Investors Council Recap: Vouchers in the New Housing Market

On November 9th, nearly 100 housing developers and advocates convened at MHP’s latest Investors Council breakfast to discuss the challenges facing housing choice voucher (HCV) holders and to consider how housing industry leaders might work together to address those challenges.

MHP welcomed four panelists, Jessica Deegan of the Minnesota Housing Finance Agency, Lael Robertson of Minnesota Legal Aid’s Housing Discrimination Law Project, Terri Smith of Metropolitan Council HRA, and Mary Rippe of Minnesota Multi Housing Association. The panelists provided insight into a range of perspectives — from the voucher holders themselves, to their landlords, to the entities that administer vouchers. Deidre Schmidt of CommonBond Communities (pictured right) moderated the conversation.

Who holds Housing Choice Vouchers and what do they offer?

According to Lael Robertson of the Housing Discrimination Law Project, housing choice vouchers are intended, as the name implies, to expand housing choice for low income households. Unlike other publicly subsidized housing options for low-income families, which are confined to a fixed location, housing choice vouchers allow low-income individuals to rent any eligible privately owned unit in the region to which their voucher applies. This allows families to find a unit that best fits its needs.

According to a survey conducted by the Housing Discrimination Law Project, voucher holders want a home that’s safe, close to family and natural spaces, and cared for by a respectful landlord. As Robertson (pictured right) pointed out, half of voucher households include children, one third have at least one member with a disability, and 17 percent include at least one elderly individual. Voucher holders typically contribute 30 to 40 percent of their income toward rent, while federal dollars cover the remaining cost.  

Panelists from left: Lael Robertson, Terri Smith and Mary Rippe

Robertson explained that for many of her clients, “vouchers are life changing.” Vouchers allow families to choose a place that feels like home — whether that means living closer to work, social networks, or in an area that provides better access to services. In addition, vouchers can provide families with access to high opportunity areas. Studies such as the 2016 Moving to Opportunity Experiment show that parents given the chance to move to a lower-poverty area with the help of an voucher, see improved futures for their children. Children who participated in the study and moved before turning 13 were more likely to attend college and to live in lower-poverty areas as adults. Their overall lifetime earnings increased by more than $300,000, demonstrating that vouchers can play an important role in breaking poverty cycles.

A Shortage of Affordable Rental Units

Because voucher offer such a significant opportunity Robertson and her colleagues call them “golden tickets.” But these “golden tickets” are hard to get and can be nearly as challenging to use.

Jessica Deegan of the Minnesota Housing Finance Agency provided an overview of the market for affordable rentals in the Twin Cities, noting that demand greatly exceeds supply. Declining renter incomes, a growing demand for luxury rentals, low vacancy rates, and a loss of unsubsidized affordable units have created an increasingly competitive rental market. That’s led to an estimated gap of 66,000 housing units affordable to households with incomes at or below 50 percent of area median income.

From Jessica Deegan’s presentation — download slides here.

Demand for the vouchers themselves also exceeds supply. Deegan referenced a report released last month by the National Low Income Housing Coalition based on a nationwide sample of 320 Public Housing Authorities. It found that the median time spent on voucher waiting lists is 1.5 years, and a quarter of those lists have wait times of three years or more.

From National Low Income Housing Coalition report

The high demand for vouchers and the shortage of affordable rentals are linked. Because low-income households in the current market are struggling to find affordable units, some seek assistance. Given so many households facing the same challenges, vouchers are in high demand. According to Terri Smith of the Metropolitan Council Housing and Redevelopment Authority (Metro HRA) — the largest administrator of housing choice vouchers in the Twin Cities area — all of its 6,500 vouchers are currently in use and 50 turn over each month.

If a household manages to secure a voucher, they must look to a limited pool of eligible rentals to find a property that accepts vouchers and that meets federal program requirements. If a voucher holder fails to find such a property in 60 days (unless granted an extension by the local housing authority), they lose out on the federal rental assistance guaranteed to them by their voucher. According to Smith, voucher holders served by Metro HRA have six months to find a suitable unit, a time limit recently extended from 120 days.

From Terri Smith presentation — download slides here.

Smith and her colleagues work hard to “put the ‘choice’ in Housing Choice Voucher,” she said. To be eligible for participation in the HCV program, HRAs require that rents charged by property owners fall within 90 to 110 percent of fair market rent (FMR) as determined by HUD. Smith explained that the HRA is setting higher limits to expand the pool of eligible properties — and therefore choice — for voucher holders. The Metro HRA also created the Community Choice program — a partnership between Metro HRA, voucher holders, and property owners — that ultimately assists families in gaining access to higher opportunity areas. The program provides guidance to families on how to be successful renters and support for landlords, including damage deposits upon signing and assurance of timely HRA rent payments.

Challenges Faced by Property Owners

Property owners participating or considering participation in the voucher program face challenges, as well. Deegan noted that participation requires additional knowledge and paperwork, such as collecting two rent payments, and ensuring that properties pass stringent housing quality inspections. In addition, some property owners are wary of the program due to concerns about renter accountability.

Mary Rippe of the Multi Housing Association (MHA), which provides resources for multifamily housing owners, explained that organizations like MHA are working to understand how to make the program easier to use and how to incentivize property owner participation. To delve deeper into property owner perceptions, Rippe referenced a report released by the Family Housing Fund: the Owners/Managers Creating Opportunity Project.

From Mary Rippe presentation — download slides here.

Property owners who participated in the project were keen to see the voucher program succeed. They pointed to a need for effective partnerships between owners and the Public Housing Authorities (PHA) that administer voucher programs, and suggested programmatic changes that would make participation more attractive to owners. For example, PHAs could provide property owners with inspection requirements before inspections occur and cut down on the frequency of inspections of properties that consistently meet requirements. Property owners also discussed the possibility of “exception rents,” which would allow households to rent properties from owners willing to accept vouchers in areas where rent is slightly higher than the fair market rent determined by HUD.

Federal Policy Changes

Deegan concluded her presentation with a round-up of new federal legislation and administrative changes, including:

  • With bipartisan support, Congress passed the Housing Opportunity through Modernization Act of 2016, which helps make inspection requirements more flexible for property owners.
  • In 2016, Senators Cantwell (D-WA) and Hatch (R-UT) introduced the Affordable Housing Credit Improvement Act (S. 3237) to increase accessibility of financing for affordable housing development.
  • In 2015, Rep. Keith Ellison (D-MN) introduced the Common Sense Housing Investment Act (H.R. 1662), which would address the shortage of affordable rentals through reforms to the mortgage interest tax deduction.

Deegan also pointed to several administrative changes such as the tenant protection voucher notice, fair housing activities such as criminal screening and the Violence Against Women Act, and a proposed rule relating to Small Area Fair Market Rents.

Click here to see photos from the event, and join the Investors Councils to be part of these timely discussions in the future!