Getting Started with the Housing Trust Fund (Part Two of Two)
Part one of this article addressed many different aspects of the National Housing Trust Fund (HTF). This installment focuses on a few specific topics. State housing finance agencies will begin planning this year for how to use funding scheduled to be available in 2016. One of the most important of the numerous factors to consider is who will live in HTF-funded units. Under the Interim Rule published by the Department of Housing and Urban Development (HUD) in January, households must be at or below 30 percent of area median income (AMI), which also is known as being extremely low income (ELI).
Unfortunately, in some cases minimum wage can be too much income to qualify for an HTF unit (depending on where the property is located and the number of children). Even earning the lowest legal pay could mean not being an ELI household. So who will be eligible? One answer is those with limited or no ability to be employed. A person may qualify for Supplemental Security Income (SSI), due to a disabling condition which partially or fully precludes working. SSI is $733 per month; individuals at this level qualify as ELI nationwide. As such, a natural use of HTF will be to create supportive housing, which also targets people experiencing homelessness.
Another important aspect of the Interim Rule is the maximum housing expense must be affordable to those at 30 percent of AMI, which means rents of less than $400 (after utilities) in most of the country. That amount of revenue is insufficient to cover operating expenses, let alone debt service, and yet is still not affordable for someone living on SSI alone. As a result, units serving ELI households, especially for persons with disabilities, necessarily involve some form of ongoing financial support to be feasible. Part 1 of this article, published in the April issue of the Novogradac Journal of Tax Credits, explored several options, one of which is using HTF itself to assist with operating costs.
Direction from Federal Agencies
HUD does not provide a great deal of guidance on using HTF to serve people with disabilities and/or persons experiencing homelessness (more guidance might be forthcoming). The two main policies are that the housing may not be transitional or require participation in services.
However there is no shortage of other direction from the federal government in this area. The supportive housing world is in a period of transition due to mandates from three different cabinet agencies. Taken together, the inexorable trend is toward integrated housing with connections to voluntary services.
1. The Department of Justice (DOJ) is actively enforcing the Americans with Disabilities Act, as interpreted by the U.S. Supreme Court’s Olmstead decision. Attorneys in the Civil Rights Division bring actions against state governments (not specifically housing agencies) for
- operating facilities/programs that segregate people with disabilities;
- financing the segregation of people with disabilities in private placements; and
- promoting segregation through planning, service design, funding choices, or practices. For example, many systems primarily rely on congregate or all-disability housing (e.g., group or adult care homes). The resulting settlement agreements have required states to make available thousands of scattered-site apartments through various means. The objective is to allow people a real choice to live in the most integrated setting. Characteristics of the housing include:
- permanent, no time limit for residency;
- standard rights and responsibilities of tenancy;
- affordable (no more than 30 percent of income toward rent);
- residents primarily do not have a disability known to the state (e.g., no more than 20 percent of units are targeted);
- choice of unit and roommate, if desired; and
- range of flexible services and supports available but not mandated as a condition of tenancy.
In some states the ADA/Olmstead actions have been brought by advocacy groups instead of DOJ, with similar outcomes.
2. In 2014 the Department of Health and Human Services Center for Medicare and Medicaid Services adopted a final rule on Home and Community Based Services (HCBS). Millions of people nationally rely on HCBS for essential supports. The final rule covers the standards all home and community-based settings must meet. For someone to be eligible for HCBS, where they live must:
- be integrated in and support full access to the greater community;
- be selected by the individual from among different options;
- ensure individual rights of privacy and freedom from coercion and restraint;
- optimize autonomy and independence in making life choices; and
- facilitate choice regarding services and who provides them.
- In addition to the above, individuals in provider-owned or -controlled settings must have:
- a lease or other legally enforceable agreement providing similar protections;
- privacy in their unit, including lockable doors, choice of roommates and freedom to furnish or decorate the unit;
- control over their schedule, including access to food at any time; and
- visitors at any time.
The setting also must be physically accessible.
The HCBS rule provisions will be phased in over time, with state human services agencies having an opportunity to interpret the requirements for the settings in their jurisdictions. However, ultimately individuals living in housing which isolates them from the broader community will be placed in an untenable circumstance of choosing between where they live and receiving essential supports.
3. HUD has several different programs and initiatives in this context. One of the best-known examples is the Section 811 Project Based Demonstration Grant, which provides funding for states to administer as project-based rent assistance for persons with disabilities. Eligible properties share the same characteristics as described above: No more than 25 percent of units may be set-aside for persons with disabilities and participation in services cannot be required.
These three federal agencies, acting independently, are all moving in the same direction for how to create supportive housing. The good news is HTF is a good fit. In addition to the Interim Rule provisions matching the requirements described above, HTF units will be a small percentage in any one property and thus almost certainly integrated.
Not only will the HTF serve persons in need of supportive housing, it also will inherently act as a homelessness prevention tool by providing apartments affordable to persons at the lowest end of the income strata. In many cases, individuals and families lose their home simply because of the gap between their income and the cost of housing. Having a disability increases the risk.
For those already experiencing homelessness, providing an apartment without special conditions is not only an effective intervention, but doing so also is cost-efficient because of alleviating use of other resources such as emergency rooms, shelters and other expensive public systems. Utah has demonstrated effective results with this approach, which is known as “Housing First.”
Unfortunately, experience in these public systems too often results in problematic credit and criminal history. When these experiences are connected to an individual’s disability, federal law may require owners to provide a reasonable accommodation of their screening criteria. (Doing so is easier for credit issues when the unit has operating assistance.) Incorporating HTF supportive housing units in a property will mean management agents carrying out this process more frequently.
In addition to difficulties accessing housing, securing disability income is a challenge. SSI/SSDI Outreach, Access and Recovery (SOAR) is a program designed to increase access to benefits for adults experiencing or at risk of homelessness with a mental illness, medical impairment, and/or a co-occurring substance use disorder. On average, the program more than doubles applicants’ success rate.
Operating Cost Assistance
As described above, the maximum rent for an HTF unit is less than what is necessary to pay for its share of the ongoing expenses, yet also will be too high for those living on SSI alone. In addition to other options available to address this need (e.g., project-based Section 8), the Interim Rule allows states to use up to one-third of each annual grant for operating costs.
Such support is only available to housing rehabilitated or newly constructed with HTF funds; a state also must provide HTF in some other form. One approach which often will work well is a gap loan.
The assistance may be either payments over time or reserves created up front. The amount allowed is the difference between rents collected for HTF-assisted units and their share of monthly operating costs. Eligible costs include utilities, insurance, taxes and replacement reserves. So long as the HTF is capitalized from Fannie Mae and Freddie Mac, as opposed to an appropriation, reserves may be created for up to the amount needed for 30 years. For example, assume a property’s per-unit operating cost is $450 per month and the HTF tenant rent is $220. A state could provide the owner $2,760 per unit annually or set up a reserve of approximately $80,000 multiplied by the number of units.
In April, the Technical Assistance Collaborative and the National Low Income Housing Coalition released a report entitled “Creating New Integrated Permanent Supportive Housing Opportunities for ELI Households: A Vision for the Future of the National Housing Trust Fund.“ Through a review of case studies in three states, the authors identified policies which were critical in creating successful models of permanent supportive housing.
You can find it at www.taxcredithousing.com under the Resources tab. Click on Reports & Research.
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