How HOTMA Affects Number of Site-Assigned Project-Based Vouchers

HUD issues HOTMA final rule for voucher programs.

HUD recently published a new HOTMA final rule implementing a number of changes made by the Housing Opportunity Through Modernization Act of 2016 (HOTMA) to the Housing Choice Voucher (HCV) and the project-based voucher (PBV) programs. The changes are intended to enhance the accessibility and sustainability of public housing nationwide.

One change involves increased flexibility for PHAs with payment standards for the HCV/PBV program. The rule grants PHAs the ability to utilize Small Area Fair Market Rents (SAFMRs) in non-metropolitan areas. In essence, this flexibility helps PHAs establish rent standards that more accurately mirror the local rental market conditions, potentially making more neighborhoods accessible to voucher holders.

Other changes involve updating regulations around inspections to align with NSPIRE protocols and implementing flexibilities for PHAs when units don’t meet inspection standards. For example, the rule allows PHAs to provide financial assistance to the family to move to a new unit, using the rental payments that were withheld from the owner as a result of their failure to make necessary repairs.

We’ll go over the notable changes incorporated in this final rule related to the project cap—the maximum number of project-based vouchers that may be assigned to a specific site. These changes to project-based vouchers are intended to attract more significant investment in affordable housing. They’ll allow PHAs to link long-term federal PBV rental assistance directly to specific housing units or developments. And, as a result of providing more certainty to investors and developers, the shift could attract more private and public financing.

HOTMA-Required Changes

Housing Choice Vouchers are “tenant-based,” meaning people can use them to rent any private apartment that meets program guidelines. Project-based vouchers, in contrast, are attached to a specific unit whose owner contracts with the state or local public housing agency to rent the unit to families and individuals with low incomes.

Prior to the statutory changes made by HOTMA, the PBV statute and regulations limited the number of units in a project that could be project-based to 25 percent of all the units in the project (assisted and unassisted). This is called the project cap or the “income mixing” requirement. The HOTMA statute changed the project cap to be either 25 percent of all units or 25 units, whichever is greater.

In addition, HOTMA allowed PHAs to attach PBVs to a greater share of units at sites in lower-poverty areas. In census tracts where the poverty rate is 20 percent or less, PHAs can attach PBVs to 25 units or 40 percent of the units in the project, whichever is larger. HOTMA also revised the exception categories to the project cap. Under HOTMA, units that are in one of the excepted categories are excluded from the 25 unit or 25 percent of all units cap.

HOTMA also doesn’t count toward the project cap units that are project based through the PBV program that previously received other forms of HUD project-based rental assistance or that were previously subject to federally required rent restrictions.

These increased flexibilities related to project cap requirement means when PHAs attach PBVs to newly constructed or rehabilitated units as well as existing units, there can be an increased source of stable income for a development. PBVs can be integral to the financing package that makes constructing or rehabilitating affordable housing possible. And since sites generally can use PBVs in only a minority of the units, these projects are more likely than older forms of assisted housing to serve tenants with a mix of incomes while preserving low-income families’ ability to choose to move to a location that better suits them without losing rental assistance.

Final HOTMA Rule

The final rule follows the HOTMA statute regarding the basic project cap, allowing a PHA to base the greater of 25 percent of all units in a project or 25 units, and the final rule follows the statute allowing the project cap to increase to the greater of 40 percent of all units in a project or 25 units if the project is located in an area where vouchers are difficult to use.

Revised PBV definitions. The final rule expands the definition of “an area where vouchers are difficult to use” to include a census tract with a poverty rate of 20 percent or less; a ZIP code where the rental vacancy rate is less than 4 percent; or a ZIP code where 90 percent of the small area fair market rent (SAFMR) is more than 110 percent of the metropolitan area FMR or county FMR.

Expanded exception category. The final rule expands the exception category to include eligible youth using Family Unification Program’s (FUP) Foster Youth to Independence (FYI) program (FUP/FYI). The units exclusively made available to youth under this program are not counted toward the project cap.

PBV units, therefore, are not counted toward the project cap or are considered excepted units if the units exclusively:

• Serve elderly households.
• Are made available to youth assisted by the FUP/FYI program.
• Are made available to households eligible for supportive service(s).

The supportive service(s) must be designed to help households at the site live as independently as possible or achieve self-sufficiency. For the supportive services exception, a unit is excepted if any member of a household is eligible for one or more of the supportive services even if the household chooses not to participate in the services.

Combined exception categories. The final rule adds a clarification that exception categories in a project maybe combined. For example, some of the units may be designated for elderly households that don’t need supportive services and some may be designated for households who are eligible for supportive services but are not elderly.

Units previously subject to required rent restrictions. The final rule also provides a list of excepted units that were ‘‘previously subject to federally required rent restrictions.’’ This list includes HUD and other federal housing programs for which project-based vouchers aren’t counted toward the project cap. The following units don’t count toward a site’s project cap if they’ve been subject to rent limitations or received specified types of assistance within five years prior to PHA commitment of PBVs:

• HUD Assistance Programs: Public Housing; project-based rental assistance under Section 8 program; Housing for the Elderly (Section 202); Housing for Persons with Disabilities (Section 811); Rental Assistance Program (RAP) of the National Housing Act; or Flexible Subsidy Program (Section 201 of the Housing and Community Development Amendments Act of 1978);
• Federally required rent-restricted programs: Low-Income Housing Tax Credit program; Section 515 Rural Rental Housing; Section 236; Section 221(d)(3) Below Market Interest Rate; Section 202 Housing For the Elderly; Section 811 Housing for Persons with Disabilities; Section 201 Flexible Subsidy Program; or any other program identified by HUD through a Federal Register notice subject to public comment.