2004-08-25 (Report)
CITY OF ENCINIT AS
HOUSING AUTHORITY
. AGENDA REPORT
Meeting Date: August 25, 2004
TO: Mayor and City Counci.1 :
-/1--
VIA: Kerry L. Miller, City
\ trick S. Murphy, Director
~. David de Cordova, Principal Planner
David Harris, Housing Coordinator Û fvUA
SUBJECT: Approval of amendments to the Agency Plan and Section 8 Administrative
Plan designed to reduce Housing Choice Voucher program costs in response to the
reduction of funding from the U.S. Department of Housing and Urban Development
BACKGROUND: The U.S. Department of Housing and Urban Development's (HUD)
reports that Section 8 Program costs have increased by 41 percent over the past four
years. This increase is due in large measure to increasing housing costs across the
. country, the HUD requirement to target 75% of vouchers to extremely low-income
families, and pressure on housing authorities to achieve a minimum lease up rate of 95
percent. In Encinitas, these factors have combined to substantially increase the size of
its rental assistance program. The voucher program is now 98% leased up, whereas a
year ago it was only 90% leased-up. The annual program operating cost is over
$900,000, a 30% increase over last year's budget of $700,000.
Since May 2003, the average housing assistance payment (HAP) has increased by 21
percent, from $523/unit per month to $631/unit per month. In previous years, HUD
would reimburse a housing authority for any increased program costs due to increased
HAP amounts and higher lease-up rates. Additionally, most housing authorities built-up
a reserve that could be used to cover excess housing assistance and administrative
costs. The Encinitas Housing Authority (EHA) has built-up a healthy program reserve
but no administrative reserve.
In January 2004;, Congress passed an appropriations bill that provided continued
funding for the Housing Choice Voucher Program along with a Provision that
significantly altered the method of reimbursement for housing vouchers. This provision
caps the level of housing assistance payments available to housing authorities in
carrying out their programs. On April 22, HUD released a rule informing housing
authorities that the amount of HAP funding will be based on the average monthly cost
for the period of May/June/July 2003 and the number of units leased as of August 1,
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2003. The result of this change for the EHA is that there will be a significant funding
gap. The shortfall for the 2004-05 program year is estimated as follows:
. Avg. HAP #of monthly annually
vouchers
New HUe formula $544 130 $70,720 $848,640
EHA Project Cost $630 130 $81,900 $982,800
-$11,180 -$134,160
The HUD Notice provides that housing authorities can make up funding shortfalls by
accessing their reserve balances. Housing authorities may also request additional funding
for units leased- up since August 2003 from a central fund set up by HUD. However, the
reimbursement rate is also capped by the average HAP as of August 2003 (plus an
inflation factor).
EHA needs to take proactive measures now to bring program costs in line with HUD's
capped funding formula. While EHA has sufficient program reserves to cover the
anticipated funding gap for another 15 to 18 months, it will take a year or longer to fully
realize program savings from the recommended changes.
ANALYSIS: In order to bring the program operating cost down to a sustainable level,
staff is recommending two significant changes to the administration of the voucher
. program (The proposed amendments are attached as Exhibits A and B). One change is
to lower the payment standards, which are based on the Fair Market Rents (FMRs).
The FMRs are a schedule of rents for various unit sizes for the San Diego region
published annually by HUD. The schedule is based on actual rents charged for
households moving into units over an 18-month period. The other change is to modify
the occupancy standards, which is used to determine the number of bedrooms
appropriate for each household size.
As proposed, the housing assistance payment standards will be changed from 110% of
Fair Market Rents (FMR) to a flexible range of between 90% and 110% of FMR. Staff
recommends that initially the payment standards be rolled back to last year's level
(which is 110% of 2003 FMRs). This will reduce the FMRs by about 7% for each
bedroom size, as follows:
110% of 110% of Amount
2004 FMR 2003 FMR Reduced
1 $1 ,032 .$962 (-$70)
bedroom
2 $1,292 $1,204 (-$88)
bedroom
3 $1,799 $1 676 (-$123)
bedroom
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The revised FMRs will be immediately applied to new lease-ups and voluntarily moves.
It will be implemented on October 1, 2004, for the 15 vouchers that currently exceed the
2003 FMR levels (at 110%). To accomplish this, the EHA will send out 30-day notices
. to cancel contracts with landlords on September 1 st and then reissue new contracts to
take effect October 1 st. Tenants impacted by the reduced HAPs will either have to
make up the difference or move to a lower cost unit. If the EHA approves this
recommendation, it will be in line with similar measures taken by the San Diego
Housing Commission which rolled back FMRs to 110% of 2003 FMRs, and the County
of San Diego which cancelled contracts that were based on 2004 FMRs and reissued
them at lower rent levels.
The second amendment involves the occupancy standards that will be changed from
"one bedroom for the head of household plus one bedroom per every two persons
thereafter" to "one bedroom for every two persons". The new occupancy standards will
apply immediately to new lease-ups and voluntary moves, and will be applied to
existing tenants after February 1, 2005, upon their annual re-certifications.
Approximately 20 households will be directly affected by the new occupancy standard;
most are households comprised of one parent and one child. Those who are living in 2-
bedroom units will be reduced from a maximum of $1,292 for a 2-bedroom voucher to
the 2004 FMR of $1,032. The families will have a choice of paying the difference to
remain in their current unit, or moving to a lower cost or smaller home (i.e., a 1-
bedroom unit). Three tenants who reside in 3-bedroom units will have their payment
standards reduced from a maximum of $1,676 to $1,204; they will have a choice of
. paying the difference to stay in their current unit, or moving to a lower cost or smaller
home (Le., a 2-bedroom unit).
The EHA continues to provide "reasonable accommodation" by providing a 2-bedroom
voucher for elderly and disabled persons who require a live-in aide. Existing tenants
with project-based certificates at Pacific Pines will not be subject to the revised
occupancy standards because they do not have the option of moving to a lower cost 1-
bedroom unit.
Staff is also recommending two other amendments to the Administrative Plan, in order
to be consistent with other housing authorities. The EHA will raise the minimum tenant
rent payment from $25 to $50 per month. All of the tenants are currently paying more
than $50 per month so this will have no immediate impact. The other change affects a
family that wants to move out of the city and requests that their voucher be transferred
to another housing authority. If the receiving housing authority has higher housing
costs which will incre~se the amount of the HAP, then EHA will deterl11ine whether it
has sufficient funding to cover the increase. In the event that there is insufficient
funding, then EHA will deny the request in accordance with HUD regulations.
The proposed amendments have been made available for review at the Planning and
Building Department. The 45-day public comment period is from August 12, 2004 to
. September 27,2004. Any comments received at the public hearing or thereafter will be
included with the proposed amendments and submitted to HUD by October 1, 2004.
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Staff will closely monitor the impact of the changes on program operating costs. In the
event that the operating deficit is not steadily reduced over the next 18 months, staff
may request the Housing Authority to implement additional changes.
. FISCAL AND STAFF IMPACTS:
It is necessary for the EHA to implement lower payment standards and modified
Occupancy standards now in order to lower the average HAP over the next 18 months.
The Housing Choice Voucher Program is currently running a deficit of about $11,000 a
month, due to the unanticipated reduction in program funding which was put into effect on
January 1, 2004. The City's Section 8 operating reserve fund is projected to COver the
deficit for 24 months from that date.
Staff has projected the potential savings to the program when the new payment and
Occupancy standards are fully implemented at $75,000. The lower FMRs will result in
$15,000 in program savings per year and the revised Occupancy standards will save an
addijional $60,000. In addffion, staff has sent an appeal to HUD to raise its per voucher
cap to $561 based on a recalculation of the average HAP for the periOd of MaY/June/July
2003; if the appeal is approved, this will further reduce the funding gap.
In addition to program cuts, HUD has also reduced administrative fees by 6% (from $69
per voucher to $64.67 per Voucher). As a result, staff projects a $4,000 shortfall in
funding to administer the Housing Voucher progmm for the 2004-05 fiscal year.
RECOMMENDA TION:'
. Staff recommends that the Housing Authority adopt the proposed amendments to the
Agency Plan and the Section 8 Administrative Plan.
Exhibits
A. Proposed amendments to the Agency Plan
8. Proposed amendments to the Section 8 Administrative Plan
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Exhibit l-
.
.
City of Encinitas
Housing Authority
.
Agency Plan
2000-2005 Five Year Plan
2000-2001 Annual Plan
.
\4~ ~ 5""
. EXECUTIVE SUMMARY
The City of Encinitas Housing Authority has prepared this Agency Plan in compliance
with Section 511 of the Quality Housing and Work Responsibility Act of 1998 and the
resulting HUD requirements. The Encinitas Housing Authority is required to submit a
streamlined plan because is only administers Section 8 Rental Assistance and does not
own any public housing.
We have adopted the following Mission Statement to guide the activities of the Encinitas
Housing Authority:
To promote adequate and affordable housing, economic opportunity and a
suitable living environment for Encinitas residents of all income levels.
We have also adopted the following goals and objectives for the next five years.
Goal: Manage the Encinitas Housing Authority's existing Section 8 program in an
efficient and effective manner thereby qualifying as at least a standard performer.
Objectives:
HUD shall recognize the Encinitas Housing Authority as a high performer by
. December 31,2004.
The Encinitas Housing Authority shall promote a motivating work environment
with a capable and efficient team of employees to operate as a customer-friendly
and fiscally sound player in the affordable housing industry.
Goal: Expand the utilization and quality of housing choices available to participants in
the Encinitas Housing Authority's tenant-based rental assistance program.
Objectives:
The Encinitas Housing Authority shall achieve and sustain a utilization rate of
98% by December 31,2004.
The Encinitas Housing Authority shall attract 15 new landlords who want to
participate in the program by December 31,2004.
Goal: Ensure Equal Opportunity in Housing for all Americans.
Objectives:
Undertake affirmative measures to ensure access to assisted housing regardless
. of race, color, religion national origin, sex, familial status and disability.
~;Z- lp
Encinitas Housing Authority Agency Plan (2000-2005) i
. Complete a new Assessment of Impediments to Fair Housing Choice with new
Consolidated Plan submission.
Our Annual Plan is based on the premise that if we accomplish our goals and objectives
we will be working towards the achievement of our mission.
The plans, statements, budget summary, and policies set forth in the Annual Plan all
lead towards the accomplishment of our goals and objectives. Taken as a whole, they
outline a comprehensive approach towards our goals and objectives and are consistent
with the Consolidated Plan for the community. Here are a few key points of our Annual
Plan:
. We have adopted local preferences for our community - which include working
families with children, seniors, homeless households, and persons with disabilities.
. We discourage the over concentration of lower income households.
. Applicants will be selected from the waiting list by preference and in order of the
date they applied.
. We are going to use 110% a ranQe of 90% to 110% of the published Fair Market I
Rent (FMR) as our payment standard for the Section 8 Program.
In summary, we are working to increase the availability of affordable housing in our
community, thereby improving the quality of life for lower income households in
Encinitas.
.
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Encinitas Housing Authority Agency Plan (2000-2005) ii
Exhibit B
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Total Tenant Payment. Each eligible Household's Total Tenant Payment shall be either
the greater of 30 percent of net income after allowable deductions or 10 percent of gross
income, with a minimum rent of$50.00. paYIHeHt of$25.09. I
P.22
Section VIll. SUBSIDY STANDARDS FOR ISSUANCE OF ÇERTIFICl'.TBS ANJ;1 I
V OU CHERS ÒF F AMIL Y P ARTI CIP A TI ON. Prior to issuing the Voucher, the
appropriate dwelling unit size for the Household will be detennined by applying the
following criteria:
A. One bedroom is assi two household members re ardless of sex
age or relationship-. -
A+fte. Bed_.... siæ- "".;gBe<J.- sk.~!G- Bet- ...~W..,. -- tI!a&- '-- -...... t& eo ""reo Ißo
same-eleepiag Feeœ-ef-liYiÐg/sJeeping roøm. A-f'aFeBt shalI-t1et-Ðe-feq~iFe4-~
eOCt:1py a beàreem \\"Ìth an inÍàRt €IF ehild-.
. B. Every Household member regardless of age is to be counted as a person. A
pre8lJa?t Woman wilJ ~ counted, as two persons.. +h&- ~~=-::;
::::;~=";,:";:à ~:=:::..~ ~=;~:iow...... [01' atilili..
ftft4- ethet:- 5efviGes- èees- fißt... 6Keeøå- the- faH:.. market Rmt- fer the- èedæØfl:1- SÌ:í3e
designateG-eR-tfle-Certifieat-e. The Household may rent a smaller bedroom size
unit proyided the unit meets the standards of acceptability, i.e., "...at least one
sleeping room or living/sleeping room of appropriate size for each two persons."
A P8feBt sHall Hat be reEJt:1h=ed ta eeeaj3)' a bedreem with an infaat or el1ì1è.
C. Any Jive-in aide approved by ERA to reside in the unit is counted in detennining
unit size. To receive a roval live-in aides must erfonn vital assistance that I
cannot be rovided in any other wa' to an elder) household member or a
household member with disabi1ities. -
D. A Household unit size for any Household consisting of a single person must be
zero or one-bedroom unit unless a live-in aide resides with the Household.
E. E. The EllA must approve composition of the resident Household at
admission and must also approve later changes in Household composition. The
Household must request EHA approval to add any Household member as an
occupant of the unit (exception is newborn, adoption or court-awarded custody of
. a child). ERA must approve addition of a foster child or live-in aide. I
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P.28
Portability
2. The ERA will accept certification from the "initial housing authority" unless there are
changes in income or Household composition. The "initial housing authority"
determines whether the Household is income eligible in the area where the Household
wants to rent. ~~c ~~~~~~:~ ~'iÐg betw:: .::=.=: :":~: ~rogramS,
the Household ffiHst meet meome hfFlIts of the 'Or I I a ."
3. If a Household is re uestino. to move to the 'urisdiction of another housina authorit '
which will increase the amount of the housing assistance payment the EHA will
determine whether it has sufficient ftmding to cover the increase. In the event that
there is insufficient funding, then the EHA will denv the request.
.
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