The House this week is scheduled to vote on bipartisan legislation that would change how certain allowances for low-income families — such as child care and medical expenses — are used to determine federal housing assistance. Under the Housing Opportunity Through Modernization Act (H.R. 3700), the Department of Housing and Urban Development (HUD) would be required to change certain aspects of its rental assistance programs by altering calculations of tenant income and rent, and making households that exceed new income and asset limits ineligible for assistance.
Specifically, the bill proposes to lower the amount of child care expenses as well as medical expenses that can be deducted for elderly and disabled families, but would increase the amount that can be deducted for dependents. In addition, households with more than $100,000 in assets would be ineligible for assistance, though enforcement of this new requirement would be left to local housing authorities.
Nearly five million families and individuals receive rental assistance each year through HUD, including the Section 8 Housing Choice Voucher program that provides assistance to roughly two million low-income recipients. Under the Section 8 program, tenants pay approximately 30 percent of their income towards rent and the rest is paid through federal subsidies.
“Section 8 is consuming a larger part of HUD’s budget because more people are participating in the program and new participants have lower incomes than legacy participants,” states the committee report to accompany H.R. 3700. “Many fear that unless the Section 8 program is reformed, it will soon drain resources from other HUD programs or it will require significant increased funding notwithstanding diminishing program effectiveness.”
In December, the House Financial Services Committee voted 44 to 10 to clear the Housing Opportunity Through Modernization Act for floor consideration. During the markup, the committee rejected an amendment offered by ranking member Maxine Waters (D-CA) to strike the provisions to scale back the deductions for child care and elderly/disabled medical care expenses.
“You have a relatively good bill with two very significant flaws,” argued Waters.
The full House is slated to vote on the legislation on Tuesday, and if passed would be sent to the Senate for further consideration.
The summary below was written by the Congressional Research Service, which is a nonpartisan division of the Library of Congress, and was published on Jul 30, 2016.
(This measure has not been amended since it was passed by the House on February 2, 2016. The summary of that version is repeated here.)
Housing Opportunity Through Modernization Act of 2016
This bill amends the United States Housing Act of 1937 and other housing laws to modify the Department of Housing and Urban Development's (HUD's) rental assistance (including section 8 low-income [voucher]) and public housing programs, the Federal Housing Administration's (FHA's) requirements for condominium mortgage insurance, and the Department of Agriculture's (USDA's) single family housing guaranteed loan program.
TITLE I--SECTION 8 RENTAL ASSISTANCE AND PUBLIC HOUSING
(Sec. 101) This section revises the requirements for Public House Agencies (PHAs) to inspect dwelling units before making housing assistance payments to ensure that units comply with housing quality standards. If the PHA determines that a unit has defects, the bill sets forth procedures and requirements for determining noncompliance, correcting defects, withholding assistance payments, terminating a housing payments contract for a unit, notifying tenants, and relocating a tenant.
(Sec. 102) A PHA must review the incomes of assisted families in dwelling units: (1) upon the initial provision of housing assistance for the family, (2) annually thereafter, and (3) any time the family's income and deductions are estimated to increase by 10%. A family may request a review at any time its income and deductions are estimated to decrease by 10%. The PHA must follow specified requirements in calculating income and deductions.
HUD must: (1) develop a mechanism for disclosing information to PHAs for employment and income verification, and (2) ensure that PHAs have access to information contained in the Do Not Pay system established by the Improper Payments Elimination and Recovery Improvement Act of 2012.
(Sec. 103) If a PHA determines that a tenant's income is greater than 120% of the area median income for two consecutive years, the PHA must: (1) charge the tenant the greater of the fair market rent or the amount of the government subsidy for the unit, or (2) terminate the tenancy. HUD may increase or decrease the income limitation based on unique local conditions, such as construction costs, unusually high or low family incomes, vacancy rates, or rental costs.
(Sec. 104) A PHA may not rent a dwelling unit to or assist families with net family assets exceeding $100,000 annually (adjusted for inflation) or an ownership interest in property that is suitable for occupancy. This restriction does not apply to victims of domestic violence, individuals using housing assistance for homeownership opportunities, or a family that is offering a property for sale. PHAs must require applicants to authorize financial institutions to disclose records necessary to determine eligibility for benefits.
(Sec. 105) A unit owned by a PHA means any dwelling unit located in a project owned by: (1) the PHA, (2) an entity wholly controlled by the PHA, or (3) a limited liability company or limited partnership in which the PHA holds a controlling interest.
A unit shall not be deemed to be owned by a PHA if the agency only holds an interest in the ground lease, holds a security interest under a mortgage or deed of trust on the unit, or holds a non-controlling interest in an entity that owns the unit.
(Sec. 106) This section changes requirements for PHA project-based assistance. (Project-based rental assistance is a subsidy attached to a unit of privately-owned housing that houses low-income tenants. If the family moves, the subsidy remains with the housing unit. In contrast, tenant-based rental assistance vouchers permit families to move and retain their vouchers.)
A PHA may not use more than 20% of its authorized units for project-based vouchers (PBVs), except for an additional 10% that a PHA may use for PBVs that target the homeless, veterans, the elderly, the disabled, or for units in areas where vouchers are difficult to use due to market conditions.
Calculation of the 20% limit shall not include units subject to federal rent restrictions or receiving another type of long-term housing subsidy from HUD.
A PHA may not provide PBVs in a project that exceed the greater of 25% of the units in a property or 25 units, subject to exceptions for units: (1) exclusively made available to elderly families or to households eligible for supportive service, or (2) located in areas where vouchers are difficult to use or where the poverty rate is 20% or lower.
This section extends the permissible term for PBV contracts from 15 to 20 years, subject to the availability of funds and inspection requirements. If there are insufficient funds, a PHA must prioritize payments for units subject to a PBV contract if other cost-saving measures that do not require the termination of contracts are available. Subject to these limitations, a PHA and the owner may: (1) add eligible units within the same project during the term of a contract, and (2) enter into a housing assistance payments contract with an owner for housing under construction or recently constructed.
If a PBV contract is not extended or is terminated, this section extends tenant-based rental assistance for households to continue to reside in the property or to choose to move.
Subject to existing rent restrictions, a PHA and owner may agree to limit rent increases to the operating cost adjustment factor (OCAF) established by HUD pursuant to the Multifamily Assisted Housing Reform and Affordability Act of 1997. Owners may request an additional adjustment periodically subject to rent reasonableness.
Residents may place their names on site-specific waiting lists managed by owners, in addition to waiting lists established by PHAs.
A PHA may provide PBV assistance to improve, develop, or replace a public housing property or property that it controls or has an ownership interest in without using a competitive process if it notifies the public of its intent through its public housing agency plan.
PHAs may use project-based HUD-Veterans Affairs Supportive Housing (HUD-VASH) and Family Unification Program (FUP) vouchers under the same policies and procedures applicable to general purpose vouchers.
(Sec. 107) This section modifies the public notice requirements for proposed Fair Market Rents (FMRs). PHAs may request exception payment standards within fair market rental areas, subject to HUD procedures and criteria. (Payment standards are used to calculate the housing assistance payment that the PHA pays to the owner on behalf of the family leasing the unit.) No PHA shall be required to reduce any payment standard for a unit based on a reduction in the fair market rent determination if the family occupying the unit before the FMR analysis continues to reside in the unit.
(Sec. 108) HUD must collect and publish utility consumption data to assist in establishing tenant-paid utility allowances.
(Sec. 109) PHAs may establish a replacement reserve to fund specified capital fund activities, subject to specified requirements and restrictions on the transfer of operating funds into the replacement reserve.
(Sec. 110) This section increases: (1) to 36 months the time-period for which a child aging out of foster care may use a family unification housing voucher, and (2) to 24 the maximum age for an individual using the Family Unification Program (FUP). HUD must issue guidance to improve coordination between PHAs and public child welfare agencies in carrying out the FUP.
(Sec. 111) HUD must publish guidelines for minimum heating requirements in public housing units operated by PHAs.
(Sec. 112) This section revises the requirements for providing and calculating voucher rental assistance for families living in manufactured housing.
(Sec. 113) HUD must prioritize financial assistance for U.S. citizens or nationals over aliens who are eligible for assistance.
(Sec. 114) This section exempts PHAs in the county of Los Angeles, California, and in the states of Alaska, Iowa, and Mississippi from the requirement to include public housing residents on their governing boards. PHAs that do not include residents on their boards must establish an advisory board of at least six public housing residents or recipients of section 8 assistance.
TITLE II--RURAL HOUSING
(Sec. 201) This section amends the Housing Act of 1949 to permit USDA to delegate to preferred lenders its loan approval authority for the Rural Housing Service's single family housing guaranteed loan program.
(Sec. 202) USDA may charge lenders a fee of up to $50 per loan to use USDA's automated underwriting systems for the single family loan program.
TITLE III--FHA MORTGAGE INSURANCE FOR CONDOMINIUMS
(Sec. 301) This title amends the National Housing Act to require the FHA to modify its certification requirements for condominium mortgage insurance to make recertifications substantially less burdensome than original certifications. The FHA must consider lengthening the time between certifications for approved properties and allowing information to be updated rather than resubmitted.
A HUD field office must make decisions regarding exemptions to current FHA commercial space requirements and must consider factors relating to the economy of the locality in which the project is located.
The FHA must apply to FHA condominium mortgage insurance the existing standards of the Federal Housing Finance Agency (FHFA) relating to encumbrances under private transfer fee covenants to the same extent and in the same manner as those standards apply to mortgage investments by the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). If the FHFA changes its standards after enactment of this bill, the FHA must adopt the changes or disregard them with an explanatory notice within 90 days.
The FHA must issue guidance regarding the percentage of units that must be occupied by the owners (or sold to owners intending to meet such occupancy requirements) in order for a condominium to be eligible for FHA mortgage insurance. If the guidance is not issued within 90 days of enactment of this bill: (1) at least 35% of all family units must be occupied by the owners or sold to owners who intend to meet the occupancy requirement, and (2) the FHA may increase the requirement for a project on a project-by-project or regional basis after considering factors relating to the economy of the locality in which the project is located.
TITLE IV--HOUSING REFORMS FOR THE HOMELESS AND FOR VETERANS
(Sec. 401) This section amends the McKinney-Vento Homeless Assistance Act to require HUD to define the ''geographic area'' for purposes of the Continuum of Care Program (which awards project sponsors or unified funding agencies competitive grants focused on addressing the long-term housing and services needs of homeless individuals and families).
(Sec. 402) Local governments receiving Emergency Solutions Grants may distribute all or part of the assistance to PHAs or Local Redevelopment Authorities. (The grants are awarded to assist the homeless and prevent homelessness. Distribution of the grants is currently limited to nonprofit organizations.)
(Sec. 403) This section amends the Department of Housing and Urban Development Act to require HUD to transfer the position of Special Assistant for Veterans Affairs from the Office of the Deputy Assistant Secretary for Special Needs to the Office of the Secretary.
(Sec. 404) HUD and the Department of Veterans Affairs must submit annually to Congress reports regarding: the number of veterans assisted by HUD programs, coordination of services for veterans, and the cost of administering programs to veterans.
(Sec. 405) HUD must reopen the public comment period for the interim rule entitled "Homeless Emergency Assistance and Rapid Transition to Housing: Continuum of Care Program."
(Sec. 501) All recipients of HUD Disaster Housing Assistance Program funds must meet specified income verification requirements.
(Sec. 502) This section amends the Housing Opportunity Program Extension Act of 1996 to prohibit HUD from requiring any dwelling in the Self-Help Ownership Opportunity Program to meet energy efficiency standards other than those included in the Cranston-Gonzalez National Affordable Housing Act.
(Sec. 503) HUD must create data exchange standards to improve interoperability between federal and state agencies.
(Sec. 601) HUD, in consultation with the Department of Labor, must report to Congress on their interagency strategies to improve family economic empowerment by linking housing assistance with other support services, such as employment counseling and training, financial education and growth, childcare, transportation, meals, and youth recreational activities.
TITLE VII--HOUSING OPPORTUNITIES FOR PERSONS WITH AIDS
(Sec. 701) This title revises the formula and requirements for distributing funds under the Housing Opportunities for Persons With Aids (HOPWA) Program.
A grantee that received an allocation in FY2016 shall continue to be eligible for such allocations in subsequent fiscal years, subject to HUD approval and the amounts available from appropriations Acts. HUD shall:
redetermine a grantee's eligibility at least once every 10 years, and ensure that a grantee that received an allocation in the prior fiscal year does not receive an allocation 5% less than or 10% greater than the amount allocated to that grantee in the preceding fiscal year. HUD may also award such funds to an alternative grantee if the original grantee agrees in a written document meeting HUD approval.