The U.S. Department of Housing and Urban Development (HUD) recently issued guidance for implementing its fiscal year (FY) 2014 budget for Housing Choice Vouchers (HCV), including requirements for obtaining additional HCV funds due to shortfalls and for allocation of tenant protection vouchers. The guidance is outlined in Notice PIH 2014-05, "Implementation of the Federal Fiscal Year 2014 Funding Provisions for the Housing Choice Voucher Program" (the Notice).

The Notice implements HCV program funding that is provided through the Consolidated Appropriations Act, 2014, enacted on January 17, 2014 (the 2014 Act). Ballard Spahr’s e-alert on the FY 2014 HUD budget, including HCV funds, is available here.

Set-Aside for Funding Adjustments

As in prior years, HUD may adjust funding allocations to housing authorities that meet certain criteria. The 2014 Act sets aside up to $75 million for the following categories:

• Category 1: Shortfall Funds. To be eligible for this category, housing authorities must meet one of two specific shortfall scenarios outlined in the Notice, which generally include working with HUD’s Shortfall Prevention Team (SPT) to confirm a shortfall and taking steps by March 31, 2014, to cease issuing or absorbing vouchers.
• Category 2a: Unforeseen Circumstances. To be eligible for this category, housing authorities must demonstrate that unforeseen circumstances have significantly increased voucher renewal costs.
• Category 2b: Portability Cost Increases. To be eligible for this category, housing authorities must demonstrate a significant increase in voucher renewal costs related to portability.
• Category 3: Project-Based Vouchers. To be eligible for this category, housing authorities must demonstrate that the funding is needed to address existing project-based voucher commitments.
• Category 4: HUD-VASH. To be eligible for this category, housing authorities must show a per-unit cost or leasing increase associated with Veterans Affairs Supportive Housing (VASH) vouchers.

The Notice includes very specific requirements for demonstrating the need for additional funding under each of these categories. Housing authorities may find the set-aside a helpful resource to address funding shortfalls.

Applications for Category 1 funds may be submitted throughout the calendar year 2014. Applications for other categories must be received no later than April 15, 2014.

Tenant Protection Vouchers

The 2014 Act also provides $130 million for Tenant Protection Vouchers (TPVs), which are distributed to replace certain types of affordable units that cease to be available as assisted housing. The initial funding term is typically 12 months but may vary subject to availability of TPVs. Due to anticipated demand, HUD will initially only provide TPVs for occupied units; however, subject to available funding, HUD may subsequently provide vouchers for vacant units that were occupied within the past 24 months. HUD anticipates that it will issue separate guidance outlining the eligibility and priority criteria for receiving TPVs. The Notice outlines the following activities and programs for which TPVs may be requested:

• Multifamily – To assist participants affected by the Moderate Rehabilitation replacements, Single Room Occupancy replacements, and Multifamily Housing conversions, including terminations, opt-outs, prepayments, property disposition relocations, and certain Rental Assistance Demonstration (RAD) conversions
• Public Housing Inventory Removal Actions – To assist housing authorities based on certain actions that remove units from their public housing inventory, including demolitions/dispositions, required conversions, voluntary conversions, homeownership plans, and HOPE VI removal actions
• Choice Neighborhood Initiative (CNI) Actions –To assist housing authorities and/or multifamily housing CNI grantees based on units that will be temporarily or permanently removed pursuant to a CNI Transformation Plan approved by HUD

As discussed in a previous e-alert, President Obama's fiscal year 2015 budget for HUD, released on March 4, 2014, increases funding for many programs compared with the FY 2014 appropriation.