Small Area Fair Market Rents: Briefing on Proposed HUD Rule

New York City’s Voucher Programs New York City has 3 voucher programs: NYCHA, HPD, DHCR (NY State) About 120,000 vouchers Voucher holders: About half are elderly or disabled households Most live in the Bronx or Brooklyn Most earn less than 30% AMI

Section 8 Program Overview Tenant-based and project-based Tenant pays 30% of adjusted income to landlord Agency pays balance of rent to the landlord Maximum amount of rental subsidy amount is called the payment standard. Payment standard is set between 90-110% of the metropolitan fair market rent (FMR) For New York City, the FMR for a 2-Bedroom is $1,571

Example: Rent Payment Calculation Fair Market Rent: $1,500 Voucher Payment Standard $1,500 Monthly Rent for Unit 30% of Tenant’s Monthly Income $300 Agency Rent Subsidy $1,200 Total Tenant Share

Fair Market Rents HUD sets the FMRs annually using Census data FMR is 40th percentile of median rents in the metropolitan area NY metro area includes New York City, Putnam and Rockland counties Problem: FMRs do not reflect differences in the cost of housing within metro areas (e.g., a voucher is worth the same in Park Slope and East New York, even though rents are very different) HUD’s proposed solution: set rents at the zip code level so that families can access neighborhoods with more opportunities (higher performing schools, quality healthcare, and lower crime rates).

HUD’s Proposed SAFMR Rule FMRs would be set by ZIP codes instead of metro area 31 metro areas would be mandated to use SAFMRs, including NYC New York City has around 185 residential ZIPs Idea is that voucher holders will have the ability to move to higher-opportunity, higher-cost neighborhoods Policy would have a number of unintended negative consequences in New York City

Lower FMRs mean lower rent subsidy When the FMR decreases, the amount of rental subsidy that the agencies can pay also decreases Tenant may have to pay more rent FMR & rent subsidy decrease Tenant portion of rent increases

Example of Impact on Tenant’s Rent Current FMR: $1,500 SAFMR: $1,300 Payment Standard $1,500 $1,300 Monthly Rent 30% Tenant’s Income $300 Agency Payment $1,200 $1,000 Additional Tenant Rent $200 Total Tenant Share $500

Concerns about SAFMRs in NYC Market Rental vacancy rate is 3.45% - nowhere to move FMR data doesn’t keep pace with gentrifying neighborhoods Housing preservation and new development via project-based vouchers ZIP codes don’t represent neighborhoods

Effect of SAFMRs in NYC Existing tenants could see an increase of hundreds of dollars in their rent portion. This means they would pay more than 30% of their income in rent to stay in their unit. 55,605 households in New York City may pay more in rent under the proposal.

ZIPs with FMR increase or decrease by Borough 65% of ZIPs in the City would have a decrease in FMR (meaning the amount of the rental subsidy decreases)

FMR increases & decreases under the proposed rule, relative to current FMR

Examples of lower SAFMRs in Gentrifying Neighborhoods Zip Code 100% SAFMR, 2 BR 100% FMR, 2 BR Difference Lower East Side/ Chinatown 10002 $1,130 $1,571 -$441 Central Harlem 10026 $1,270 -$301 Bedford-Stuyvesant 11216 $1,330 -$241 This is a sample calculation of potential rent burden. Impact numbers discussed in previous slides use actual individual level analysis of rent burden.

Impact on Existing Tenants: Borough & Bedroom Size Tenants Impacted by Borough Borough Impacted Households Percentage of Total Impacted Households Manhattan 4,845 9% Bronx 31,265 56% Brooklyn 16,621 30% Queens 2,208 4% Staten Island 666 1% Total 55,605 100% Tenants Impacted by Bedroom Size Unit Bedrooms Impacted Households Percentage of Total Impacted Households 1,744 3% 1 15,281 27% 2 21,672 39% 3 14,019 25% 4 2,345 4% 5-8 545 1% Total 55,606 100%

Impact on Existing Tenants: Household Type

ZIP Codes with Highest Number of Impacted Households Borough Zip Neighborhood Impacted Households Bronx 10467 Norwood-Williamsbridge 2,810 10453 Morris Heights 2,797 10458 Belmont-Fordham-Bedford Park 2,757 10468 University Heights-Kingsbridge 2,668 10457 Tremont 2,493 10452 Highbridge 2,273 10456 Morrisania 2,083 Brooklyn 11207 East New York 1,863 10460 West Farms-Crotona Park East 1,815 10462 Parkchester-Van Nest 1,552

ZIP Codes with Highest Average Increase in Tenant Share Borough Zip* Neighborhood Average Increase in Tenant Share % Median of New Rent Burden Queens 11693 Hammels-Broad Channel $403 69% Bronx 10473 Soundview-Clason Point $334 51% 10475 Co-op City - Eastchester $330 59% 11692 Arverne $313 62% Brooklyn 11224 Coney Island $277 55% 10454 Mott-Haven-Port Morris $268 56% Manhattan 10030 Central Harlem $266 31% 10039 $262 52% 10455 Melrose-Longwood $256 50% 10456 Morrisania $235 53% *By zip codes with at least 50 impacted households.

H.R. 3700 (HOTMA) Newly-passed legislation allows PHAs to keep existing voucher holders at the previous year’s FMR if the new FMR is lower Example: If FMR was $1,500 in 2016 and $1,200 in 2017, existing voucher holders would still be at the 2016 level While this protects existing voucher holders from SAFMR impact, it also has budget implications for the housing agencies No new funding to implement SAFMRs

Recommendations to HUD Exclude NYC based on low-vacancy rate Revise SAFMR formula for setting rents Exclude PBVs from SAFMRs Support alternative mobility models tailored to local needs

What happens next? HPD and NYCHA submitted a joint response to HUD on August 15th (end of official comment period) After comment period ends, HUD responds to comments and issues a final rule (may or may not be different than proposed rule)

Actions Communicate your concerns to elected officials or other industry leaders Send letter to HUD Secretary (may submit after Aug. 15th)