Enfoque tradicional

Rental assistance programs use government funds to help low income households pay the rent for private apartments. Participants pay a minimum percentage of their income (often 30%) toward their rent and utilities, and state or federal funds pay the owner the difference between the tenant share and the total rent up to a fixed amount. Participants can lease units with rents that exceed the subsidy limit, but must pay all of the extra cost in addition to their minimum share. Participants can only rent units that meet basic quality standards, and generally rents cannot exceed going rents for comparable unassisted units.

Rental assistance and public housing are the only programs that make housing affordable to extremely-low income households because housing costs are pegged to tenant income; if a household’s income falls, the government will increase the subsidy up to the maximum allowed under the program. Rent subsidies take two basic forms:

• Tenant-based (“mobile”) subsidies travel with the tenant. The maximum subsidy is specified on a piece of paper called a voucher. Participants can use their voucher to rent a unit

anywhere as long as it meets program standards and if they move, they can use it for their next unit.

• Project-based subsidies are tied to specific units in specific developments. A household with a project-based voucher can only use it while occupying that unit. When they move, they lose their voucher and another eligible household fills the unit. Project-based subsidies are often used to finance affordable housing development or rehabilitation by guaranteeing rent levels sufficient to support debt and operating costs. They are also used to deepen the affordability of projects that have mortgage subsidies under other state and federal programs.

• More recently, a special form of tenant-based assistance called a project-based voucher has become available under the Federal Section 8 program that combines features of both tenant- and project-based assistance. A 2001 federal law allows housing authorities to use up to 20% of their Section 8 tenant-based funding for vouchers that are assigned to specific units under 5-10 year contracts with owners but also allows tenants to move without losing assistance. State and federal rental assistance programs are currently authorized to assist about 148,000 households in Massachusetts, with most (about 140,000) funded through HUD’s Section 8 program. About 76,000 of the subsidies are tenant-based113 and about 70,000 are project-based. Three state-funded programs currently assist almost 6,400 households.

State and Federal Rental Assistance – January 2008

Tenant Based Project Based Total

Mass. Rental Voucher Program (MRVP) 2,041 3,031 5,072

Alternative Housing Voucher Program 512 0 512

DMH Rental Assistance 0 798 798

Total State-Funded 2,553 3,829 6,382

HUD Section 8 Authorized 73,754 66,646 140,400

Total State and Federal114 75,847 70,475 146,782

Massachusetts has three state-funded rental assistance programs: the Massachusetts Rental Voucher Program (MRVP) serves about 5,100 households of all types, while two smaller programs assist just over 1,300 households with disabilities.

The Massachusetts Rental Voucher Program (MRVP)

The Massachusetts Rental Voucher Program (MRVP) is the state’s largest state-funded rental assistance program and the only one not restricted to persons with disabilities. It has two

components: tenant-based (“mobile”) and project-based. Currently (as of January 2008), MRVP assists 5,072 households (2,041 with mobile vouchers and 3,031 with project-based vouchers). MRVP began in 1966 as the “Chapter 707” program. It grew rapidly in the mid- to late 1980s as the state increased funding to support new affordable housing development and to help homeless families leave shelters. At its peak in FY1990, “Chapter 707” assisted just under 20,000

households, including almost 15,000 tenants with mobile subsidies.

The fiscal crisis of 1990-1991 led the State to stop issuing new vouchers and begin shrinking the program by no longer re-issuing mobile vouchers as participants left the program. On the project- based side, it stopped entering into contracts for new units. It also cut the tenant- and project- based rent levels it would subsidize across the board. In November 1992, it revised the overall program (renaming it MRVP), cut the income limits for eligibility, and increased the minimum amount tenants must pay toward their housing costs.

Starting in FY1997, the State began funding some program restorations, reversing earlier rent cuts and later allowing increases to bring them closer to market rents for modest apartments, but in the years that have followed, funding has been erratic and the program has continued to shrink. Income Eligibility Prior to 1992, the income limit was the same as for public housing. When the State created MRVP, it lowered the income level for initial and continuing eligibility, setting it at 200% of the federal poverty limit (which is uniform statewide, rather than varying by region like other housing program income limits). This limit applies to both mobile and project-based assistance. Once a household reaches that limit, they stop receiving a subsidy (and permanently lose their voucher 90 days later unless there is a financial reversal).

MRVP Tenant-Based (“Mobile”) Assistance The tenant-based program is administered by local housing authorities (LHAs). In communities lacking an LHA-operated MRVP program, the program is administered by eight regional nonprofit housing agencies under contracts with DHCD. When waiting lists are open, the LHAs and nonprofits take applications on a first come, first serve basis, and tenants are selected using the same priority system used for state public housing. The voucher can be used to rent housing anywhere in Massachusetts.

Rent: The MRVP tenant-based program differs from other state housing programs, including other state-funded rental assistance program, in that it does not consider utility costs when

determining subsidy levels. Participants receive a fixed voucher amount (based on their income, household size and geographic location), which they use to help pay their contract rent. They must contribute at least 30% of their income plus $50 toward the contract rent. If that

contribution plus the voucher exceeds the rent, the voucher is reduced by the difference. Since FY2006, the Legislature has used annual budget language to cap the tenant contribution at 40% of income and DHCD re-instituted “ceiling rents”. (In the past, most paid more than 40% of their income for housing in part because due to their out of pocket utility costs and in part because voucher amounts were low relative to rents.)

MRVP Project-Based Assistance The project-based program began in the late 1960s as a way to make some units in private, subsidized developments, including projects financed by

MassHousing, affordable to very low income households through long term contracts with owners. Owners agreed to reserve a percentage (often 20-25%) of their units for MRVP-eligible households. The contracts specify the rent the owner can charge and the State pays the

difference between that rent and the tenant contribution. The subsidy is tied to the unit; when a family moves out, they lose their subsidy and the unit is rented to another income-eligible household.

Currently, half of the project-based vouchers in use are in MassHousing-financed projects. Most of the others are in projects developed by CDCs and other nonprofits in the late 1980s and early 1990s or in older buildings owned by small landlords. Many are in elderly/disabled

developments. Some of the MRVP contracts require owners to reserve a specific number of units for MRVP voucher holders, while others provide MRVP project-based subsidies on a “back-up” basis, available only if the owner is unable to fill the unit with a tenant using a Section 8 or MRVP tenant-based voucher.

The project-based program has been shrinking in recent years. It peaked around 1992 when it was authorized to assist up to almost 6,000 units, but over time, freezes and cuts in the contract rents led owners to withdraw units. While DHCD still has contracts for 3,650 units in these older projects, utilization rates have steadily fallen as owners choose to rent to households with other rent subsidies. This has enabled DHCD to assign some vouchers to new affordable developments. As of January 2008, 3,175 households were using project-based vouchers.

MRVP Project Based Units January 2008

Project type Authorized Leased

Older MHFA 1,405 1,270 SHARP 316 264 Mod Rehab 1,136 831 RHS (FmHA) 51 43 All other 742 623 3,650 3,031

Rent and Eligibility: Households with project-based MRVP vouchers pay: • 40% of their income toward their rent if heat is included

• 35% if heat is not included.

The project-based voucher covers the balance of the contract rent. Eligibility and admissions procedures are the same as for MRVP tenant-based vouchers.

MRVP Program Trends and Policy Issues

After steady funding cuts and program shrinkage through the 1990s, rising concern about homelessness led the legislature to increase funding for MRVP in FY2001—for the first time in ten years—in order to maintain the program size and update benefit levels. The budget language authorized DHCD to lift the freeze on re-issuing mobile vouchers, meaning the program would not expand but new households could be assisted when current recipients left. Over the next two years, contract rents for project-based rent and mobile voucher amounts were restored and

updated. Funding was cut again in FY2002 when state fiscal problems forced a rescission and has remained low in the years that have followed, forcing freezes on re-issuing vouchers (with occasional breaks), rent cuts and another increase in the minimum tenant contribution toward the rent.

MRVP Changes FY1996-2008

Tenant Based (Mobile) Program Project-based Program

July 1996 LHA Administrative fee raised from $15 to $25

November 1997 Vouchers increased by $25-$50 Rents increased by $25-$50

December 1999 Voucher re-issuance freeze lifted

February 2000 Mobile waiting lists re-established

May 2000 Ceiling Rents eliminated for Mobile Program

June 2000 Vouchers increased by $25-50 Rents increased by $25-50

November 2000 Vouchers increased by $25-50 Rents increased by $25-50

January 2001 Rent increases restored for MassHousing and

RHS units

March 2001 Vouchers increased by $50-100

August 2001 Vouchers increased by $150-300 Rents increased by $150-300

May 2002 Voucher re-issuance frozen Rents for MassHousing and RHS frozen

August 2002 All Mobile waiting lists closed

November 2002 Tenant shares increased $50; Tenant shares increased from 30-35% of income

to 35-40%. All rents (except RHS and MassHousing ) decreased by $30-60

2005 Freeze on turnover partially lifted; 40% cap imposed;

ceiling rents adopted

2006 Freeze on turnover partially lifted

October 2007 Freeze on 100 vouchers lifted

As a result, even with small funding increases in FY2007 and FY2008, the program is even smaller today than it was in 2000. (The total number of households receiving tenant- or project- based assistance fell from 7,300 in January 2000 to 4,700 in January 2005, before slowly beginning to rise in FY2007 and reaching 5,072 in January 2008.)

MRVP Appropriations – FY’01- FY’08

Appropriation Change from Prior Year ($) Change from Prior Year (%) FY01 35,298,397 FY02 31,768,557 (3,529,840) -10% FY03 26,668,557 (5,100,000) -16% FY04 22,688,557 (3,980,000) -15% FY05 24,283,345 1,594,788 7% FY06 26,283,345 2,000,000 8% FY07 27,483,345 1,200,000 5% FY08 29,958,638 2,475,293 9% FY09 33,047,202 3,088,564 10%

• Fluctuating funding levels in recent years have made it difficult for DHCD to predict how many vouchers it can unfreeze each year, as it cannot be assured that funding will be provided in the following year to sustain them. The small number of vouchers unfrozen at any time has also made it difficult for housing authorities to re-open their waiting lists as it is unclear how many, if any, new vouchers will be authorized. Since FY2007, DHCD has made 100 new mobile vouchers available competitively statewide for local housing authorities and

authorized about 400 more mobile and project-based vouchers for special programs to prevent homelessness and help more households move from shelters (some are still being leased up or reserved pending completion of projects).

• Need for Additional Vouchers: As discussed in the Homelessness and Prevention chapter, Massachusetts is housing record-high numbers of families in its homeless shelter system at an average cost of $3,000/month and over $18,000 per family with an average stay of six

months. In the 1980s, when faced with a similar situation, the State used MRVP to rapidly re- house families. This approach is already being used on a limited scale, but without sufficient funding to support a comprehensive approach.

Increasing MRVP funding significantly in FY2009 would enable the State to address the shelter problem much more quickly and reduce the disruption to families and children that homelessness brings. Using MRVP is a much less costly solution to homelessness as well (as of January 2008, the average subsidy cost for an MRVP mobile voucher, including program administration, was $562/month or $6,744/year).

Increasing MRVP funding would also help the State assist some of the growing number of households, most of whom are very poor, who are on waiting lists for Section 8 and have been unable to obtain help due to the 15+ year contraction of MRVP and more recent HUD cuts. According to DHCD, there are over 55,000 households (unduplicated count) on its statewide waiting list for Section 8, which turns over about 1,200 vouchers a year. Almost all (87%) are extremely low-income households; two-thirds are families with children, and 31% are households with disabilities (almost all non-elderly).

• Low Income Limits/Lack of Targeting The initial (and upper) income limit for eligibility is 200% of the federal poverty limit (FPL), which is a uniform standard statewide (unlike the HUD income limits which are based on area median incomes). Using a statewide income limit in a state where housing costs and incomes vary widely by region particularly hurts households in eastern Massachusetts.

Changing the initial eligibility standard to a percentage of the HUD area median income would better reflect regional variations. Given the scarcity of housing resources, some advocates have also recommended that new vouchers follow the income targeting used in the federal Section 8 program, with 75% of new vouchers reserved for households with incomes at or below 30% of area median income and the balance targeted to households with incomes at or below 50% of area median income.

• Upper Income Limits and Termination Criteria Households stop receiving financial assistance as soon as their incomes rise above 200% of the federal poverty level, and they lose eligibility for continued MRVP assistance 90 days later (the grace period provides protection against job loss). This income cutoff is well below the income limit for eligibility for most housing programs. In Greater Boston, for example, the 2008 upper limit for a household of three ($35,200) equals 46% of the HUD area median income adjusted for household size; for a household of one, it equals 35% of area median income. (In

Springfield, the figures are 53% and 40%.) At 30% of income, a household of 3 that loses eligibility could only afford to pay $880/month (including utilities) and a household of one, $520. Federal rental assistance programs, by contrast, continue eligibility until incomes

reach the level where households can afford a modest apartment at the going rent. Changing MRVP termination criteria to match that formula, and extending the grace period to the 180 days used in Section 8, would better meet the goals of providing housing stability, averting homelessness and removing work disincentives.

• Inequity in tenant contribution to housing cost Budget cuts led DHCD to require households with state-funded rental assistance to pay a higher percentage of their income for housing, despite their poverty, than it requires of households assisted under programs that target households with incomes of up to 80% of area median income (including first time homebuyers), with the highest amounts imposed on MRVP households. Changing the formula for the tenant share of the rent under MRVP (e.g. to no more than 35% of their income if heat is included and 30% if not, or to a formula consistent with Section 8) could help rectify this inequity.

Alternative Housing Voucher Program (AHVP)

The AHVP program was established in 1995 to provide tenant-based rental assistance to people under age 60 with disabilities who choose to relocate from a state public housing development or are on the waiting list for such housing. It was created as part of a state law that put a cap on the percentage of units in Chapter 667 state public housing115 for the elderly and disabled that could be occupied by non-elderly households (13.5%). Because many developments were far above the 13.5% cap, this meant most openings both in the short run and in the future would go to the elderly, and result in long wait times for the non-elderly disabled. AHVP provides an alternative to those on the waiting list and assists non-elderly, disabled residents who would prefer other housing options. The assistance is transitional and ends when tenants access other housing assistance (e.g. state public housing, other subsidized housing or Section 8).

Admissions/Eligibility/Rent The income limit for AHVP is the same as for Chapter 667

elder/disabled state public housing: 80% of the HUD area median income adjusted for household size. Applicants must also be disabled and under 60. Tenants pay a minimum of 30% of their income towards the contract rent if it includes heat and all utilities, or 25% of their income if the contract rent includes no or only some of the utilities, and receive a voucher to cover the balance of the rent up to a fixed amount. If their rent exceeds that limit, they must pay the excess. While applicants must apply to an LHA that has an allocation of AHVP vouchers116, the vouchers can be used anywhere in the state.

Trends/Program Issues When AHVP was enacted, it was agreed that the program should serve 800 households at a time and it was funded at $4 million a year. In FY2002 and FY2003, state fiscal pressures led the Legislature to cut the appropriation to $3 million. To cut costs, DHCD stopped re-issuing vouchers as participants left (starting in June 2002), froze the rent levels it would subsidize, began transferring longer-term AHVP recipients to its federal Section 8 program and asked local housing authorities with AHVP participants to do the same.117

AHVP Appropriations FY01 4,000,000 FY02 3,000,000 FY03 3,000,000 FY04 2,300,000 FY05 2,300,000 FY06 3,000,000 FY07 3,500,000 FY08 3,500,000 FY09 4,000,000

By January 2005, transfers plus DHCD’s continued freeze on turnover had cut the number of assisted households to 238, well below the 300-350 the FY2005 appropriation could support. However, the freeze came under increasing criticism, given the significant homelessness among individuals with disabilities. Starting in FY2006, the Legislature began to restore funding and currently (as of January 2008), the program assists 512 households, the maximum it can support within its current appropriation.

DMH Rental Assistance

The State has funded rent subsidies for DMH clients since the 1980s. Most of the assistance is project-based (tied to specific units) and tenants receive support services. Funding for this program has been provided at times through DMH’s budget and at times through DHCD’s budget, but the program has always been administered by DHCD. Local service providers maintain the waiting lists for assistance and refer clients to LHAs who administer the subsidy payments. The income eligibility limits are the same as state public housing (80% of area median income).

Rent Tenants pay 35% of their income towards the contract rent if all utilities are included, or 30% if only some or no utilities are included (up from 25-30% prior to August 2002) and state funds pay the full balance. Local service providers maintain the waiting lists for assistance and