National Housing Law Project Housing Law Bulletin

HUD published the final regulations for the new voucher program and for the conversion of current certificates to vouchers on October 21, 1999./2/ One aspect of the final rule was subsequently amended on November 3, 1999./3/ In the final rules, HUD has made a number of important changes to the interim regulations that were published on May 14, 1999./4/ The interim regulations were reviewed in the June 1999 issue of the Bulletin. This article discusses only the changes made to the interim regulations by the final rule and the correction to the interim rule published September 14, 1999./5/ In particular it will focus on how these subsequent rules responded to the issues raised in our earlier article. The merger of the certificate and voucher programs began October 1, 1999./6/

Who Will Get Vouchers?/7/

Reservation of Units for Applicants with Incomes Beneath 30 Percent of Median

Under the statute, each PHA must make sure that 75 percent of the new households it assists each year in the voucher program have household incomes at or beneath 30 percent of the area median -- known as extremely low income [ELI] families -- unless the Secretary approves an alteration in the income targeting standard "for good cause."/8/ The interim voucher regulations were silent with regard to this provision. During the public comment period and at the public forums held by HUD concerning the interim voucher rule, many PHAs asserted that they would have difficulty complying with the new 75 percent ELI targeting requirement. The final rule adds stringent standards and procedures for HUD approval of a PHA request to target fewer than 75 percent of its vouchers annually to ELI families. These new procedures should ensure that HUD grants such permission only in cases where a PHA has truly done all it reasonably can to open its voucher program to needy applicants in the surrounding area, and when the higher income families assisted as a result of the good cause exception have severe housing needs./9/ The final rule also implements the statutory "good cause" exception by authorizing HUD to approve a PHA’s request to disregard the admission of some families with income between 31 and 50 percent of Area Median Income (AMI) for new Welfare-to-work vouchers in determining PHA compliance with its income targeting obligations./10/ The preamble to the final rule reiterates that either of these two modifications of the income targeting standard is subject to the two basic principles of consistency with the PHA plan (presumably, with its identification of housing needs), and with "the PHA obligation to administer the [Section 8] program in a manner that affirmatively furthers fair housing."/11/ The final rules also clarified how the targeting and eligibility rules apply when newly admitted families exercise their portability rights./12/

In areas where there are unusually high or low incomes, the statute (and the interim and final regulations) authorize HUD to adjust the 30 percent of AMI level used to determine what income level qualifies as extremely low income./13/ Effective July 21, 1999, HUD systematically adjusted the 30 percent of AMI level for one-person households in Alaska, California, Louisiana, Oklahoma and West Virginia in order to include applicants with SSI income./14/

b. Local Preferences

The final rule made two important improvements in the regulations governing PHA discretion to establish local admissions preferences for the Section 8 voucher program. First, HUD added a new regulatory prohibition against local preferences that discriminate against families solely because they reside in public housing./15/ Second, HUD substantially revised the regulatory standard for PHA adoption and HUD approval of residency preferences. The final rule requires that a residency preference-- that is, an admissions preference for applicants from the local area served by the PHA--must "not have the purpose or effect of delaying or otherwise denying admission to the program based on the race, color, ethnic origin, gender, religion, disability or age of any member of any applicant family."/16/ This new standard applies to residency preferences that PHAs have used for years, as well as to newly-established ones. Because any residency preference must be included in the PHA plan, all residency preferences will be subject to re-examination under the new regulatory standard. It will be important to bring to HUD’s attention, during the 75-day PHA plan review process, any evidence indicating that a PHA’s Section 8 residency preference does not comply with this new standard or the PHA’s civil rights certification./17/

Screening

Ineligibility of People Previously Evicted From Federally Assisted Housing

Our previous article pointed out that the provision of the interim rule requiring PHAs to reject applicants who have been evicted from federally assisted housing for a serious lease violation within a reasonably recent period of time/18/ appeared to violate the statute. HUD apparently agreed. The final rule deletes the requirement to deny such applicants and substitutes an option for PHAs to deny voucher assistance if any member of the family was evicted from federally assisted housing in the previous five years./19/

Screening for Suitability as a Tenant

Our previous article also noted that while HUD had made some regulatory changes in the interim rule that appeared to give PHAs the option of screening applicants for their suitability as tenants, HUD had not specifically authorized PHAs to deny eligibility for Section 8 vouchers on such grounds. HUD plugged this regulatory hole with a Correction to the interim rule issued September 14, 1999. The new provisions specifically authorize a PHA to deny Section 8 assistance to new applicants based on its screening for family behavior or suitability in accordance with policies specified in the PHA’s Section 8 Administrative Plan./20/ As such a denial would be optional rather than mandatory, it is subject to the PHA’s obligation, expanded in the final rule, to consider "mitigating circumstances related to the disability of a family member" in light of reasonable accommodation requirements./21/ The obligation to incorporate screening criteria in the PHA’s Section 8 Administrative Plan provides an opportunity for public and resident comment on the advisability of having such criteria, as the final rule requires the Section 8 Administrative Plan to be a "supporting document" to the PHA Plan./22/

Where Can the Vouchers Be Used?

Anti-Discrimination Requirements

The final rule expands on the interim rule provision that state anti-discrimination laws prohibiting discrimination against a Section 8 voucher-holder because of the person’s status as a voucher-holder are not preempted by the federal Section 8 statute and regulations, by including local laws within the "no preemption" protection./23/

Portability

Our earlier article noted that statutory and parallel regulatory changes appeared to deprive families of the guarantee that they could exercise their portability rights to move to locations that do not come within the operating area of a PHA administering the voucher program, by deleting the obligation of the originating PHA to continue to administer the voucher in (some) unserved locations./24/ In the preamble to the final rules, HUD notes that in practice this problem will rarely occur, as multi-jurisdictional PHAs often administer the program in areas where there are no local PHAs./25/ In addition, the expanded definition of a "public housing agency" for Section 8 purposes makes it possible -- though not required -- for the original PHA or any other "private non-profit entity or a governmental entity or public body that would otherwise lack jurisdiction to administer the program" to operate as a PHA in such an area./26/

With regard to the new statutory discretion for PHAs to immediately allow a non-resident voucher holder to use a voucher in another jurisdiction, without requiring a delay of one year,/27/ HUD clarified that PHAs may apply this discretion on a case-by-case basis or may have a program-wide policy. HUD further stated that reasonable accommodation requirements apply to this decision./28/

Search Time

In an important change that has the potential to expand a family’s opportunity to use vouchers to rent housing in better neighborhoods where it may take more time to locate a suitable unit; the final rule repeals the 120-day limit on search time. PHAs now have discretion to grant one or more extensions of the initial voucher term of any duration./29/ Furthermore, PHAs must extend the voucher term up to the time reasonably required to accommodate a person with a disability./30/

3. Housing Quality Standards (HQS)

The interim rule implemented the statutory duty to issue guidelines and performance standards on inspections by requiring PHAs to put such guidelines and standards in their administrative plans./31/ In the final rule, HUD rescinded the requirement that PHAs adopt such guidelines and standards, but retained the obligation to include what inspection guidelines a PHA has in the Administrative Plan./32/ As grounds for this decision, HUD stated it had "determined that the pre-merger HQS inspection requirements and the SEMAP HQS-related performance standards" meet the statutory obligation./33/

In the correction to the interim rule, HUD made it clear that any HQS variation adopted by a PHA must meet or exceed the federal HQS standards./34/

4. What Will Voucher Rents Be?

In a very important correction to the interim rules, HUD added provisions authorizing PHAs to grant individual exception payment standards up to 110 percent of the Fair Market Rent (FMR) when required as a reasonable accommodation for a family that includes a person with disabilities, and to request the HUD Field Office to approve an individual exception payment standard up to 120 percent of FMR for the same reason./35/ This change will avoid the rent increases and some of the obstacles to voucher use that advocates for the disabled had feared. Whether the new provision functions as effectively as the superceded obligation of PHAs to grant individual exception rents in the certificate program up to 120 percent of FMR depends on whether the need to seek HUD Field Office approval for an individual exception payment standard in the 111 to 120 percent range inhibits PHA action or causes delays that result in the loss of available units.

The final rule adds a regulatory standard based on families’ rent burdens for HUD approval of a PHA payment standard beneath 90 percent of the FMR (The "basic range" in which Congress has authorized PHAs to establish payment standards is 90 to 110 percent of FMR). The new rule states that HUD will not approve a lower payment standard if the "family share" for more than 40 percent of participants exceeds 30 percent of adjusted income/36/ ("Family share" is the term HUD uses under the new voucher rules for the family’s payment obligation for rent and utilities--computed as the amount of the PHA’s utility allowance--after subtracting the PHA payment. The "family share" is greater than the "total tenant payment" when the gross rent exceeds the applicable PHA payment standard.)/37/. This rule is the same as the standard that HUD will use to determine if participants’ rent burdens are excessive, a condition that may cause HUD to require the PHA to increase its payment standard./38/ HUD claims that it has no authority, however, to require any PHA to increase its payment standard above 110 percent of FMR./39/

One of the major changes Congress made to the new voucher program is to require that no family newly participating in the program or moving to a new unit may pay more than 40 percent of adjusted income for rent and utilities./40/ This provision was intended to protect tenants from the excessive rent burdens that many feared would result in the change from certificates to vouchers. HUD’s interim and final rule implemented the literal statutory language, prohibiting PHAs from approving any lease where the initial rent burden for a family in a new unit is greater than 40 percent of adjusted income./41/ An unanticipated consequence of the new maximum initial rent burden rule, however, was to preclude new families from participating in the program altogether if their "total tenant payment" was based on a PHA minimum rent, a so-called "welfare rent," or 10 percent of gross income due to substantial income adjustments, and exceeded 40 percent of adjusted income./42/ To correct this problem, HUD amended the final rule in light of a reconsideration of the legislative history. As amended, the 40 percent maximum initial rent burden test does not apply when a unit’s gross rent is below the applicable payment standard./43/ This amended rule should also help so-called mixed families that are subject to pro-ration of the PHA subsidy due to the presence in the household of one or more persons ineligible for federal housing assistance due to immigration status,/44/ so long as they are able to locate housing where the rent is below the payment standard.

5. Leases

HUD declines in the final rules to amplify the statutory grounds concerning when a PHA may approve an initial lease term of less than one year (The statute permits a shorter lease term if such a lease term is the prevailing local practice and the PHA determines that the shorter term will improve housing opportunities for the family). HUD does clarify that approval of an initial lease term of less than one year may be made on a case-by-case or general basis./45/

HUD also declined to reinstate in the regulations the list of prohibited lease provisions that have been part of federally subsidized housing law since 1971 and were used in the Section 8 program from its beginning./46/ The final rule does, however, clarify that if an owner does not use a standard form of lease for unassisted tenants, the owner may use a PHA model lease./47/

6. How Will Evictions and Subsidy Terminations Be Handled?

The final rule retains the provision, first contained in the interim rule, requiring rather than merely permitting PHAs to terminate a family from the program if it is evicted from its Section 8 home for a serious violation of the lease./48/ The preamble addresses the policy (though not the legal) arguments against this requirement and acknowledges its potentially unfair consequences, such as in domestic violence cases. Nonetheless, HUD retains the rule "to foster responsibility in the Section 8 program" and to "address the complaint that some assisted families have kept their Section 8 benefits even after they have caused extensive damage or incurred a large unpaid rent debt."/49/ In other words, HUD does not trust PHAs to use their discretionary authority to terminate Section 8 assistance in such egregious cases, and for the public relations good of the program concludes that it is necessary to make a strong statement about "responsibility" by forcing PHAs to terminate such families’ Section 8 assistance regardless of the circumstances. If a PHA is really opposed to the mandatory termination of assistance, it may readmit a family by using its discretion to consider mitigating circumstances for applicants for whom the PHA had previously terminated assistance./50/ As a practical matter, however, such readmission may not occur until substantially after the family has lost its Section 8 assistance, depending on the PHA’s waiting list and preferences.

The final rule retains the basic conversion time-frame of the interim rule: current participants in the tenant-based program who do not move have, in essence, a grace period of at least a year and up to two years, until the effective date of the second annual recertification after the revised merger date of October 1, 1999. That means that the earliest mandatory conversion to the new "housing choice" voucher program, as HUD calls the new program, is October 1, 2000 for tenants whose recertification was October 1, 1999 and effective the same day. Conversion should be complete before the end of calendar year 2001.

Within this basic framework, however, the final rule provides for additional families to benefit from the grace period. Families participating in the pre-merger voucher program have the benefit of either the PHA’s voucher payment standard at the beginning of their current HAP contract term, or the PHA’s voucher payment standard at the time of their most recent recertification, whichever is higher, until the effective date of the second regular reexamination of family income and composition on or after the merger date, regardless of how much time has elapsed since the beginning date of the HAP contract./51/ Pre-merger voucher tenants are also able to retain the benefit of the "shopping incentive" during the one-to-two year grace period, if their unit rents below the payment standard./52/

Current certificate tenants with over-FMR tenancies whose PHAs have a voucher payment standard below the FMR may have a grace period from any reduction in subsidy attributable to the lower payment standard./53/

The final rule contains a clarification that should be helpful in preventing the early involuntary conversion to the voucher program of certificate tenants who stay in place but whose landlords increase the rent, so long as the increased rent (and any allowance for tenant-paid utilities) remains at or below the FMR and therefore permissible under the certificate program. The final rule clarifies that a new HAP contract (which triggers the obligation to convert to the voucher program) is required only for a change in responsibility for utilities or appliances--or for a change in the lease term--but not for a rent increase./54/

If the landlord, however, seeks a rent increase in excess of the FMR, the tenant may only remain in the unit by voluntarily converting to the voucher program and paying the amount (if any) in excess of the payment standard (assuming the PHA approves the increased rent as reasonable). Where the PHA has increased the payment standard to 110 percent of FMR, and the landlord’s increased rent (plus any tenant-paid utilities) is within 110 percent of FMR, a certificate tenant could convert to the voucher program without having to pay more than 30 percent of income for rent.

The preamble to the final rule makes clear that the conversion of certificate tenants to the new voucher program does not create a new tenancy. As a result, a certificate tenant on conversion who remains in place is not subject to the 40 percent initial maximum rent burden rule, nor to the prohibition on renting from a relative./55/ The rule also relieves PHAs of some of the administrative burden of the conversion by loosening the requirements for unit re-inspection and for income verifications./56/

Overall, the comment process resulted in a number of important improvements in the new voucher program for applicants and tenants. It is unfortunate that HUD did not eliminate the new authority given to PHAs to deny voucher applicants based on suitability and behavioral criteria or the requirement to terminate voucher assistance for families evicted for serious lease violations, and did not include further guidance in the regulations for PHAs to follow in setting their payment standards./57/ Yet the final rules add important fair housing-related protections for applicants and tenants, and include clear standards to guide the exercise of discretion by this and any future administration at HUD on such central issues as good cause exceptions to the targeting requirements and PHA requests to reduce the voucher payment standard below 90 percent of FMR. The substantial effort exerted by the legal services community and others to submit written and oral comments on the interim rule were worthwhile.

Notes

1    This article was written for NHLP by Barbara Sard, Director, Housing Policy, Center on Budget Policy and Priorities.

2    Section 8 Tenant-Based Assistance; Statutory Merger of Section 8 Certificate and Voucher Programs; Housing Choice Voucher Program, 64 Fed. Reg. 56,894 (Oct. 21, 1999). (Hereinafter all citations to the final rule will cite the section to the regulations as it appears in the Federal Register). These regulations implement the merger of the Section 8 certificate and voucher programs in § 545 of the Quality Housing and Work Responsibility Act, Pub. L. No. 105-276, 112 Stat. 2461, 2518 (Oct. 21, 1998).

3    64 Fed. Reg. 59,620 (Nov. 3, 1999), amending 24 C.F.R. §§ 982.305(a)(5) and 982.508.

4    64 Fed. Reg. 26,631 (May 14, 1999).

5    64 Fed. Reg. 49,656 (September 14, 1999).

6    64 Fed. Reg. 43,613 (August 11, 1999); 24 C.F.R. § 982.4(b), definition of "merger date," 64 Fed. Reg. 49,656, 49,658 (September 14, 1999).

7    HUD appears to have moved the admissions rules that govern the voucher program to 24 C.F.R. Part 982. Provisions uniquely relevant to the voucher program will probably no longer appear in 24 C.F.R.,Part 5.

8    42 U.S.C. § 1437n(d), as amended by § 513 of Pub. L. No. 105-276, 112 Stat. 2461, 2547.

9    24 C.F.R. § 982.201(b)(2)(ii), 64 Fed. Reg. 56,912 (October 21, 1999).

10    24 C.F.R. § 982.201(b)(2)(iii), 64 Fed. Reg. 56,912 (October 21, 1999). The list of the 121 PHAs in 35 states awarded Welfare-to-work vouchers under the FY 1999 appropriations act can be found on the web at http://www.hud.gov/pressrel/wtwchart.pdf.

11    64 Fed. Reg. 56,898 (Oct. 21, 1999).

12    24 C.F.R. §§ 982.201(b)(4)), 982.355(c)(10); preamble at 64 Fed. Reg. 56,899, 56,905 (Oct. 21, 1999).

13    42 U.S.C. § 1437n(b) (West Supp. 1999); 24 C.F.R. § 982.201(b)(2)(i)(B), 64 Fed. Reg. 26,643 (May 14, 1999).

14    See 64 Fed. Reg. 56,897 (Oct. 21, 1999) and Notice PDR 99-04, available on the web at: http://www.huduser.org/datasets/il/fmr99rev/sect82.html.

15    24 C.F.R. § 982.207(a)(4), implementing 42 U.S.C. § 1437f(s).

16    24 C.F.R. § 982.207(b)(1)(iii) (emphasis added).

17    See 24 C.F.R. §§ 903.7(a), (c) and (o); 903.23, 64 Fed. Reg. 56,844 (October 21, 1999).

18    24 C.F.R. § 982.552(b)(1), 64 Fed. Reg. 26,650 (May 14, 1999).

19    24 C.F.R. § 982.552(c)(1)(ii); Item 27(a), 64 Fed. Reg. 56,915 (Oct. 21, 1999). The preamble to the regulations, however, notes that HUD "may review this matter again as it finalizes the pending ‘One Strike’ regulation." 64 Fed. Reg. 56,909 (Oct. 21, 1999)

20    24 C.F.R. §§ 982.54(d)(23), 982.307(a) and 982.552(e), 64 Fed. Reg. 49,656 (September 14, 1999).

21    24 C.F.R. § 982.552(c)(2)(i) and (iii).

22    Id. § 982.54(b).

23    Id. § 982.53(d), as amended by 64 Fed. Reg. 56,911, Item 5 (b) (Oct. 21, 1999).

24    Pub. L. No. 105-276, § 553, 112 Stat. 2610-11 (Oct 21, 1998) (amending 42 U.S.C. § 1437f(r)(1) (effective Oct. 1, 1999), 64 Fed. Reg. 26,646, Item 58 (May 14, 1999), removing 24 C.F.R. § 982.354 (1999); 24 C.F.R. § 982.353(b), 64 Fed. Reg. 26,646 (May 14, 1999).

25    64 Fed. Reg. 56,905 (Oct. 21, 1999).

26    24 C.F.R. § 982.4(b), 64 Fed. Reg. 26,641 (May 14, 1999), as amended by 64 Fed. Reg. 56,911, Item 4(b)(Oct. 21, 1999).

27    24 C.F.R. § 982.353(c)(2), 64 Fed. Reg. 26,646 (May 14, 1999).

28    64 Fed. Reg. 56,905 (Oct. 21, 1999).

29    24 C.F.R. § 982.303(b)(1).

30    Id. § 982.303(b)(2).

31    42 U.S.C. § 1437f(o)(8)(E) (West Supp 1999); 24 C.F.R. §§ 982.54(d)(22), 982.405(f), 64 Fed. Reg. 26,641, 26,647 (May 14, 1999).

32    64 Fed. Reg. 56,914, Item 17 (Oct. 21, 1999).

33    64 Fed. Reg. 56,905 (Oct. 21, 1999).

34    24 C.F.R. § 982.401(a)(4)(iii)(A), 64 Fed. Reg. 49,657-8 (Sept. 14, 1999).

35    24 C.F.R. § 982.503(b)(a)(iii), (c)(2)(ii), 64 Fed. Reg. 49,658 (Sept. 14, 1999).

36    24 C.F.R. § 982.503(d).

37    See 24 C.F.R. §§ 982.505, 982.508.

38    24 C.F.R. § 982.503(e).

39    24 C.F.R. § 982.503(e)(2), 64 Fed. Reg, 56,907 (Oct. 21, 1999).

40    42 U.S.C. § 1437f(o)(3) (West Supp. 1999).

41    24 C.F.R. § 982.508.

42    64 Fed. Reg. 59,621 (Nov. 3, 1999).

43    24 C.F.R. §§ 982.305(a)(5) and 982.508, 64 Fed. Reg. 59,620 (Nov. 3, 1999).

44    See 24 C.F.R. Part 5, Subpart E, as revised, 64 Fed. Reg. 25,726 (May 12, 1999).

45    24 C.F.R. § 982.309 unchanged, 64 Fed. Reg. 56,903 (Oct. 21, 1999).

46    24 C.F.R. § 982.308, rewritten at 64 Fed. Reg. 26,645 (May 14, 1999), 64 Fed. Reg. 56,903 (Oct. 21, 1999). The revised Tenancy Addendum, HUD form 52641-A, is available on the web at http://www.hud.gov/pih/publications/forms/52641-a.pdf. Tenants can sue to enforce the provisions of the Tenancy Addendum, which must be part of the lease between the tenant and the owner as well as part of the Housing Assistance Payments contract between the PHA and the owner. 24 C.F.R. § 982.308(f)(2)(October 21, 1999), 24 C.F.R. § 982.456(b)(2)(May 14, 1999).

47    24 C.F.R. § 982.308(b)(2).

48    24 C.F.R. § 982.552(b)(2), 64 Fed. Reg. 26,650 (May 14, 1999).

49    64 Fed. Reg. 56,909 (Oct. 21, 1999).

50    24 C.F.R. § 982.552(c)(iii).

51    Contrast 24 C.F.R. § 982.502(c) with 24 C.F.R. § 982.505(c)(3) and (4), both as amended by 64 Fed. Reg. 56,914

52    24 C.F.R. § 982.502(c)(2).

53    Preamble at 64 Fed. Reg. 56,906 (Oct. 21, 1999). The statement that the regulation (24 C.F.R. § 982.502(b)) has been revised as stated in the text, however, does not seem to be the case.

54    24 C.F.R. § 982.308(g), preamble at 64 Fed. Reg. 56,903 (Oct. 21, 1999). The owner, however, must give the PHA at least 60 days advance notice of the rent increase and the PHA must approve the new rent as reasonable. Id.

55    24 C.F.R. § 982.306(d), preamble at 64 Fed. Reg. 56,906-7 (Oct. 21, 1999).

56    Id.

57    HUD states that it will be issuing such guidance through sub-regulatory channels. 64 Fed. Reg. 56,907 (Oct. 21, 1999)