A Housing Strategy for the Medium Term
Until now, most of the policy response to the health and financial crisis has focused appropriately on immediate relief to those who need it most, including renters. However, a national response is also needed to address renters facing long-term unemployment and heavy housing burdens. New project-based rental assistance would simultaneously stabilize renters, protect scarce properties from deterioration, and preserve rent affordability.
The Need
Hopefully emergency rental assistance will feature in the next stimulus packages and together with enhanced unemployment insurance, eviction moratoria and mortgage forbearance will be enough to bridge many folks to a return to employment and meeting their financial obligations. Even with the highest level of expanded unemployment benefits from the CARES Act, however, newly unemployed renters in higher cost areas may see those resources quickly depleted by rent burdens. Research has found that nearly 16.5 million renter households had at least one wage earner working in a currently at-risk industry and 6.3 million only had wages from at-risk industries. This crisis is hitting marginalized communities the hardest and not surprisingly, impacted renters are more likely to be people of color. At NHT, we have witnessed many of our residents at Mass Place Apartments in Washington, DC who work for local restaurants lose their jobs over the past seven weeks.
Enhanced federal unemployment benefits currently end on July 31. The Congressional Budget Office projects that challenges in the economy and the labor market will persist into 2022 at the earliest. Many renters in impacted industries, which now extend beyond restaurant, retail, entertainment and travel to management, supply chains, and business services may emerge to find that their jobs and employers have vanished permanently.
Moreover, many suffering workers did not qualify or have not accessed federal benefits.Overwhelmed state agencies are struggling to provide unemployment benefits to the 30 million Americans who have filed claims. Recent studies have found that as many as 50 percent more people than counted as filing claims may have qualified for benefits, due to difficulties accessing benefits and navigating eligibility requirements, which vary from state to state. Based on the data about those successfully receiving benefits, it is likely that a significant proportion of those failing to obtain them are also renters.
Housing stability was already fragile for many Americans before the crisis. Nearly 11 million low-income renter households paid more than half their income toward rent before the pandemic. Maintaining their housing is critical to preparing them to return to work and staving off a cascade of damaging outcomes including homelessness, eviction and illness.
For renters facing long-term unemployment and heavy housing burdens, more patient support will be needed. We must design intermediate housing solutions now, so they are ready when current benefits end. The huge numbers of impacted renters will mean that any one solution will be overloaded, and a multichannel approach is required. The unemployment insurance system and the Paycheck Protection Program have demonstrated the risks of overloading one system to meet the needs of millions of impacted Americans. Vouchers, which can be issued quickly and directly to renters, should be the dominant but not only approach. Vouchers follow renters and allow them to choose their housing and move their benefits.
New project-based rental assistance (PBRA) should complement vouchers in any intermediate housing solution. PBRA resides with an apartment home or set of apartment homes and can deliver relief to multiple impacted families at once. Landlords navigate the system of qualifying for assistance, instead of tenants. PBRA can simultaneously stabilize residents and their fragile housing communities, which may be vulnerable to financial failure during the crisis.
PBRA is a public-private partnership between the federal government and housing owners that directly benefits renters. Any renter that lives in a housing unit supported with PBRA pays 30 percent of their income in rent and rental assistance pays the remainder. This approach would help apartment communities that are home to workers who have been impacted by the crisis and did not previously receive housing assistance, such as properties with Low-Income Housing Tax Credits (Housing Credits) or naturally occurring affordable housing (NOAH). Many of these workers are unfamiliar with rental assistance and may find themselves navigating multiple safety net systems. A project-based assistance contract secured by their landlord would relieve them of a financial and procedural burden.
PBRA simultaneously stabilizes renters, preserves scarce properties from deterioration, and ensures rent affordability. In the current unprecedented crisis, PBRA would work well to ensure renters remain in their homes over the medium term and help property owners stabilize their properties and avoid bankruptcy. In communities where renters face challenges finding jobs and regaining self-sufficiency after the pandemic subsidies, PBRA will provide landlords a steady stream of revenue and the necessary resources to maintain properties and provide critical resident services. Many property owners, some of whom may have never before partnered with the federal government, will likely see this as an attractive option to help cover their operating costs and keep their properties in sound financial and physical condition.
How Would it Work?
PBRA has evolved over the years and we propose adapting its most recent form from HUD’s Rental Assistance Demonstration (RAD) and introducing a five-year contract option. If launched quickly, property owners could learn about PBRA while their residents are potentially receiving other short-term emergency assistance, then agree to a Housing Assistance Payments (HAP) contract after screening by HUD or their subcontractors, Performance-Based Contract Administrators (PBCAs). Vetting would include verifying the property’s condition and the owner’s background. Owners would receive contracts from HUD for a portion of the units and actual assistance would flow depending on the needs of the current residents. When a resident’s income exceeds the program’s limits or when a resident moves out, the subsidy could be moved to another unit within the five-year period.
During the five-year crisis contract period, owners would enjoy some flexibility from program requirements while agreeing to a lower rent standard than usual. To provide a cost-effective and politically viable option, we propose limiting rents to the lower of market or Fair Market Rents (FMR) for the duration of these contracts.
PBCAs, which are often state Housing Finance Agencies (HFAs) would provide a different distribution channel for assistance, relieving pressure from overwhelmed HUD and public housing authorities. State HFAs have decades of experience administering rental assistance, deep knowledge of their local housing stock communities, and existing relationships with property owners who may not be familiar with federal rental assistance. HFAs can be leveraged to provide a complementary solution to renters and properties facing longer term challenges in recovering from the pandemic.
One size and one system will not meet the needs of renters struggling to recover from this pandemic. A project-based approach using an alternative delivery system would address intermediate needs and provide multiple benefits for the nation.
5.5.2020
This article originally appeared at National Housing Trust.