Re: ADV-BUDGET ANALYSIS, Bush Budget would slash key housing programs, 500,000 Section 8 Vouchers at risk because of Bush's Veto.

http://www.cbpp.org/11-14-07hous.pdf
Read more at the link above, 18 pages

page 13:
The problems in 2007 originated in an inadequate President’s budget request for
the project-based Section 8 program. While Congress increased funding above the
request in the final 2007 HUD funding law, the program nevertheless experienced
a large shortfall of funding in the second half of the fiscal year. As a result,
thousands of Section 8 building owners endured lengthy delays in receiving
assistance payments, and a large number of owners reportedly received no
payments from HUD for periods of three months or more.

In the final quarter of the fiscal year, HUD formally implemented, for the first
time, a policy of
funding Section 8 contract renewals only “incrementally,” i.e., of providing
only a few months of
funding for each contract — just enough to carry it over into the next fiscal
year — rather than
providing 12 months of funding for the entire period of the renewal contract. As
part of this new
policy, HUD required every owner to sign a revised contract that made clear that
HUD would
guarantee no more than a few months of funding at a time. As highlighted above,
HUD plans to
follow this policy through the end of fiscal year 2008 to ensure that total
housing assistance
payments will not exceed the President’s budget.

Chronic late assistance payments and the new policy of “short-funding” Section 8
renewals —
both of which are direct results of inadequate budget requests from the
President — will have
numerous harmful consequences that directly impact the predominantly elderly and
disabled tenants
of these developments, as well as other low-income families in need of
assistance. According to
persuasive testimony by private owners and trade associations at a hearing
convened by Congress to
address the issue of late payments in the project-based Section 8 program, these
consequences
include:
• Increased costs of operating the Section 8 housing (e.g., vendors that provide
services such as
office supplies, landscaping, or plumbing repair may raise their prices if they
sense that
payments to them may be unreliable or if the contract term for their services is
shortened to
adapt to the short funding of the Section 8 contracts, and they may charge
penalty fees if
service payments are late);
• Delays in needed repairs and maintenance (one witness testified about an owner
who was
forced to suspend work to remove asbestos at one property after the work had
already begun);
• Increased difficulty and costs of securing loans and investments to
rehabilitate older housing to
preserve it for low-income families. One witness observed, “The perception of
this kind of
contract [i.e., short-funded contracts] is devastating. Until recently, several
years of
predictability and stability in the Section 8 renewal process have led
purchasers, lenders, and
investors in Section 8 properties to rely on long-term Section 8 renewal
contracts, even though
subject to annual appropriations, as sufficient backing for their investments.
They assumed the
risk because in these contracts because they thought the risk was miniscule.
They are not so
sure anymore”; and

• An increase in defaults on mortgages insured by the Federal Housing
Administration.
In addition to deteriorating living conditions, tenants could be at risk of
having to pay the full
unassisted rent — which often exceeds their entire monthly income — or be
evicted. Owners of
developments in Philadelphia and Cleveland have put tenants on notice that if
HUD is more than
one month late in making Section 8 payments, the tenants — many of whom are
elderly or have
serious disabilities — will be responsible for the full rent. Owners also could
attempt to mitigate
funding shortfalls by admitting higher income tenants who will pay a larger
share of the rent and by
skipping over poorer applicants with a greater need for housing assistance.

Up to 500,000 Affordable Apartments at High Risk of Loss Due to Funding
Shortfall

Most importantly, significant numbers of private owners could choose to
terminate their
participation in (i.e., to “opt out” of) the Section 8 program at the first
opportunity, having
concluded that the problems generated by persistent funding shortfalls are too
difficult to overcome
or not worth the trouble. As one witness representing owners put it:
Owners who have properties with market rents proximate or higher than the
current projectbased
Section 8 subsidy amount will have no reason to continue to participate in a
program in
which they have no confidence that the subsidy will be available…There is little
question that
owners of these properties will have every incentive to opt out of the program
so long as HUD
does not provide a full year, annual contract.23

At greatest risk are approximately 500,000 Section 8 apartments with rents
(i.e., the tenant rent
plus the federal housing assistance payment) that are well below current market
rates, thereby
providing their owners with a strong financial incentive to leave the program.
(The appendix shows
the distribution of these at-risk units across the 50 states.)

When private owners terminate their participation in the project-based Section 8
program,
communities lose important affordable housing resources that are not easily
replaced. This is
particularly true for the properties most at risk, where the market commands
higher rents than the
properties now are permitted to charge. Moreover, it will cost the federal
government more if
owners of these under-priced properties leave the program, because the “enhanced
vouchers” that
tenants will receive will provide higher subsidies pegged to the actual market
rent.