PURPOSE

The purpose of this report is to provide additional information necessary for the Housing Authority Board to consider:  1) the Five-Year Public Housing Agency Plan for FY 05-06 to FY 09-10; 2) the Public Housing Agency Annual Plan for FY 05-06 (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 fiscal period from July 1, 2005 through June 30, 2010 (Exhibit A) with annual plans each year (Exhibit B).  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 and the Annual Plan provides regular updates during the five-year term.

On February 15, 2005 the draft Public Housing Authority Five-Year Plan and the Annual Plan were presented to the City Council/Housing Authority Board for consideration.  In response to the information presented (specifically a proposal to adjust Burbank�s housing assistance payment standard) additional information was requested on the following topics:  1) an update on the waiting list purge process; 2) Burbank�s Section 8 participant income profile; 3) fair market rent standards; and 4) Section 8 funding options.

WAITING LIST PURGE PROCESS

In accordance with HUD guidelines, Section 24 CFR 982.204, the Section 8 Program Administrative Plan describes the policy and procedures that the Burbank Housing Authority staff will use to purge the applicant waiting list.  In an effort to keep the Section 8 applicant waiting list as current as possible, and to ensure that accurate address and preference information is on file for all applicants, the Housing Authority Board adopted the current procedure in 1999, which instructs staff to accept change of preference and change of address information in writing on a daily basis.

The Administrative Plan also calls for a purge of the applicant waiting list every 24 months.  The primary goal in purging the waiting list is to obtain current information on interested applicants and to remove applicants that are inaccessible or no longer interested in participating in the program.  This process involves mailing letters to all applicants on the Applicant Waiting List informing them that any change in address must be sent in writing to the Burbank Housing Authority.  The applicants are also advised to send written notification of any change in household circumstances that would qualify them for a preference.  In accordance with Federal regulations and the Burbank Housing Authority Administrative Plan, staff will remove applicant names from the waiting list if any letter is returned from the United States Postal Service without a forwarding address.

Currently, the Burbank Housing Authority has a waiting list of approximately 8,700, of which, 1,365 applicants are Burbank residents.  The FY 04-05 purge process began on November 1, 2004 with a �test� mailing of one-thousand (1,000) non-resident applicant update letters.  The purpose of this initial test mailing was to outreach to those non-resident individuals that have been on the waiting list the longest (since 1994) and to get a �sample read� of the non-resident status before beginning the purge process for the Burbank residents on the list.     

Of those 1,000 non-resident update letters mailed, 123 (13%) were returned by the United States Postal Service as undeliverable.  As mentioned above, those 123 have been removed from the waiting list and updates on the remaining 877 applicants were made and those names remain on the list.  The mailing for the remaining 7,700 individuals (including 1,365 Burbank residents) on the waiting list was completed March 1, 2005.  As of the writing of this report, update information is being received and response tabulation is in process, but not yet complete.

On February 15^th, the Authority Board inquired whether or not the waiting list purge process should occur more frequently.  The Housing Authority has an extremely low turn-over in tenants and rarely has significant numbers of openings on the program.  Also, as mentioned above, the Housing Authority updates its records on an ongoing, as-needed basis whenever applicants notify the Authority of changes in addresses, phone numbers or any changes that might affect preference status.  Based on these two factors (low tenant turn-over coupled with ongoing updates to keep contact and preference information current) staff opines that the frequency of the purge process (every 24 months) as currently defined in the Housing Authority Administrative Plan is adequate.

PROGRAM PARTICIPANT INCOME PROFILE

The Burbank Housing Authority administers 1,014 housing assistance payment vouchers.  As of February 2005, these households translate to 1,932 individuals who are being assisted by our local program.  Of this service population, 896 or 46% are seniors and/or disabled.  In terms of program participant incomes, the average annual household income ranges from $9,630 per year for a studio unit (no bedroom) to $19,337 annually for a three-bedroom unit.  The overall program-wide average annual income per household for the month of February 2005 was $14,088. 

FAIR MARKET RENT STANDARDS

As discussed in the February 15^th staff report, there have been many challenges in administering the local Section 8 Program this past year.  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 for Burbank�s housing assistance payments upward.  However, no increases were made to the program administration funding allocation. 

In an effort to maintain the highest level of service to the community and assist the greatest number of households/household members, staff recommended the Housing Authority Board amend the policy of setting the payment standards currently at the fair market rents to 90% of the fair market rents.  As described in the staff report and presentation of February 15^th this adjustment would allow the Housing Authority to continue administering all 1,014 housing assistance vouchers. 

With regard to fair market rent standards, Exhibit C outlines the HUD designated standards for various sized residential units (between $746 and $1,510 per month depending on the number of bedrooms in a unit); information on average monthly rental payments for both tenants and the Housing Authority is also shown for comparison purposes.

FUNDING OPTIONS

Staff was asked to investigate the possibility of using other funding sources to augment the Section 8 HUD allocation. While the Federal HOME Program guidelines allow for rental subsidies and California Redevelopment Law also allows the Agency to exercise any or all of its powers to provide affordable housing (including the provision of rental subsidies), in accordance with the HUD Section 8 guidelines the �layering� of other funds with the Section 8 federal allocation is prohibited^[1].

However, as mentioned, both Federal HOME program guidelines and California Community Redevelopment Law have provisions that allow rental subsidy programs.  Such a program would have to be structured and administered separately from the Section 8 program.  If a separate, but equal program were established to augment the Section 8 program and provide the same level of rental assistance as those on Section 8, the potential, estimated, ongoing cost of that assistance could range between $1.4 million (Exhibit D) and $3.8 million per year (Exhibit E).  The lower end of the range reflects the program cost as it would be with all landlord participants charging the maximum rent according to HUD�s standards and the recommended 90% payment standard.  The upper end of the range assumes all rents at the maximum 2005 HUD fair market rental standards along with the current rental assistance rate of 110%.  Stated another way, this �self-funded� amount of $1.4 to $3.8 million per year would be the difference between our current level of HUD funding for the Section 8 program (approximately $7.0 million) and the maximum, potential cost of providing rental assistance to 1,014 households at either 90% (potentially at $8.3 million) or 110% (potentially $10.8 million^[2]) of the HUD fair market rent standard.           

ANALYSIS

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. 

As explained in the February 15^th staff report, during the past year, the Housing Authority has spent approximately $104,000 more each month (from program reserves), than our average HUD-allotted monthly budget ($514,504 in 2004) in order to keep the higher payment standard and utilize the maximum number of vouchers.  In December 2004, HUD 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 standards set by HUD.

IMPACT OF REDUCED PAYMENT STANDARD

Based on our Program statistics for the month of February 2005, setting the payment standards at 90% of the fair market rent would result in an average per-household subsidy decrease of $104 per month for approximately 34% of the program participants (340 households).  While this amount represents the average monthly impact, the actual range is between $70 and $157 (Exhibit F).  It is important to note that as HUD increases the rent standards, this number could fluctuate over the next two years.  Again, this number is based on today�s program profile.  All of the 340 households have chosen to live in more expensive units, which is allowed under program guidelines.  

When comparing the above monthly increases to the amount of what these tenants are now paying, on the average, tenants with studio-unit vouchers will incur a 29% increase ($70 more in rent each month) and those with one-bedroom vouchers will realize a 27% increase in rent ($78 more each month).  Likewise, tenants with two-bedroom vouchers will have a 28% increase ($111 more each month); and tenants with three-bedroom vouchers will assume a 33% increase in rent ($157 more rent each month).

Should the Housing Authority Board approve the recommended amendment, (to the housing assistance payment standard) the 340 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%.   

IMPACT OF MAINTAINING CURRENT PAYMENT STANDARD

Given the current program statistics (February 2005) if the payment standard is left at 110% all program reserves will be exhausted in less than 12 months.  After that time (given the same conditions) the Burbank Housing Authority will have to return unfunded housing assistance payment vouchers. Based on the average number of unfunded vouchers since December 2004 (when HUD increased program funding for 2005) 26 vouchers would need to be returned.  These 26 vouchers are currently comprised of:  15 households that are Burbank voucher holders, who are not receiving any financial assistance from the Section 8 program because they are in the process of searching for new units; and 11 vouchers went unassigned.

Both of the above scenarios assume program statistics that are comparable to those in February 2005.  However, as mentioned earlier in this report, not all of the program landlords are charging the full amount possible under the 2005 HUD fair market rent standards.  At any given time, our landlord participants could increase rents to the 2005 HUD standards.  If that were to happen, and all 1,014 vouchers were utilized, and the current 110% payment standard remained in place, the full, potential, annual Section 8 program cost would be approximately $10.8 million.  The 2005 HUD funding allocation is $7.0 million, leaving an unfunded gap of $3.8 million.  Based on the average annual housing assistance payment of $10,644 ($10.8 million divided by 1,014 vouchers), 360 vouchers would go unfunded and would have to be returned.  Even at the recommended assistance rate of 90%, if maximum rent were charged for all available vouchers, 137 vouchers might have to be returned.  While this is a �worst-case� scenario and may not happen, it is possible and staff recommends mitigating the overall gap in funding.

The fundamental challenge with the HUD Section 8 program is that the fair market rent standards established by HUD continue to increase and out-pace the amount of HUD-allocated funding.  This is a nation-wide problem, not unique to Burbank.  However as previously mentioned, Burbank has a very generous housing payment assistance standard of 110%, which compounds the matter.

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, and the current local program trend continues, these funds, combined with the annual HUD budget allocations (announced in December 2004 and estimated at $7.0 million) would be sufficient to cover the two-year �tenant notice period�.  Assuming there are no significant HUD budget reductions or local program changes the Burbank Housing Authority budget is expected to balance by FY 06-07 without reliance on program reserves.

SUMMARY

The Burbank Housing Authority budget is a fixed dollar amount as allocated by HUD with no provision for mid-year budget amendments to increase funding.  As discussed in the staff report of February 15, 2005, the annual HUD budget allotment does not cover the cost to administer the program at the current payment standard of 110%.  In FY 03-04 over $1.0 million of program reserves were spent to maintain the 110% standard. 

As outlined in the February 15^th staff report, projections based on the current program statistics indicate that setting the payment standards at 90% of the fair market rent would  result in an average per-household subsidy decrease of $104 per month for approximately 34% of the program participants (340 households).  However, with this reduction the Housing Authority is expected to be able to continue serving the maximum number of households (1,014) possible (while staying within the annual HUD allocated funding without reliance on the General Fund for assistance [not as a direct contribution, but assistance in reducing or eliminating Section 8 payments to the General Fund for direct and indirect services]).

The U.S. Department of Housing and Urban Development approved the current Section 8 budget through December 31, 2005.  However, the 2005 allocation is not sufficient to fund the program at the current standard of 110%. Based on future potential budget decreases, diminishing local reserve funds, along with increasing HUD fair market rental standards, 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.  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.

RECOMMENDATION

Staff recommends that the Housing Authority Board 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 for submittal to HUD by April 15, 2005.

LIST OF EXHIBITS

EXHIBIT A � Five-Year Plan (FY 05-06 to FY 09-10)

EXHIBIT B � Annual Plan (FY 05-06)

EXHIBIT C - Section 8 HUD Rental Standards & Local Payments

EXHIBIT D � Section 8 Potential Program Costs & Funding � 90%

EXHIBIT E � Section 8 Potential Program Costs & Funding � 110%

EXHIBIT F - Impacted 340 Household Profile � February 2005    

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