Owner Update “Question of The Month”

Since April, TMHA has been experiencing an overleasing problem. Following is a Q and A explaining this situation.

Q. What is overleasing?

A. In recent years, HUD has established a “baseline” number of units for each housing authority that it will fund, based on past voucher grant awards. TMHA’s baseline number is 574 units. HUD looks at leasing on the “unit month” basis, which is 574 units X 12 months, or 6888 unit months for the year. Our housing authority can go over or under 574 in any given month, but we cannot exceed the “unit month” number of 6888 for the year. In 2006, Congress’s established a statutory regulation prohibiting overleasing even if the housing authority has the funds to support overleased units. (TMHA does.)


Q. How did the overleasing happen?

A. Leasing on the Voucher program is a numbers game, with variables that the housing authority cannot control. End Participations: families go off the program each month for a number of reasons, but TMHA cannot predict how many will exit. New Leases: Families issued Vouchers will use the voucher about 50% of the time based on averages, but TMHA never knows exactly how many new leases will result. The Rental Market: the success of searching Voucher holders is based in part on the number of open rentals and the willingness of owners to accept them.

Going into 2006, TMHA was underleased by about 20 units, so we issued extra Vouchers to bring the numbers up. Then a leasing boom happened! Instead of the 50% Voucher use average in the past, Voucher holders were much more successful, and 60% - 70% of Vouchers resulted in new leases. Perhaps Voucher holders were working harder to find units. Maybe the softening real estate market meant that more rentals were available, but the bottom line was that our leasing numbers went through the roof in a couple of months. We have to correct this overleasing situation by the end of the year.


Q. What is TMHA doing to solve the problem?

A. After conversations with the Cleveland HUD office as to solutions, our housing authority has decided the best and most equitable way to solve this dilemma is to take the HAP contracts on TMHA’s lowest subsidy units “off line” for purposes of reporting them to HUD, thereby reducing the number of units under active contract. The tenants we are taking “off line” are already paying all their rent, and the housing authority subsidy is zero, or the subsidy amount is relatively small. This will affect about 30 tenants and HAP Contracts. Affected owners are being informed by letter.

Please note that our housing authority does not intend to discontinue assistance to these families. While these families are in “off line” status, we still intend to pay their subsidy out of our administrative funds, and the assistance for this tenant will continue as “business as usual.” Therefore, owners will continue to receive a TMHA subsidy check on the family’s behalf as before, though the check appearance will be a bit different. There is a chance that the HAP Contracts on these units will have to be re-executed, though we hope this eventuality will not occur.

This overleasing situation should sort itself out by the end of the year when a new funding year begins and TMHA should be able to “reactivate” these tenants. Except for those families who still have open Vouchers, TMHA will not be issuing any more Vouchers to new applicants until the end of 2006.
 

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