HUD Secretary Testifies on Rental Assistance Reform

HUD Secretary Shaun Donovan spent time on Capitol Hill in May testifying before the House of Representatives Committee on Financial Services about an important new development at the Department, which involves the Preservation, Enhancement and Transformation of Rental Assistance Act (PETRA).

PETRA is a multi-year initiative proposed in President Obama's fiscal year 2011 budget that seeks to preserve HUD-funded public and assisted housing, enhance housing choice for residents, and streamline the department's rental assistance programs.

In his prepared remarks, Donovan said, “Today we have a parallel housing system in which most families live in housing that is financed, developed, and managed through mechanisms that can be integrated with the communities around them—while the two-and-a-half million poor families served by HUD's oldest programs live in another. These families are not only required to fill out dozens of applications processed by scores of administrators simply to have a decent chance of receiving the assistance they need—even worse, they often find themselves trapped in neighborhoods of concentrated poverty because moving means giving up that assistance. That's not right.”

PETRA proposes to streamline HUD's rental assistance programs and allow them to link housing investments to surrounding neighborhoods. Donovan made the point that the proposed legislation would fulfill President Obama's commitment to ensure that “all families can live in sustainable, vibrant communities of opportunity and choice.”

Five-Pronged Approach to Reform

Donovan outlined five fundamental principles that would be applied to transform rental assistance, which he called the basis of the legislation. This initiative has been dubbed TRA—Transforming Rental Assistance. Donovan described these principles as follows:

Streamline and simplify. The complexity of HUD's programs is part of the problem. HUD must streamline and simplify its programs so that they are easier for families to access, less costly to operate, and easier to administer at the local level. TRA is intended to move properties assisted under these various programs toward a more unified funding approach, governed by an integrated, coherent set of rules and regulations that better aligns with the requirements of other of federal, state, local, and private sector financing streams.

Change funding structure to leverage capital. The key to meeting the current and ongoing capital needs of HUD's public housing portfolio lies in shifting from the federal capital and operating subsidy funding structure we have today—which exists in a parallel universe to the rest of the housing finance world—to a federal project-based subsidy that lenders understand and that can be used to leverage additional capital from public and private sources. This can be done without risking the loss of assisted units, Donovan said.

Bring in the market. Bringing market investment to all of our rental programs will also bring market discipline that drives fundamental reforms. Only when our programs are truly open to private capital will we be able to attract the mix of incomes and uses and stakeholders necessary to create sustainable, vibrant communities, said Donovan.

Encourage resident choice. We must combine the best features of our tenant-based and project-based programs to support resident choice and mobility. It's wrong that residents of public and assisted housing cannot choose where they want to live unless they give up the rental assistance that they need, Donovan said. TRA reflects HUD's commitment to complementing resident choice with the benefits that a reliable, property-based, long-term rental assistance subsidy can have for neighborhood revitalization efforts and as a platform for delivering social services.

Target the neediest families. HUD must continue to target its rental assistance resources on the neediest families. TRA maintains the targeting and affordability requirements embedded in programs under the U.S. Housing Act.

Conversion Voluntary

Essentially, PETRA will authorize the conversion of public and assisted housing sites to long-term property-based rental assistance under Section 8 of the U.S. Housing Act. Participation in the programs authorized by PETRA is entirely voluntary and up to each public housing authority (PHA) and assisted site owner. In 2011, the first phase of TRA, sites eligible for the voluntary conversion are:

• Public housing;

• Sites assisted under HUD's multifamily programs owned by PHAs; and

• Privately-owned sites with contracts under the Rent Supplement program, Rental Assistance Program (RAP) or Section 8 Moderate Rehabilitation program (excluding properties funded under the McKinney Act).

TRA also incorporates essential resident rights, including income-based rents and security of tenure, and rights to organize and be recognized by owners. It is expected that Phase One of PETRA will be enacted in late 2010 and invitations to participate will be extended in early 2011.

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