Title
Resolution to Approve Amendments to the HCV Administrative Plan: Chapters 16 Related to Cost Saving Measures to Prevent Shortfalls
Memorandum
Due to insufficient funding from HUD to respond to the local market rent increases, the Ann Arbor Housing Commission (AAHC) has gone into funding shortfall multiple budget cycles, despite taking numerous measures to manage costs. The AAHC is amending its Housing Choice Voucher (HCV) Administrative Plan to incorporate program updates, policy amendments, clarify procedural requirements, and/or implement newly approved Moving to Work (MTW) activities. The following revisions apply to Chapter 16 of the Administrative Plan and address implementation of cost saving measures to prevent shortfalls and termination of HAP contracts.
This part discusses the methodology the PHA will use to determine whether or not the PHA has sufficient funding to issue vouchers, approve moves, and to continue subsidizing all families currently under a HAP contract. The PHA must identify in the administrative plan, in the event of insufficient funding, cost saving measures the PHA will implement. The following sections outline the Administrative Plan chapter and policy area being revised, including the previous language and the updated policy language adopted by the AAHC.
PART VIII: DETERMINATION OF INSUFFICIENT FUNDING
16-VIII.B. METHODOLOGY
Current PHA Policy
The PHA will determine whether there is adequate funding to issue vouchers, approve moves to higher cost units and areas, and continue subsidizing all current participants by comparing the PHA’s annual budget authority to the annual total HAP needs on a monthly basis. The total HAP needs for the calendar year will be projected by establishing the actual HAP costs year to date. To that figure, the PHA will add anticipated HAP expenditures for the remainder of the calendar year. Projected HAP expenditures will be calculated by multiplying the projected number of units leased per remaining months by the most current month’s average HAP. The projected number of units leased per month will take into account the average monthly turnover of participant families. If the total annual HAP needs equal or exceed the annual budget authority and funding reserves, or if the PHA cannot support the cost of the proposed subsidy commitment (voucher issuance or move) based on the funding analysis, the PHA will be considered to have insufficient funding.
Updated Additions to Current PHA Policy
PIH Notice PIH 2025-28 III., provides a menu of options for public housing agencies (PHA), including Moving to Work (MTW) PHAs, that need to reduce housing assistance payment (HAP) expenses to prevent shortfalls. The notice provides a non-exhaustive list of PHA cost-savings actions and is divided into three categories: (1) standard regulatory compliance and sound program management practices that may also reduce program costs; (2) additional actions PHAs may consider to lower costs; and (3) further cost-savings actions that require HUD approval.
Potential cost saving measures in category 1 are current mandatory program requirements that, if used proactively, may assist in better managing HAP expenses. Cost-savings measures in categories 2 and 3 are optional, except when required by HUD prior to terminating HAP contracts or as a condition of receiving Shortfall Funding.
A. Category 1 Mandatory Cost Saving Measures: Standard Regulatory Compliance and Sound Program Management Practices
1. Ensuring Correct Voucher Size. The PHA will ensure the payment standard used to calculate the family share is based on the lower of the voucher size for which the family is eligible or the actual unit size leased.
2. Reviewing Payment Standards. The PHA will review their payment standard amounts and schedule and adopt any updates to remain within the basic range of 90 to 110 percent of the applicable fair market rents (FMR). The PHA will not increase (or decrease) the dollar amount of their payment standards based on changes in applicable FMRs unless the change in FMR results in the payment standard being outside the basic range.
When the PHAs experiences HAP funding difficulties and have adopted increased exception payment standards under Notice PIH 2024-34, the PHA will consider whether those exception payment standards are still necessary to help families lease units.
The PHA will immediately cease the use of any exception payment standards and MTW payment standards above the basic range, including use of exception payment standard Small Area Fair Market Rents.
3. Utility Allowances.
i. Reviewing Utility Rates. The PHA will review utility allowances at least annually. The PHA may review the utility allowances more frequently to determine if they are higher than the typical cost. Changes in utility allowances may be applied immediately.
ii. Ensuring Accuracy of Individual Utility Allowances. The PHA will ensure that the utility allowance used to calculate the housing assistance payment for a tenant-based HCV is for the lesser of the size of dwelling unit leased by the family or the family unit size as determined under the PHA subsidy standards.
iii. Implementing Utility Allowance Flexibilities. The PHA may also maintain an areawide, energy-efficient utility allowance schedule to be used for units that are in a building that meets Leadership in Energy and Environmental Design (LEED) or Energy Star standards, which could result in cost savings. Additionally, the PHA may base its utility allowance payments on actual flat fees charged by an owner for utilities that are billed directly, but only if the flat fee charged by the owner is no greater than the PHA's applicable utility allowance for the utilities covered by the fee. If an owner charges a flat fee for only some of the utilities, then the PHA will pay a separate allowance for any tenant-paid utilities that are not covered in the flat fee.
4. Conducting Rent Reasonableness. The PHA will determine whether the rent to owner is a reasonable rent in comparison to rent for other comparable unassisted units and in accordance with the HAP contract. The PHA will ensure that owner rents do not exceed amounts charged for unassisted units in the same building or complex. The initial rent and all rent increases must comply with any applicable State or local rent control limits. As a cost-savings measure, PHAs do not have to wait until the HAP contract anniversary date to review and make adjustments to the owner rents, which may include reducing them if warranted.
5. Evaluating Entering New PBV HAP Contracts. PHAs may cancel requests for proposals (RFP) or other selection processes that are underway but have not yet resulted in a proposal or project selection if the PHA determines it does not have budget authority available to pay the HAP for PBV contract units. A best practice is to include information in RFPs stating that factors outside the PHA’s control may result in cancellation of the RFP. PHAs may also include a condition in the written notice of proposal or project selection that allows the PHA to rescind the selection if the PHA determines it does not have sufficient budget authority. If a PHA has executed an Agreement to Enter into a HAP Contract (AHAP) covering a project, the PHA must execute a new PBV HAP contract if the owner completes the units and otherwise fulfills all AHAP terms.
6. Determining PBV Rent to Owner. PHAs determine the amount (within maximum limits) at which they set the rent to owner at each PBV project, though the amount must not exceed the rent requested by the owner (if applicable) or the reasonable rent. PHAs may also consider whether to elect within PBV HAP contracts to not reduce rents below the initial rent to owner. PHAs may be able to achieve cost-savings during the term of a PBV HAP contract if they preserve the option to reduce the rent to owner to a level lower than the initial rent to owner.
B. Category 2: Additional Actions PHAs May Consider to Lower Program Costs
1. Reducing or Stopping Voucher Issuance to Applicants. The PHA may reduce or stop issuing turnover vouchers to new applicants. Voucher issuance is not applicable to the PBV program.
2. Increasing the Minimum Rent. The PHA may increase the minimum rent up to $50 (or higher for MTW PHAs with an approved MTW waiver to increase the minimum rent above $50). The effective date for the increased minimum rent is dependent upon PHA policy. PHAs could institute a policy for increases in family contribution to be effective immediately (i.e., once the change is adopted, it can be applied with an interim reexamination) rather than at the next annual reexamination. PHAs may choose to charge a lower minimum rent (including a minimum rent of $0) specifically for their HUD Veterans Affairs Supportive Housing (VASH) program.
3. Stopping Portability Absorption. As a receiving PHA, the PHA may stop absorbing new portable families and elect to bill the initial PHA as a cost-savings measure. As the initial PHA, the PHA may request that a receiving PHA absorb portable families for which the initial PHA is billed. This request may include asking the receiving PHA to retroactively absorb families for which the initial PHA was already billed and made payments. In these cases, the receiving PHA reimburses the initial PHA for payments made back to the effective date of the absorption but only for the current calendar year. Both the receiving PHA and initial PHAs must agree to this arrangement.
4. Reducing Subsidy Standards. The PHA may revise subsidy standards that exceed minimum HUD requirements to reduce voucher size eligibility. Subsidy standards must be consistent with the space requirements, which provide that units assisted under the HCV or PBV program must have at least one bedroom or living/sleeping room for each two persons. In the case of tenant-based HCVs, irrespective of any increase or decrease in the payment standard amount, if the family voucher size increases or decreases during the HAP contract term, due to change in family composition or change in PHA subsidy standard policy, the PHA may use the new voucher size to determine the payment standard amount for the family immediately but no later than the family's first regular reexamination following the change in eligible voucher size.
In the case of PBVs, if a PHA determines that a family is occupying a wrong-size unit following a change to the PHA’s subsidy standards, then the PHA must follow the requirements in 24 CFR 983.260 to offer the family continued housing assistance in another unit.
C. Category 3: Further Cost Savings Actions that Require HUD Approval
1. Denying Portability and Moves within the PHA Jurisdiction. Under limited circumstances, the PHA may deny requests from families receiving tenant-based HCVs to move if the PHA does not have sufficient funding for continued assistance.
For PBV families, if continued tenant-based rental assistance, such as a tenant-based HCV, is not immediately available due to insufficient funding at the time the family is requesting to move with tenant-based rental assistance, then the family must wait until funding is available, and the PHA must give the family priority to receive the next available opportunity for continued tenant-based rental assistance (regardless of where the family will move).
Once a family is eligible to move from a PBV unit with a tenant-based HCV, the PHA may only deny the family’s request to move until the next opportunity for continued tenant-based rental assistance is available.
First, the PHA must determine that: (1) no comparable tenant-based rental assistance that may be provided pursuant to the Administrative Plan is available, and (2) the PHA has insufficient funds to pay for and/or insufficient CACC unit authority to issue an additional tenant-based HCV without having to terminate assistance of current program participants during the current CY. The PHA will make reasonable estimates when projecting whether there is sufficient funding available for the remainder of the CY to support the additional voucher that would be issued to a family exiting PBV (the family’s current voucher would remain attached to the PBV unit for occupancy by a new family).
The PHA may factor in the following conditions:
• Pending rent increases that would affect the subsidy
• Attrition rate for families leaving the program
• Costs for vouchers issued to families from the waiting list but not yet leased.
2. Rescinding Vouchers Issued to Applicants. The PHA will consider pulling back vouchers issued to applicants searching for housing that have not yet resulted in an executed HAP contract. The PHA will work with HUD’s SPT and the local HUD Public Housing Field Office prior to pulling back outstanding vouchers. The PHA will not consider pulling back vouchers unless they are in shortfall, and they have determined, in consultation with the HUD SPT, that this step is necessary to mitigate terminations of assistance.
3. Request a Waiver to Apply Decreases in Payment Standards During the HAP Contract Term Immediately. When the PHA is experiencing financial difficulties and working with the SPT, the PHA may request a regulatory waiver for good cause so that reduced payment standards may be applied immediately with notice to the family in accordance with their Administrative Plan policies.
4. Request Approval to Establish Payment Standards Below 90 Percent of the Applicable FMR. The PHA may request approval from HUD to establish a payment standard below 90 percent of the applicable published FMR by following the requirements in 24 CFR 982.503(e). The PHA will not request such payment standard amounts if the family share for more than 40 percent of the PHA’s voucher participants exceeds 30 percent of monthly adjusted income unless it is necessary to prevent termination of program participants. However, the PHA may request that HUD waive this requirement for good cause.
V. REASONABLE ACCOMMODATIONS. Regardless of the PHA’s adoption of policies to deny portability or moves within a PHA’s jurisdiction or revision of payment standards or subsidy standards, the PHA will consider requests for reasonable accommodations that are necessary for a qualified individual with a disability to benefit from the program (in accordance with the Fair Housing Act, Section 504 of the Rehabilitation Act, title II of the Americans with Disabilities Act and HUD’s implementing regulations at 24 CFR 100.204, 24 CFR 8.33, and 28 CFR 35.130). An individual with a disability can request a reasonable accommodation to any rules, policies, practices or services at any time.
Staff
Prepared by Weneshia Brand, Deputy Director
Approved by Jennifer Hall, Executive Director
Body
WHEREAS, the Ann Arbor Housing Commission (AAHC) administers the Housing Choice Voucher Program in accordance with federal regulations and the agency’s adopted Administrative Plan; and
WHEREAS, the AAHC is a designated Moving to Work (MTW) agency and is authorized to implement MTW flexibilities to improve program administration, enhance housing choice, and support long-term program sustainability; and
WHEREAS, AAHC staff have recommended amendments to the HCV Administrative Plan to align local policy with MTW-approved activities, current operational needs, and updated program procedures; and
WHEREAS, the Executive Director is authorized to implement these changes effective immediately and make any necessary procedural or administrative adjustments required for compliance; and
WHEREAS, the Board of Commissioners has reviewed the proposed amendments and finds them necessary and appropriate to ensure consistent, effective program administration;
NOW, THEREFORE, BE IT RESOLVED that the Board of Commissioners of the Ann Arbor Housing Commission hereby approves amendment(s) to the Housing Choice Voucher Administrative Plan Chapter 16 related to implementing cost-saving measures to prevent shortfalls and terminations of HAP contracts as described previously.