1. Housing Choice Voucher Program CY 2014 Implementation Public Housing Agency Briefing March 18, 2014

2. Today’s Topics CY 2014 Voucher Renewal Funding CY 2014 HAP Set-Aside CY 2014 Administrative Fee Provisions CY 2014 Other Programs Net Restricted Assets and Program Reserves

3. Voucher Renewal Funding HUD operated under two Continuing Resolutions prior to FFY 2014 Appropriations Funding allotments were received based on FFY 2013 Appropriations during that time January thru March 2014 obligations to PHAs have been made based on that level of funding; disbursements limited to that level, based on projected needs P.L. 113-76 enacted January 17, 2014, providing full year appropriations

4. Voucher Renewal Funding FFY 2013 Post-Sequestration Renewal Funding: $16,349,364,819 FFY 2014 Renewal Funding: $17,365,527,000 No sequestration in FFY 2014 HUD may and will use up to $75,000,000 of FFY 2014 Renewal Funding as a HAP Set-Aside

5. Voucher Renewal Funding PHA renewal allocations calculated per Appropriations Act: – (1) Re-benchmarking conducted, based on actual HAP costs for CY 2013, per VMS reporting and HUD review, not to exceed costs for baseline units – (2) Renewal Inflation Factor applied – (3) Adjustments for first time renewals – to ensure that new increments initially funded for fewer than 12 months are fully funded through 12/31/2014, and that initial funding is inflated per renewal inflation factors for new increments that span 2013 and 2014

6. Voucher Renewal Funding – (4) National Pro-ration Factor applied – determined by comparing national eligibility to funds appropriated; same factor applies to all PHAs – (5) NRA Offset applied in cases of excess NRA and reserves – (6) Result is CY 2014 Prorated Renewal Funding PHAs also have non-renewal funding and NRA/Program Reserves available

7. Voucher Renewal Funding PHA’s pro-rated eligibility after offset is compared to renewal funds obligated January thru March – Thru March, if obligations are less than pro-rated eligibility after offset, the difference will be obligated – Thru March, if obligations exceed pro-rated eligibility after offset, the excess has been reduced from the April obligation, rather then reducing obligations across the remaining months of the year, as has been done in prior years

8. Voucher Renewal Funding (1) Re-benchmarking – Based on submitted and validated CY 2013 HAP costs per VMS, as of February 24 deadline – HAP costs capped at 100% of baseline vouchers to ensure over-leasing is not funded: UMAs divided by UMLs, not to exceed 100% Example: 1000 UMAs / 1050 UMLs =.95238 HAP costs = $1,000,000; multiplied by.95238 to yield baseline eligibility of $952,380 = amount to renew 1000 UMAs

9. Voucher Renewal Funding (2) Renewal Inflation Factor – National per unit cost increase from a forecasting model is apportioned among PHAs based on the increase in the Fair Market Rents in each area from FY 2013 to FY 2014 – No area may have a negative inflation factor – For 2014, most PHAs have a factor of 1.000

10. Voucher Renewal Funding (3) Adjustment for first time renewals – Applies to new (not renewal) increments effective after January 1, 2013 – If funded for 12 months, an inflation adjustment per the renewal inflation factor is applied for the months in CY 2014 – If funded for less than 12 months, renewal funding is provided based on: 12 minus months in VMS in CY 2013 minus months funded in CY 2014

11. Voucher Renewal Funding (3) Adjustment for first time renewals – Example: Increment term: 6/1/2013 thru 3/31/2014 (10 months) Months reported in VMS in re-benchmarking period: 6/1/2013 thru 12/31/2013 (7 months) Months funded in CY 2014: 1/1/2014 thru 3/31/2014 (3 months) First time renewal funding: 12 – 7 - 3 = 2 months Based on total vouchers in increment and higher of increment PUC or CY 2013 VMS PUC, inflated

12. Voucher Renewal Funding (4) National Proration Factor The following are summed to yield Total Renewal Eligibility: – Capped renewal eligibility, inflated, plus adjustment for first time renewals – Plus or minus adjustments for transfers VMS expenses for months after effective date of the transfer are moved to the receiving PHA – Plus inflated DHAP eligibility Based on higher of DHAP December PUC or CY 2013 average PUC and vouchers leased as of December

13. Voucher Renewal Funding (4) National Proration Factor – Total Renewal Eligibility for all PHAs are compared to total renewal funding available (appropriations minus set-aside) to determine a national proration factor – Proration factor is applied to the eligibility of each PHA to determine prorated eligibility – MTW agencies’ eligibilities are calculated per their agreements, but prorated at the same rate as non- MTW PHAs

14. Voucher Renewal Funding (5) NRA and Program Reserve Offset – 2014 Act allows HUD to offset excess NRA and program reserves to avoid or reduce the need for proration of renewal funding; and prevent termination of assistance as the result of insufficient funding – Act does not mandate an amount to be offset, unlike prior years – Funds offset in 2014 are not returned to Treasury, but used for the two stated purposes above

15. Voucher Renewal Funding (5) NRA and Program Reserve Offset – Excess Funds Available for Offset = Total of: – NRA: Lesser of PHA-Reported NRA or PHA- Reported Cash/Investments as of December, 2013, per VMS, plus – Estimated Program Reserves: Reconciled 12/31/2012 Balance plus CY 2013 Budget Authority minus disbursements applicable to CY 2013

16. Voucher Renewal Funding (5) NRA and Program Reserve Offset Specific amounts are deducted from the total excess and are exempted from offset Funds needed to maintain December 2013 voucher leasing – Renewal Funding is based on CY 2013 total HAP costs (average) – December leasing may be higher – Formula: Average CY 2013 leasing compared to lower of December leasing or December UMAs, times inflated CY 2013 per unit cost, times 12 – Example: December UMAs = 100; Average CY 2013 leasing = 95; December leasing = 98. Renewal funding covers 95; excess funds exempted to cover 3 more vouchers for 12 months

17. Voucher Renewal Funding (5) NRA and Program Reserve Offset Specific amounts are deducted from the total excess and are exempted from offset Funds needed to reach 100% leasing of VASH vouchers in CY 2014 – Leasing will be assumed to occur evenly across the year – Formula: December UMAs minus December UMLs (if less) multiplied by CY 2013 average VASH per unit cost, inflated, multiplied by 6 – Any CY 2014 new VASH funds are deducted from the amount needed, as they are available to support leasing

18. Voucher Renewal Funding (5) NRA and Program Reserve Offset Specific amounts are deducted from the total excess and are exempted from offset CY 2013 prorated portion of incremental vouchers effective in CY 2013 – HAP costs incurred for incremental vouchers are unknown; total is exempted from offset – Example: » Increment effective 10/1/2013 for 12 months, with BA of $120,000 » $120,000 / 12 x 3 = $30,000 is exempted excess funds

19. Voucher Renewal Funding (5) NRA and Program Reserve Offset Specific amounts are deducted from the total excess and are exempted from offset Amount equal to 10 percent of CY 2014 renewal funding Intended to support increased per unit costs and increased leasing above December actual level Offset equals total excess funds minus amounts protected from offset Offsets are not calculated for PHAs with fewer than 50 vouchers and PHAs with confirmed shortfalls in CY 2013, as they start CY 2013 with $0 NRA and reserves HUD intends to use offset funds for both eligible purposes: increase renewal funding proration and address shortfalls

20. Voucher Renewal Funding (6) Prorated Renewal Funding = prorated renewal eligibility minus offset – Monthly obligations will equal 1/12 of prorated renewal eligibility, minus offset until completed – April obligation will include any under-obligation for January thru March, any over-obligation will result in lowered obligations for April and later months if needed – PHA will use NRA and/or program reserve funds in lieu of new BA for the amount offset

21. Voucher Renewal Funding Monthly Obligations Example: Prorated Renewal Eligibility $ 1,200,000 Offset $ 40,000 Prorated Renewal Funding After Offset $ 1,160,000 Obligations January thru March $ 280,000 Obligations due thru March $ 300,000 Additional Obligations due thru March $ 20,000 April Obligation ($100,000 - $40,000 + $20,000) $ 80,000 May thru December Obligations $ 800,000

22. Renewal Disbursements Disbursements are based on cash management requirements per Notice PIH 2011-67 January thru March based on actual HAP expenses of July thru September 2013, plus margin, limited monthly to 1/12 of expected CY 2014 actual eligibility (obligations) April thru June will be based on actual average costs for October thru December 2013, plus 3% margin, limited to obligations – Reductions were made in February and March for cash due HUD for excess disbursements through 3 rd quarter of 2013 – Reductions will be made in 2 nd quarter for remaining excess disbursements from CY 2013, after final reconciliation

23. Renewal Disbursements For the balance of CY 2014: – PHAs must still assess level of program they can support across the CY – Based on total HAP funding and NRA/reserves available, actual expenses to date, and projected expenses – Disbursements for the balance of CY will be calculated per cash management requirements – Frontloads will continue to be available, up to the total budget authority obligated for the PHA – Non-renewal disbursements will continue to be made based on contract terms of incremental awards (tenant protection, new VASH and RAD)

24. Voucher Set-Aside Funding $75,000,000 of renewal appropriations may be used to augment renewal allocations for the following purposes: – Prevention of terminations due to insufficient funding – Unforeseen circumstances – Portability cost increases – Project-Based Vouchers – HUD-VASH

25. Voucher Set-Aside Funding Prevention of terminations due to insufficient funding Scenario 1 – PHAs already in shortfall At the time of set-aside application, PHA is working with HUD’s Shortfall Prevention Team and SPT has confirmed the PHA is in shortfall PHA has ceased issuing vouchers as of 3/31/2014 PHA has rescinded vouchers on the street as of 3/31/2014 Exceptions: participants issued vouchers to move; tenant protection vouchers for targeted families residing in covered property on the date of the eligibility event; VASH vouchers for homeless veterans, up to VASH baseline

26. Voucher Set-Aside Funding Scenario 1 – PHAs already in shortfall PHAs may enter into project-based HAP contracts for units already under AHAP and may fill vacant PB units PHA has ceased absorbing portable vouchers as of 3/31/2014 Scenario 2 – PHAs who manage their program budgets in a responsible manner but are later determined by SPT to be in shortfall PHA must submit signed CY 2014 Set-Aside Attachment A

27. Voucher Set-Aside Funding Shortfalls: Determination of Funding Required – Calculated by HUD using Two Year Projection Tool – Compares all resources available to PHA to HAP expenses projected for the year Resources: NRA; HUD-held reserves; CY 2014 renewal BA; CY 2014 portion of incremental BA; set-aside funds Expenses: Current leasing and expense data, projected through the year; suspension of vouchers; projection attrition based on prior actual attrition

28. Voucher Set-Aside Funding Shortfalls: – Application period remains open through CY 2014 – PHA may apply multiple times if circumstances change – PHA anticipating a shortfall should immediately contact the field office – Shortfall funds will be awarded in the amount needed for the PHA to end CY 2014 with $0 NRA and reserves

29. Voucher Set-Aside Funding Unforeseen Circumstances Eligibility: PHA must have encountered circumstances during or after the re- benchmarking period that could not have been foreseen and have significantly increased renewal costs Submission Requirements: – Signed Set-Aside Attachment B – Written narrative describing the unforeseen circumstance

30. Voucher Set-Aside Funding Unforeseen Circumstances Requirements – Evidence to support the narrative – PHA calculation of the increased costs for CY 2014 Examples: – Unforeseeable rise in rental costs, beyond the inflation factors – Increase in HAP PUC due to local, specific economic conditions that reduced average total tenant payments – PHA actions (raising payment standards or utility allowances; leasing beyond means) do not constitute unforeseen circumstances

31. Voucher Set-Aside Funding Portability – Eligibility: PHA must have experienced a significant increase in renewal costs due to portability (HUD will calculate) – Portability average HAP PUC for re-benchmarking period must exceed program-wide PUC by 10% – Eligibility will be HAP difference multiplied by the unit months leased for “Port Vouchers Paid” Submission Requirements: – Signed Set-Aside Attachment B

32. Voucher Set-Aside Funding Project-Based Vouchers – Eligibility: Vouchers were not in use during the re- benchmarking period, in order to be available to meet a commitment for PB vouchers assistance – Adjustment will not exceed the number of unleased unit months – Only new construction and rehabilitated housing are eligible

33. Voucher Set-Aside Funding Project-Based Vouchers Submission requirements: – Specific sections of the executed AHAP agreement (see the Notice) – If executed, specific sections of the HAP agreement (see the Notice) – Signed Set-Aside Attachment B – Signed Set-Aside Attachment C and D for each project requested

34. Voucher Set-Aside Funding HUD-VASH - Eligibility: – Per Unit Cost Increase: Program-wide funded CY 2014 HAP PUC is less than current VASH HAP PUC Submit VASH leasing and costs not yet in VMS for all VASH awards Submit calculation of funds requested – Leasing Increase: Total VASH leasing for CY 2014 will exceed the level included in renewal funding plus leasing that will be supported by NRA and reserves retained for that purpose Submit total VASH leasing for all awards not yet in VMS and VASH leasing schedule for balance of CY 2014 for all VASH vouchers – Submit signed CY 2014 Set-Aside Attachment B

35. Voucher Set-Aside Funding Submission receipt deadline for all requests other than shortfalls: April 15, 2014 Requests must be submitted to HUD HQ address or electronic mail box in the Notice Hard copy submission should be sent via expedited delivery service Following requests will not be accepted: – Requests to other HUD addresses – Late requests – Faxed requests

36. Tenant Protection Vouchers Total Appropriation: $130,000,000 Multifamily Housing: – Vouchers are available to assist participants affected by Mod Rehab and SRO replacements and MF conversions such as terminations, opt- outs, prepayments property disposition relocations and certain RAD conversions – Initial term typically 12 months – If funded term is less than 12 months, increments will be renewed at expiration

37. Tenant Protection Vouchers Public Housing: – Vouchers may be available to PHAs based on certain actions that remove units from the PH inventory, including demolitions and dispositions – Separate guidance will be issued concerning eligibility and priority criteria – HUD will determine a PHA’s eligibility for TP vouchers as part of its approval of the removal actions and PHA may then apply for the vouchers – Initial term typically 12 months – If funded term is less than 12 months, increments will be renewed at expiration

38. Tenant Protection Vouchers Choice Neighborhood Initiative: – Vouchers may be available to PHAs and/or MF CNI grantees, based on units temporarily or permanently removed under a CNI Transformation Plan – Separate guidance will be issued concerning eligibility and priority criteria – HUD will determine a PHA’s eligibility as part of its approval of the transformation plan and PHA may then apply for the vouchers – Initial term typically 12 months – If funded term is less than 12 months, increments will be renewed at expiration

39. Tenant Protection Vouchers Replacement Vouchers for Vacant Units: – 2014 Act provides that HUD may only provide replacement vouchers for units that were occupied within the previous 24 months that cease to be available as assisted housing, and only to the extent that funding is available – Due to anticipated demand, tenant protection vouchers are only initially being provided for occupied units. – Subject to the availability of funding, HUD may later be able to provide vouchers for vacant units in the impacted properties

40. Administrative Fees FFY 2013 Post-Sequestration Admin Fee Funding: $1,305,528,490 FFY 2014 Admin Fee Funding: $1,500,000,000 HUD will use up to $10,000,000 of FFY 2014 Admin Fee funding as a set-aside

41. Administrative Fees Admin fee funds are advanced monthly, based on latest reconciled eligibility Admin fees are reconciled quarterly; for CY 2014 earnings will equal approximately 75 percent of eligibility PHAs must take actions to reduce costs if fees and UNA are insufficient – Notice PIH 2012-15 discusses streamlining administrative practices to reduce costs – HAP funds may not be used for admin costs

42. Administrative Fees CY 2014 AF schedules have been posted to the HCV website at http://portal.hud.gov/hudportal/HUD?src=/program_ offices/public_indian_housing/programs/hcv – If calculated fee rates for an area have decreased, HUD held the rates to CY 2013 level – Rates are effective 1/1/2014 PHA requests for higher admin fees or blended fee rates are due to HUD by April 15, 2014 Higher fee requests are submitted to Financial Management Center, supported by data stipulated in the Notice Blended fee requests are submitted to Financial Management Division; no supporting data needed Approvals are for CY 2014 only

43. Administrative Fees Portability Fees: based on 80% of Col B rate of initial PHA, prorated – Due to varying pro-rations across the CY, PHAs may use 75% to prorate portability fees all year: Col B rate x 80% x 75% = fee Special Fees/Set-Aside: – Homeownership (HO): $200 for every HO closing for families in Voucher HO, Section 8 Family Self-Sufficiency or Section 8 MTW HO programs HUD will calculate and disburse, based on PIC reporting - no PHA application required – MF Housing Conversions: $200 for each unit occupied on the date of the eligibility event HUD will calculate – no separate PHA application required for fees

44. Administrative Fees Special Fees/Set-Aside: – Special Portability Fees: PHAs administering port-in vouchers which equal 20% or more of the PHA’s total leased vouchers as of December 31, 2013 Funding: 5% of PHA’s Column A fee rate for each eligible port-in voucher for 12 months HUD will calculate and disburse, based on portability data in PIC and leased data from VMS; no PHA application required All special fees subject to availability of funds

45. Veterans Affairs Supportive Housing FFY 2013 VASH Funding: $74,850,000 FFY 2014 VASH Funding: $75,000,000 Allocated based on need of homeless veterans and adjusted by performance data from PHAs and VA Medical Centers Once allocations are identified, HUD will invite PHAs to apply for the vouchers, based on location and administrative performance

46. 5 Year Mainstream Changes for CY 2014: – 5 Year Mainstream voucher renewals will be based on actual HAP expenses as reported in VMS for CY 2013, in the same manner as other vouchers – Administrative fees will be based on leasing as of the first of each month and will be prorated at the same level as fees for other vouchers – Additional information will be provided to agencies administering Mainstream vouchers

47. HCVP Financial Management PHAs must manage their programs in a responsible manner to enable them to serve families within their CY 2014 allocations, NRA and reserves, and within voucher baselines. PIH Notice 2011-28 provides guidance on cost-savings measures PHAs may take to reduce financial shortfalls in the HCV program. PIH Notice 2013-28 stipulates that PHAs may not use outside funding sources to maintain or increase leasing, but only to prevent terminations; prior HUD approval required to use outside funding and to report in VMS the expenses it supports

48. HCVP Financial Management In compliance with Treasury requirements, effective January 1, 2012, HUD implemented cash management procedures for the disbursement of HAP funds to PHAs under the HCV program. – disbursing only the funds required for current HAP costs results in the re-establishment of HUD-held program reserves, whereby excess HAP funds will remain obligated but undisbursed at the HUD level rather than held by the PHAs. – moves new budget authority into the program reserves if it is not needed for current costs, where it remains until needed for program expenses; not a recapture – NRA funds held by PHAs will be transitioned in to HUD- held program reserves and will be available for use also

49. Transition of NRA to Program Reserves Required to ensure that HUD is not advancing funds in excess of each PHA’s immediate needs, and PHAs are not holding excess funds. Will occur in CY 2014, as follows: – PHAs were advised to ensure the accuracy of its NRA balance reported in VMS as of December 31, 2013 – Balance will be reduced by any needed use for those funds prior to the transition date and by any amount that HUD offsets for reallocation from the PHA as part of the CY 2014 renewal funding allocation process – HUD will review the reported balances as adjusted and will determine those cases where further review is needed – Transition anticipated to begin May 1, 2014, via reduction of monthly disbursements

50. Transition of NRA to Program Reserves – If PHA’s NRA balance differs materially from HUD- maintained NRA balance, HUD may delay the transition as necessary to resolve the discrepancy – If PHA reports it cannot meet its HAP expenses if transition begins May 1, HUD may delay the transition as necessary to resolve the cash issue – PHA must contact FMC financial analyst and must submit documentation to support its balance and HUD may conduct reviews to verify balance and cash on hand – Any change in the amount of NRA to be transitioned will be reflected in a later disbursement – Detailed guidance will be provided

51. Transition of NRA to Program Reserves PHAs must ensure that the NRA balances are readily available in cash, as the PHA will need the funds to support HAP expenses in lieu of disbursement from HUD in the same amount for the month of May, and any later months if needed to complete the transition in 2014. This transition of the remaining NRA to Program Reserves is a separate activity from the offset and re-allocation process – The offset for re-allocation will be made prior to the transition of the NRA, with only the remaining balance then subject to transition to the Program Reserves – Transitioning the NRA to Program reserves does not constitute recapture – just moves the funds to the program reserves – Transitioned NRA funds are available for PHA use for HAP expenses

52. Questions? Any questions after this broadcast may be submitted to PIH.Financial.Management.Division@hud.gov Questions and answers of common interest will be posted to the HUD web site