HUD Institutes Cost Control Measures for Section 8 Project-Based Rental Assistance

Recently, HUD’s Acting Deputy Assistant Secretary for Multifamily Housing Programs, Janet Golrick, sent a memorandum to all Section 8 multifamily project owners announcing three policy changes that HUD will formally implement through Housing Notices in coming months to implement project-based rental assistance (PBRA) savings and constrain future expenditures.  Golrick’s memorandum states that although HUD's FY 2012 Section 8 PBRA appropriation is sufficient for full funding of all existing contracts, HUD is committed to achieving certain savings in order to slow the growth of PBRA expenditures and to effectively manage the account within appropriated levels.

First, funds currently held in project residual receipts accounts will be used to reduce assistance payments.  HUD is formulating a process to apply these funds to PBRA expenditures and is committed to implementing this policy in a way that is minimally disruptive to the current voucher and disbursement process.  On December 5, HUD released a follow-up memorandum clarifying that this policy will be applicable to Section 8 contracts generally known as “New Regulation” contracts and subject to the regulatory authority at 24 C.F.R. §§880.205(e), 881.205(e), and 885.306(e).

Second, HUD will limit all "Option 4" contract renewals and annual rent adjustments to Operating Cost Adjustment Factor (OCAF) increases if proposed rents exceed market.  This policy was announced and commented on over the past year by the industry as part of HUD’s revision and reissuance of the Section 8 Renewal Guide.

Third, HUD will require all rent comparability studies to justify proposed rents that exceed 110 percent of Small Area Fair Market Rents (SAFMR).  Forthcoming guidance will contain instructions on the additional analysis required to justify proposed market rents in excess of this SAFMR benchmark.

Golrick’s November 22 memorandum indicates that HUD will implement these policy changes in 2012 and likely expand them in 2013 to help meet the increasingly difficult budget environment.  For more information, please contact Ellen Lurie Hoffman.