2011-08-17 (Report)
HOUSING AUTHORITY OF
CITY OF ENCINITAS
AGENDA REPORT
Meeting Date: August 17, 2011
TO:Chairperson and Board of Commissioners
VIA: Gus Vina, Executive Director
Jennifer Smith, Treasurer
FROM: Patrick Murphy, Planning & Building Director
Ron Barefield, Housing Administrator
SUBJECT:
Status Report on the Housing Authority’s Section 8 Housing Choice Voucher
Program and of sixteen owned condominium residences at Pacific Pines.
Section 8 Housing Choice Voucher Program
Background: The Housing Authority of City of Encinitas has operated a Section 8 Housing Choice
Voucher (HCV) program since 1995. Currently, the U.S. Department of Housing Urban
Development (HUD) has allocated 136 vouchers to the Housing Authority. Each voucher can assist
an eligible household. Over the last several years, HUD has moved to a budget-based funding that
does not completely fund the allocated vouchers. That is, HUD determines a budget based on
federal appropriations and previous year expenditures of the HCV program. The Housing Authority
funds the maximum number of vouchers based on that budget authority. For FY2010-11, the HCV
program averaged assistance to 119 households and utilized 99.6 percent of the funds provided.
Basically, eligible participants (i.e., households at 50% or less of area median income), typically pay
30 – 40 percent of their income toward the rent. The balance of the rent is paid by the Housing
Authority through the HCV program (payment referred to as the Housing Assistance Payment or
HAP). The Housing Authority establishes a payment standard in determining an appropriate rent
level. HUD allows housing authorities to establish the payment standard at 90 to 110 percent of the
Fair Market Rent (FMR), as published by HUD. The Housing Authority’s payment standard is
approximately 100 percent of FMR (it varies by bedroom size). The payment standard’s
determination is based primarily on rental unit availability, landlord participation and area rents.
The Housing Authority pays the HAP each month from its funds. HUD funds the HAP each month
based on HUD budgeted funds and also provides an administrative fee based on the number of
vouchers that are under lease. Any HUD funded HAP and/or Administrative Fee in excess of cost
is placed in reserve accounts, which are reported to HUD on a monthly basis. HUD provides
funding based on a calendar year budget, so the Housing Authority’s fiscal year spans two calendar
years’ federal funding.
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Discussion: As noted, the Housing Authority’s HCV program has reserve accounts for HAP and
Administrative revenue over expense. As of June 2011, the HAP reserve account referred to by
HUD as Net Restricted Assets (NRA), which can only be used for rental assistance payments, has
approximately $226,000. The Administrative reserve account referred to by HUD as Unrestricted
Net Assets (UNA), which can used for Housing Authority expenses, has approximately $113,000,
as of the same date. The amounts may vary, subject to fiscal year-end closure. HUD requires any
interest earned on the assets to be reported monthly. Interest is applied to the NRA and UNA,
respectively, and expended as authorized.
Currently, the Housing Authority receives approximately $80,000 per month for HAP and earns
approximately $10,700 per month for leased vouchers. Unfortunately, HUD has reduced
Administrative fees by eight percent for CY2011, due to federal budget reductions. Staff targets
100 percent expenditure of HAP but due to uncontrollable events such as participant income
change, participants moving to other housing authority jurisdictions, and rent increases, the
participant HAP can increase or decrease during the year. For CY2011, HUD approved a $960,694
HCV budget for the Housing Authority.
The HUD Secretary directed HUD staff to contact housing authorities to maximize HCV funding to
assist as many households (as does the Housing Authority), as possible. Prudent management of the
HCV program dictates an adequate NRA for a temporary disruption of federal funding. HUD does
not designate an appropriate NRA but the general consensus is a one-month NRA. HUD has
contacted Housing Authority staff and requested that the NRA be used to issue more vouchers until
an approximate one-month NRA is reached. The increased leased vouchers will also increase the
Administrative fee earned.
In cooperation with HUD, staff is currently increasing the issuance of vouchers, which will expend
the NRA to an approximate one-month level.Although HUD in recent years has based the next
calendar year budget on past HAP expenditure, there is some uncertainty with future federal
appropriations that HAP funding may not be sustainable or the budget procedure will change. If not
sustainable, staff believes a safety net is in place for HCV participants, if moderate funding
reductions occur through the HOME tenant-based rental assistance program recently approved by
the City Council.
Pacific Pines Residences
Background: In 2003, the Housing Authority acquired sixteen condominium units at the Pacific
Pines complex located on South El Camino Real for the purpose of providing affordable rental
housing to tenants qualified under the HCV and HOME Investment Partnership Act (HOME)
programs. The HCV and HOME programs provide rental assistance to lower income households
through federal funding.
The units were purchased with Community Development Block Grant (CDBG) and HOME
program grant funds. Additionally, a 30-year loan, currently with Wells Fargo, was acquired to
complete the purchase funding. The Housing Authority retains a private property management firm
for maintenance of the residences and responding to tenant needs.Operational costs are fully offset
by rental income from the residences.
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An operational reserve is maintained by the property management firm for ongoing maintenance
cost. Any rental income revenue exceeding operational cost, maintaining the operational reserve,
and homeowner association fees is placed in a project reserve account. Tenancy has been stable and
the Homeowner Association maintains the exterior through owner fees.
Discussion: As noted, rental income exceed operation cost for the Housing Authority-owned
residences. As of the beginning of FY2011-12, the project reserve account (in addition to the
operational reserve maintained by the property management firm) has approximately $360,000.
The Housing Authority may want to consider investing a portion of the reserve funds in other
affordable housing opportunities, leveraging funds, or use for affordable housing operational needs.
At this time, staff wants to inform the Housing Authority Board that there is a healthy reserve, and
in the future, staff may request approval to retain a professional firm for services such as performing
an appropriate reserve analysis, determining asset value, and creating an asset management plan.
FISCAL AND STAFF IMPACTS
:
No fiscal or staff impacts related to this report.
RECOMMENDATION
:
Staff recommends that the Housing Authority Board:
Receive report.
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