Apartment Groups Testify Regarding Section 8 Reform Legislation:
Proposal Omits Needed Reforms and Perpetuates Funding Uncertainty
FOR IMMEDIATE RELEASE
May 18, 2005
Contact: Michael Tucker
(202) 974-2360
mtucker@nmhc.org
www.nmhc.org
WASHINGTON, DC – The National Multi Housing Council (NMHC) and National Apartment Association (NAA) testified today before the U.S. House of Representatives on legislation that would substantially change the way the Section 8 Housing Choice Voucher program is funded and managed.
NMHC/NAA told Congress that instead of fixing the bureaucratic obstacles that can discourage private property owners from accepting vouchers, the proposal would instead create new burdens and perpetuate the funding uncertainties experienced in the past three years. The net result of these changes would be fewer apartments available to low-income Americans. This would be a disturbing outcome considering that the number of working families spending more than half their income on housing has grown 76 percent between 1997 and 2003.
In recent years, the Section 8 voucher program has been thrown into turmoil because HUD and Congress have repeatedly changed the way the program is funded. These changes have caused funding shortfalls in voucher programs across the country and have resulted in short-notice, across-the-board rent cuts in many jurisdictions. This unstable funding situation not only alienates apartment owners, it can also dis-courage lenders from investing in new and rehabilitated affordable housing.
In his oral testimony on behalf of NMHC/NAA, Chris Reilly, Area Vice President for Equity Residential, shared a story about a Massachusetts property that was subjected to unilateral decreases in contract rents by the local housing authority on only 14 days’ notice. At the same time, the property was in need of in-creased spending for capital improvements. Reilly expressed concern for the effect that this combination of decreased rental revenues and increased capital spending might have on a smaller property owner’s ability to maintain the property and serve the low-income residents who live there.
Reilly told legislators that, unfortunately, the State and Local Housing Flexibility Act (S. 771, H.R. 1999) being considered by Congress would perpetuate the funding uncertainty. For example, instead of basing rents for voucher holders on the national Fair Market Rents that HUD establishes each year, the legislation would allow each of the nation’s 2,500 local housing authorities to set its own rents. This means that apartment owners who operate across different states and jurisdictions would have to manage different voucher programs—up to 2,500 different voucher programs across the country.
The bill would also change the way vouchers are funded. In the past, the program was funded on a unit-based system. The amount of money appropriated for each voucher was based on the fair market rent for an apartment in the town receiving the voucher. But under S. 771/H.R. 1999, each voucher would be funded at a specific dollar value, regardless of rent levels and changes in the income of the voucher holder. This dollar-based funding system is what has caused the funding shortages experienced by Equity and other apartment firms around the country.
Not only does the bill institutionalize an unstable funding mechanism for the program, it also fails to make much-needed programmatic reforms that would increase the supply of housing for voucher holders by making the program more attractive to private owners. For instance, apartment owners who accept vouchers must use a HUD-approved lease that often conflicts with local landlord-tenant law and requires the owners to train their staff on two separate leases. Furthermore, Section 8 subsidy payments from housing authorities are often significantly late because there are no meaningful penalties to encourage timely subsidy payments. Finally, it can take up to 60 days for a unit to be inspected and approved for a voucher holder, during which time the owner collects no rent on the apartment.
Equity Residential’s Reilly urged Congress to work to restore stability and predictability to the program’s funding, and to reform the program so the cost of renting to voucher residents is comparable to the costs of serving unsubsidized residents. This, he said, will ensure that affordable housing is available to more Americans.
Reilly’s testimony is available at www.nmhc.org/Content/ServeContent.cfm?ContentItemID=3431.
Note to Editors: Pictures of Reilly testifying are available by contacting Michael Tucker at mtucker@nmhc.org or by calling 202/974-2360.
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NMHC and NAA operate a Joint Legislative Program and represent the nation’s leading firms participating in the multifamily rental housing industry. NMHC/NAA’s combined memberships are engaged in all aspects of the development and operation of apartment communities, including ownership, construction, finance and management. Together, the organizations operate a federal legislative program and provide a unified voice for the private apartment industry. Nearly one-third of Americans rent their housing, and almost 15 percent of all U.S. households live in an apartment home. For more information, contact NMHC at 202/974-2300, e-mail the Council at info@nmhc.org, or visit NMHC’s web site at www.nmhc.org.