HUD Proposes Multifamily Rent Reform

HUD yesterday proposed changes intended to offer multifamily property owners, public housing authorities and HUD-assisted families a simpler and more transparent set of rent structures.

The changes in the proposed Making Affordable Housing Work Act would also place HUD’s rental assistance programs on a more fiscally sustainable path, HUD Secretary Ben Carson said.

HUD currently helps 4.7 million families to pay their rents. The agency said the proposed reforms will not increase rents paid by qualifying households currently receiving assistance that comprise elderly persons or persons with disabilities. However, under the plan nearly two million families could see their rent share increase–in some cases, steeply–analysts said. Enterprise Community Partners, Washington, D.C., said the bill would increase the residents’ rental contributions from 30 percent of monthly adjusted income to the higher of either 35 percent of monthly 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–approximately $150 per month.

“The system we currently use to calculate a family’s rental assistance is broken and holds back the very people we’re supposed to be helping,” Carson said. “HUD-assisted households are now required to surrender a long list of personal information and any new income they earn is ‘taxed’ every year in the form of a rent increase.”

Current law requires HUD-assisted households to contribute 30 percent of their income toward rent; the government pays the difference up to market rent. But this approach imposes “substantial administrative burdens” on apartment owners and public housing authorities and may suppress residents’ earned income, HUD said. Under the proposal, that percentage would increase to 35 percent.

“Owners and PHAs, many with limited staff, must spend many hours calculating the correct payments for their tenants, who may themselves be confused by byzantine rent rules for tenant income calculations. The complex annual income recertification process creates a perverse set of conditions that increase the risk of inaccurate income reporting and discourage family unification and progress toward self-sufficiency.”

HUD proposed a structure of ‘core rents’ that would offer a more predictable rent calculation for both landlords and tenants. Under the core rent proposal, apartment owners and PHAs would only be required to verify income every three years rather than annually. HUD will also create a menu of ‘choice rents’ that PHAs and owners may implement to “promote greater flexibility, local control and self-sufficiency” for non-elderly and non-disabled households. This could result in higher rents, analysts said.

The HUD proposal requires congressional approval.