Limited Section 8 and Public Housing funds available if shutdown continues

In early February, HUD sent a letter to Public Housing Agencies (PHAs), informing them that if the government shuts down again on February 15, there are limited funds available to house Section 8 Housing Choice Voucher (HCV) and Public Housing residents. HUD will be able to make HCV payments through the end of April, and Public Housing Operating Funds will be available through the end of May.

But if no agreement is made between President Trump and Congress by this Friday’s deadline, PHAs may struggle to pay for its rental assistance programs in the following months.

The recent long government shutdown shed light on the problems PHAs have with setting aside funds for reserves. These reserves are usually used to pay landlords when program shortfalls occur, such as when rents have risen quickly in an area, or during an economic decline when working families lose income. When PHAs do not receive funding during a government shutdown, program reserves allow them to continue supporting low-income renters for only short periods of time. Affordable Housing Online contacted many major PHAs around the country, and found that most do not have enough reserves to carry their Section 8 HCV programs even a month beyond a government shutdown.

The Section 8 HCV program is the largest federal affordable housing program. It helps 2.2 million low-income households rent housing in the private market. Tenants pay 30% of their income towards rent, and the U.S. Department of Housing and Urban Development (HUD) provides the PHA with funds to pay landlords the rest. Almost a third of Section 8 renters are elderly or persons with disabilities, and 70% are families with children.

PHAs are allowed to set aside excess program funds at the end of the year and carry them forward. These reserves are used to pay landlords when program shortfalls occur, such as during a recession when working families lose income and PHAs need to dip into reserves to provide more rental assistance. They can also be used to continue payments to landlords during a government shutdown. The reserve payments must only be for program-related purposes.

Most PHAs that Affordable Housing Online contacted have little or no reserves for their Section 8 HCV programs. Federal policies since 2011 have limited the amount of reserves that local PHAs can keep aside for emergencies.

In the past, HUD was more flexible in how much PHAs could set aside in Section 8 HCV reserves. Prior to 2012, the reserves were controlled by local PHAs. This was to allow quicker response to local program needs. However, a few PHAs were caught misusing large reserves they had amassed. One example is a 2010 HUD investigation of a PHA in North Carolina that improperly used Section 8 reserves to purchase property.

Effective in 2012, HUD made changes to the rules for how Section 8 Housing Assistance Payments (HAP) were disbursed and how program reserves are operated.  The changes were designed to provide more oversight of reserve funds. HUD would now control the reserve funds, not the local PHAs. The rules were designed to limit the amount of reserves, with HUD holding back new program funds until current reserves had been spent out. The purpose of this was to promote more efficient use of program funds. HUD revised these rules in 2017, but the updates mostly just changed the timelines for reconciling the cash accounts.

However, these rules governing Section 8 HCV program reserves left little or nothing for PHAs to count on during a prolonged government shutdown. Not only are there limited funds for PHAs to draw down for landlord payments and administrative costs, most of the HUD staff approving the use of reserves are put on furlough. Even if PHAs have reserves, HUD cannot necessarily turn those requests around quickly.

Affordable Housing Online reached out to 30 PHAs during the last week of the government shutdown in California, Illinois, Florida, New York and Texas. These are the states with some of the largest populations and number of vouchers. Twelve PHAs responded to our questions about Section 8 and Public Housing reserve issues during the partial government shutdown. These 12 PHAs administered 50,476 vouchers and operate 13,872 Public Housing units.

Of the 12 PHAs who responded, only 3 had enough HCV program reserves to carry the program for one month. Five PHAs had no HCV program reserves at all and the rest could only cover half or less of their program needs for a month.

Affordable Housing Online also asked these PHAs about their operating reserves for Public Housing. Seven PHAs responded. Among them, they could pay utilities and other Public Housing bills for between two months and a year. Although large PHAs could keep their Public Housing operating for awhile, a prolonged government shutdown could lead to deferred maintenance and staffing reductions to stretch operating dollars. Many smaller PHAs do not have large operating reserves and would have to seek other funding to keep their Public Housing open. Affordable Housing Online has written more about how limited operating funds have hurt Public Housing here.

HUD’s operating reserve rules serve an important purpose. They limit opportunities for abuse of funds and promote more efficient use of taxpayer dollars. However, the system only works when the government makes its payments on time. Million of low-income renters depend on these payments for their shelter. Millions of landlords cannot pay their bills without HUD’s share of the rent.

The amount of reserves that PHAs can save for a rainy day should be increased, at least enough to carry a program through two or three months. Government shutdowns are becoming more frequent. There have already been three shutdowns in President Trump’s term. If Congress does not reach an agreement on border security and President Trump’s wall by February 15th, the partial government shutdown could begin again.

PHAs are already stretched thin recovering from the last shutdown. If they are allowed to build larger reserves going forward, millions of low-income renters would not be held hostage to policy fights in Washington.

Additional reporting by Robin Lovelace; Edited by Nathan Brunet

The following PHAs responded to Affordable Housing Online for this article:

New York

• Newark Housing Authority

537 Vouchers, No Public Housing Units

• Syracuse Housing Authority

4090 Vouchers, 2340 Public Housing Units

• Albany Housing Authority

3194 Vouchers, 1905 Public Housing Units

Illinois

• Housing Authority for LaSalle County

550 Vouchers, 948 Public Housing Units

• St. Clair County Housing Authority

2593 Vouchers 1002 Public Housing Units

• Housing Authority of Dekalb County

611 Vouchers, 280 Public Housing Units

California

• Housing Authority of the County of Stanislaus

4838 Vouchers, 280 Public Housing Units

• Housing Authority of the County of Riverside

9769 Vouchers, No Public Housing Units

Texas

• Housing Authority of the City of El Paso

5690 Vouchers, 3259 Public Housing Units

• Ft. Worth Housing Solutions

5553 Vouchers, 2302 Public Housing Units

Florida

• Housing Authority of the City of St. Petersburg

3612 Vouchers, 371 Public Housing Units

• Tampa Housing Authority

9403 Vouchers, 1185 Public Housing Units