National Housing Law Project Housing Law Bulletin

HUD recently published a Notice in the Federal Register that outlines how it plans to spend slightly more than $3 billion of budget authority this fiscal year for the Section 8 certificate and voucher programs.¹ The Notice provides some fodder for rumination about where the money is going.

The General Picture

The first point is that the vast majority of the money is in a sense not going anywhere. That is because $2.5 billion of the more than $3 billion in annualized budget authority will be used only to renew the funding for families who are already in the Section 8 program and for whom appropriations and annual contributions contracts will be expiring this year. Another $150 million will go to amend contracts that are not expiring but that have used up all the funds that have been appropriated for them. Therefore, $2.65 billion of these $3 plus billion (about 86 percent) will just keep the system running in place, not adding a single family to the number of households participating in the program.

Some of the remaining money -- about $423 million -- will be used to create certificates and vouchers for 58,645 families who have not had them before. But nearly $288 million of this budget authority (68 percent of remainder, 7 percent of total) will be spent providing certificates or vouchers for families who are being displaced as public and assisted housing projects are taken out of the system by demolition and sales, by expiring use restrictions, by expiring Section 8 and Section 23 contracts, and by HUD's property disposition activities. That budget authority -- two-thirds of the total new certificates -- will fund 39,845 certificates or vouchers. Of those, a total of 12,400 will serve three purposes: (1) to relocate people displaced because their public housing buildings are being demolished, sold or closed for conversion to vouchers; (2) to substitute for approved and funded new public housing that a PHA decides not to build; and (3) to replace public housing units that have been demolished or sold without direct displacement. Another 26,800 certificates and vouchers will be funded for families displaced when HUD sells their buildings without subsidies, when their owners prepay their mortgages, and when Section 8 contracts are not renewed by the owners or by HUD. This general category includes the 645 certificates or vouchers that will be used to convert buildings from the old Section 23 program.

The next biggest category is comprised of the certificates and vouchers to be provided as a result of the designation of public housing projects for elderly people only. In these situations, PHAs will have to mitigate the impact upon people with disabilities who otherwise would be living in some of public housing buildings that will now go to elderly applicants. A total of 8,400 certificates and vouchers, costing $50 million, will be used for this purpose.

Another 6,400 certificates and vouchers will be created for the family unification program. They will be used to prevent children from going into foster care because their parents cannot afford housing for them, or to reunite families where the children are already in foster care for lack of housing. Those certificates and vouchers will cost $58.8 million.

The rest of the money will go for three miscellaneous categories. One is for relocating witnesses from public housing -- 300 certificates or vouchers, costing $2 million. The second is to settle litigation -- 1,700 units, at a two-year cost of $30 million from unspent, prior year budget authority. Congress prohibited spending any FY 1997 money for that purpose. Finally, 2,000 certificates and vouchers will be funded for people with disabilities moving into private housing at a five-year cost of $48.5 million.

Use of Section 8 Funding and What It Produces²
(m = million; b = billion)

Annualized Budget Total
Budget Authority Budget Program Units Authority Per Unit Authority

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Program Authority   Public Housing Relocation Public Housing Development Recapture Public Housing Replacement Loss of HUD-Assisted Units Section 23 Conversion Designated Housing Family Unification Mainstream Program Litigation Settlements Witness Relocation Subtotals     Section 8 Renewals Section 8 Amendments   TOTALS

Units   } } } } } }12,400  } } } }   26,800   645 8,400   6,400 2,000 1,700   300 58,645     Not provided Not provided

Annualized Budget Authority         $108.75 m           $176.00 m   $2.80 m $50.00 m   $58.80 m $9.70 m $15.00 m   $2.00 m $423.05 m     $2.50 b     $152.20 m   $3.075 b

Budget Authority Per Unit         $8,770           $6,567   $4,341 $5,952   $9,187 $4,850 $8,823   $6,667 $6,211     N/A     N/A

Total Budget             $147.5 m           $176.0 m   $2.8 m $50.0 m   $58.8 m $48.5 m $30.0 m   $2.0 m $515.6 m     $2.50 b     $152.2 m   $3.168 b

What this overview reveals is that the vast majority of the funds do not create any new certificates or vouchers at all. It just goes to renew the ones already out there. Again, of the funds that do create new certificates or vouchers, the majority just go to replace other forms of assisted housing that are being taken off the market. Only about 20,000 of the 60,000 "new" vouchers or certificates could be classified as assistance that will add to the number of assisted families. Those are the certificates and vouchers for facilitating the designation of public housing developments as elderly only, for mainstreaming people with disabilities, for uniting families, for settling litigation and for witness relocation. But even they are not enough to offset the losses of assistance elsewhere -- for example, from the losses of public housing units or the delay in reuse of certificates and vouchers -- and thus cannot qualify as true incremental assistance.

Funding Rules

Only a small portion of this budget authority is made available through this Notice of Funding Availability, i.e., the $147.5 million for public housing replacement and resident relocation. Some of the rest was made available by previous NOFAs.³

The rest of the funding will be made available on an ad hoc basis. For Section 23 conversions, the PHAs with those projects will have to apply for the money at their HUD field office. For prepayment, expiring Section 8 contract and property disposition cases, the HUD field offices will have to apply to HUD Headquarters for those funds as they become needed, and the Headquarters will fund them on a first come, first served basis. The litigation settlements will be funded when the cases settle. The renewals and amendments will be funded as needed.

Public Housing Rules

Because this Notice announces the availability of certificate and voucher money for public housing relocation and replacement, it contains some interesting information about how that money will be used. The first priority will be filling the relocation needs of public housing tenants displaced by demolition, sales and voucher conversions. However, certificates and vouchers will not be the first priority source for relocation assistance. Instead, PHAs will have to relocate as many tenants as possible into other public housing before they may start using certificates and vouchers. That raises the question how HUD can reconcile its funding priorities with the statutory requirement that relocation housing be housing of the tenant's choice, including certificates and vouchers, to the maximum extent practicable.⁴

If any of the $147.5 million budget authority is left after covering relocation needs, the next priority is to provide certificates or vouchers to PHAs that volunteer to return money they have received to build new public housing, assuming it has not yet been built. After the PHAs exhaust that money, whatever is left may be used for replacing public housing that is being demolished or sold.

Not only is replacement housing the last priority for HUD; even when money is available, it cannot be used for replacement if the PHA has already received certificates or vouchers or other funds, such as condemnation or insurance proceeds, to relocate families displaced from public housing. It used to be that relocation and replacement were considered to be two separate problems, the first being the immediate problem of mitigating the effects of displacement on tenants who had to move, and the second being the long-range problem of ensuring that the stock of assisted housing is not diminished. Now, given the suspension of the one-for-one replacement requirement, HUD has taken one step further its antipathy toward replacing lost public housing. It has decided that a PHA may not use certificates or vouchers to replace a unit if they are being used to relocate a family from the unit, or to relocate a family from a unit if Section 8 has been used to replace it. The only exception is that HOPE VI funds may be used for replacement housing, even if certificates or vouchers have been used for relocation.

It is also fairly clear from the Notice that a PHA may not use certificates or vouchers to replace public housing units that are demolished, sold or converted to vouchers if they were vacant when the demolition or sale was approved or when the conversion assessment was done. That reveals two things. One is that HUD's prime, and possibly sole, concern is for families already living in public housing who face displacement, not for families on the waiting list who will have to wait even longer as a result of a demolition, sale or conversion. As long as the loss of units can be mitigated by attrition, HUD appears to be unconcerned. The second is that "conversion to vouchers" is a misnomer. As long as the buildings can be vacated by a PHA's refusal to re-rent units when tenants move out, or present tenants can be transferred to other public housing, there will be no vouchers made available when a public housing project is "converted." What will happen is that the project will be closed, and current and future applicants will be denied access to an affordable home.

1. Notice of Fiscal Year funding for the Section 8 Rental Certificate and Rental Voucher Programs, 62 Fed. Reg. 33,951 (June 23, 1997).

These figures are taken from the chart appearing in the June 23, 1997, Federal Register Notice except for the following:

• The annualized budget authority is calculated from the budget authority listed in the Notice, divided by 2 or 5 in those cases in which the Notice indicates that the budget authority figure is to be used over a two- or five-year period.
• The budget authority per unit is calculated by dividing the annualized budget authority by the number of units listed in the Notice.

 
2. These calculations have produced a wide range of annual costs per unit, from $4,341 to $9,187. Although some variation from program to program may be expected, it seems more likely that the few categories in the $8,770 to $9,187 range -- public housing relocation, family unification, and litigation settlements -- are a result of some error, either in our calculations or in HUD's chart.
3. A $50.5 million NOFA for designated housing, 62 Fed. Reg. 17,672 (Apr. 10, 1997); $58.8 million for the Family Unification program, 62 Fed. Reg. 19,208 (Apr. 18, 1997); and $48.5 million for the mainstream program, 62 Fed. Reg. 17,666 (Apr. 10, 1997).
4. 42 U.S.C.A. § 1437p(b)(2) (West Supp. 1997).