HUD is considering a rule to ensure that households in public housing continue to need housing assistance after admission. This potential rule was prompted by a HUD Office of Inspector General (OIG) report stating that of 1.1 million families in public housing that were examined, 25,226 were over the qualifying income limit – some significantly. Comments on this ANPR are due at HUD no later than March 4, 2016.
Background
The Housing Act of 1937 is the primary statute governing public housing. The Act provides that public housing units be rented only to families who are low-income at the time of their initial occupancy. Public Housing Agencies (PHAs) must undertake periodic reviews of household income. The Act does not require eviction of families whose income exceeds the income limits after move-in.
On July 21, 2015, HUD’s OIG issued an audit report indicating that a number of households had income significantly in excess of the maximum income limits, although they income qualified at move-in. In one identified case, a Nebraska millionaire occupied a $300 per month public housing unit. Current regulations do not prohibit a family from continued occupancy due to an increase in income after move-in. An increase in income may be minimal or temporary, and HUD believes that such increases should not be the basis for termination of public housing assistance. The purpose of this ANPR is to solicit comments on how to structure policies to reduce the number of households with incomes significantly in excess of income limits when those income limits have been exceeded for a sustained period of time.
HUD’s position is that any changes that would require the termination of tenancy for over-income families should be enacted with caution so as not to impede a family’s progress toward self-sufficiency.
Since November 26, 2004, PHAs have had the authority to terminate the tenancy of over-income families. However, they were not required to do so and had a good deal of discretion as to whether or not to terminate tenancy. While the 1937 Act did not require termination of tenancy for over-income residents, it did not prohibit PHAs from doing so. HUD indicates that many factors should be considered in developing these policies, including local market conditions, community stability, the source and duration of increased income, and whether the resident is elderly or disabled.
HUD is considering revising its regulations in a way that would continue to give PHAs discretion on when to evict or terminate the tenancies of over-income families but narrow that discretion by providing circumstances that would require a PHA to terminate tenancy or evict an over-income family. It is clear from the wording of the ANPR that the two main areas for which HUD is seeking input are (1) how to define income that “significantly” exceeds the limit, and (2) how to define a “sustained period of time” with excess income. Another area of concern is what a reasonable period of time to find alternative housing would be.
HUD is not considering an alternative in the exceptions to eviction or termination of tenancy for families over the income limits if the family has a valid contract for participation in a Family Self-Sufficiency (FSS) program. Also, a PHA will not be able to evict a family that is over the income limit if the family is currently receiving the earned income disallowance.
In developing the final rules for the program, HUD will have to avoid being too restrained in their approach to higher income residents. HR 3700, the Housing Opportunity Through Modernization Act, sailed through the House on a 427-0 vote, and is expected to receive strong support in the Senate. Once passed, it is very likely that President Obama will sign it. Part of this legislation places limits on how long higher income families may remain in public housing. If Congress feels HUD is circumventing Congressional intent through regulation, additional statutory requirements could easily be imposed.
The legislation, if signed into law as expected, will also prohibit families with net assets in excess of $100,000 from living in public housing. At least for now, the law will apply only to public housing – not Section 8, Section 515 or the Low-Income Housing Tax Credit (LIHTC). However, history has shown that once rules for public housing are changed, they eventually are applied to other affordable housing programs.
One amendment that was adopted as part of the Bill keeps the $480 dependent deduction and increases the elderly/disabled deduction from $400 to $525.
The changes outlined here are likely to become law and regulation in 2016. Based on the current mood in Congress regarding regulatory reductions and cost cutting, 2017 may well be a year of change for the affordable housing industry.