PURPOSE

The purpose of this report is to provide the information necessary for the Housing Authority Board to consider:  1) the Five-Year Public Housing Agency Plan for 2005 � 2009; 2) the Public Housing Agency Annual Plan FY 2005 (which includes an amendment to the Section 8 program payment standard); and 3) authorizing the Board Chairperson and the Executive Director to execute the certifications that are required by the United States Department of Housing and Urban Development.

BACKGROUND

The Section 8 Rental Assistance Program is funded by the U. S. Department of Housing and Urban Development (�HUD�) for the purpose of providing  rent subsidies on the behalf of very low income tenants throughout the City of Burbank. Congress passed the Quality Housing and Work Responsibility Act of 1998 which made substantial changes to the Section 8 Program. Section 511 of this Act requires that all Housing Authorities submit a Public Housing Agency Plan. This Plan covers the five year period from July 1, 2005 through June 30, 2009 with annual plans each year. As a result, the Administrative Plan was revised to reflect those changes. The Five-Year Plan describes the mission of the Housing Authority and the goals for achieving its mission over the next five years (Exhibit A).

The mission of the Burbank Housing Authority is to provide affordable housing that is decent, safe and sanitary to very low income tenants in Burbank.  By implementing the federally-funded Section 8 Program, the Housing Authority is able to take existing units in the private rental market and make them affordable.  The primary goal of the Housing Authority is to assist the greatest number of families or households within the HUD-allocated budget, utilizing all 1,014 housing assistance vouchers available to Burbank.

Other goals include:

• Apply for additional 250 non-targeted Vouchers over the next five years, if available;

• Maintain Section 8 Management Assessment Program score of 90 points or above (high performing Housing Authority);

• Maintain 100% Voucher lease up rate; and

• Administer Family Self Sufficiency Program to HUD standards.

Within the past year there have been many challenges in administering the local Section 8 program.  Nationwide, the program was faced with uncertainties as the Federal program budget was being established during an election year.  Additionally, during the past twelve months, HUD had considered significant changes that, if approved, would have completely changed program administration altogether.  HUD announced in December 2004, that these proposed program revisions would not be implemented and likewise, budget information was released.  For the period of January through December 2005, HUD has adjusted the local allocation upward.    

In an effort to make an efficient and nationally-consistent process for the preparation, submission, and review of the Five-Year Plan, HUD created a template to be followed. The same template is to be used by Housing Authorities that own public housing projects and those that administer the Section 8 Rental Assistance Program.  Due to the fact that the Burbank Housing Authority does not own any public housing units, many of the sections of the report do not apply.  However, HUD has mandated that the template stay intact.

For the most part, federal regulations dictate the way the Section 8 Program will be implemented.  However, there are some areas where local discretion is allowed.  Those local policy decisions are included in the revised Administrative Plan (also included in Exhibit A) and are highlighted below:

• Timing for opening and closing the Section 8 Waiting List;

• Establishing local preferences for the Waiting List;

• Obtaining credit reports for applicants and participants;

• Establishing local housing assistance payment standards;

• Obtaining information on criminal activity for household members; and

• Establishing repayment options for fraudulent cases.

The Section 8 Program Administrative Plan is the policy and procedure manual that the Burbank Housing Authority staff uses to ensure that all applicants and participants are treated in a fair and equitable manner. Each chapter deals with different aspects of implementation.

The HUD regulations give certain parameters that must be followed in establishing the amount of subsidy that the Housing Authority must pay to ensure that the tenant portion of rent is affordable. Chapter 7 of the Administrative Plan describes the methodology used to determine Burbank�s payment standard and establishes the local framework (within the HUD guidelines) for determining how much rental assistance each household will receive.

In accordance with HUD guidelines, Section 24 CFR 5.613, the local rent subsidy is defined and calculated as the difference between the fair market rent and the amount a particular household can afford to pay for rent. The calculation formula for establishing this amount considers several factors including: household size; household income; medical allowance; and utility allowance.      

ANALYSIS

As stated above, the Housing Authority�s primary goal is to assist the greatest number of families or households within the HUD-allocated budget, utilizing all 1,014 housing assistance vouchers available to Burbank.  Meeting this goal within the past year has been challenging.  Not only has the Burbank Section 8 program been subject to the uncertainties of the federal HUD program, but the real estate market has also impacted the program as well.   Many of the program�s existing landlords took advantage of low interest rates and refinanced their properties.  In addition, several properties have changed ownership and new landlords have entered the program.  In both cases, the Section 8 program has experienced increases in rental subsidy payments.   

Since 1999, the Housing Authority established the policy of setting the Section 8 payment standards at 110% of the fair market rents. The Burbank Housing Authority has used this more generous payment standard and has still been successful in achieving its primary goal. This has been possible because the Housing Authority had a sufficient amount of reserve funding available, from which to draw.  During the past year, the Housing Authority has spent approximately $104,000 more each month, than our average HUD-allotted monthly budget ($514,504) in order to keep the higher payment standard and utilize all 1,014 vouchers.   As briefly mentioned above, HUD has upwardly adjusted our local allocation for the calendar year of 2005.  However, this increase in HUD funding does not cover the cost of Burbank�s 1,014 vouchers at our payment standard of 110%, due to the increase in the fair market rent limits. Rather, this amount only funds 990 vouchers (a difference of 15 vouchers).  

While the Housing Authority has been affected by uncontrollable variables as described above, there is one �internal factor� that, combined with our increasing rental rates, has also created fiscal challenges.  As outlined above, the local Authority has the ability to set its own payment standards.  As previously described, the per household subsidy is based on the fair market rents. As that component increases, the gap between what the tenants can pay (the Section 8 subsidy) also increases. With Burbank�s rental rates on the rise, our local standard of paying 110% above the HUD fair market rents has negatively impacted the Authority�s budget.  Again, as mentioned earlier, the Authority has been fortunate to have had reserve funds available to bridge the gap between HUD funding and the 110% payment standard.  However, these funds are finite and if conditions are left unchanged, the Housing Authority reserve funds will be exhausted within twelve months.   

In an effort to avoid reducing rental vouchers or running out of funds, staff is recommending a program administration amendment.  There are at least three identified options:

• The City could augment HUD program revenues with General Fund dollars;

• The Housing Authority could return 15 unfunded housing assistance vouchers to HUD to balance the annual budget; or

• The Housing Authority could amend its payment standard. 

Staff does not recommend two of the three options identified.  The General Fund continues to be impacted and staff is planning for further budgetary reductions in the upcoming fiscal year.  Additionally, returning 15 of our 1,014 housing assistance vouchers would be counter productive in meeting the Authority�s goal of providing assistance to the greatest number of families/households possible, within the framework of our Section 8 program.

Each year when HUD issues fair market rent limits the Housing Authority must �translate� those limits into payment standards. Setting the payment standards at the fixed rate of 110% above the fair market rents requires the Housing Authority to increase the subsidy amount paid to the landlord on an annual basis.    

Therefore, staff is recommending the Housing Authority Board amend the payment standard from the fixed rate of 110% above the fair market rents to 90% of the fair market rents.

Setting the payment standards at 90% of the fair market rent would ultimately result in a per-household subsidy decrease of roughly $104 per month for approximately 34% of the program participants (roughly 341 households).  However, with this reduction the Housing Authority will be able to continue serving the maximum number of households (1,014) possible,  thereby, providing the highest level of service and assistance to the greatest number of people while staying within the annual budget (without reliance on the General Fund for assistance).   

Should the Housing Authority Board approve the recommended amendment, (to the housing assistance payment standard) the 341 households would not be affected until FY 06-07.  In accordance with HUD guidelines, a local Authority must provide a two-year notice period to the affected tenants.  In the meantime, households new to the program and tenants that move would be assisted at the new payment standard of 90%.

COMMUNITY OUTREACH

In accordance with HUD guidelines, Section 24 CFR, the Resident Advisory Board (comprised of 12 Section 8 participants) reviewed the proposed Five Year Plan and the proposed Annual Plan at a Public meeting held on January 25, 2005. The Housing Authority meets annually with the Resident Advisory Board.  One of the main topics of discussion was the proposed funding cuts in the Section 8 Program, as well as the proposed reduction in subsidy payment standards.  The comments received at the meeting have been included in the Plan (page 28, Exhibit A).

Also, in accordance with HUD guidelines, Section 24 CFR, the required public noticing was made within the required timeframes, in two publications: the Burbank Leader; and the Daily News.

SUMMARY

The U.S. Department of Housing and Urban Development approved the current Section 8 budget through December 31, 2005.  Unfortunately, budget reductions could occur.  Based on these potential budget decreases, the diminishing local reserve funds, along with the real estate market trends, staff recommends the payment standard be set at 90% of the fair market rents.  Each year when the fair market rent limits are published, the payment standards can be adjusted accordingly.  Likewise, the payment standards will be reviewed annually in conjunction with the Housing Authority Board�s approval of the Annual Plan. However, should the local Section 8 Program experience unanticipated impacts during the year staff will bring the matter to the Housing Authority Board for immediate consideration.  

FISCAL IMPACT

The current Section 8 reserve balance as of January 31, 2005 is $1,430,000.  If the payment standard is lowered from the current maximum Housing Authority subsidy amount, set at 110% of the fair market rent, to  90% of the fair market rent, these funds, combined with the annual HUD budget allocations (announced in December 2004 and estimated at $6,960,000) would be sufficient to cover the two-year �tenant notice period�.  Assuming there are no significant HUD budget reductions, the Burbank Housing Authority budget is expected to balance by FY 06-07 without reliance on program reserves or the General Fund.

RECOMMENDATION

Staff recommends that the Housing Authority Board of Commissioners approve the proposed resolutions, which:  1) approves the Burbank Public Housing Agency Five-Year Plan; 2) approves the Annual Plan (including the amendment to the housing subsidy payment standards); and 3) authorizes the Chairperson of the Board and the Executive Director to execute HUD-required certifications.

LIST OF EXHIBITS

EXHIBIT A -   PHA Five-Year/Annual Plan

EXHIBIT B -   HUD-Required Certifications

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