Housing Authority Faces Unprecedented Crunch
WASHINGTON, Dec. 9, 2004-Joseph Finnerty, executive director of the New Bedford Housing Authority, is ready to throw up his hands: The federal government has tossed him a math problem to which there is no good answer.
“We really are caught between a rock and a hard place,” he says. “The numbers just don’t make sense.”
The swirling numbers pertain to Section 8 vouchers, which the Housing Authority administers and the government pays for. These vouchers allow low-income families to choose their apartment with certificate in hand, and pay only 30 to 40 percent of their income in rent.
The government pays the remainder, but only up to a certain guideline: the area’s fair market rent, which is supposed to represent the 40 th percentile of rental costs in the area (meaning 60 percent of rentals would be more expensive than the fair market rent).
That is where the equation has gotten tricky for New Bedford.
In October, the Department of Housing and Urban Development determined that New Bedford’s fair market rent had dropped by as much as 14 to 24 percent from the year before.
Change had been minimal in previous years, making this is an unprecedented shift – one that leaves the Housing Authority to cope under a tighter budget.
And Finnerty, who believes these figures inaccurately portray the cost of renting in the area, says his agency will have only two choices under its already-tight budget: They can either deny more applicants the certificates that lead to affordable new homes or they can force others, already on the program, to pick up the tab.
“People are going to have a very hard time finding safe, sanitary housing at that price,” Finnerty said.
It was a sentiment echoed by several politicians and housing experts. Rep. Barney Frank, D-Mass., for example, a ranking Democrat on the House Financial Services Committee, wrote HUD requesting a reevaluation of New Bedford’s figures.
“We are very concerned about the rents in New Bedford,” said Kay Gibbs communications director for the Democratic staff of the committee. “New Bedford has a legitimate concern to say that they don’t feel that all that could have been done has been done.”
Critics point to discrepancies between the figures for New Bedford and the nearby city of Fall River, where fair market rents increased by about 25 percent. In New Bedford, they decreased by about 18 percent.
Steven Beauregard, director of leased housing for the authority, noted in a letter to HUD that Fall River has for the past five years averaged 13 percent below New Bedford in regard to fair market rent values.
“Amazing, amazing, amazing,” said Finnerty. “New Bedford and Fall River are usually referred to as sister cities, because geographically they have the same demographics. It just doesn’t make sense that the fair market rent in the Fall River area would increase.while New Bedford’s would decrease. It is just illogical.”
The repercussions of the fair market rent cuts and area discrepancies are already being felt. Several New Bedford area landlords have notified the Authority that they might have to opt out of the program.
Claremont Cos., for example, which manages Rockdale West and Buttonwood Acres in New Bedford and Sol-E-Mar in South Dartmouth may stop accepting the vouchers. Overall throughout the area, the company runs about 1200 affordable housing units, two to three percent of which rent to individuals with vouchers from the Housing Authority
“An approximately 20 percent decrease in the rents makes it not feasible to participate in the [voucher] program,” said Patrick Carney, president and chief executive officer of Claremont. He pointed to the discrepancies between Fall River and New Bedford as evidence that HUD “has made a terrible mistake in their new 2005 rents.”
Claremont will continue to provide project-based Section 8 housing, which uses the same formula for assistance, but is set up directly between the rental property and HUD.
Yet Aaron Gornstein, executive director of Citizens’ Housing and Planning Association, a statewide advocacy group for affordable housing and community development, is worried that Carney’s reaction might be indicative of a future trend: landlords pulling out of the voucher program because of fears of losing money.
“It undermines the confidence in the program among landlords,” Gornstein said. “It is going to be more difficult to recruit more landlords into the program in the future.and to keep them on board now.”
Since HUD first published proposed figures in August, it has been under fire from affordable housing proponents and state representatives disputing the numbers. The result has been a long, drawn-out process in which HUD has figured and re-figured its methods for areas nationwide.
HUD has for years calculated its fair market rent figures using the most recent census data adjusted by inflation along with metropolitan statistics published by the White House’s Office of Management and Budget. These latter statistics were based on geographical areas defined by county lines, or in some exceptions, more flexible groupings of cities and towns.
New England had, for the most part, always relied on this exception.
But in August, the Office of Management and Budget started basing its metropolitan statistics on county lines alone.
Across Massachusetts, cities and towns with widely varying leasing prices were suddenly classified as having the same fair market rents. The number of geographic areas declined from 19 to 10, and New Bedford, which had previously comprised its own metropolitan area, joined the rest of Bristol County, which spans from Providence to Boston.
Five Bristol County communities saw their fair market rents drop more than half from the previous year, and most others, including New Bedford, saw drops from 18 to 36 percent, according to the Citizens’ Housing and Planning Association.
The move also had ripple effects for housing programs across the country, and more than 350 groups sent letters to HUD, urging it to reconsider its methods. The outcry prompted department officials to reverse course and in October they reverted to the 2004 geographical areas.
Combining the previous year’s geographical data, with the most updated census data, produced a set of numbers different from both the August proposals and the previous year’s figures.
HUD also agreed to perform random digit dialing surveys in 29 communities to further ensure the numbers’ accuracy. It had already completed 24 of these local market surveys, but had been using the August geographic guidelines.
These revisions solved the perceived problems in most areas, but not all – and not in New Bedford.
“The [latest figures] were only very slightly different, to the point where they could have just rubber stamped them and sent them back to us,” said Finnerty of the Housing Authority.
This fact did not escape the Housing Coalition, which specifically mentioned New Bedford in its letter to HUD, arguing that budget changes in April, coupled with the decreases in fair market rents, created a dire scenario for the city.
The organization also suggested HUD make major changes for determining, and publishing, fair market rents for the next time around.
“Taken as a whole, this year’s changes are not easily understood and they do not address the well-known criticisms of the old [fair market rates] in any meaningful or consistent way,” the Housing Coalition argued. “Values change[d] unpredictably last year to this, creating great uncertainty among tenants, administrators and advocates. In most cases.fairly arbitrary changes in geography and methodology appear to be at work.”
But in Massachusetts, next year might come too late.
“The numbers, as proposed, would be devastating to certain areas of the Commonwealth,” Beth Bresnahan, spokeswoman for the Massachusetts Department of Housing and Community Development, said in October, after the revisions. The department, in conjunction with the University of Massachusetts’s Donahue Institute, conducted its own investigation into HUD’s methodology.
According to Gornstein of the Citizens’ Housing and Planning Association, the majority of the fair market figures for Massachusetts are still “significantly below” the real world figures in most regions, and that non-metropolitan areas have been particularly hard-hit.
“In reviewing its choices,” Gornstein wrote in a letter to the department, “HUD needs to ask.what implementation is reversible, and what does irrevocable harm? If the [fair market rents] are too low now, and are allowed to stand pending review, then hundreds of families in Massachusetts and thousands nationwide will be displaced out of good housing.with many more displaced over time. This will be irrevocable.”
Eighty Massachusetts organizations ranging from housing authorities to research institutions signed on to the letter, as did the New Bedford Housing Authority.
Of particular significance to New Bedford, Gornstein argued that the process by which the random digit dialing surveys were used was flawed.
For some areas of Massachusetts, original survey results (under the discarded geographical definitions) were used, while in others, like New Bedford, fair market rents were updated based on the recent census data alone.
Gornstein pointed out that the survey results had been maintained in Fall River, but discarded in New Bedford. He asserted that this explains the difference in fair market rents between New Bedford and Fall River.
And according to the Housing Authority’s Beauregard, 96 percent of rental inventory taken for the Providence-Fall River survey fell within New Bedford’s property area.
“Our analysis suggested that the New Bedford area really needed its own RDD [random digit dialing] survey,” said Mike Goodman, director of economic and public policy research at the Donahue Institute, and one of the authors of the Department of Housing and Community Development’s report.
But with an already tight budget, the Housing Authority might find it difficult to fund a survey of its own.
The other hope is that HUD might add New Bedford to the list of cities and towns for which it is continuing to revise numbers. Department officials are considering it, said Kristine Foye, a spokeswoman for HUD’s New England regional office.
New Bedford will find out if that will happen when HUD responds to open comments in the next Federal Register, due out after the first of the year, according to Donna White of HUD.
But that leaves Finnerty, who has already decided not to issue any new vouchers for 2005, simply keeping his fingers crossed.
“Right now, we are operating as if the October 1 rents are the ones we will be living by,” he said.
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