Urgent Fixes Needed in the Federal Section 8 Housing Program to Avoid Loss of Affordable Housing

WASHINGTON, DC – Tens of thousands of affordable housing residents are at risk of losing their housing unless Congress acts to force changes at the U.S. Department of Housing and Urban Development (HUD).  That was the message delivered in testimony today before the Senate Banking Committee by the National Multi Housing Council (NMHC), National Apartment Association (NAA) and the National Leased Housing Association (NLHA).

Testifying on behalf of NMHC/NAA and NLHA, Hector Pinero, Senior Vice President of New York-based Related Management, praised the Section 8 project-based assistance program as “the most effective housing subsidy ever devised by Congress,” but warned lawmakers that the program is experiencing major disruptions that seriously jeopardize the program’s continued success.

Pinero explained that the program suffers from widespread funding shortages because of recent changes in contract processing by HUD.  These problems are compounded by problems with HUD’s payment process and computer systems, which are compromising Section 8 properties around the country.

According to Pinero, while late rent subsidy payments to property owners have been a sporadic problem for years, last summer, they became the rule rather than the exception.  He offered an example from his own firm’s experience: As of June 2007, the company was owed $9.8 million in subsidy payments.  A month later, nearly one-third of that ($3.1 million) remained unpaid.  Three months later, nearly 20 percent — $2 million — was still unpaid.

Apartment owners rely on these payments to pay their mortgages as well as their operating costs.  HUD’s failure to make timely payments puts owners at risk for defaulting on their mortgages, many of which are insured by HUD.  It also forces them to defer the maintenance needed to maintain these properties.

Unfortunately, noted Pinero, the proposed FY 2009 HUD budget perpetuates this problem, which will negatively impact the nation’s affordable housing at a time when turmoil in the single-family housing sector makes the nation’s affordable rental housing stock even more critical.

Continued late payments will encourage many apartment owners to opt out of the federal rent subsidy program and convert their properties to conventional market use.  Owners who remain in the program will have difficulty securing the capital they need to maintain properties because lenders and investors will be less willing to provide funding for Section 8-related properties.  And thousands of residents will be forced to endure the anxiety of not knowing if their housing is secure.

NMHC/NAA/NLHA called on Congress to take three key steps to address these problems:

1. Exercise close oversight over the process HUD uses to calculate its budgetary needs and to make its Section 8 assistance payments.

2. Enact legislation to penalize HUD for late payments and to provide more flexibility to owners with regard to project reserves and notification requirements when payments are more than 30 days late.

3. Ensure sufficient appropriations in HUD’s FY 2009 budget, which as
proposed are insufficient in light of the housing affordability issues
plaguing this country.

In addition to the recurring late-payment problem under the project-based program, NMHC/NAA/NLHA also noted that HUD’s proposed budget contains a flawed funding formula and proposed cuts in funding for the Housing Choice Voucher program, which are projected to result in shortfalls in the tenant-based program.  They informed Congress that cuts in HUD’s FY 2009 budget proposal will result in at least 100,000 current Section 8 voucher holders losing their subsidy.

Pinero also used the hearing as an opportunity to address the problems caused by the wave of foreclosures the country is experiencing, blaming it in part on the government’s “homeownership at any cost” housing policy.  For years, NMHC/NAA/NLHA and others have warned policymakers that pushing homeownership so aggressively could be disastrous not only for the hardworking Americans lured into unsustainable homeownership, but also on our local communities and our national economy.

Now that we are experiencing the consequences of that misguided policy, NMHC/NAA/NLHA called on Congress to learn from past mistakes and recognize that homeownership isn’t the right housing choice for all households at all points in their lives.  They urged lawmakers to adopt a more balanced housing policy, one that recognizes that we need a vibrant rental market as well as a functioning ownership market to house our diverse nation.

NMHC/NAA/NLHA’s full testimony is available on NMHC’s web site at
www.nmhc.org/goto/4496.

About NMHC/NAA

NMHC and NAA operate a Joint Legislative Program and represent the nation’s leading firms participating in the multifamily rental housing industry.  NMHC/NAA’s combined memberships are engaged in all aspects of the development and operation of apartment communities, including ownership, construction, finance and management. Together, the organizations operate a federal legislative program and provide a unified voice for the private
apartment industry. Nearly one-third of Americans rent their housing, and more than 14 percent of all U.S. households live in an apartment home. For more information, contact NMHC at 202/974-2300, e-mail the Council at , or visit NMHC’s web site at www.nmhc.org.

About NLHA

The National Leased Housing Association is a national organization
representing all major participants-private and public-in the affordable multifamily rental housing industry. NLHA is a vital and effective advocate for 550 housing provider organizations and their consultants, specializing in federally assisted rental housing.  For more information, contact NLHA at 202/785-8888, e-mail the Association at , or visit NLHA’s web site at www.hudnlha.com.

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Based in Washington, DC, National Multi Housing Council (NMHC) is a national association representing the interests of the larger and most prominent apartment firms in the U.S.  NMHC's members are the principal officers of firms engaged in all aspects of the apartment industry, including owners, developers, managers and financiers.  Nearly one-third of Americans rent their housing, and more than 14 percent live in a rental apartment.

Contact:

Tel: 202.974.2300
Fax: 202.775.0112

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