MyNewPlace Blog

Yesterday, an article appeared in the Boston Globe about President Barack Obama's plan to use around $4 billion of economic stimulus money to create new affordable housing nationwide. According to the author, this marked a watershed movement as the new administration decidedly moves away from the “ownership society" initiatives of the Bush years.

The plan will use the $4 billion (of the total $14 billion stimulus funds granted to HUD) to create more affordable rental housing by converting foreclosed into rental units and constructing new low-rise apartment buildings. HUD will use another $4 billion to refurbish the nation's existing public housing stock of 1.2 million units and announced on July 28th that $2.25 billion of stimulus cash was already spent or “in action" on completing stalled public housing projects. That bridge financing will provide funding where private capital, usually incentivized by LIHTC has dried up.

New York City will be the first city to begin construction use stimulus money to actually start new public housing projects, using $60 million to begin construction on apartments in Harlem and East New York, reported Multi Housing News today.

What do people think about this? Is this a good use of money?

The Housing Choice Voucher Program, which supplies Section 8 apartments to renters, has generally been thought to be a much better solution than housing projects. The short term need for new jobs in the construction sector and the need to do something with foreclosed homes besides letting them fall into disrepair seem to be the chief reasons for this new HUD expenditure, rather than some ideological shift on the housing front.

HUD Secretary Shaun Donovan released details on February 20th of a new plan designed to reach out to renters who are still recovering from the devastating effects of Hurricanes Katrina and Rita. Although it has been over 3 and a half years since these hurricanes lambasted the gulf coast and displaced thousands of renters and homeowners, efforts are still ongoing to get people back in their homes.

This means more rental assistance to displaced families in New Orleans and surrounding areas, with a special focus on transitioning those in the Disaster Housing Assistance Program (DHAP). DHAP took effect on September 1, 2007 to replacing the existing FEMA rental-subsidy program. There is a lot of bureaucratic information on the subject here.

This shift in administration was the result of an agreement between HUD and FEMA. Two years after the hurricanes had actually hit, FEMA, after infamously bungling recovery, was probably more than happy to hand over the responsibility of assisting around 40,000 families with their rental payments over to HUD. Also, FEMA is responsible for responding to the immediate aftermath of disasters, whereas HUD, with its extensive network of public housing offices and employees is a much more suitable agency to carry out long term housing assistance, no matter the initial cause.

Since DHAP was scheduled to sunset on February 28th, HUD needs to figure out what to do for the approximately 31,400 families still relying on the program to cover their rents. The plan will work as follows:

• HUD will expand its assistance to all income-eligible families; the Bush Administration only aided senior, disabled and extremely low-income families. HUD will work with local public housing offices to get all income-eligible families into Section 8 housing.
• The plan will begin March 1 and go until August 31 and will require DHAP families to pay an additional $100 towards rent.

Basically, HUD plans to use whatever is left over from the original funding authorization of $85 million to transition all income-eligible families that were getting funds from DHAP to the Section 8 program in 6 months.

In the interest of keeping apartment owners and management companies abreast of political events as well as reaching out to those renters searching for affordable housing, we wanted to pass along and summarize an issue under consideration in Washington that is poised to affect the housing rental industry.

Last Wednesday the Senate Committee on Banking, Housing and Urban Affairs received a strong admonishment regarding the inability of the United States Housing and Development to sustain the Section 8 affordable housing program from Hector Pinero of Related Management Company, LLC, who spoke on behalf of the National Multi Housing Council, National Leased Housing Associated and the National Apartment Association.

According to a press release issued by the National Multi Housing Council, Mr. Pinero warned members of the Senate Committee that HUD has been unable to make timely reimbursements to apartment managers that participate in the Section 8 subsidized program. The Housing Choice Voucher Program, commonly referred to as Section 8, a reference to the section of U.S. Housing Act of 1937 that created the subsidy program, has helped low-income families pay the rent since the Great Depression.

People who rent an apartment under the Section 8 program pay around 30% of their income to the apartment manager for rent and the HUD subsidy covers the remaining rent. However, late payments have become commonplace, making it difficult for apartment management companies that offer low-income apartments to pay their mortgages on time and make necessary repairs and improvements to their buildings.

The NMHC, NAA and NLHA advocate the following three steps to be taken by Congress to avoid the possible exodus of apartment owners from the Section 8 program:

1. Reevaluate and audit the process by which HUD calculates its own budget regarding Section 8 expenditures
2. Pass legislation that would penalize HUD for making late payments
3. Allocate more money to HUD to continue the Section 8 program, since the proposed budget will likely result in 100,000 renters losing their subsidies

These groups believe that the Section 8 program, which Mr. Pinero called “the most effective housing subsidy ever devised by Congress," will be unsustainable without the above reforms. If HUD fails to make timely reimbursements to apartment owners, it is likely that many of them will opt out of the program. With waiting lines for vouchers perpetually growing, a decrease in the supply of subsidized apartments would result in many families being faced with some very difficult housing decisions.

The MyNewPlace apartment search allows you to select “affordable" as one of the amenities. Selecting this icon will include apartment buildings that offer Section 8 housing programs. Many buildings are mixed between market and subsidized housing so be sure to contact the management company for availability and details.

Check out our forthcoming apartment guide for more tips on affordable apartments and updates on the Section 8 housing program.