HUD's plan to transform rental assistance requires some transforming

Friday, July 9, 2010

IN HIS 1935 State of the Union address, Franklin Delano Roosevelt identified "the security of decent homes" as an essential part of the security of American families. Today, 4.5 million Americans depend on the federal government to pay their rent, either in public housing or in private subsidized housing.

But every year for more than a decade, the United States has lost 10,000 units of affordable housing to deterioration and demolition. Currently, waiting lists are long, conditions in many places are declining, and the Department of Housing and Urban Development estimates that the nation's public housing faces a backlog of $20 billion to $30 billion in capital needs.

The Obama administration's proposed solution, the Preservation, Enhancement, and Transformation of Rental Assistance Act, or PETRA, seeks to address these problems through a smorgasbord of changes. Under the current system, HUD supports public housing through 13 programs, offering direct operating and capital funds to local authorities in some areas and supplying vouchers and rental assistance in others. PETRA would replace this arrangement with a series of long-term rental assistance contracts, in which HUD agrees to subsidize rents at market rates. Eliminating the restrictions that accompany direct government operating and capital support would allow property owners to open their units to private investment, add units at market rates and leverage their assets to finance repairs.

PETRA also seeks to create a system of greater flexibility for tenants. While simplifying the housing application process and consolidating the programs that administer funds, it would also allow residents to move without losing their funding by letting them transform unit-based subsidies into vouchers.

Untangling more than 70 years' worth of regulations and programs is no easy task. Questions remain about what security the new plan offers "hard to house" tenants who have trouble securing space even in areas where openings are plentiful and vouchers easy to use. In cases where leveraging results in foreclosure, the HUD secretary can waive the use restrictions designating units as affordable housing "if necessary to generate lender interest." Such broad ability to make exceptions is troubling, as is the uncertain status of guaranteed rental housing when the 20-year contracts expire. There is also concern about future voucher funding. Dedicated housing units offer a physical testimony to the need for annual funding even when their tenants move; when people graduate from the voucher program, no such tangible reminder exists to urge that abandoned vouchers be renewed. PETRA is a promising attempt to enhance freedom and choice in, while innovatively attracting resources to, the public housing system, but it must address such concerns.

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