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Denita Johnson Manager of Applications & Contracting

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0 Housing Choice Voucher Program Cuyahoga Metropolitan Housing Authority
Rent Determination Independence Library - Cuyahoga County Library October 18, 2013

1 Denita Johnson Manager of Applications & Contracting
Topics of Discussion Voucher Term & Size Briefing Packet Request for Tenancy Approval {intake process} Important Facts Rent Affordability Calculator

2 Voucher Term Voucher Term Valid for a period of: New Admissions-60 days from the date the voucher was issued Movers-120 days from the date of issuance Extensions may be granted by the Housing Authority for reasonable accommodations purposes

3 Voucher Size Voucher Size The number of bedrooms the family is eligible to receive A family can go up a voucher size or down a voucher size Final rent is determined on the lower of the two

4 Briefing Packet The Briefing Packet is an informational packet of forms that the family uses to request the HCVP’s approval for assisted tenancy

5 Briefing Packet The packet consists of the following:
Landlord Instructions Request for Tenancy Approval (RFTA) Landlord Certification W-9 Agent Form Sample Lease (lease is on the CMHA website) Lead based paint disclosure Property built before Jan 1, 1978 30 day notice of intent to vacate Building Rent Form Addendum for Drug Free Housing Tenancy Addendum Landlord Fraud Letter

6 When the Family Finds A Unit… what happens?
The owner and the family must complete the RFTA packet in its entirety The completed RFTA packet is submitted to the HCVP RFTA process begins


8 RFTA intake process HCVP WILL:
Review the RFTA packet; all forms must be signed. Check to confirm that the unit isn’t in foreclosure HCVP WILL NOT: Provide preliminary rent offer Provide inspection date

9 Important Facts: Submitting multiple RFTA packets
We will only accept 1 RFTA packet If the unit is a 2-family, please indicate up or down Submitting multiple RFTA’s could lead to all RFTA’s being cancelled Inspections Unit must be ready for HQS inspections If the unit fails HQS inspections twice, the RFTA will be cancelled

10 You MUST submit a signed lease before the contract can go into effect
Important Facts cont.: Contract signing days are held twice a month The 1st & 3rd week of the month Move-in Date Is established by the Contract Specialist, Owner &Tenant If the Tenant moves into the unit prior to the Contract Specialist establishing the move-in date, the tenant is responsible for ALL rent until the contract goes into effect. You MUST submit a signed lease before the contract can go into effect

11 Important Facts cont.: New Landlord Briefing
All new landlords must attend the briefing before signing the housing assistance contract with HCVP. The workshop are held 3 or more times a month: Morning Saturday Afternoon

Important Facts cont.: BREAKING THE CONTRACT EARLY? The Housing Assistance Payment (HAP) Contract is for a 1 year term. Mutual agreements between the landlord and tenant to break the lease early will not be honored by the HCVP. A change in ownership requires assumption of the existing contract in the first year of the contract.

13 Three-Way Partnership
Voucher CMHA FAMILY HAP Contract Lease OWNER

14 Three-Way Partnership
HCVP Responsibilities: Determine if the family is eligible to participate in the HCVP. Determine the rental amount of the unit. Determine the family’s portion of the rent to owner. Inspect the subsidized unit annually. Issue housing assistance payments.

15 Three-Way Partnership Cont.
Owner’s Responsibilities: Screen families to determine their suitability as a renter Maintain the housing unit by making necessary repairs Comply with the terms of the Housing Assistance Payment (HAP) Contract Enforce the lease

16 Three-Way Partnership Cont.
Family’s Responsibilities: Abide by the terms of the lease Pay rent on time and take care of the housing unit Provide any utilities and maintain appliances which are not furnished by the owner The family is responsible for damages to the unit or premises beyond normal wear and tear which results in a breach of the HQS.

17 Rent Affordability Calculator
Interactive tool to determine affordability. Available on the CMHA website,

18 Rent Affordability Calculator continued…

19 Rent Affordability Calculator continued…

20 Rent Affordability Calculator continued…

21 Rent Determination Ava Decembly

22 Overview Before the Public Housing Authority (PHA) establishes a Housing Assistance Payment (HAP) contract with a landlord, the following must occur: Unit must pass an inspection; Rent reasonableness test must be conducted; and Final rent has to be affordable

23 Rent Determination Factors
Rent determination process begins with: Fair Market Rent Payment Standards Utility Allowances Income Reasonable Rent Affordability

24 Fair Market Rents 24 CFR § Developed by HUD and published annually around October 1 Rent estimates which allow rental of modest housing within specific geographic area Represents housing costs which are comprised of the rent plus tenant-paid utilities CMHA permitted to use the 50th percentile rent estimates Provides broader range of housing opportunities Low-poverty areas

25 Fair Market Rents 24 CFR § Is not reasonable rent Primary function is to control costs Published by bedroom size Basis of determining the payment standards

26 Payment Standards 24 CFR § 982.402
Based on FMRs Established by PHA Individual payment standard created for each bedroom size Must fall within 90% - 110% of FMRs Represents maximum allowable amount PHA can contribute towards the rent Entire amount may not necessarily be contributed.

27 Applicable Payment Standard
Payment standard used to determine who contributes what towards the rent PHA subsidy standards determine eligible voucher size Once unit selected, applicable payment standard comes into play Compare unit size to eligible voucher size Lower of the two determines applicable payment standard used in the rent calculation

28 Applicable Payment Standard
Important affordability concept Lesser of unit and eligible voucher sizes prevail Unit size 3 $1,026 Voucher size 2 $ 783 Factor in portions contributed towards the final rent (HAP) (Tenant Rent to Landlord) = (Contract Rent) PHA portion Tenant portion Final Rent

29 FMR’s and Payment Standards
BR Size FY 2013 FMR PS PS ÷ FY 2014 FY2014 1 2 3 4 $ 623 $ 790 $1,058 $1,093 $ 673 $ 783 $1,026 $1,155 108.0% 99.1% 97.0% 105.7% $ 632 $ 801 $1,073 $1,108 106.5% 97.8% 95.6% 104.2% PHAs must change if outside of HUD’s 90%-110% guidelines FY2014 payment standards will remain the same PHA’s decision to change payment standards based on: Budget Utilization Create housing opportunities

30 Utility Allowances (UA)
Represents tenant-paid utilities Includes heating, electricity, water, sewer, trash collection fee, stove, and refrigerator Unit size, fuel sources, structure type taken into consideration Consumption * Rates

31 Utility Allowance Schedule
HUD requirement Must revise whenever local rates change +/- 10% Factor in determining reasonable rent, gross rent, and tenant rent to owner CMHA updates annually regardless January 2014 schedule reflects: Slight decrease in natural gas rates Slight increase in electric rates Increase in water and sewer rates Increase in range & refrigerator rental rates

32 Utility Allowance Schedule Effective January 1, 2013
Actual bedrooms in unit: 1 BR 2 BR 3 BR 4 BR Monthly dollar allowances: SPACE HEAT (natural gas): 1 Single-family dwelling 49 60 71 81 2 Townhouse, Duplex/Triplex, Row House 48 57 66 76 3 Multi-unit apartment 36 39 41 43 4 Manufactured home 44 45 46 47 5 Manufactured home - OIL 108 1 2 3 How to read: Step 1: Unit size Step 2: Fuel source Step 3: Structure type

33 Utility Reimbursement (UAP)
Who’s eligible Based on income Usually very low income Not automatic, must reside in a unit to receive How determined Amount by which the UA exceeds the TTP Participant’s TTP Minus Utility Allowance Less any additional monies tenant is required to contribute towards the rent (Gross Rent Minus Payment Standard)

34 Change in Utility Responsibility
Requirements for changing: Landlord must submit formal request PHA must conduct rent reasonableness test taking revised utility responsibility into consideration May result in revised rent, Will result in new HAP contract In most cases owner shifts their responsibility over to tenant More than likely will result in rent decrease due to: Change in responsibility Market changes Utility allowances revisions Affordability

35 Household Income Could change during life of contract
Client’s annual recertification Interim changes (reduction in work hours, no longer employed, promotion, new job, etc.) Another factor in determining rent portions Very low income may trigger $50 minimum rent or utility reimbursement Income Change Client’s Portion PHA’s Increase Decrease

36 Initial Family Contribution
10% of Gross Annual Income 30% of Annual Adjusted Income Minimum Rent Greater of the 3 Gross Income = $10,000 (($10,000 * .10) ÷ 12) $1,000 ÷ 12) = $83 2. Adjusted Income = $9,200 (($9,200 * .30) ÷ 12 ($2,760 ÷ 12) = $230 3. Minimum Rent = $50 The $230 is the greater of the three and therefore becomes the initial family contribution.

37 Reasonable Rent (RR) Units rated based on: Comparable unassisted rents
Unit attributes Structure type Unit size Condition Location Utility responsibility

38 Sources for comparables
Reasonable Rent (RR) Sources for comparables Advertisements Local newspapers Internet Online rental websites Real estate and apartment associations Apartment complexes

39 Reasonable Rent 24 CFR § PHA must determine if rent is reasonable before lease approval Must be re-determined: At HUD’s direction Prior to rent adjustments If 5% decrease in FMRs in effect 60 days before contract anniversary PHA may re-determine at any other time. At all times during the assisted tenancy, the rent to owner may not exceed the reasonable rent as most recently determined or re-determined by the PHA.

40 Rent to Owner PLUS Tenant-paid utilities
Gross Rent Rent to Owner PLUS Tenant-paid utilities Example: Rent to Owner $1,000 Tenant-paid Utilities Gross Rent = $ 1,200 Factor in determining if tenant must contribute additional dollars towards the contract rent.

41 Affordability Only applies to new contracts Rent Burden
Household’s total contribution towards housing costs as percentage of household’s TTP Cannot exceed 40% Initial year of contract Amount gross rent exceeds payment standard Represents additional amount for which tenant’s responsible Gross Rent > Pmt. Std. Pmt. Std. > Gross Rent Tenant contributes additional amount. There is no additional amount and the rent burden = 30%.

42 Affordability Example
Gross rent [$1,000 (rent) + $200 (UA)] $1,200 Payment Standard [3BR] $1,026 (Additional Tenant Payment) [(($9,200 (adjusted income)* 0.30) + ($174 * 12))] = ($2, $2,088) = $4,848 $4,848 ÷ $9,200 = 52.7% Rent Burden = 53% $174 TTP In this example, the household’s rent burden exceeds 40% and is not affordable. In order to make it affordable, the owner would have to agree to a $903 rent, a decrease of $97.

43 Affordability Factors
Tenant- vs. Landlord-paid utilities Payment standards Applicable Income Low-income rental assistance program 84% of the new admissions to program at extremely low income level. Over-housed (In unit with more bedrooms than eligible for) Rents high in comparison to tenant income HUD Income Limits BR Size 1 2 3 4 Extremely Low Income $13,300 $15,200 $17,100 $19,000

44 Housing Assistance Payment (HAP) Tenant Rent to Owner (TR)
Rent Determination Final rent determined by PHA Establishes HAP and Tenant Rent to Owner Housing Assistance Payment (HAP) + Tenant Rent to Owner (TR) = Contract Rent (CR) Landlord requests seeking additional monies from tenants beyond that approved by the PHA are forbidden according to HUD regulations.

45 Rent Determination Rents will change for: New contracts (Movers)
Change in utility responsibility Requested rent adjustments Could be less than the current rent based on rent reasonableness test results Required based on HUD’s 5% rule

46 Building Rent Building serves as the market Must have:
Minimum 3 unassisted units paying requested rents Similarly sized units Within same property/complex If doesn’t meet the above criteria will have to conduct regular rent reasonableness test.

47 Same affordability rule applies for initial year of contract
Building Rent Landlord must provide requested information CMHA Building Rent Form Rent roll/schedule (proof of rents charged) PHA must have this documentation to substantiate rents [On HAP Contract under item 8. Owner Certification (page 4 of 10)] By executing a HAP contract the owner is certifying that the “…rent to owner does not exceed rents charged by the owner for rental of comparable unassisted units in the premises.” Same affordability rule applies for initial year of contract

48 In summary: Contract rent determined using a combination of unit and client related data. Rent reasonableness based upon: Utilities Unit attributes Comparables Client data Income Voucher size

49 Maintaining positive relationships with our communities and landlords
Partnership Maintaining positive relationships with our communities and landlords has been instrumental in expanding housing choice opportunities for our program participants. Thank you.


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