No, Minimum Rents Do Not “Encourage Financial Responsibility”
Posted by Gideon Anders on March 13, 2014
President Obama's 2015 Budget seeks to impose a $50 per month minimum rent on tenants living in USDA Rural Development (RD) financed Section 515 Rural Rental Housing and Section 514 and 516 Farm Labor Housing.
This will only impact extremely low-income households with adjusted annual incomes of less than $2,000. These are the absolute poorest households residing in RD housing. They typically do not have a regular source of income. RD indicates this requirement will affect about 42,000, or 10 percent, of the households living in RD rental housing.
What type of households are these?
- Elderly households. According to RD’s latest statistics, nearly 60 percent of households occupying RD rental housing are 62 years of age or older.
- Disabled Households. Households that have a person with a disability comprise nearly 48 percent of all RD rental households.
- Single Female Households. They comprise over 69 percent of total one person households in RD rental housing.
- Female Head of Multi-Person Households. They are nearly 75 percent of all multiperson RD rental households.
In other words, this change will impact the most destitute tenants who have the
least capacity to pay minimum rent. They are vulnerable households who temporarily or
permanently do not receive Social Security, Disability, or other assistance and have no
regular full time employment. They are simply unable to pay minimum rent.
Ironically, RD claims that the imposition of minimum rents will “encourage financial responsibility in tenants, increasing their opportunity for success on the path to homeownership.” Nothing could be further from the truth. Elderly and disabled persons
with less than $2,000 in annual income are more likely to become homeless from the
imposition of minimum rents than to become successful homeowners.
RD contends that residents in need will have hardship exemptions from the minimum rent requirements, as HUD tenants do. In fact, a 2010 HUD sponsored study found that the extension of HUD’s hardship exemptions was extremely rare. Among public housing authorities that had adopted minimum rents, 82 reported granting exemptions to less than 1 percent of families subject to minimum rent and only 5 percent of the agencies said that they had exempted more than 10 percent of eligible families.
There is no reason to believe that the experience of RD residents will be any different. Just as in the HUD programs, RD residents are not likely to become aware of the hardship exemptions or how they may qualify for them.
HUD is authorized to impose minimum rents on tenants in Project-based Section 8
housing, but, based on the population served, the RD Section 515 program is most
comparable to the HUD Section 202 elderly and Section 811 disabled housing programs. Congress has never adopted minimum rent requirements for either of these programs except when they are assisted by the HUD Project-based Section 8 program.
Indeed, Congress rejected the administration’s 2013 budget proposal to extend minimum rents to these developments. The HUD minimum rent provisions also do not apply to HUD assisted housing under its Rental Assistance, Rent Supplement, Section 221(d)(3) BMIR or Section 236 programs. Moreover, in the HUD project-based Section 8 subsidy programs, HUD only charges a $25 minimum rent, one-half of what RD is proposing.
RD estimates that if fully implemented, the imposition of minimum rents will ultimately generate $20 million in revenue. Given the fact that the Rental Assistance program alone costs the federal government over $1.1 billion, the savings is paltry.
The savings seems not to recognize that a significant number of households will qualify for hardship exemptions. If it did, the savings would decrease dramatically. In its 2015 Budget Explanatory Statement, RD states that “Rental Assistance is vital to beneficiaries by providing tenants with the financial support to remain in their home, providing a stable home life to support the tenant and their family. This stability is critical to elderly and disabled tenants without the means to otherwise live on their own.”
If the agency truly believes this, it should abandon its efforts to impose minimum rents on the neediest residents in its rental housing programs.