Analysis to inform Congress and HUD on new funding formula to keep pace with costs
WASHINGTON – April 8, 2015 – (RealEstateRama) — Public Housing Agencies (PHAs) across the country are significantly underfunded in managing the federal government’s largest low-income housing assistance program which serves 2.1 million households nationwide. The U.S. Department of Housing and Urban Development (HUD) today published its Housing Choice Voucher Program Administrative Fee Study which concludes high-performing PHAs operating well-managed voucher programs are increasingly hard-pressed to meet the actual cost burden of this program.
Congress directed HUD to gather comprehensive and detailed data on the administrative costs associated with operating the Housing Choice Voucher (HCV) Program. The purpose of the study is to better understand how much it costs for a PHA to administer a high-performing and efficient HCV program and to use the findings to propose a new funding methodology.
“This study offers clear evidence on what local housing authorities already know to be true – that current funding limits on their administrative fees don’t come close to meeting the reasonable costs of operating a well-run voucher program,” said HUD Secretary Julián Castro. “We’re asking Congress to consider the President’s 2016 Budget request which will go a long way toward filling this gap and, ultimately, will help more Americans reach their goals and achieve upward mobility.”
HUD’s proposed Fiscal Year 2016 budget seeks $2 billion in administrative fees, which is an increase of $490 million from 2015. The HCV Program is administered by approximately 2,300 local, regional, and state PHAs. The funding these PHAs receive for running the HCV program includes the housing subsidy itself, plus administrative fees to cover the costs of running the program. The study seeks to answer four primary research questions:
- What accounts for the variation in administrative costs across PHAs?
- How much does it cost to run a high-performing and efficient HCV program?
- What would be an appropriate formula for allocating administrative fees to PHAs operating HCV programs on an ongoing basis?
- Is there a minimum size below which an HCV program cannot successfully operate on administrative fees alone?
This report addresses each of these research questions and presents the findings of the study’s time measurement and cost data collection effort, which took place between 2012 and 2014 at 60 high-performing PHAs across the country.
“The new administrative fee formula we’re recommending provides hard evidence of the real world costs of providing quality service to low-income voucher residents,” said Lourdes Castro-Ramirez, HUD’s Principal Deputy Assistant Secretary for Public and Indian Housing. “If public housing authorities are expected to continue providing the kind of critical support needed by the most vulnerable in our communities, then there must be a more rational way of allocating administrative fees that both reflects and keeps pace with what’s really driving the costs of the voucher program.”
For much of the voucher program’s history—starting with the Section 8 Certificate Program in the 1970s—program administrative fees have been calculated based upon historical Fair Market Rents (FMRs). The study suggests HUD cease using FMRs as a basis for the allocation of fees because actual costs are driven by other factors, notably local wages, health insurance costs, program size, family characteristics, and the extent to which voucher-assisted families live at substantial distance from the PHA’s main office.
HUD will be hosting a Public Briefing on the Housing Choice Voucher Program Administrative Fee Study in the Brooke-Mondale Auditorium on April 17, 2015 from 10:00am – 11:30 am. Read more and RSVP to this briefing.