U.S. Blamed in Cuts to Rental Aid for Poor

Housing officials in some California cities say they will have to reduce, and possibly cut off, rental subsidies to poor families because the federal government isn’t doing enough to resolve problems in its subsidized housing program.

Officials statewide say a new strategy designed to shore up the program does not help in all cases and even when it does, it is only a temporary fix; higher rents and canceled housing contracts still lie ahead for thousands of participants in Section 8, a federal program that subsidizes the rents of more than 700,000 people in California.

On Tuesday, the Long Beach Housing Authority’s board of commissioners approved a plan to cancel all 6,172 contracts effective Aug. 1 and issue new contracts with a lower subsidy.

Such problems with Section 8 have rattled housing advocates, industry groups and lawmakers. Last month, 20 members of California’s Democratic congressional delegation joined other lawmakers calling on federal officials to provide full funding to the nation’s largest housing assistance program for the poor.

Rep. Diane Watson (D-Los Angeles), who wrote a letter signed by 19 other Democrats, said a new policy, announced last month, amounted to a funding cut for some housing authorities and could cause many families to lose their housing or pay higher rents.

“We strongly believe that HUD should rescind the April 22 notice and restore full funding for the Section 8 Voucher Program,” Watson wrote. “This new rule, coupled with President Bush’s proposal to cut voucher funding sharply in [fiscal 2005] and convert the program to a block grant, would significantly undermine the ability of some Californians to afford adequate shelter.”

Rep. Barney Frank (D-Mass.) has introduced a bill that would ensure full funding of Section 8.

At the heart of the debate is a new funding formula that was implemented by the Department of Housing and Urban Development last month, retroactive to January. In the past, HUD provided local agencies with funds to cover the actual costs of housing a set number of participants, often raising its contribution when housing costs rose.

Under the formula, which HUD officials say was ordered by Congress, HUD will pay local agencies at last August’s level, plus an inflation factor. That means some agencies will receive less than their actual costs.

News of the policy change cut particularly deep in California, where rents have skyrocketed. Under Section 8, low-income tenants pay about a third of their income to rent; the federal government pays the rest.

HUD Assistant Secretary Michael Liu said the funding change and other measures proposed for 2005 were necessary to control costs in a program whose expenses have grown 10% per year.

The program received about 14% more than last year, he said.

“Congress has been generous with this program, but it has been concerned about cost,” Liu said. “They did what they think is reasonable.”

In a letter to his House colleagues, Rep. James T. Walsh (R-N.Y.), chairman of the Subcommittee on the Department of Veteran Affairs and HUD, said the funding formula was “wholly consistent with the bipartisan conference agreement and should be fully supported by Congress.”

Across the country, supporters of Section 8 called the change unfair and argued that HUD had misinterpreted Congress’ intentions.

In an apparent response to the outcry, HUD Secretary Alphonso Jackson on May 20 announced a plan to assist public housing agencies. Jackson introduced a simple fix welcomed by city and county housing officials: HUD would provide the so-called inflation factor upfront, rather than later.

“These steps should alleviate the funding challenges some public housing authorities were anticipating when HUD recently adopted congressionally mandated formula changes to Section 8 funding,” Jackson said in a written statement.

Also, HUD would provide $150 million to replenish the reserve funds of 525 housing authorities nationwide. The funds can be used to cover deficits caused by the new funding formula. Nationwide, 1,267 of 2,500 agencies would receive less funding as a result of the new formula.

Kim Willis, a policy analyst with the Low-Income Housing Coalition based in Washington, D.C., said the $150 million is not additional funding but money agencies would have received anyway. Those funds will “delay housing authorities from having to cut people from the program, but it’s not going to solve” the problem, she said.

Willis and other experts said that if HUD continued to use the new funding formula, the problem would force agencies to take extreme measures.

* The Alameda Housing Authority, facing a $3.2-million deficit, will cancel the contracts of about 100 families, effective July 1, said Michael Pucci, executive director of the city’s housing authority.

“Technically you could say we’re in bankruptcy -- not because of anything we’ve done, but because of the funding formula, and they’re withholding funds that are due the housing authority,” he said.

* The city of San Diego’s Housing Commission had faced a $4-million deficit. Last week, the agency learned that it would receive enough reserve funds to make the June payment, said Elizabeth Morris, who heads the commission.

“Then we need to start worrying about what we do for the fiscal year that begins July 1, and how do we contain costs because we won’t have very much in our reserve fund,” she said.

* The San Diego County Housing Authority plans to notify about 4,300 of the 10,400 households it serves that their rental contracts will be canceled. Tenants can expect to pay more each month for rent -- from a few dollars to $100 or more -- under new contracts.

* The agency that administers Section 8 in Los Angeles County has not yet determined the effect the funding formula will have on county participants, a spokeswoman said. Carlos Jackson, executive director of Los Angeles County’s Community Development Commission, which administers Section 8, declined to be interviewed.

* The Long Beach Housing Authority learned last week that it would receive about $2.69 million of its reserves to help cover its deficit, but it remains about $700,000 short, said Larry Triesch, housing authority bureau manager.

Long Beach and Alameda face an even tougher battle because they have issued more housing vouchers than they were allotted. The practice, known as over-leasing, is similar to an airline overbooking to ensure all seats are filled and was once encouraged by HUD so that no voucher went unused.

Liu blamed several agencies for creating their own financial troubles by over-leasing.

In Los Angeles, over-leasing contributed to a funding shortfall that forced officials to suspend the vouchers of 1,500 families in February.

Officials at the Los Angeles Housing Authority say overbooking was only part of their problem; 44% of the shortfall was caused by the new funding formula.