effect of the reduction in the payment standard (also effective upon recertification). A history of actual costs reductions will be developed in the next few months and this will increase the reliability of the projections. Again, our projections are that it will likely be early 2006 before the capacity to fund the Project Based Vouchers might be available. This assumes HUD funds at the current level for 2006. Recommendations: It is recommended that the Housing Authority make every effort to provide the vouchers needed for these five developments and to continue to collaborate with the County Community Development Department in their efforts to restructure these project to keep them moving forward. To this end, the Housing Authority should continue to freeze the Section 8 Voucher Program and carefully monitor the results of steps previously taken to reduce the overall HAP costs. We believe that better"real cost" data will be generated by June or July. Projections regarding developing excess capacity will then be provided to the non-profit developers. Further, it is recommended that the Housing Authority request a waiver to HUD allowing unit reductions accruing due to the leasing freeze be counted in its calculations for 2006 funding should HUD use a similar methodology for allocation of HAP's for 2006 as was used for 2005. As was directed in the Community Development Department Board Order of February 15, 2005, the Housing Authority will report on this matter to the Board of Supervisor's Finance Committee at its regular April meeting. 4