Housing Choice Voucher Program Cuyahoga Metropolitan Housing Authority

Rent Determination

Parma LibrarySeptember 30, 2014

Denita Johnson, Deputy Director of HCVP

Voucher Term & Size Briefing Packet Request for Tenancy Approval {intake process} Important Facts Rent Affordability Calculator

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Topics of Discussion,Putting all the pieces together

Voucher Term

Voucher TermoValid for a period of: •New Admissions-60 days from the date the

voucher was issued•Movers-120 days from the date of issuance

oExtensions may be granted by the Housing Authority for reasonable accommodations purposes

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Voucher Size0Voucher Size

0The number of bedrooms the family is eligible to receive

0A family can go up a voucher size or down a voucher size

0Final rent is determined on the lower of the two

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Briefing Packet

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

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Briefing Packet

The packet consists of the following:

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0 Landlord Instructions0 Request for Tenancy Approval

(RFTA)0 Landlord Certification0 W-90 Agent Form0 Sample Lease (lease is on the

CMHA website)

0 Lead based paint disclosure0 Property built before Jan 1, 19780 30 day notice of intent to vacate0 Building Rent Form0 Addendum for Drug Free

Housing0 Tenancy Addendum0 Landlord Fraud Letter

When the Family Finds A Unit… what happens?

The owner and the family must complete the RFTA packet in its entirety, inconsistent information will cause delay in the process.

The completed RFTA packet is submitted to the HCVP, Room 101 (8:00 a.m. – 6:00 p.m.)

RFTA process begins

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RFTA

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RFTA intake process

0 HCVP WILL:• Review the RFTA packet; all forms must be signed.• Check to confirm that the unit isn’t in foreclosure

0 HCVP WILL NOT:• Provide a preliminary rent offer• Provide an inspection date

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Important Facts:

0 Submitting multiple RFTA packets 0 We will only accept one(1) RFTA packet

0 If the unit is a double or multi-family, please indicate UP or DOWN or the unit number

0 Submitting multiple RFTA’s could lead to all RFTA’s being cancelled

0 Inspections0 Unit must be ready for HQS inspections0 If the unit fails HQS inspections twice, the RFTA

will be cancelled10

Important Facts cont.:

0 Contract signing days are held twice a month

0 Move-in Date• Is established by the Contract Specialist, Owner, and

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

Important Facts cont.:

0 New Landlord Briefing0 All new landlords must attend the briefing before

signing the housing assistance contract with HCVP.

0 The workshops are held three or more times a month:0 Morning 0 Afternoon0 Saturday

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Important Facts cont.:

0 BREAKING THE CONTRACT EARLY? 0 The Housing Assistance Payment (HAP) Contract is

for a 1-year term. 0 Mutual agreements between the landlord and

tenant to break the lease early will not be honored by the HCVP.

0 A change in ownership requires assumption of the existing contract in the first year of the contract.

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Three-Way Partnership

CMHA FAMILY

OWNER

Vouch

er

Lease

HAP Contra

ct

Three-Way Partnership

0 HCVP Responsibilities:0 Determine if the family is eligible to participate

in the HCVP.0 Determine the rental amount of the unit.0 Determine the family’s portion of the rent to

owner.0 Inspect the subsidized unit annually.0 Issue housing assistance payments.

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Three-Way Partnership Cont.

0 Owner’s Responsibilities:0 Screen families to determine their suitability

as a renter0 Maintain the housing unit by making

necessary repairs0 Comply with the terms of the Housing

Assistance Payment (HAP) Contract0 Enforce the lease

0 CMHA is not a party to the lease16

Three-Way Partnership Cont.

0 Family’s Responsibilities:

0 Abide by the terms of the lease

0 Pay rent on time and take care of the housing unit

0 Provide any utilities and maintain appliances which are not furnished by the owner

0 The family is responsible for damages to the unit or premises beyond normal wear and tear which results in a breach of the HQS.

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Rent Affordability Calculator

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Interactive tool to determine affordability. Available on the CMHA website, www.cmha.net

Rent Affordability Calculator continued…

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Rent Affordability Calculator continued…

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Rent Affordability Calculator continued…

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Rent Determination

Ava Decembly

OverviewBefore the Public Housing Authority (PHA) establishes a Housing Assistance Payment (HAP) contract with a landlord, the following must occur:

1. Unit must pass an inspection;

2. Rent reasonableness test must be conducted; and

3. Final rent has to be affordable

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Rent Determination Factors

Rent determination process reflects:

Fair Market Rent

Payment Standards

Utility Allowances

Income

Reasonable Rent

Affordability 24

Fair Market Rents24 CFR § 888.111

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

0 Provides broader range of housing opportunities

0 Low-poverty areas

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Fair Market Rents24 CFR § 888.111

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Are not reasonable rent

Primary function is to control costs

Published by bedroom size

Basis for determining the payment standards

Payment Standards 24 CFR § 982.402

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• Represents maximum allowable amount PHA can contribute towards the rent Entire amount may not necessarily be contributed.

• Based on the FMRs

• Established by PHA

• Individual payment standard created for each bedroom size

• Must fall within 90% - 110% of the FMRs

Applicable Payment Standard

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Payment standard used to determine who contributes what towards the rento PHA subsidy standards used to determine eligible

voucher size

Once unit selected, applicable payment standard comes into play

Compare unit size to eligible voucher sizeo Lower of the two determines applicable payment standard

used in the rent calculation

Applicable Payment Standard

Important affordability concept

0 Lesser of unit and eligible voucher sizes prevail

Unit size 3 $1,026

Voucher size 2

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$ 783

Factor in determining portions contributed towards the final rent

(HAP) + (Tenant Rent to Landlord) = (Contract Rent)

PHA portion + Tenant portion = Final Rent

FMR’s and Payment Standards

BRSize

FY 2013FMR

FY 2013PS

PS ÷FMR

FY 2014FMR

FY2014PS

PS ÷FMR

1234

$ 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

$ 673$ 783$1,026$1,155

106.5%97.8%95.6%

104.2%

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•PHAs must change if outside of HUD’s 90%-110% guidelines FY2014 payment standards have remained the same

• PHA’s decision to change payment standards based on:a. Budget constraintsb. Utilizationc. Create housing opportunities

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

31Consumption * Rates

Utility Allowance Schedule

0 HUD requirement

Must revise whenever local rates change +/- 10%Factor in determining reasonable rent, gross rent, and tenant rent to ownerRecent change in how determined for rent calculation

Previously unit size determined which allowances to useChanges to the LOWER of the unit versus voucher size will determine which allowances to use

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Utility Allowance Schedule CONTINUED…

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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 An updated schedule will be effective on

January 1, 2015

CMHA updates annually regardless

Utility Allowance ScheduleEffective January 1, 2014

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 108 108 108 108

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1

2

3

How to read: Step 1: Unit sizeStep 2: Fuel sourceStep 3: Structure type

Utility Reimbursement (UAP)

Who’s eligible

Based on income0 Usually very low income0 Not automatic, must reside in a unit to receive

How determined0 Amount by which the UA exceeds the TTP

Participant’s TTP Minus Utility Allowance

0 Less any additional monies tenant is required to contribute towards the rent (Gross Rent Minus Payment Standard)

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Change in Utility Responsibility

Requirements for changing:

Landlord must submit formal request

PHA must conduct a new rent reasonableness test taking the revised utility responsibility into consideration

0 May result in revised rent, 0 Will result in new HAP contract0 In most cases owner request shifts their responsibility over to

tenant

More than likely will result in rent decrease due to:

0 Change in responsibility0 Market changes0 Utility allowances revisions0 Affordability 36

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 37

IncomeChange

Client’sPortion

PHA’sPortion

Increase

Decrease

Initial Family Contribution

1. 10% of Gross Annual Income

2. 30% of Annual Adjusted Income

3. Minimum Rent Greater of the 3

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1. 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.

Reasonable Rent (RR)

Units rated based on:

1. Comparable unassisted rents

2. Unit attributes

a. Structure typeb. Unit sizec. Conditiond. Location

3. Utility responsibility39

Reasonable Rent (RR)

Sources for comparables

1.Advertisements• Local newspapers

2.Internet• Online rental websites

3.Real estate and apartment associations

4.Apartment complexes

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Reasonable Rent24 CFR §982.507

PHA must determine if rent is reasonable before lease approval

Must be re-determined:

1.At HUD’s direction

2. Prior to rent adjustments

3. If 5% decrease in FMRs in effect 60 days before contract anniversary

4. PHA may re-determine at any other time.

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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.

Gross Rent

Rent to Owner PLUS Tenant-paid utilities

Example: Rent to Owner $1,000 Tenant-paid Utilities + 200

Gross Rent = $ 1,200

Factor in determining if tenant must contribute additional dollars towards the contract rent.

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Affordability

0 Only applies to new contracts

0 Rent Burden0 Household’s total contribution towards housing costs as

percentage of household’s TTP

0 Cannot exceed 40%0 Initial year of contract

0 Amount gross rent exceeds payment standard0 Represents additional amount for which tenant’s responsible

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Gross Rent > Pmt. Std. Pmt. Std. > Gross Rent

Tenant contributes additional amount.

There is no additional amount and the rent burden = 30%.

Affordability Example

Gross rent [$1,000 (rent) + $200 (UA)] $1,200Payment Standard [3BR] - $1,026

(Additional Tenant Payment)

[(($9,200 (adjusted income)* 0.30) + ($174 * 12))] =

($2,760 + $2,088) = $4,848

$4,848 ÷ $9,200 = 52.7%

Rent Burden = 53%

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$174

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.

TTP

Affordability Factors

1. Tenant- vs. Landlord-paid utilities

2. Payment standards

a. Applicable

3. Income

a. Low-income rental assistance program

b. 84% of the new admissions to program at extremely low income level.

4. Over-housed (In unit with more bedrooms than eligible for)

5. Rents high in comparison to tenant income

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HUD Income LimitsBR Size 1 2 3 4

Extremely Low Income $13,200 $15,050 $16,950 $18,800

Rent Determination

0 Final rent determined by PHA

0 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.

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Rent Determination

Rents will change for:

New contracts (Movers)

Change in utility responsibility

Requested rent adjustments

0 Could be less than the current rent based on rent reasonableness test results

Required based on HUD’s 5% rule

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Building Rent

Building serves as the market

0 Must have:

0 Minimum 3 unassisted units paying requested rents

0 Similarly sized units

0 Within same property/complex

0 If doesn’t meet the above criteria will have to conduct regular rent reasonableness test.

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Building Rent

0 Landlord must provide requested information

0 CMHA Building Rent Form

0 Rent roll/schedule (proof of rents charged)0 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.”0 Same affordability rule applies for initial year of contract

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In summary:

Contract rent determined using a combination of unit and client related data.

1.Rent reasonableness based upon:0 Utilities0 Unit attributes0 Comparables

2.Client data0 Income0 Voucher size

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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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