April 26, 2018

HUD’s Proposed Rent Reform Would Increase Rents on HUD-Assisted Households

Yesterday the Trump Administration released a draft bill that would change the way rents for HUD-assisted households are calculated. These changes would increase rents, eliminate income deductions for health and child care expenses, and permit Public Housing Agencies (PHAs) and housing providers to implement work requirements and alternative rent structures on tenants. 

Rent Increases

In current statute, most HUD-assisted households pay 30 percent of their adjusted income on rent, although the minimum rent that a household could pay is $50 per month, even if that is more than 30 percent of the household’s monthly income. In HUD’s proposal, most families would either pay 35 percent of their gross income, or 35 percent of the amount earned by an individual working 15 hours a week for four weeks at the federal minimum wage (which rounds out to $150 per month), whichever is higher. This means that if HUD’s bill went into effect, the lowest-income households would see their rents increase threefold. These changes would apply to residents served by public housing, Housing Choice Vouchers, and Section 8 Project-Based Rental Assistance. 

HUD’s bill would also eliminate income deductions for medical and childcare expenses, effectively increasing rents for households with high healthcare or childcare costs.

The bill would allow for hardship exemptions from the new rent proposal, but HUD has not yet implemented a requirement in the Housing Opportunity Through Modernization Act (HOTMA)  of 2016, which calls on HUD to certify that PHAs and housing providers are complying with hardship exemptions.

Elderly and Disabled Households

Under HUD’s proposal, changes would also be made to the rent structures for Section 202 Housing for the Elderly and Section 811 Housing for Persons with Disabilities programs. Families headed by the elderly or persons with disabilities would pay 30 percent of the household’s monthly gross income, or a $50 minimum rent, whichever is greater. Currently, most elderly households are required to pay at least $25 per month on rent, whereas disabled households do not have a minimum requirement.

The bill also redefines elderly individuals as those aged 65 and above and elderly households as those in which everyone in the household—except for a care-giver—must be 65 or over, adjusted from the current age of 62.

Alternative Rent Structures

HUD’s bill would also permit PHAs and housing providers to establish alternative rent structures, including but not limited to tiered rents, where rents are calculated differently based on different income brackets; stepped rents, where rents would systematically increase over time; and timed escrow. The bill does stipulate that these alternative rent structures must serve the same number of families. 

These alternative structures have the potential to significantly increase rents on low-income households. Additionally, allowing over 3,800 PHAs to set their own rent rules would result in a more complicated and fragmented system which would create challenges for households moving across jurisdictional boundaries and over which HUD would be challenged to provide oversight. 

Work Requirements

The bill also permits PHAs and housing providers to establish minimum work requirements for individuals and households, excluding elderly and disabled households as they would be newly defined. The bill calls on the Secretary to set maximum hours permitted in work requirement schemes as well as the types of employment and other employment-related activities that would satisfy work requirements.  Leaked language from HUD’s draft bill in January proposed imposing minimum work requirements of up to 32 hours a week, although that is not specified in this proposal. 

It is important to note that most of the 5 million households currently served by HUD programs are either already working or headed by individuals who are elderly or have a disability. In fact, a Center of Budget and Policy Priorities analysis of HUD administrative data shows that 9 in 10 HUD-assisted households are elderly, disabled, working, or receiving TANF. An increase in rent without meaningful job opportunities will impose a burden on the lowest income people.

Congressional Action

While this proposal from HUD has not been introduced in Congress, the legislative body is currently considering rent reform proposals. Representative Dennis Ross (R-FL-12) is circulating an unintroduced bill that proposes a series of new rent-setting formulas for PHAs, which were discussed in a House Financial Services Committee hearing yesterday.

Representative Ross’s bill would allow PHAs and housing providers to choose from six rent structures, including tiered rents, stepped rents, gross income-based rents, shallow subsidy, rent innovation, and rent structures specific to elderly and disabled populations. 

Response from Stakeholders

Affordable housing advocates responded critically to the proposed bill, arguing that it would leave “more low-income people without…without stable homes, making it harder for them to climb the economic ladder to achieve financial security and live with dignity.” 

At Enterprise, our mission is to expand access to affordable well-designed homes in communities connected to opportunity. While we are concerned that rent increases without access to meaningful job opportunities will burden the lowest-income households, we will work with the Administration and Congress to implement policies that improve housing stability and expand access to education, jobs, and health care opportunities.