As has been reported by Minnesota Public Radio and advocacy groups, rental assistance programs are already being scaled back in Minnesota in anticipation of cuts to the state’s 2012-13 budget. Minnesota Housing, which administers the rental assistance program in question, has frozen the availability of state-funded housing assistance for low income households as it plans for a smaller program.
As of April 1, agencies that help low income households by distributing funds under Minnesota Housing’s rental assistance program were told not to admit any new households to the program. Decreasing the number of rent-assisted households through attrition is a strategy the Agency has opted for to align program expenses with an anticipated smaller budget. By taking this step, Minnesota Housing hopes to avoid terminating assistance to, and thereby displacing, households already receiving these funds.
Minnesota Housing staff report that even under Governor Dayton’s best-case budget scenario for FY 2012-13, the rental assistance program will not be sustainable at its current level. The recently adopted Minnesota House and Senate budgets would result in even greater cuts.
Who receives Minnesota Housing rental assistance?
1,500 low income households currently receive support under the state’s rental assistance program. Of these, 60 percent are families with children, and 78 percent are households with long histories of homelessness. The remainder are low income single adults and households with children, many with disabilities. Approximately one-third of the households reside in greater Minnesota, and two-thirds in the Twin Cities.
All those who receive state rental assistance are unable to afford housing alternatives that are decent or safe. The average annual income of the individuals receiving rent assistance is $7,300. The average monthly rent assistance subsidy, including administrative costs, is $600.
About 250 households, or 16 percent of those assisted, exit the program at some point during the year.
How would a smaller rental assistance program work?
A freeze in new admissions would create the attrition that Minnesota Housing sees as the least disruptive way of dealing with anticipated cuts.
In recent meetings with provider agencies, the agency has posed three possible scenarios for making the program work at a smaller size, based on state budget cuts midway between the Governor’s proposal and the proposals of the House and Senate. The three scenarios follow.
1. In the first scenario the program would continue as it now stands. In this case about 700-815 fewer households would be provided rental assistance at any given time. An admissions freeze would continue through the entire two-year budget period. Starting in October, about 400 households would also be terminated from the program.
2. In the second approach, monthly rental subsidies would be capped at an amount, possibly at $250 for an efficiency and $450 for a two-bedroom apartment. Higher and lower amounts could be developed for areas of the state based on local rental costs. Unless average rental subsidies are substantially lower, this approach also would necessitate a two year freeze, and a reduction in the program size by 350 - 400 vouchers. Terminations of households already being assisted would be avoided.
3. Finally, the third option would require tenants to pay higher portions of their income for rent, in the range of 35-45 percent. In this case, the program size would reduce by 300-380 vouchers, there would be no terminations, and the freeze on new admissions would be shorter, lasting between 9 and 12 months
The service providers attending the agency meetings believed that the third option, paying higher percentages of income for rent, was the best. For most of their clients, they said, a rent cap, option two, would make the program unworkable since they would not be able to find apartments with rents low enough to be covered by the cap amount plus their income. They thought that the landlords participating in the program would support the third option.
The agencies also hope to retain flexibility in program design so that they can best fit the available funding to their clientele. One representative said that he thought the high tenant percent of income would motivate people to apply for public housing.
Agency staff made clear that they are planning for a likely funding outcome, but that if the state budget is higher or federal resources appear, they will avoid the drastic steps being discussed. If budget reductions occur, the agency expects to implement a new structure to the rental assistance program on October 1.
Updated April 25, 2011: Click here to read Minnesota Housing's summary of input on the rent assistance issue.
