Affordable Housing Highlights from Philadelphia

Regulation | November 08, 2018 | by Colleen Bloom

At this year’s LeadingAge annual meeting, affordable housing providers had a chance to literally celebrate the recent successes in FY18 at an enthusiastically well-attended Housing Celebration Reception and to hear about new opportunities and challenges expected in the coming year in three sessions outlined below. While we cannot recreate the energy of the reception gathering, we can share the highlights and many of the details from the Housing Policy Forum, HUD Management Update and RAD for PRAC sessions.

Housing Policy Forum

HUD Deputy Assistant Secretary for Multifamily Programs Lamar Seats spoke at the Housing Policy Forum in Philadelphia. This year’s Housing Policy Forum also featured Linda Couch, LeadingAge’s Vice President for Housing Policy. The forum included an update on the facts and figures of growth in the older adult population and increasing gap of affordable supportive housing with services for older adults, current happenings in Congress and the development of LeadingAge’s housing policy platform for 2019.

Mr. Seats was appointed to his position in May. Mr. Seat’s office is responsible for HUD’s multifamily housing portfolio. Mr. Seats ingratiated himself to the audience by sharing that his father operated a skilled nursing facility and that he grew up in a culture of caring for older adults. Mr. Seats noted the great need to preserve existing assisted housing, but also acknowledged the “overwhelming need for more product out there.”

Mr. Seats shared his perspective on the growing population of older adults, saying that they will be less financially secure than their predecessors. Mr. Seats also discussed how housing is a platform for services, and how, given the significant capital needs of Section 202 Housing for the Elderly communities, the new expansion of HUD’s successful Rental Assistance Demonstration preservation program will help these communities thrive for the next 20 years. Mr. Seats also lamented the Section 202 program going from more than $400 million a year for new funding to zero dollars over the last several years, and related recently-returned Assistant Secretary and Federal Housing Commissioner Brian Montgomery shared sentiment along this line. When Mr. Montgomery last served as FHA Commissioner, the Section 202 program had still been going strong, and was celebrated for having created almost 300,000 units of the highest performing properties over 50 years.

The Housing Policy Forum also included timely updates and insights, like the fact that PRAC renewal approvals for October and November were overdue, but expected out within the coming week (by early November), and that the Notice of Funds Availability (NOFA) for new Section 202 funding is expected to be released by the end of the year.

Linda Couch reviewed LeadingAge’s position in its fight against ageism, provided compelling insights into the demographic changes in the US as we all are aging, emphasizing that while currently only 1 in 3 eligible seniors, older adult households make up 66% of the recent increase in worst-case housing needs, and celebrated the major legislative achievements in FY18 thanks to member engagement including: the first significant new Section 202 funding since 2011 ( $5 million for new 202s in FY17 bill and $105 million for new 202s in FY18 bill); expansion of authority to allow PRACs to participate in the RAD program to convert subsidy and leverage capital investments; the defeat of harmful budget cuts and rent reform proposals from the Trump Administration.

Ms. Couch also discussed a range of possible considerations as LeadingAge moves forward with developments of FY19 policy objectives which will incorporate feedback from members obtained during the recent round of state town halls, and will need to address both opportunities and potential challenges related to the new Congress about affordable housing solutions; connecting health supports and services to the affordable housing platform at the federal level; the return of the Non-Defense Discretionary caps; and the “5% Cut” as directed by President Trump to agencies.

LeadingAge will hold further discussions with members who sign up for the Housing Advisory Group to discuss future strategies and objectives which are likely to include pushing hard for HUD funding, new 202 funds, capital repair funds, modifications to existing policies that prioritize sweeping of residual receipts before preservation and services, expansion of Service Coordination, and preservation of subsidy for all HUD programs. And other topics like the Low Income Housing Tax Credits and Private Activity Bonds, continued resources for the National Housing Trust Fund, and Older Americans Act funding and reauthorization.

During a period of open discussion, attendees raised topics ranging from continuing problems with service coordination funding gaps (many sites still awaiting their final 70% funding allocation to close out FY18), possibilities of leveraging defaulted non-subsidized FHA-insured properties for expanding affordable housing resources, and inquiries into HUD’s collaborations with other federal agencies to better address the health needs of older adults.

HUD Management Update

Colleen Bloom, Director for Housing Operations at LeadingAge, welcomed Randall Scheetz, HUD Chief of the Account Executive Team for the Northeast Region Asset Management Division, and Jenny DeSilva, Director of Blueprint Housing Solutions to the podium for the annually-featured HUD management update session which focuses on current operational issues.

Colleen shared details on the status of Service Coordinator (SC) funding which had been provided to her in the days leading up to the conference by Alicia Anderson who is in charge of administering the service coordinator grant program at HUD Headquarters. For calendar year 2018, SC grant funds were issued in an initial release of 30% of annual funds in the spring with a second allocation of the remaining 70% of funds expected in the summer. Ms. Anderson shared that, as of October 23, HUD’s understanding is that 99% of all service coordinator grants have now been funded in full. This issue was also discussed at the Housing Policy Forum, and a show of hands suggests that the number of grants still awaiting the second allocation may be higher than expected. (NOTE: Anyone reading this who has not by now received notification of or access to any outstanding CY18 SC grant funds is encouraged to contact LeadingAge for assistance.)

According to Ms. Anderson, a few properties may still be awaiting final action to release funds that could have been caught up in the annual financial system shut-down that happens at HUD each year as it prepares to transition from one fiscal year to the next. Otherwise, according to Ms. Anderson, another 1% of sites may still be experiencing a lack of funding due to one of three situations:

    • The HUD funding specialist may have overlooked when/how to distribute funds to the site (for 30% and/or 70%);
    • The grant is one of 56 known to not yet have received their Notice of Award – which is most likely due to DUNS number issues or CY17 funding closeout considerations; or
    • The grant is one of an approximate 5060 which have not yet been accepted by grantees in the Grants Management System

Colleen further conveyed information concerning the reformatted form HUD 91186-A, the annual budget form required for all service coordinator grants, which is now online as fillable XCEL file highlighting a significant revision – HUD’s elimination of project information asking for an “estimate of # of frail, at risk elderly.” This reflects a policy change and “HUD’s goal for past 3 – 4 years to fund all elderly properties with a full-time Service Coordinator regardless of percentages of frail or at risk.” As Ms. Anderson related it, HUD policy is no longer to serve just the frailest, but the entire community to help ensure successful aging in community. Colleen emphasized that this major shift in policy should not be overlooked, though some members responded that they are still having problems getting approval to increase budgets for some service coordinator grants.

As articulated by Ms. Anderson, it is vitally important that sites create and submit actual annual budgets that fully reflect real budgeted numbers and sources – not just minimally tweaked old-budget forms that may or may not accurately reflect costs - - so that HUD can request future renewal/amendment dollars to fully fund at every current site.

HUD is also reportedly learning “a lot” already through the Enhanced Supportive Services (I-WISH) Demonstration about the inclusion of and funding for allowable and unallowed items. This reinforcement the statement about the Importance of identifying true costs and all funding sources – to help HUD ensure it is budgeting appropriately to cover 100% of the grant, should other sources fall away.

Housing owners can use any of five funding sources to pay the costs of a Service Coordinator program, which are reflected in Section 4 of form HUD 91186A and allows sites to match individual funding sources to specific line item activities. Note specifically the Budget Detail page on the fillable Xcel spreadsheets (Item 3, lines L – MFSC grant, M – Residual Receipts, N – Rental Assistance, 0 – Debt Service Savings and especially P – Other sources – gifts, fundraising, philanthropy, etc) to attribute costs to MFSC grant, residual receipts, rental assistance and/or debt service savings.

Ms. Anderson emphasized the importance of grantees taking timely action to report lack of funding if there is nothing showing in the LOCCS account within 30 days after acceptance of a Notice of Funding Award. Colleen urged members to make contact with LeadingAge staff within weeks, not months, should funding not be made available to project accounts within 30 days of the acceptance of a new grant agreement and initial contacts with grant specialists yield no positive results..

Colleen also took this opportunity to exhort affordable housing members to consider participation in the Larry Minnix Leadership Academy noting the substantial value to housing participants, as well as the excellent value to other non-housing participants by gaining a broader perspective on the field of aging services. Applications for the 2019-2020 year will reopen in the spring of 2019.

Mr. Scheetz, whose office is in Philadelphia, welcomed LeadingAge members and provided a high-level view of the latest issues in the office of multifamily housing, starting with an update on some names and the numbers of new people in headquarters, the regional field offices and doing asset management more broadly. He related that though staffing is still low, positions are being prioritized to be filled at the regional level, and he encouraged members to spread the word that available positions can be found on usajobs.gov. Mr. Scheetz addressed the status of current funding, and assured attendees that HUD believes it has enough funds available during the continuing resolution to pay all grants and rental assistance subsidy contracts. He also reviewed the latest with the state of the multifamily portfolio nationwide, noting that the non-profit senior housing properties represent those with the lowest level of delinquencies among all other cohorts.

Mr. Scheetz reminded attendees about the new online resource guide and online learning tools for Service Coordinators, reiterated that RAD for PRAC implementation was expected somewhere around the end of the calendar year; and encouraged attendees to sign-up at grants.gov to receive notification as soon as the 202 Notice of Funding Availability is issued. He also indicated that, while HUD has yet to fully implement HOTMA, a publication for public comment may be posted in January of 2019.  He closed by referencing HUD’s ongoing work with and reorganization of the current 4350.1 handbook expected shortly for future release.

EIV discrepancy resolution was the deep-dive subject for this session.  Ms. DeSilva shared with attendees a proven strategy for quickly resolving EIV discrepancies, walking them through an example with detailed process and timeframe adjustment grids. The process is just one component of EIV training routinely offered by Blueprint Housing solutions and attendee comments strongly supported the value of the resource that was provided and demonstrated.

RAD for PRAC

The RAD for PRAC session provided attendees with helpful insights into the not-yet-available, but impending release of the RAD for PRAC implementation guidance, including considerations for current owners considering possible participation in the program once it is launched.

A power-panel facilitated by Gates Dunaway featured new data about the state of the national PRAC portfolio and developing guidance by Tom Davis, HUD Director of the Office of Recapitalization, as well as two multi-site providers' portfolio status and participation considerations as provided from the perspectives of Cheryl Wickersham at United Church Homes and Michelle Norris from National Church Residences.

Colleen Bloom provided background on the notably fast-paced progression of this issue from member and workgroup discussions, to proposed legislation, to Congressional passage and (soon) implementation in around 3 years, applauding members for their active participation at all stages, and thanking HUD for the opportunity to help inform the development of the implementation guidance.  She also reiterated the importance of addressing the needs of other PRAC properties, which may not want or be able to participate in this RAD conversion process, as outlined in the LeadingAge task force’s PRAC Preservation Needs and Options report.

Mr. Davis reviewed some of the issues HUD staff have been grappling with as HUD prepares to issue Revision 4 of the Rental Assistance Demonstration’s implementing notice. Mr. Davis said that HUD recognizes significant differences in the PRAC portfolio, compared to the Section 8 portfolio, which HUD must contend with in developing Revision 4. One issue is whether there is any interest at all in establishing rules and protocols for conversion to Project-Based Vouchers. The many idiosyncrasies of the PBV program have HUD staff wondering if they must fully build out a PBV conversion option in the forthcoming notice. Mr. Davis said that HUD may get some of the ideas out for comment before the notice itself is issued in December 2018 or January 2019. Mr. Davis expects Revision 4 to be about 400 pages, with the last 30 pages or so devoted to the new RAD for PRAC authorization.

Annual meeting attendees were also reminded that RAD is a demonstration and that the conversion to the Section 8 platform is one in which providers and HUD are still experimenting, and is completely voluntary. Section 202/PRAC sponsors, Mr. Davis said, should not shy away from seeking waivers if their conversion needs to not fit into the confines of the implementing notice.

HUD is also very well aware, Mr. Davis said, that many PRAC communities are very small. The prevalence of communities, approximately 65% of the national portfolio, having fewer than 50 units have taken up a lot of attention from HUD staff as it works to develop the best possible implementation notice. Mr. Davis noted that the experiences of public housing agencies, particularly those converting very small communities through RAD, are being looked at for guidance. One goal here is to help ensure smaller communities still have some access to 9% low-income housing tax credits, perhaps by bundling multiple smaller communities into one conversion. The clustering of communities, or perhaps how to not create barriers to clustering communities, is something HUD is well aware of in its implementation notice development.

Rents are another big area of consideration for HUD, Mr. Davis said. Today, 45% of PRAC homes are at 80% of Fair Market Rent or lower; and another 30% are between 80 and 100% of FMR, and 15% are between 100 and 120% of FMR – yet there are some outliers with rents as high as 160% of FMR.

In the Section 8 program, the statutory maximum rents of 120% FMR for Project-Based Rental Assistance and 110% of Fair Market Rent for Project-Based Vouchers is a constraining force. In the world of public housing conversions through RAD, some public housing agencies have been allowed to average their rents across properties being converted. HUD is considering whether this averaging tool is something it can bring to the RAD for PRAC context. Rents and RAD for PRAC conversions have highlighted to HUD the very uneven distribution of PRAC rents across the country. HUD is now having internal conversations on how PRACs’ budget-based rent increases are done so that both traditional PRACs and RAD for PRACs can be as successful as possible.

Mr. Davis also noted that replacement reserve deposits are as consistent nationally as rents are (that is, not at all consistent). Bearing out the findings in LeadingAge’s early assessment of disparate member experiences regarding reserves and budget adjustments, data graphics provided by HUD at this session reveal that the largest portion of current PRAC reserve deposits (in approx. 1300 properties) are between $25 and $50 per unit per month (PUPM), with approx. 500 properties each depositing less than $25 or between $50 and $75 PUPM, again with notable outliers depositing zero or as much as $150 to $300. One question on the table is, can some of the reserve for replacements be used for debt service post-RAD-conversion?

Concerning resident service coordinators, Mr. Davis noted that HUD is working on how to carry forward with resident services coordination upon the conversion to the Section 8 platform. Statutorily, Mr. Davis said, there does not appear to be wiggle room for Section 8 Project-Based Rental Assistance rents to be above 120% of Fair Market Rent, whether to help pay for resident service coordinators or any other reason.

Ms. Wickersham, Vice President for Housing Services at United Church Homes, discussed the importance of having a good handle on the capital needs of their individual PRAC properties and adequately funded reserve for replacement accounts. Ms. Wickersham shared how her organization, as they have been evaluating the needs of their 38 PRAC properties (1640 units), discovered that comprehensive needs assessments too often do not comprise adequate assessments of costly issues of related to roof, wall or window replacement needs, as well as hardscape, elevator or fire alarm/fire sprinkler assessments, or full Section 504 accessible design needs. The absence of information concerning these major capital needs can, according to Ms. Wickersham, severely handicap budget considerations and are an essential part of a good Replacement Reserve analysis when it comes to budgeting, whether for ongoing PRAC budget submissions or in preparation for RAD conversion to leverage new capital investments.

Ms. Norris, Executive Vice President of External Affairs and Strategic Initiatives, provided an overview of the National Church Residences PRAC portfolio, indicating that 45% of their PRAC properties are over 15 years old, with a significant gap in financial need projections in the coming 10 years measured against current and projected Reserve for Replacement account funds as aggregated across the combined properties. Possibilities of combining assets and/or transfer of subsidy were among issues and considerations raised by Ms. Norris.

Both providers expressed specific interest in ensuring the continuation of service coordination in the properties, but acknowledge the challenges that the cost can represent when compared against comparable rents and/or fair market rents. This is a significant issue of interest for LeadingAge and an ongoing consideration for HUD in the final development and eventual release of the RAD for PRAC implementation.

Other practical suggestions were for other PRAC owners to begin to assess their capacity to participate in the RAD program conversion are to review current per-unit rents against local fair market rents and seek increases now to reserve for replacement account deposits.

 

Questions on these or other issues are always welcomed by LeadingAge housing staff, Linda Couch and Colleen Bloom.