MSHDA - Office of Housing Voucher Programs Policy and Procedures Manual

Chapter I: General Information

Effective: November 2007

Introduction

The Housing Choice Voucher (HCV) Section 8 Rental Assistance Program has roots dating back to the 1930’s. Many changes have occurred over the years. Use this chapter for general information about the program and refer to the other chapters of the Policy/Procedure Manual (PPM) for specific information on each subject.

Section A: Background/Evolution of Program

1. Beginning in the 1930s

• The National Housing Act of 1934 created the Federal Housing Administration (FHA) and a system of mortgage insurance, which enabled many more families to become homeowners.
• At the same time, pressure increased for affordable rental housing. To provide affordable rental housing and stimulate employment, the National Industrial Recovery Act (1933) authorized the financing of low-rent public housing.
• In 1933 the Public Works Administration (PWA) offered loans to non-profit and limited dividend housing corporations for the construction of low-cost rental housing.
• Due to limited response, the PWA began direct federal construction of low-rent housing projects in 1934, primarily in slum areas.
• Although approximately 60 projects were eventually built, local opposition to direct federal intervention and legal obstacles required that another approach be taken.

2. United States Housing Act of 1937

• The Housing Act of 1937 authorized states to pass legislation enabling establishment of local Public Housing Agencies (PHAs) in order to receive federal assistance.
• The 1937 Act also initiated the public housing program.
• A production approach was selected because of the Depression era emphasis on job creation and elimination of slums. Public housing units were to be owned and operated by local PHAs.

3. Section 23 Leased Housing Program

• The Section 23 Program, implemented in 1965, allowed PHAs to lease units from private owners and sublease them to low-income tenants.
• The U.S. Department of Housing and Urban Development (HUD) provided annual contributions to enable PHAs to pay a portion of the family’s rent.
• PHAs retained tenant selection, rent collection, and in some cases management/maintenance responsibilities.
• Section 23 was eliminated in 1974 and replaced by the Section 8 Existing Housing Program.
• PHAs were to convert Section 23 assisted units to the Section 8 Existing Housing Program.
• Some developments are still in the process of converting.

4. Housing Act of 1968

• The Section 235 homeownership program and the Section 236 rental program created by the 1968 Act continued the strong movement toward use of subsidies in private dwellings.
• The 1968 Act established the goal of providing six million housing units for low- and moderate-income families over a ten year period.

5. Experimental Housing Allowance Program (EHAP)

• This was implemented as a demonstration program to test the feasibility of providing housing allowances to eligible families. The demonstration was conducted in 12 locations between 1971 and 1980.
• It was the most extensive social program demonstration ever conducted by the federal government.
• There were three separate components of the demonstration:
  1. The Supply Experiment tested the effect of the program on the housing market.
  2. The Demand Experiment tested the response of consumers to the program.
  3. The Administrative Agency Experiment tested various ways of administering the program using PHAs, welfare offices, and state and local governments.
• Cash assistance was provided to participants who leased units directly from private owners.
• Homeowners, as well as renters, were able to participate at two of the demonstration sites.
• Almost 50,000 households were assisted over a nine-year period.
• HUD’s evaluation of the demonstration found that:
  1. A housing allowance-type program could preserve existing housing stock by encouraging owner repairs and maintenance.
  2. Allowing families mobility resulted in the selection of better neighborhoods.
  3. Families did not select expensive units and were able to pay their share of the rent in the selected units.

6. The Housing and Community Development Act of 1974

• The Housing and Community Development Act of 1974 authorized the Section 8 program, which included three components:
  1. Section 8 New Construction Program
  2. Section 8 Substantial Rehabilitation Program
  3. Section 8 Existing Housing Program
• It signaled a shift in the federal housing program from locally owned public housing to the use of privately owned rental housing

7. The Section 8 Existing Housing Program

• The Existing Housing Program, also known as the Rental Certificate Program, was modeled on the Experimental Housing Allowance Program, with the following key differences:
  1. Subsidy payments under the Rental Certificate Program were made by the PHA to the owners on behalf of the family rather than directly to the family.
  2. The Rental Certificate Program imposed a ceiling on rents that could be paid (Fair Market Rents [FMRs]).
  3. The program grew rapidly and was popular with Congress, local governments, owners, and tenants because it:
  4. Provided assistance quickly;
  5. Allowed family anonymity;
  6. Did not create projects or site selection problems; and
  7. Was a relatively inexpensive program which did not require long-term funding commitments to maintain the units.
• Four hundred thousand (400,000) units were occupied within the program’s first five years.
• The Section 8 Moderate Rehabilitation Program was implemented in 1978 to promote moderate upgrading of existing housing stock.

8. Rental Voucher Program

• The Rental Voucher Program, authorized by Congress as a demonstration program in 1984, was adopted as a program in the Housing and Community Development Act of 1987.
• The program was similar to the Rental Certificate Program and was administered as a component of the Section 8 Existing Housing Program.
• The key differences between the Rental Certificate and Voucher Programs were:
  1. The Rental Voucher Program did not have a Fair Market Rent limitation; and
  2. The Rental Voucher Program allowed families to pay more than 30% of their adjusted gross income for rent and utilities.

9. Combining the Certificate and Voucher Programs

• Through the issuance of three “conforming” rules in 1994, 1995, and 1998, HUD combined the Rental Certificate and Rental Voucher Programs to the extent permitted by statute.
• In July 1994 and July 1995, HUD published the first two parts of a Section 8 “conforming” rule designed to combine all aspects of the two programs which did not have differing statutory requirements. The July 1994 rule created unified admissions rules. The 1995 rule combined a wide range of other administrative and leasing activities.
• For units currently assisted under old voucher contracts executed before these rule changes, the old program rules remain in effect.
• A third conforming rule became effective in June 1998. It addressed rent reasonableness, the calculation of rent and housing assistance payment, and special housing types. It also created a new type of tenancy, over-FMR certificate tenancy, which has since been eliminated.

10. The Public Housing Reform Act of 1998 and Merger of the Certificate and Voucher Programs

• In October 1998, Congress passed long-awaited housing reform legislation, which includes a full merger of the certificate and voucher programs.
• Some provisions of the law became effective with the President’s signature, and HUD provided guidance for implementation of those changes on February 18, 1999 through a notice published in the Federal Register.
• On May 14, 1999, HUD published an interim rule providing for the complete merger of the certificate and voucher programs into a new Housing Choice Voucher (HCV) program.
• HUD published the final merger rule on October 21, 1999 and amendments on November 3, 1999 and March 30, 2000. All certificates should have been converted to housing vouchers by October 1, 2001.
• The program is now known as the HCV Section 8 Rental Assistance Program.

Section B: Program Components

1. Key Relationships

2. Initial Contract

3. Subsidy Types

• In public housing, participants live in a unit in a building or development which has the subsidy attached to it. Under tenant-based subsidy, families can choose their unit.

4. Regulations

• Regulations are issued in the Federal Register.

5. HUD Statistical Areas

• HUD operates two field offices in Michigan, which are located in Detroit and Grand Rapids.
• Michigan is divided into Metropolitan and Non-Metropolitan statistical areas.

Note: Shaded areas are served by Grand Rapids HUD Office (underlined when printed).

Non-Metropolitan Counties

• Alcona
• Alger
• Alpena
• Antrim
• Arenac
• Baraga
• Barry
• Benzie
• Branch
• Cass
• Charlevoix
• Cheboygan
• Chippewa
• Clare
• Crawford

• Delta
• Dickinson
• Emmet
• Gladwin
• Gogebic
• Grand Traverse
• Gratiot
• Hillsdale
• Houghton
• Huron
• Ionia
• Iosco
• Iron
• Isabella
• Kalkaska

• Keweenaw
• Lake
• Leelanau
• Luce
• Mackinac
• Manistee
• Marquette
• Mason
• Mecosta
• Menominee
• Missaukee
• Montcalm
• Montmorency
• Newaygo

• Oceana
• Ogemaw
• Ontonagon
• Osceola
• Oscoda
• Otsego
• Presque Isle
• Roscommon
• St. Joseph
• Sanilac
• Schoolcraft
• Shiawassee
• Tuscola
• Wexford

Note: Shaded areas are served by Grand Rapids HUD Office (underlined when printed).

Section C: Key Program Documents

1. Annual Contributions Contract (ACC)

• The Annual Contributions Contract (ACC) is a written contract between HUD and a PHA.
• Under the ACC, HUD agrees to make payments to the PHA, over a specified term, for Housing Assistance Payments (HAP) to owners and for the PHA administrative fee.
• The ACC specifies the maximum payment over the ACC term.
• The PHA agrees to administer the program in accordance with HUD regulations and requirements.
• The ACC does not specify how many units are to be funded. The PHA makes that projection in their budget documents.
• HUD’s commitment to make payments for each funding increment in the PHA program constitutes a separate ACC.
• Commitments for all funding increments in a PHA program are listed in one consolidated contractual document called the Consolidated Annual Contributions Contract (Consolidated ACC).
• A single Consolidated ACC covers funding for the PHA tenant-based assistance program.

2. Program Funding

• Congress approves funding and appropriates moneys to HUD. HUD reserves a portion of the funds and allocates the remainder to PHAs as either new funding increments or renewals of expiring funding increments. Currently, the typical funding increment is for one year.
• Traditionally, new funding has been distributed on a fair-share formula and is disbursed through a competitive application process. HUD issues a Notice of Funding Availability (NOFA) and reviews applications from PHAs based on the criteria defined in the NOFA. Funding is provided for HAPs and administrative fees. A tenant contribution is assumed.
• Before the PHA receives funding, the PHA and HUD must sign an ACC.

3. Fees

Administrative Fees

• PHAs receive administrative fees from HUD to fund program administration. Each year PHAs project the amount of fees to be earned and submit a budget to HUD for approval. Essentially there are three types of fees: preliminary fees, ongoing fees, and other fees to cover the costs associated with, for example, coordinating Family Self-Sufficiency (FSS) or conducting an audit.

Preliminary Fees

• A preliminary fee is a one-time fee used to cover program expenses that the PHA has incurred to lease up new units.
• PHAs may receive $500 for each new unit leased, but only in the first year of administering the HCV program. Any amounts not earned remain in the ACC for later use. Previously, preliminary fees were available for units in all new funding increments.

Ongoing Fees

• Ongoing administrative fees are used to cover ongoing program costs such as salaries and supplies.
• An ongoing fee may be received for each unit which is under HAP contract on the first day of the month
• Effective October 1, 1998, ongoing administrative fees are based on 7.65% of a HUD-determined base amount for a PHA’s first 600 units and 7% of the base amount for each additional unit over 600.
• This new fee structure, established by the Reform act of 1998, applies to the Moderate Rehabilitation Program (MRP) including Single Room Occupancy (SRO) and Shelter Plus Care, the new HCV Program, and to remaining pre-merger certificates.
• HUD adjusts the base amount by using the most recent Bureau of Labor Statistics data.

Other Administrative Fees

HUD may approve special fees for other extraordinary costs. Other fees that may be paid to PHAs are as follows:

1. Housing Conversion Fees
   1. PHAs are entitled to receive reimbursement for their out-of-pocket expenses up to $250 per unit that is occupied at the time HUD awards HCVs to the PHA for a housing conversion action such as owner prepayment of a mortgage, opt-outs, property disposition actions, and enforcement actions.
2. Hard-to-House Fees
   1. HUD will pay $75 hard-to-house fees for the extra effort required to assist large families, and families with disabled members, locate suitable housing. The hard-to-house fee is paid each time an eligible family moves to a new unit.
   2. Families for which hard-to-house fees are paid include families with three or more minors and families including a disabled person.
3. Lead-Based Paint Testing and Assessment Fees
   1. PHAs can receive $150 for an initial lead-based paint clearance test required when there is deteriorated paint in a unit occupied by a family with a child under the age of six.
   2. HUD will also pay a fee up to $350 each time a PHA conducts a risk assessment in a unit occupied by a child under age six identified by the local health department, or other medical provider, as having an Environmental Intervention Blood-Lead Level (EIBLL).
4. Increase and Decrease of Fees
   1. HUD may reduce fees for units owned by the PHA to reflect reasonable costs for administration, or if the PHA is not doing its job properly.
   2. HUD may increase the fee if necessary, to reflect the higher costs of administering small programs and programs operating over large geographic areas.

4. Administrative Plan

General Information

• The Administrative Plan is the PHA’s principal statement of the policies to be used in the administration of the HCV Section 8 program.
• The PHA must adopt a written administrative plan that establishes local PHA policies for administration of the program in accordance with HUD requirements.
• The Administrative Plan must be revised to comply with HUD requirements.
• The Administrative Plan and revisions must be formally adopted by the PHA Board of Commissioners or other authorized PHA officials, is a supporting document to the PHA plan, and must be available for public review.
• The written Administrative Plan does not have to be approved by HUD, but must be available for audit.
• The purpose of the plan is to prevent misunderstandings between PHA staff, landlords and program participants, to avoid lawsuits, and provide consistency.
• The PHA must comply with all equal opportunity requirements imposed by contract and federal law.

Contents of the Administrative Plan

The PHA Administrative Plan must cover PHA policies on these subjects:

1. Applicant selection from the waiting list, preferences, procedures for removing applicant names from the waiting list, and closing and reopening the waiting list.
2. Issuing or denying vouchers, including PHA policy governing voucher term, and any extensions or suspension of the voucher term.
3. Special rules for special purpose funding.
4. Definition of family and definition of continuously assisted.
5. Outreach to owners outside areas of low income or minority concentration.
6. Assistance to families who claim illegal discrimination prevents them from leasing a suitable unit.
7. Family information to be provided to prospective owners.
8. Owner disapproval.
9. Subsidy standards.
10. Family absence from unit.
11. Split households.
12. Informal review procedures for applicants.
13. Informal hearing procedures for participants.
14. Process for establishing and revising voucher payment standards.
15. Method of determining that rent to owner is a reasonable rent initially and during the term of the HAP.
16. Choice whether to offer particular special housing types.
17. Special policies on special housing types (shared housing).
18. Policies concerning payments by a family to the PHA of amounts the family owes to the PHA.
19. Interim re-determinations of family income and composition.
20. Restrictions, if any, on the number of moves a participant can make.
21. Approval by Board or other authorized officials to charge the Administrative fee reserves.
22. PHA screening of applicants for participant behavior or suitability for tenancy.
23. Standards for denying admission or terminating assistance based on criminal activity or alcohol abuse in accordance with 24 CFR 982.553.

5. PHA Plan

• The Public Housing Reform Act of 1998 requires PHAs to periodically undertake a comprehensive planning process that addresses all aspects of their operation. The PHA is required to develop a plan for the agency in consultation with its HCV program participants and its public housing residents, if the PHA administers public housing, and to offer the broader community the opportunity for review and comment. The product of these activities is the PHA plan that is submitted to HUD prior to the beginning of each PHA fiscal year. The PHA plan also includes related planning and policy documents that are made available to the public on an ongoing basis.
• The PHA plan consists of two documents:
  1. A Five-Year Plan that describes the mission of the PHA, its long term goals, and quantifiable objectives for achieving the mission; and
  2. An Annual Plan that provides details about the PHA’s participants, programs and services, and its strategy for addressing operational concerns, residents’ needs, programs, and services for the upcoming fiscal year.

6. Submission of the PHA Plan

• The actual submission to HUD is made electronically, in the form of responses entered into a comprehensive “question and answer” template.
• The PHA plan is submitted to HUD 75 days before the start of each PHA fiscal year. Prior to submitting the plan to HUD, the PHA must conduct a public hearing to discuss the plan and invite public comment. The PHA must publish a notice of the availability of the plan and the details of the public hearing no later than 45 days before the hearing. (NOTE: MSHDA’s plan must be submitted by April 17th.)
• PHAs that have HCVs only, as well as high performing PHAs and PHAs that operate 250 or fewer public housing units, may submit a streamlined PHA Annual Plan. The items required in the streamlined PHA plan are listed in the instructions that accompany the PHA plan template.

The Five-Year Plan

The PHAs’ five-year plan states the PHA’s mission for serving the needs of low-income, very low-income, and extremely low-income families in the PHA’s jurisdiction, and lists the goals and objectives which will be used to measure the agency’s success in fulfilling the mission.

The Annual Plan

PHAs administering the HCV program must provide responses for the following elements of the PHA annual plan. These are the only required elements of the annual plan. Where the information requested is contained in the PHA’s administrative plan, the PHA may refer to the administrative plan which must be attached to the annual plan.

• Statement of housing needs.
• Statement of financial resources.
• Statement of the PHA’s policies that govern eligibility, selection, and admissions.
• PHA’s rent determination policies.
• Statement of the PHA’s operation and management.
• Statement of the PHA’s procedures for informal reviews and hearings.
• Homeownership programs administered by the PHA.
• Statement of the PHA’s community services and self-sufficiency programs.
• Civil rights certification.
• Results of the PHA’s annual audit.

7. Resident Advisory Board

• PHAs, including PHAs that operate only the HCV program, must establish one or more resident advisory boards to participate in the development of the PHA plan. The resident advisory board, whether newly formed or previously existing, must assist the PHA in the development of the PHA plan and make recommendations in the development of the plan. The PHA must consider the comments and recommendations of the resident advisory board in preparing the final PHA annual plan.
• If the PHA has a HCV program, the PHA must ensure that the resident advisory board has a reasonable representation of families receiving assistance under the program, and that a reasonable process is undertaken to choose this representation. Where resident councils do not exist that would adequately reflect and represent the residents assisted by the PHA, the PHA may appoint additional resident advisory boards or board members. The PHA must provide reasonable notice to residents and urge that they form resident councils that comply with the tenant participation regulations.

8. Housing Assistance Payments (HAP) Contract (HUD 52641)

The HAP Contract is executed between the PHA and the owner. The contract specifies the rights and responsibilities of the owner and the PHA. The PHA agrees to HAP to the owner in return for compliance with program rules

9. Tenancy Addendum (HUD 52641A)

The Tenancy Addendum is included both in the HAP Contract and in the Lease between the owner and tenant.

10. Housing Choice Voucher (HUD 52646)

The Voucher is issued by the PHA to an applicant selected for admission to the voucher program. The document authorizes the participant to look for a unit and specifies PHA and family rights and responsibilities during the period of the participant’s participation.

11. Lease

The Lease is provided by the owner and executed between the owner and the participant. A copy of the executed Lease is provided to the PHA.

Section D: Roles and Responsibilities

To administer the HCV program, MSHDA enters into contractual relationships with three parties: HUD, the owner, and the participant. The roles and responsibilities of HUD, MSHDA, the owner, and the participant are defined in the federal regulations and in the legal documents which the parties execute in order to participate in the program.

1. The Role of HUD

HUD has four major responsibilities:

1. Develop policy, regulations, handbooks, notices, and other guidance which interpret housing legislation;
2. Allocate housing assistance funds;
3. Provide technical assistance and training to Housing agencies (HAs); and
4. Monitor MSHDA compliance with program requirements and production goals.

2. The Role of MSHDA

MSHDA serves as a contract administrator for HUD and has the following broad areas of responsibility:

1. Examination and re-examination of tenants;
2. Outreach to owners outside of areas of poverty or racial concentration;
3. Compliance with equal opportunity requirements;
4. Assistance to disabled persons to help them find satisfactory housing;
5. Approval of units and leases;
6. HAP to owners;
7. Informal reviews and hearings;
8. Compliance with federal and local rules;
9. Administration of the FSS program;

MSHDA must comply with HUD regulations and requirements, the consolidated ACC, the HUD-approved applications for program funding, and MSHDA’s Administrative Plan.

MSHDA does not act as the owner, as occurs in the public housing program.

MSHDA’s responsibilities are defined in the Consolidated ACC, the Voucher, the Housing Voucher Contract, and the Code of Federal Regulations.

3. The Role of the Owner

The owner has the following major responsibilities:

1. Tenant selection (screening) and leasing;
2. Compliance with the HCV contract;
3. Normal owner functions during the lease term
4. Maintaining the unit in accordance with HQS;
5. Complying with equal opportunity requirements;
6. Paying for utilities and services (unless paid for by the participant under the lease);
7. Collection of amounts due from the participant under the lease.
8. Enforcement of the lease.

4. The Role of the Participant

The participant must:

1. Supply required information which is true and complete including:
   1. Any information that MSHDA or HUD determines is necessary in the administration of the program including evidence of citizenship or eligible immigration status;
   2. Information as requested for regular or interim re-examinations;
   3. Social Security numbers and signed consent forms for obtaining and verifying information.
2. Rectify any breach of HQS caused by the participant.
3. Allow MSHDA to inspect the unit at reasonable times and after reasonable notice.
4. Not commit any serious or repeated violation of the lease.
5. Not engage in drug-related or violent criminal activity.
6. Notify MSHDA and the owner before moving or terminating the lease with the owner.
7. Promptly give MSHDA a copy of an eviction notice from the owner.
8. Use the assisted unit only as a residence and as the only residence of the family. Members of the household may engage in legal profit making activities within the unit, but only if those activities are incidental to the primary use of the unit as a residence. The members of the family also may not receive another housing subsidy.
9. Promptly inform MSHDA of any change in household composition and obtain MSHDA and landlord approval to add a family member by any means other than birth, adoption, or court-awarded custody of a child.
10. Notify MSHDA of any absence from the unit and comply with MSHDA policies governing absence from the unit.
11. Not sublet the unit or assign the lease or have any interest in the unit.
12. Not commit fraud, bribery, or any other corrupt or criminal act in connection with assisted housing programs.

Family obligations are defined in the Housing Voucher, and in the Code of Federal Regulations.

Section E: Occupancy Cycle

1. Intake Process

1. Application
   1. The applicant submits an application (MSHDA-322) if the waiting list is open.
   2. If the applicant is ineligible, an Application Denial/Program Termination Notice (MSHDA-1634b) is sent notifying the applicant of their ineligibility, the reason for it, and informal review procedures.
2. Waiting List
   1. The participant is placed on the waiting list in accordance with policy (i.e. preferences, first come-first served, lottery, special programs, etc.).
3. Needs Estimation
   1. The Housing Agent (HA)/MSHDA estimates voucher openings based upon the availability of funding for family sizes and projected contract turnover. (Those managing waiting lists should project ahead about 90 days, and not wait until vouchers are vacant.)
   2. The estimate of the number of participants needed to fill each opening:
      1. Will be influenced by accuracy of waiting list;
      2. Look at past data for waiting list success factor and leasing success factor.
   3. The HA/MSHDA selects applicants from the waiting list based on residency and considers income targeting requirements, and notifies them of available assistance.
   4. If there is no response from the applicant, MSHDA sends a Notice of Denial of Assistance, which states the opportunity for informal review (MSHDA-1634b). When the informal review period expires, the applicant is removed from the waiting list.
4. Final Eligibility
   1. The HA/MSHDA issues an Initial Request Verification (MSHDA-1791) to the participant.
   2. The participant signs the verification and release forms. The HA/MSHDA photocopies the original documents submitted by family.
   3. The HA/MSHDA processes applicable non-citizen verifications and sends out forms to third parties for other eligibility factors.
      1. If verifications are not returned within the timeframe in the Administrative Plan, the HA/MSHDA uses original documents provided by family for verification.
   4. The HA/MSHDA requests criminal records for household members as described in the Administrative Plan.
   5. The HA/MSHDA compares the participant’s annual income to income limits and calculates the Total Tenant Payment (TTP).
   6. The HA/MSHDA determines if there is a voucher available for the participant.
      1. If yes, final eligibility is determined.
      2. If the participant is ineligible, a MSHDA-1634b is sent.
      3. If no voucher is available, the applicant stays in the verified pool of applicants.

2. Lease-Up/Move Process

1. Briefing and Voucher Issuance
   1. A briefing is held to explain the program and issue the voucher. Group or individual briefings are held at the HS/A’s option.
   2. The initial term of a voucher is at least 60 days. The participant has the time specified on the voucher to find a unit.
2. The Participant Searches for a Unit
   1. They find a unit to lease and discuss the program with the owner.
   2. A request for approval of the tenancy (Rental Unit Information/ MSHDA-51b) is submitted, along with a copy of the lease.
      1. Leases must include the tenancy addendum.
      2. The MSHDA-51b must be submitted during the term of the voucher in the manner required by MSHDA.
      3. The HS/A determines if the owner is approvable.
      4. If the owner is approved, an HQS inspection is scheduled.
      5. The HS/A determines if the rent is reasonable/comparable to rents for similar unassisted units in the area. If not, the HS/A negotiates with the owner.
      6. If the owner disagrees, the participant must locate another unit to continue the process.
3. HQS Inspection
   1. The HS/A schedules and conducts a unit inspection ensuring HQS are met (MSHDA-281).
   2. A report is provided reporting inspection deficiencies (MSHDA-105) to the owner and the participant.
   3. The owner is given a specified time period to make the necessary repairs.
   4. The unit is re-inspected for failed items.
   5. If the owner does not agree to make the repairs, or if the rent is not reasonable, the rental unit will be disapproved.
      1. If there is still has time remaining on the voucher, or if the HS/A will extend the voucher, or if the voucher was suspended, the participant must find another unit to continue the process.
4. Approval and Execution
   1. If the unit is approved, documents are executed:
      1. The owner and the participant execute a lease.
      2. The owner and the HAS execute a contract.
   2. Assisted tenancy begins on the effective date stated in the lease and contract.
5. Moves
   1. The participant may move to another unit, and the same lease-up steps are followed. An annual re-examination is performed at this time.
   2. HUD regulations and MSHDA policy determine when and if a family can move to another unit.

3. Annual Re-Examination (Process begins 120 days before Contract anniversary date)

4. Interim Re-examination (Occurs between Contract anniversary dates)

Interim Re-examination

• Same steps as annual re-examination except verification of changes only
• Examples: Income change, family change, HQS, or Contract Rent change

5. Moves (At annual re-examination or after the initial lease term)

Moves

• Same steps as initial contract except process begins at Brief Applicant and Issue Voucher

6. Terminations

Section F: Payment Standards (PS)

1. Overview

Payment standards are used to calculate the HAP MSHDA pays to the owner on behalf of the participant leasing the unit. Each PHA has latitude in establishing its schedule of PS amounts by bedroom size. The range of possible PS amounts is based on HUD’s published FMR schedule for the FMR area in which MSHDA has jurisdiction. FMRs are based on either the 40th or 50th percentile of rents charged for standard rental housing in the FMR area. MSHDA may set its PS amounts from 90 to 110% of the published FMRs, and may set them higher or lower with HUD approval.

The level at which the PS amount is set directly affects the amount of subsidy a participant will receive, and the amount of rent paid by program tenants.

If the participant leases a unit with a gross rent at or below the PS for the family size, the participant’s share of the rent will be its TTP. If the gross rent for the unit is higher than the PS, the participant’s share will be higher than the TTP.

If the PS amount is too low:

1. Participants may need to pay more than they can afford; or
2. Participants may have a hard time finding acceptable units or units in more desirable areas;
3. Housing choices will be narrowed and MSHDA’s efforts to affirmatively further fair housing will be undermined.

If the PS amount is too high, owners may be encouraged to ask for higher than reasonable rents.

Payment standard amounts should be high enough to allow families a reasonable selection of modest, decent, safe, and sanitary housing in a range of neighborhoods in MSHDA’s jurisdiction. To meet that objective and to support families wishing to move to areas with lower concentration of poor and minority households, MSHDA may establish higher PS schedules for certain areas within its jurisdiction so that program families can rent units in more desirable areas.

MSHDA’s procedures for establishing and revising its PS schedule are set forth in its Administrative Plan.

2. Establishing Payment Standard Amounts

MSHDA is required to establish PS amounts for each unit size in an FMR area. The PS amounts may be within several ranges depending on facts about the rental market. Payment standard amounts may be established:

• Within the “basic range”, which is between 90 and 110% of the 40th percentile FMR;
• Between 90 and 110% of the 50th percentile FMR if MSHDA operates within a 50th percentile FMR area;
• Between 90 and 110% of the 50th percentile rent if MSHDA has obtained HUD approved “success rate” PS amounts; or
• As exception PS amounts below 90 or above 110% of the 40th or 50th percentile FMR with HUD approval.

1. Payment Standard Amounts within the Basic Range
   • Most PHAs will establish PS amounts within the basic range; the other options for setting these amounts are made available as tools for PHAs with special market problems.
   • Within the basic range, the PS is set between 90 and 110% of the 40th percentile FMR. Whenever the FMR increases or decreases, MSHDA must ensure that its PS amounts remain within the basic range.
2. Payment Standard Amounts Based on the 50th Percentile FMR: Housing Choice
   • Payment standards based on the 50th percentile FMR are made available to PHAs in FMR areas where higher PS amounts are necessary to increase housing choice throughout a metropolitan area.
   • To increase housing choice throughout a metropolitan area, HUD will increase FMRs to the 50th percentile in metropolitan areas that meet the following criteria:
     1. The FMR area contains at least 100 census tracts;
     2. 70% or fewer of the census tracts with at least 10 two-bedroom rental units are census tracts in which at least 30% of the two bedroom rental units have gross rents at or below the two bedroom FMR set at the 40th percentile rent; and
     3. Twenty-five percent or more of the tenant-based rental program participants in the FMR area reside in the five percent of the census tracts within the FMR area that have the largest number of program participants.
   • In those areas where HUD has published 50th percentile FMRs, MSHDA may establish its PS amounts between 90 and 110% of the 50th percentile FMR. All PHAs must use the published FMR or request an exception PS (see below).
   • A PHA that sets a PS amount at more than 100% of the 50th percentile FMR will be measured under SEMAP to determine its performance in achieving de-concentration.
3. Requesting HUD Approval of Exception Payment Standard Amounts
   • A PHA may request HUD approval of PS amounts higher or lower than the established 40th or 50th percentile FMR for designated parts of the FMR area (the “exception areas”). The exception PS amounts may be for all units in the exception areas, or for all units of a given bedroom size in these areas. Any PHA with jurisdiction in the exception areas may use the HUD-approved exception PS amounts without requesting specific HUD approval.
     1. Requests for exception PS amounts from 110 to 120% of FMR must be supported by the median rent method or the 40th or 50th percentile method discussed below.
     2. HUD will only approve exception PS amounts if these exception amounts are needed to help participants find housing outside areas of high poverty concentrations, or because voucher holders have trouble finding housing to lease under the program within the voucher term.
     3. The total population of all HUD-approved exception areas may not include more than 50% of the population of the FMR area.
4. Requesting HUD Approval of Exception Payment Standard Amounts over 120% of the FMR
   • A PHA may request HUD approval to adopt exception PS amounts above 120% of the published FMRs for the same area, but not until at least six months from the date of HUD’s approval of a 120% exception PS.
     1. The exceptions must be necessary to prevent financial hardship for participants.
     2. The Assistant Secretary for Public and Indian Housing must approve requests for exception PS amounts over 120% of the published FMR.
5. Establishing the Payment Standard Schedule
   • A PHA initially establishes the PS amounts on the PS schedule at 90 to 110% of the published FMR. Like the FMR, the PS schedule is established by bedroom size category. The PS schedule applies to all voucher units administered by the PHA regardless of the source of funding (e.g. formula allocation, or vouchers targeted to specific groups of recipients) or the date on which the vouchers were awarded by HUD.
   • The PHA may establish one or more separate PS amounts within the basic range for designated parts of an FMR area. This may be appropriate where a PHA has determined that its general PS are too low to allow families seeking housing in areas with low concentrations of poverty and minority families to lease in these areas.

3. Revising the Payment Standard

Prior to the effective date of any new FMRs, the PHA must review its PS schedule and amend it as needed to ensure that the amounts remain within the basic range (90 to 110% of the new FMR). If the FMR increases, the PHA must be sure that the PS amounts for each unit size are at least 90% of the new FMR. Similarly, if the FMR decreases, the PHA must be sure that the PS amounts are not more than 110% of the new FMR.

PHAs will likely increase PS amounts as FMRs increase, to help voucher holders find units and current participants to continue to afford the units they have selected. However, the PHA is not required to increase payment standards when FMRs increase so long as the PS is from 90 to 110% of the new FMR.

1. Annual Review of Payment Standard Amounts

   At least annually, generally prior to the preparation of its HCV program budget, the PHA should review its PS amounts to determine whether adjustments are needed for some or all unit sizes. In reviewing the adequacy of its PS amounts, the PHA should consider the following:

   1. Assisted Families’ Rent burdens: the PHA should review the percentage of income voucher families use to pay rent to determine the extent to which rent burdens exceed 30% of income due to the fact that gross rent levels are above the PHA’s PS amounts.
   2. Availability of Suitable Vacant Units with Rents Below the Payment Standard Amounts: The PHA should review its rent reasonableness data, vacancy rate data, and other relevant information to determine whether there is an ample supply of vacant units with rents below the PS amounts, particularly in areas with low concentrations of poor and minority families.
   3. Size and Quality of Units Selected: The PHA should review the size and quality of units selected by assisted families before concluding that there is a need for a change in the PS amounts. Payment standard amount increases should be made only when they are needed to reach units of adequate size and quality in the mid-range of the market.
   4. Time to Locate Housing: The PHA should review the average time required for voucher holders to find units. If the PHA determines that the amount of time required is excessive (i.e. 90 days or more), an increase in the PS amount may be needed.
   5. Vouchers Expired without Leasing: The PHA should also review the number of voucher holders whose vouchers expire without having leased a unit. While some voucher drop-out is to be expected, a substantial number of participants unable to lease units with assistance under the HCV program suggest that PS amounts may be too low.
   6. Large Numbers of Participants Moving Out of the PHA’s Jurisdiction: The PHA should review the number of participants exercising the portability option to lease in other jurisdictions. Again, while some exercise of portability is to be expected, and may in fact indicate that the PHA is meeting its objectives in expanding housing opportunities for participating tenants, an excessively high number of families moving out may indicate that the PHA’s PS amounts are too low.

   SEMAP Indicator 7, Expanding Housing Opportunities, further requires a PHA to identify and provide information to voucher holders about housing opportunities outside areas of poverty and minority concentration in their jurisdiction. The PHA is required to look at difficulties experienced by voucher holders in finding housing in these areas, and, if appropriate, to seek HUD approval of exception PS amounts for these areas.

2. Lowering the Payment Standard Amount
   • The PHA’s analysis may indicate that the PS amount is too high, in which case the PHA should lower its PS to an appropriate amount within the basic range. The lower PS amount will not apply for participants who have already leased units under the higher standard until they move to a new unit or have a change in their family size or composition, or at the second annual re-examination after the PHA lowers its PS.
3. File Documentation
   • The PHA should retain documentation of its review of its PS schedule to support its determination to change or not to change the PS.

4. Applying the Payment Standard

The PS is used to calculate the monthly HAP for participants under the HCV program. The HAP is arrived at by taking the lower of the:

• Payment standard minus the TTP or
• Gross rent for the unit minus the TTP.

Under the HCV program, if the gross rent for the unit is lower than the PS, the family will pay the full TTP. If the gross rent for the unit is higher than the PS, the family will pay the TTP plus the amount by which the gross rent exceeds the PS.

If during the term of the HAP contract the owner lowers the rent for a unit, the HAP will be recalculated using the lower of the initial PS or the lower gross rent for the unit.

1. Payment Standard Amount for a Participant

   The PS amount for a family is the lower of:

   • Payment standard amount for the participant unit size, or
   • Payment standard amount for the size of the unit leased by the participant.

   If the unit is located in an exception area, the PHA must use the appropriate PS amount for the exception area.

2. When the Payment Standard Increases:
   • The PS in place on the effective date of the HAP contract remains in place for the duration of the contract term unless the PHA increases or decreases it. If a PS is increased, the higher PS is first used in calculating the HAP at the time of the participant’s regular (annual) re-examination. Participants requiring or requesting interim re-examinations will not have their HAP payments calculated using the higher PS until their next annual re-examination.
3. When the Payment Standard Decreases:
   • If the PHA lowers its PS amounts, the PS in effect on the effective date of the HAP contract will remain in effect until the participant moves to another unit, has a change in its family size or composition, or until the second annual re-examination after the PHA decreases its PS.
   • Decreases in the applicable PS due to changes in family size or composition, are effective as of the next regular (annual) re-examination following the change. At that time, the new family size will be used to determine the PS.
4. Higher Payment Standard Amount as a Reasonable Accommodation:
   • Although the HCV program does not generally allow unit-by-unit exceptions, a PHA may establish a higher PS amount within the basic range as a reasonable accommodation for a family member with disabilities.

Section G: Privacy Rights

• Applicants and participants, including the head of household, spouse, and all adults in their household, regardless of age, are required to sign the HUD 9886, Authorization for Release of Information. This document incorporates the Federal Privacy Act Statement and describes the conditions under which HUD/PHA will release family information.
• The PHA’s policy regarding release of information is in accordance with state and local laws, which may restrict the release of family information. Any requests for confidential information must be in accordance with the Freedom of Information Act (FOIA) Guidelines.
• MSHDA’s practices and procedures are designed to safeguard the privacy of applicants and program participants. All applicant and participant files will be stored in a secure location which is only accessible by authorized staff or HAs.
• MSHDA staff and contracted agents will not discuss family information contained in files unless there is a business reason to do so. Inappropriate discussion of family information or improper disclosure of family information by staff or agents will result in disciplinary action.

Section H: Multi-Family Tenant Characteristics System (MTCS)

MTCS is HUD’s automated system for recording demographic information about assisted tenants and data about the units they occupy. HUD uses MTCS data to monitor and assess MSHDA’s performance. It will be used to score five indicators in the SEMAP, and also provides documentation for budget reviews and funding decisions.

MSHDA must electronically submit the data required on the Family Report (HUD-50058) to HUD every month.

1. Minimum Reporting Rate

MSHDA is required to submit HUD-50058 data for 100% of the families enrolled in the HCV Program. Prompt and complete reporting is essential. The minimum acceptable reporting rate currently is 90%. Failure to achieve the minimum reporting rate is subject to sanctions from HUD. MSHDA’s performance on five of the SEMAP indicators is verified by data provided to MTCS. A rating of zero will be assigned to these five indicators if MSHDA’s reporting rate falls below the acceptable minimum reporting rate.

2. Required Data Transmissions

MSHDA must submit HUD-50058 data for each of the following actions:

1. Voucher issuance
2. Voucher expiration
3. New admission (Initials)
4. Annual re-examination
5. Interim re-examination
6. Portability move-in
7. Portability move-out
8. End of participation (Cancels)
9. Other change of unit (Moves)
10. FSS enrollment or exit
11. WTW enrollment or exit (reporting is in progress)

MTCS summarizes the data received and generates standard reports. As data is received, MTCS validates each record to ensure it is in the correct format and contains required field entries. When errors are detected, MTCS transmits error notifications to MSHDA. All HUD-50058’s containing fatal errors are rejected and not counted toward the minimum reporting rate. All errors must be corrected in order to be in compliance with reporting.

3. MTCS Reports

MTCS generates more than 20 standardized reports that summarize MSHDA’s operations. These reports are available to monitor performance. Refer to Chapter XIX, Operations of the PPM and the Elite manual for detailed MTCS information.

Section I: Section Eight Management Assessment Program (SEMAP)

• The SEMAP is a method used by HUD to assess whether the voucher program operates to help eligible participants afford decent rental units at the correct subsidy cost.
• HUD measures MSHDA’s performance in key Section 8 program areas, assigns performance ratings, identifies MSHDA’s management capabilities and deficiencies, and targets monitoring and program assistance more effectively.
• MSHDA uses the SEMAP performance analysis to assess and improve their own program operations.

Section J: Portability

• When a HCV Section 8 Applicant/Participant chooses to move outside of the initial PHA’s jurisdiction, the family has the right to continue their assistance under HUD’s portability provisions.
• The receiving PHA may choose to absorb (merge the family into their voucher program) or administer (bill the initial PHA for expenses) the assistance.
• Refer to Chapter XVI, Portability for detailed portability information.

Section K: Applicable Forms List