Privately Owned Project-Based Housing
Program Summaries and Purposes
Privately owned, federally subsidized housing comprises over 42,000 low-income households in Minnesota. Of those households, 11,000 rural units take part in the USDA’s Rural Development 515 program . The remaining 31,000 units fall under the umbrella of the project-based Section-8 program.
During the 1960’s and 1970’s, The United States Department of Housing and Urban Development (HUD) encouraged private developers to build affordable housing through low-interest HUD-insured loans. In exchange for the loans, landlords promised to continually accept low income tenants for a specified number of years. Contracts ranged from 15 years to 40 years.
By the mid-1980’s, some owners began paying off their loans, releasing them from their obligation to provide affordable housing. Concurrently, contracts previously secured by HUD for project-based section-8 began to expire or were allowed to expire prematurely.
While this trend has slowed in recent years, many units are still at risk, presenting their tenants with extreme difficulties. The federal government is required to provide enhanced-vouchers to compensate for the loss of affordable housing stock. However, these programs have proven incapable of meeting the challenges posed by the decline in available affordable housing. 2004 changes to Section 8’s funding structure gutted several Regional Housing Authorities (RHAs) while disallowing RHAs with a surplus from distributing capitol to meet needs. As voucher systems are renewed yearly, tenants shifted from a property-based to voucher-based affordable housing face:
- More frequent cuts
- Waitlists to get into a new apartment sometimes extending over a decade
- Limited ability to move
- Extremely rigid occupancy requirements
In addition, years of underfunding have left many buildings providing affordable housing in states of neglect. However, federal legislation prohibits construction of new project-based section 8 housing or the transference of a Project-Based Section 8 Contract to a building not already in the program. Therefore, concerned advocates have focused their efforts on preserving existing buildings providing project-based Section 8 affordable housing. Preserving affordable housing has two distinct dimensions:
- Performing physical maintenance on declining buildings that tenants rely on for affordable housing
- Preventing buildings previously supporting affordable housing from reverting to market-priced housing.
HUD’s budget is under extreme pressure. Cuts to the Section 8 program, including to project-based Section 8, could result in the loss of thousands of affordable rental homes in Minnesota and across the U.S. as a whole. Section 8 funding provides housing for some of the most vulnerable households in America. Program cuts will create a housing crisis for those least equipped to respond. For every 1,000 Section 8 units terminated, 530 seniors and 170 disabled individuals will face the loss of their home.
What Advocates Need to Know
Maturity of HUD-assisted mortgages and expiration of project-based Section 8 contracts are usually predictable events: for most project-based properties the relevant dates can be determined by reviewing relevant data on the HUD website or from the National Housing Trust (www.nhtinc.org). While HUD and USDA have limited staff and funding dedicated to preservation, transactions to preserve affordable rental housing are usually undertaken and financed by mission-driven organizations with particular expertise in this area. The process of preserving affordable rental housing is complex, and successful preservation requires the active participation of many stakeholders. The most successful local efforts include early identification of properties at risk of imminent conversion, an active partnership of tenants, preservation developers (usually regional or national nonprofits with a track record of preservation), local HUD officials, state and local housing officials, and lenders and investors with a shared commitment to preserving affordable rental housing.