The Times, They are a Changin'
5/14/2018 12:08:47 PM

The changing landscape of affordable housing in America

By: Lisa Vercauteren


I am fairly confident that Bob Dylan was not thinking about affordable housing as he wrote his 1964 hit song, "The Times, They are a Changin", but it is hard to overlook the fact that the push for more affordable housing started about the same time.


Our federal government first formally acknowledged the need for decent, safe and affordable housing in the National Housing Act of 1934 and the Housing Act of 1937. The Acts lead to the creation of the Federal Housing Administration and the United States Housing Authority which later morphed into what is now the U.S. Department of Housing and Urban Development (HUD). These laws also established the framework for the creation of local Public Housing Authorities (PHAs) across America. Using federal funds, PHAs were tasked with clearing slums and constructing low-income housing. In an attempt to meet the demand for new low-income housing and put the new federal dollars to work quickly, many PHAs built massive projects that dominated the landscape and tore at the very fabric of many neighborhoods. Some, particularly in larger cities in the East and Midwest, built large, high-rise buildings, a model that, while commonplace in Europe, was largely unproven as an effective approach to housing low-income families in the United States.


In the 1960s, while Dylan was writing his lyrics, a new cabinet-level department, the U.S. Department of Housing and Urban Development, was created, in part, in response to the social turmoil of the age. Indeed, the times, they are a changin.


While the housing programs of the 30s, 40s and 50s, emphasized private sector construction but public-sector ownership, the 60s and 70s brought a new approach: private ownership of affordable rental housing and a renewed emphasis on homeownership.


In 1974, HUD introduced the Section 8 program, the granddaddy of all subsidy programs. For the first time, a tenant's rent was determined based on what the tenant could afford to pay using HUD's calculations of income, assets, and allowable deductions. HUD awarded 20 to 40 year Section 8 contracts to private owners solidifying the department's commitment to a private/public partnership approach to affordable housing. The program was so successful that other government and private agencies created similar housing programs modeled after HUD's simple definitions of income and affordability.


In the early 21st century, as HUD's portion of the federal budget was shrinking, it became apparent that federal funds would not be sufficient to continue developing new communities using the subsidy methods of the past. At the same time, early Section 8 contracts began to expire and HUD began looking for ways to stretch the existing dollars to extend those contracts. “Preservation” became the watch-word. Contracts were renewed short term, in some cases on a month-to-month basis, because that was all the Department could afford to do. In fact, the times, they are a changin.


HUD also looked for ways to make the subsidy dollars go farther. Studies were conducted showing that money could be saved if rules were simplified, resources were provided and staff was better trained. The Enterprise Income Verification (EIV) system was created to identify errors and omissions in income reporting and other regulations changed. The National Center for Housing Management dedicated itself to the mission by greatly expanding its training and certification programs for those responsible for implementing the new rules.


As Congress continues to look for ways to stretch the federal dollars, the current focus is on simplifying processes and updating calculation rules to make the processes more efficient and to ensure better accuracy in our calculations. In support of this mission, Congress has passed several Acts over the last few years that have the potential to radically change our familiar ways of doing business. For example, the 2014 Appropriations Act gave HUD the authority to implement several changes to the regulatory requirements for housing subsidy programs. Most of these changes were implemented as part of the Final Rule on Streamlining Administrative Regulations, effective April 7, 2016.


Program changes passed in the FAST (Fixing America's Surface Transportation) Act in late 2015 are currently being implemented through a HUD Interim Final Rule effective March 12, 2018.


These changes allow PHAs/Owners to:


  • Streamline requirements for verifying and adjusting fixed income sources of income when 90 percent or more of a family's income comes from fixed income sources
  • Pay Utility Reimbursements of $15 or less per month on a quarterly basis instead of monthly
  • Accept a family's declaration of assets totaling $5,000 or less for recertification purposes instead of requiring third-party verification of each asset. Note: Third-party verification will be required every three years.

It is anticipated that program changes passed by HOTMA (Housing Opportunities through Modernization Act) in July 2016 will be implemented through Final Rule at the beginning of 2019. These changes include updates to the Elderly Family deduction, Medical Expense Deductions and other calculation changes that will alter the calculations used for determining a tenant's rent.


As Bob Dylan said, the times they are a-changin!


For 85 years since the enactment of the Housing Act of 1933, change has been the one constant in the affordable housing industry. And for more than half that time, NCHM has been there to help the industry adapt to these changes. We look forward to being a constant in your career as well, as we help you to stay abreast of the ever-changing world of affordable housing.

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