Title
Sustainability of Section 8 Voucher Program
Description
Request authorization for the City Manager, or his designee, to issue a Request for Proposals (RFP) to contract out management of the Section 8 Voucher program to a private firm experienced in U.S. Department of Housing and Urban Development (HUD) regulations and program requirements.
Report
Summary
Section 8 is HUD's largest program providing housing assistance to very low income individuals and families, the elderly, and disabled. The Housing Department, which serves as the Public Housing Authority for the City of Phoenix, has been administering the Section 8 program since 1978. The Section 8 program is a rental subsidy; Section 8 voucher holders pay thirty percent of their adjusted gross income toward rent, and the Housing Department directly pays private landlords the balance of the rent. In addition, HUD provides Section 8 Administrative fees to fund the operating costs of administering the program including staff salaries and administrative costs.
HUD calculates Administrative fees based on a formula intended to provide enough funds to cover all operating costs. In the past, this formula has provided sufficient funding to cover all administrative costs for the Phoenix Section 8 program and allow the Housing Department to establish a reserve account. As a budget reduction and a method to reduce these reserves, the federal government has been reducing Administrative fees since 2011. This funding reduction is called "proration" and the reduction in the Administrative fee has ranged from sixty-nine percent to eight-two percent of the funding formula. This loss in Administrative fees has had a significant impact. For the past five fiscal years, Housing Department annual deficits have ranged between $438,800 and $759,400. The Housing Department has used its Section 8 reserves to cover these losses and continue operations. However, the reserves are now depleted, and there is no other funding or HUD strategy to offset the losses and sustain the program.
During these years of reduced Administrative fees, HUD awarded an additional 408 vouchers to the Housing Department, resulting in current caseloads of 400 to 500 cases per employee. To keep costs as low as possible, the Phoenix Section 8 program operates with fewer management staff than other similarly-sized Public Housing Authorities. Additional reductions in staff would be detrimental to the performance and management of this program. At this time, a significant change or additional source of funding is required to continue administering the Section 8 program. The following three options were considered to address the long term sustainability of this program:
1) Seek Council approval for up to $1 million in City General Funds annually to subsidize the program.
2) Move to Private Contract Management: utilize a vendor to administer all operations and accounting while maintaining minimal City staff to manage contract and financial compliance. Remaining positions would be shifted to other Housing Department programs or placed in other City departments. This is a cost-neutral option with no losses projected.
3) Relinquish the Program to HUD (Housing Department would discontinue managing the Phoenix Section 8 program): HUD could contract the program out, give it to another local Public Housing Authority to administer, or discontinue it altogether. Relinquishing the program would cause the City to lose local control of voucher priorities such as set asides for homeless veterans, victims of domestic violence and human trafficking, chronically homeless, senior and disabled, and other special needs populations. In addition the City would no longer be able to designate Project-Based Vouchers to provide incentives for new affordable housing construction.
To continue this critical service and retain control over the special population priority vouchers, staff recommends issuing a RFP for the private contract management of the Housing Department's Section 8 program. This is a cost-neutral solution as contract vendors can manage the Program for a percentage of the Administrative fee, even with proration reductions. Contracting this program will provide a sustainable way forward, allowing for efficiencies to be introduced that are not available under the current structure such as technology, process, and systems improvements that would potentially house more low-income Phoenix residents.
HUD's reduction in Administrative fees paid to Public Housing Authorities has not solely impacted the Phoenix Housing Department. In the last few years, six major Public Housing Authorities including the Buffalo Municipal Housing Authority, Chicago Housing Authority, Memphis Housing Authority, Newark Housing Authority, Miami-Dade County, and Westchester County Housing Authority have contracted this program, which has led to the successful management and sustainability of their Section 8 programs.
The Housing Department's Section 8 program has 34 authorized full-time employees (FTE's), seven of which are vacant. Temporary agency staff are currently utilized to offset the vacant positions. The Housing Department will work closely with the Human Resources Department and the respective bargaining units to reassign and place existing staff. The Housing Department will also work with the successful proposer to interview and offer jobs to staff who are interested in employment with the private company.
Procurement Information
If authorized, the RFP is expected to be issued in late Fall 2017. Staff will negotiate business terms with the recommended proposer, which will be brought to the Sustainability, Housing, Efficiency and Neighborhoods Subcommittee for review and recommendation, and then to the full City Council for approval.
Financial Impact
There is no impact to the General Fund. Funding is provided by HUD through Section 8 Voucher program Administrative fees.
Concurrence/Previous Council Action
This item was heard at the Sustainability, Housing, Efficiency and Neighborhoods Subcommittee on Sept. 19, 2017, and approval was recommended by a vote of 4-0.
Department
Responsible Department
This item is submitted by Deputy City Manager Deanna Jonovich and the Housing Department.