HUDBlast December 29, 2006

Funding For Section 8 Project-Based Contracts

On December 22, 2006, Lanier M. Hylton, Director, Office of Housing Assistance and Contract Administration Oversight provided the following update regarding funding for Section 8 contracts. 

Last week, under the current Continuing Resolution, the Department of Housing and Urban Development received funding for Section 8 project-based contracts. The Department's first priority is to fund renewal contracts that have not received payments since October 1, 2006.

We are expeditiously funding these contracts and owners will begin receiving payments within the next two weeks.

We anticipate that all funding for renewal contracts will be in place no later than January 3, 2007. Remaining contracts, that need additional funds in order to pay currently suspended vouchers, will be funded no later than January 5, 2007.

Please note: Timely funding of the renewal contracts is contingent upon the owner's timely execution of the contract document.

CA and HUD field offices have been encouraged to ensure that someone is available to assist in the execution of these renewals.

HUD also initiated a conference call with appropriate stakeholders to provide additional clarification.  Colleen Bloom at the American Association of Homes and Services for the Aged – AAHSA (www.aahsa.org) participated in the call and provided us with some clarification. 

Here’s the latest relative to specific Section 8 contract payment types and situations:

  • For Section 8 contracts that have been in effect but were not paid in October, November or December due to shortfalls, all recognized outstanding contract shortfalls were covered under the last CR and were sent out to the field office by the 2nd week in Dec.  Those in this category should have record of the funds having reached their project accounts. 
  • For Section 8 contracts that expired and should be renewed (initial or subsequent) October 1, 2006 – March 30, 2007, HUD HQ has established an expedited renewal and funding process with a FULL 12-mos of funding for each contract.

Many contract specific allocations of this type were already completed as of Dec 21, with another next batch processing coming up next Thursday, Jan 4 and should receive confirmation of available funds within 48-72 hours.  In order to accomplish this, however, PBCA’s and/or HUD must secure and certify that owner signatures have been received, and will concurrently obligate/execute the contracts on either Dec 21 or Jan 4.  If you have a pending expired contract and have not yet received it for signature, please contact your PBCA or HUD field office promptly.

  • In-effect FY06 contract renewals expecting to go shortfall in January should be covered by a funding release (sufficient for remainder of 12 months obligation) issued to the field earlier this week, which should hit project accounts by tomorrow, Friday, Dec 29, at the latest.
  • Section 8 contracts expiring March 31 and beyond will be covered in the next CR (or whatever funding mechanism Congress settles on for the remainder of the HUD FY07 budget).

PRAC (202 and 811) contract shortfalls and renewals

Though funding is still pending, HUD HQ staff expects by 12/29/2006 to have funding allocations and a process in place to cover ALL shortfalls AND renewals (with a full 12-mos of funding) for Section 202/PRAC contracts which expire before Jan 15 for 202s and for Section 811/PRACs by Jan 31.   PRAC contract renewals after those dates will be covered by the next CR (or whatever funding mechanism Congress settles on for the remainder of the HUD FY07 budget).

Provided the same expedited processing for Section 8 is allowed, something also expected to be determined by December 29, contract obligations should take place very shortly, and funding should hit project accounts within the expedited 48 – 72 hour time frame.  So, conservatively, we would estimate outstanding PRAC payments and renewals to be available to affected PRAC projects by mid-January. 

If you’re concerned (or something stronger) about the recurring funding issues, I urge you to invest the few moments it takes to let your elected officials in Congress know how you feel.  AAHSA’s model letter on rental subsidy funding gaps was taken down but should be reposted by Tuesday of next week (Jan 2) on Contact Congress/Capwiz at http://capwiz.com/aahsa/home/ .

CONTRACT RENEWAL POLICY CHANGES

HUD has posted several pages changes to the Section 8 Renewal Guide.  The changes dated Dec 12 were posted on the Multifamily Section 8 expiring contracts webpage. These page changes, including a brief summary, can be found at http://www.hud.gov/offices/hsg/mfh/exp/guide/s8renewpgchg121206.pdf

According to the posted changes, HUD policy will now require that the “lesser of” test be used EVERY TIME an exception project’s Section 8 contract is renewed under Option 4.    As the revised guidebook reads, this “lesser of” restriction does not apply to annual adjustments within a current contract “subject to annual appropriations”, and HUD staff indicated that they do not expect this policy to apply to contract renewals already in process (though the guidebook changes fail to address any sort of transition period, so there is concern about actual practices/interpretations from the field). 

Still, there is concern that, under the new provisions, all projects where owner/operators have elected Option 4 annual renewals, or are currently due for another renewal of a previous 5-year contract AND where projected budget costs exceed current budget amounts (adjusted by OCAF), will be forced to operate at a loss.  

Under this scenario, any of the Option 4 eligible non-profits who may be experiencing something like the recent spikes in insurance costs and utilities will find their budgets in a significant deficit position.    This makes the survey, referenced in item 3, all the more critical.

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