In 2014, the federal government offered more than $50 billion in housing assistance intended for low-income families in the country. This assistance which may come in the form of preferential tax treatment or spending programs and rose by about 15% between 2000 and 2003 ( Boston, 2016 ). Regardless, this assistance has stayed somewhat stable at about $50 billion yearly. The federal government offers three main types of housing subsidy including The House Choice Voucher (HCV), Project-Based Rental Assistance (PBRA), and Public Housing. The government spent about $18billion in the HCV program in 2014. This program offers portable vouchers that are federally financed and which recipients can use to aid in paying for housing in the private market. During that same year, the government spent about $12 billion in the Project-Based Rental Assistance program and about $7 in the Public Housing program ( Boston, 2016 ). The PBRA program offers federally contracted and subsidized rent to identified housing developments in the private market while the Public Housing Program provides federally subsidized rent in publicly owned and managed developments. This paper evaluates the Project-Based Rental Assistance program in order to establish its effectiveness for low-income households in the country.
Project-Based Rental Assistance
The Project-Based Rental Assistance policy offers rental assistance on behalf of qualified renters living in identified multi-family rental housing. This program is administered through agreements between the owners of multi-family rental developments and the Department of Housing and Urban Development (HUD) ( Boston, 2016 ). The PBRA program works in such a way that the assistance remains with the housing development if a tenant decides to move. This constitutes a critical variation between the PBRA program and Tenant-Based Rental Assistance, where the support is attached to the renter. The sum payable to the owner is the difference between the stated contract rent and the sum a family is able to afford. The amount considered for the latter value is calculated as at least 30% of household income.
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Rationale for the Program
The federal government introduced the Project-Based Rental Assistance program mainly to preserve the affordability and environment of privately owned and operated housing developments. The Project-Based Rental Assistance program supports a standard of long-run inexpensive housing for low-income households in the United States ( Hanlon, 2017 ). This move has been found to be critical since the private standard of affordable rental housing available for low-income families has been gradually declining. The estimates provided by the Department of Housing and Urban Development when launching the project held that about two affordable units are available throughout the country per three very low-income households, and two per five significantly low-income households. Without PBRA, it is expected that there would be a wider gap in affordable and available rental housing. Without such subsidies, many private housing developments would either shift to markets with possibly big rental increments, which the existing households do not seem to afford or otherwise would be unable to get enough rental income to stay being kept in good state.
Additionally, in the absence of rental income, some housing developments may fail to honor their debts, including those mortgages that are backed by bonds provided by state housing finance organizations and those mortgages that are insured by the Federal Housing Administration (FHA).
The federal government also saw the need to reduce the number of households with serious housing needs and prevent homelessness. In 2013, about 8 million families had worst scenario housing needs, which represents an increase of more than 30% since 2007 ( Hanlon, 2017 ). These worst case needs are referred to as households with very low incomes, mostly below 50% of the median in their respective counties, who do not get government housing assistance and those who lived in below-standard conditions or paid more than half of their wages and salaries in rent, or both. It was also found that housing needs were evident throughout the United States and comprised all ethnic and racial communities, whether or not they resided in cities, suburbs, or rural regions.
Additionally, the federal government introduced the Project-Based Rental Assistance program to create more options for affordable rental housing found in a wide variety of groups. The maintenance of affordable rental housing assures that units will keep on being available in a broad variety of housing markets all over the country as vacancies appear ( Hanlon, 2017 ). Many housing developments are situated in developed regions, where low-income households would not be able to afford, whereas other developments are placed in areas that are likely to undergo downward investment and still provide well-preserved housing. Many developments also give much needed affordable housing in rural areas, since many of them have grown with funding through the USDA Rural Housing Service’s Section 515 Multi-family program.
Effectiveness of the Project-Based Rental Assistance Program
The PBRA program has preserved a standard of long-run affordable housing for low-income households in the United States while a long-term deficiency of affordable housing was becoming gradually severe. Between 2003 and 2013, the number of low-income families increased by about 20% ( Boston, 2016 ). At the same time, the sum of cheap units for these families declined by about 10%. Even with the current crisis concerning affordable housing, the Project-Based Rental Assistance program is responsible for more than 5% of the country’s affordable housing standard for low-income households.
The main problem with this program is that it requires a lot of money to finance. In 2016, HUD requested $10.76 billion to meet the program requirements of Project-Based Rental Assistance. This figures represent a $1.03 billion increase from the previous year and implies that this program will continue to be more expensive as the years go ( Boston, 2016 ). It has been found that some of the initial long-term PBRA contracts consisted of rents that surpassed the market rates ( Olsen, 2010 ). Regardless, Project-Based Rental Assistance is undergoing adjustments in order to cut on costs. Currently, most of the initial long-term contracts have expired, with only 1,200 out of 17,000 Project-Based Rental Assistance contracts financed from long-term appropriations. Furthermore, almost all of the remaining long-term contracts will have expired before 2022.
The Department of Housing and Urban Development has also suggested an overall provision that would develop a Pay for Success demonstration that enables this agency to get into long-term contracts to refund private investors who offer outspoken financing for energy efficacy retrofits for the PBRA program. The agency also suggests an overall provision that would trigger the revival of projects that contain use agreements as stipulated by the Low-income Housing Preservation and Resident Homeownership Act (LIHPRHA) ( Boston, 2016 ). This move would bring about an alignment of owner distribution and prepayment policies in LIHPRHA-managed housing developments as well as other Project-Based Rental Assistance properties in order to advance maintenance transactions.
Conclusion
Project-Based Rental Assistance is administered through agreements between the owners of multi-family rental developments and HUD. The federal government housing subsidy is payable to the owner of a housing development, and the amount is usually equal to the difference between the stated contract rent and the sum a family is able to afford. The main reason why the federal government opted for PBRA was to preserve the affordability and environment of privately owned and operated housing developments. Despite the current crisis involving affordable housing, the Project-Based Rental Assistance program is accountable for more than 5% of the country’s affordable housing standard for low-income families. There is a bright future for this program as most of the developments that have occurred are aimed at cutting on costs and maximizing benefits.
References
Boston, T. D. (2016). Housing Solutions for Low‐Income Families: The Standard for Quality and Sustainability. City & Community , 15 (4), 367-371.
Hanlon, J. (2017). The Origins of the Rental Assistance Demonstration Program and the End of Public Housing. Housing Policy Debate , 1-29.
Olsen, E. O. (2010). The cost-effectiveness of alternative methods of delivering housing subsidies.
