- March 3, 2013
What is Project-Based Section 8 Rental Assistance?
Project-based Section 8 rental assistance (PBRA) contracts provide subsidies for affordable multifamily rental developments to lower rental costs for low-income families and to help offset construction, rehabilitation, and preservation costs. PBRA makes up the difference between market rents and what low-income tenants can afford, based on paying 30 percent of household income for rent.
Whom does PBRA serve?
PBRA currently provides affordable housing for over 1.2 million families. These households are primarily elderly (41 percent), families with children (31 percent), and persons with disabilities (15 percent). The average income of families assisted with PBRA is only $11,000 per year, with over three-fourths earning less than $15,000 per year. Almost two-thirds of the families with children are also working families, with 65 percent reporting income earned from wages.
Why is PBRA necessary?
PBRA provides low-income households with decent, safe, and sanitary affordable housing. It directly reduces worst-case housing needs for many families, who otherwise would pay more than half of their income for rent or would live in severely inadequate physical conditions.
PBRA supports a stock of long-term affordable housing and helps preserve and protect the federal investment that went into developing and maintaining it over the years. Without this assistance, many properties would either convert to market rate with potentially large rent increases that existing residents would not be able to afford, or would not be able to generate sufficient rental income to continue to be maintained in good condition, leading to a loss of affordable housing stock. In addition, without ongoing rental income, many developments would be unable to continue payments on existing debt, including mortgages insured by the Federal Housing Administration (FHA), or mortgages backed by bonds issued by state Housing Finance Agencies (HFAs).
How does PBRA benefit housing assisted by other federal housing programs?
In addition to providing a housing safety net for low-income families, PBRA makes it possible for Housing Credit, Bond, and HOME properties to house lower income families than they otherwise could. The financial viability of some Housing Credit, Bond, and HOME developments depends on PBRA. PBRA gives owners sufficient income and certainty to build and maintain affordable housing for very low-income families. PBRA also generates $460 million in property taxes for local governments and supports 100,000 jobs annually.
What risks does HUD’s FY 2013 Budget pose to PBRA?
HUD’s FY 2013 Budget would not provide adequate funding to renew for a full 12 months all PBRA contracts in FY 2013. The bulk of this shortfall would be met by “short funding” 10,600 contracts in FY 2013 and deferring $1.1 billion in contract expenses to the FY 2014 budget. The remainder of the gap would be met with proposals to spend down property reserves, restate existing market rent standards, raise minimum rents for the poorest households, increase the threshold for medical deductions, and cap rents for properties with higher costs. In so doing, the Budget shifts costs to future years without actually achieving savings. Avoided costs are simply deferred to FY 2014, when Congress may be faced with a full 12 months of expenditures plus inflation and the need to address any possible administrative shortfalls. This proposal would increase administrative cost and complexity, raise real concerns for many properties and residents, and discourage new investment and rehabilitation in affordable rental housing.
What is the current funding level for PBRA?
PBRA was funded at $9.3 billion in FY 2012, including $289 million for Performance-Based Contract Administrators (PBCAs). The President’s FY 2013 Budget proposed $8.7 billion to renew expiring Section 8 project-based contracts, a $640 million, or seven percent, decrease from the FY 2012 appropriations of $9.3 billion. This amount includes $260 million for PBCA administrative fees.
Neither the Senate nor the House approved the PBRA cost savings proposals contained in HUD’s FY 2013 Budget. The House-passed FY 2013 HUD funding bill would provide the Administration’s requested amount of $8.7 billion to renew expiring contracts and $260 million for contract administration. The Senate Appropriations Committee-passed FY 2013 HUD funding bill would reject the Administration’s proposal to short fund contracts in FY 2013 and provide almost $9.9 billion for PBRA, including $9.6 billion for contract renewals and $260 million for contract administration. PBRA is currently being funded at FY 2012 levels through a continuing resolution, which expires on March 27.
Who administers PBRA?
PBRA contracts are administered by HUD and state and local housing authorities. Many contract administrators are Section 8 Performance-Based Contract Administrators (PBCAs) under a program HUD developed to assign some contract administration duties to state and local housing authorities, while maintaining HUD oversight. PBCAs provide direct oversight and monitoring of the financial and physical condition of project-based Section 8 properties. They conduct on-site management reviews of assisted properties; adjust contract rents; and review, process, and pay monthly vouchers submitted by owners.
Currently, 36 state HFAs serve as PBCAs. In April 2012, HUD published a Notice of Fund Availability as part of a national competition to award new PBCA contracts in 42 states. HUD has been delayed in awarding those contracts due to pending litigation against the Department related to the terms of the NOFA.
Does PBRA leverage other funding?
PBRA properties are financed in a similar manner to market-rate rental developments, utilizing private financing, FHA financing, private equity, and/or equity raised from the sale of Low Income Housing Tax Credits (Housing Credits). Currently, the project-based Section 8 portfolio is leveraging over $13 billion in FHA insurance and $17 billion in private financing and equity.