**BLOG POST UPDATED 5/2/18 TO REFLECT CENTER ON BUDGET AND POLICY PRIORITIES’ CHANGE IN RENT INCREASE IMPACT ESTIMATIONS.
Yesterday, HUD Secretary Ben Carson announced a sweeping rent reform proposal, “Making Affordable Housing Work Act of 2018“. The legislative proposal, which would need to be passed by Congress and signed by the President to become law, raises rents for HUD-assisted families, offers PHAs and building owners extreme flexibility in setting the rental terms for HUD-assisted renters, including an option to impose work requirements. These changes would apply to public housing, Section 8, Project Based Rental Assistance, 202 properties for the elderly and 811 properties for disabled residents.
Here is a summary of the main provisions impacting HUD families:
- New Rent Burden Standard- Tenant’s share of rent is increased from 30% of adjusted rent to 35% of gross rent. It is estimated that more than 500,000 HUD assisted households in NY would see an increase of almost $900. Low income families who are already struggling to meet basic needs would pay more towards rent. Households who are paying significant medical expenses and/or child care expenses out of pocket will be especially impacted by the elimination of income deductions for these categories in the adjusted rent calculations permitted under current law.
- New Rent Burden Standard for Seniors/Disabled- Seniors and disabled households will pay 30% of gross rent compared to 30% of adjusted rent currently. For senior and disabled households, all adults must qualify as disabled or be over age 65 to be considered eligible for rent calculation purposes.
- Minimum Rents- A minimum rent is set for households at approximately $150/month. For seniors and disabled households the minimum rent is $50. The Secretary may adjust minimums higher through regulations.
- Hardship Waiver– Household may request a hardship waiver from the PHA or building owner, but it is not clear this will provide adequate protections for the millions of Americans who will see their rents increased.
- Flexibility for PHAs/Owners to Institute Alternative Family Rent Structures–
- Secretary Established Rents– The HUD Secretary may establish alternative rent structures as long as the same number of families are served. Alternatives may include structure such as tiered rents (rents determined by income “bands” with the purported intent to reduce increased earnings disincentives within bands), stepped rents (gradual rent increases with purported intent to encourage self-sufficiency), and timed escrows (rent increases due to increased earnings placed into escrow for family benefit upon “positive exit” from assisted housing). The bill also requires the alternative family rent structure to provide a reasonable hardship exemption.
- PHA/Owner Established Rents– The bill gives PHAs or owners the option to propose alternative rent structures of their own design, subject to HUD approval and any additional standards established by the Secretary. Owners must also provide a reasonable hardship exemption.
- Minimum Work Requirements– The bill allows PHAs or owners to impose work requirements on families and individuals (elderly and disabled are exempt). The Secretary must first establish criteria through regulation for this to happen.
- Review of Family Income– The bill reduces the frequency of family income reviews used to calculate tenant rent contributions from annual to triennial. This change is intended to provide incentives for increased tenant earnings by allowing tenants to retain the portion of additional income earned during the three-year period between reviews that would otherwise be paid as increased tenant rent contribution. This policy change will not only be positive for tenants but will also reduce the administrative burden for PHAs. However, the bill also raises the threshold by which a change in the family’s income would require PHAs or owners to conduct interim reexaminations upon request to a decrease of at least 20 percent (the threshold would remain 10 percent for elderly families, disabled families, or other families as defined by the Secretary through regulation).
Bye Bye Brooke Amendment
Federal rent burden was established in the Brooke Amendment in 1969 which capped a tenant’s share of rent at 25% of their income. In 1981, it was raised to 30% of tenant’s income. The federal rent burden which applies to HUD rental assistance and public housing programs is based on the fact that paying more than 30% of your income in rent is a burden on any household, making it harder to afford other basic needs such as food, clothing and medicine.
Policy Power for Owners
The power imbalance between owners benefiting from HUD assistance versus the renters is quite striking in this proposal. Building owners that receive HUD project-based rental assistance may decide if the renters in the building should be required to work or not in order to maintain occupancy. They may also change the way the tenant’s share of rent is calculated, with the power to make fateful policy decisions impacting renters such as how much their rent may increase. They may also chose (or not) to adopt policies that could benefit renters such as creating escrow accounts to accumulate savings from increased income.
Under HUD’s proposal any building owner benefiting from HUD project-based rental assistance may invent their own standard and apply it to the tenants living in their building, with prior approval from the HUD Secretary. It is outrageous to think that just because someone is a building owner, they should have discretion over the terms of federal rental assistance impacting renters living in their particular buildings. Owners with project-based rental assistance will be able to require a family to work, dictate a family’s share of rent (even though it is unrelated to the amount the federal government is paying to the landlord), set policies that penalize a renter for their tenure in an apartment or reward another renter for increasing their income.
NYHC developed an online tool to calculate rent increases for families impacted by this proposal and share results on social media. Please share this link with HUD-assisted households. We need everyone to speak up and oppose this outrageously callous and classist proposal!