Owner Update "Question of The Month"

Q: What is the status of program funding for 2005?

A. In a nutshell, it’s not good, but could be worse.

In November, Congress approved funding for VA/HUD programs in the huge FY05 Consolidated

Appropriations Act, the bill that includes funding for many domestic spending programs.

THE GOOD:

The Administration’s proposal to make deep cuts in Section 8 funding was NOT enacted. The Voucher program was cut in 04, and the ‘05 funding levels will not significantly decrease from ‘04 levels,

The move to convert the program to a block grant (widely opposed as a long-term way to decrease funding) was NOT included in the bill.

THE BAD:

Congress has changed the program to a fixed budget-based approach, and away from a "maximum number leased" or "baseline" approach.

Effect of this change is that increases in program costs caused by variables over which a housing authority has little control, like the amount of income the tenant family pays toward rent, won’t be covered.

Congress virtually eliminated "program reserves," a contingency amount of funds a housing authority had available to dip into to cover unavoidable program increases, such as increases in utility costs.

The funding level does not allow for any increases in voucher families served, and will likely result in the numbers going down.

THE UGLY:

The fixed budget approach means that housing authorities will have to find ways to manage program cost increases - even those over which they have no control.

In order to operate within the fixed budget, housing authorities may have to reduce Payment Standards (funding level amount for a bedroom size), cap rent increases, reduce the number of families being served through attrition, find ways to increase the amount of rent paid by the tenant family.

The fixed budget means that the only new families that can be served are "replacement families," those that replace a family who has left the program.

Families on the waiting list for assistance are quickly growing in number. Those on the list will wait an undeterminable time to be served. Some housing authorities have already closed their waiting lists as a result.

THE BOTTOM LINE:

TMHA will have funds to operate, but will have to closely monitor and manage program costs.

TMHA will have to adopt a conservative leasing approach in this environment, since Congress has made it clear that HUD will not forward funds for a budget overrun, even if the overrun was not the fault of the housing authority.

On the good news side, TMHA believes it will have sufficient funding to serve those families already under contract, and will not have to terminate those families from the program.

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