State of Housing: State-Funded Rental Assistance

Editor’s note:
This is the thirteenth edition of our “State of Housing” series, which breaks down the HB854 Statewide Housing Study released in January 2022. You can find previous posts in this series here.

State of Housing #13 • 1,163 Words

What would state-funded rental assistance look like in Virginia?

The fifth part of the HB854 Statewide Housing Study includes five chapters exploring focused policy issues, including state-funded rental assistance, utility rate reductions, property tax reductions, bond financing options, and racial equity in housing. The first four of these policy areas were explicitly enumerated in the text of the HB854 bill.

In this edition, we’ll focus on state-funded rental assistance, where the bill requested that the stakeholder advisory group:

“…consider the following proposals as well as other proposals it considers advisable during the course of its analysis and deliberations: … a Virginia rent subsidy program to work in conjunction with the federal Housing Choice Voucher program…”

Each of these policy areas involved background research on best practices, analysis of available data related to the issue, and recommendations to support implementation.

Rental assistance demand far exceeds the supply appropriated by the federal government.

Across Virginia, cost burden has remained highest among renter households with extremely low-incomes (ELI). In 2017, it was estimated that 85 percent of extremely low income households were cost-burdened (192,790 households). The most recent data now estimates that 83 percent of ELI households are cost-burdened (183,096 households). 

In 2021, three out of four families who were eligible for housing assistance did not receive federal rental assistance. Housing Choice Vouchers (HCVs), the nation’s largest source of rental assistance are funded through an annual appropriation by Congress. But the limited amount of funding appropriated leaves many families on long waiting lists. The HB854 study’s survey of 22 public housing authorities estimated that there were 32,948 applicants on waiting lists for vouchers.

In addition to the thousands of applicants waiting for rental housing assistance, there are also numerous individuals who are not eligible due to immigration status and criminal background checks. For these populations, accessing safe and stable housing are important aspects to integration and recovery. 

Why this matters: While wages have been increasing in many places in Virginia, high housing costs and limited supply are leaving low-income Virginians unable to compete in the rental market. Limited federal funding continues to fall short of meeting their needs.

Rental assistance programs have existed in other states for decades.

We talked to administrators of state-funded rental assistance programs in other states to learn about best practices and lessons learned from their program development. The National Low-Income Housing Coalition also maintains a database of state and city funded rental housing programs from across the country.

Here are some highlights and recommendations from other localities:

  • The District of Columbia’s Local Rent Supplement Program (LRSP) uses its Housing Production Trust Fund, which is permanently funded through deed and recordation taxes;
  • Most programs use the 30 percent payment standard, but some are flexible (between 25 to 40 percent) depending on the household type and/or income;
  • Programs that are not tied to federal requirements are more adaptable to varying state-level needs;
  • Opportunities exist to leverage the knowledge base of Section 8 administrators and beneficiaries. These organizations and individuals should be engaged throughout the design of development of a state rental assistance program;
  • Programmatic changes after initial design can be politically and financially difficult to implement.

Of the states listed at the time of the HB854 study, only four states (Connecticut, Hawaii, Massachusetts, and New Jersey) and the District of Columbia had long-term rental assistance programs that served populations based on income. Many of the other programs specifically targeted persons with mental illness, at risk of homelessness, or having other special needs.

Why this matters: There are successful models of rental assistance throughout the country to draw from. There’s no need to reinvent the wheel.

Virginia has successfully implemented state rental assistance programs.

During the COVID-19 pandemic, Virginia rapidly developed and implemented the Virginia Rent Relief Program (RRP). We were actually one of the first states to create a program of this kind with federal CARES Act funding. DHCD disbursed rental assistance to over 100,000 unique households from June 29, 2020 through March 2022. 

And as we previously discussed, the Department of Behavioral Health and Developmental Services also has rental assistance programs geared towards individuals with developmental disabilities and serious mental illness. These programs have consistently exceeded stated goals.

Why this matters: The knowledge and infrastructure to administer a statewide program already exists among state agencies.

Experts from across the state made four key recommendations for a Virginia state-funded rental assistance program.

Stakeholder advisory group (SAG) members contributed to robust discussions on what a state-funded rental assistance program should look like in Virginia. With their knowledge and additional information from experts across the nation, the rental assistance subgroup of the SAG made four recommendations:

  1. Develop a rental assistance program based on the federal Housing Choice Voucher program, with expanded eligibility, flexibility, and increased efficiencies.
  2. Target households making 50% of AMI or below, with the majority of allocation for households at or below 30% of AMI.
  3. Implement a statewide program at-scale.
  4. Ensure resident success through choice, mobility counseling, and landlord outreach/incentives.

Within each of these recommendations are more detailed recommendations that contribute to a successful program that meet the needs of thousands of Virginia residents who are in need of help securing safe and stable housing.

Why this matters: Experts with an understanding of the needs of low-income renters and those experiencing homelessness provided valuable context and knowledge to guide the design and implementation of a Virginia program.

State-funded rental assistance has garnered bipartisan support.

During the 2022 General Assembly Session, Delegate Carrie Coyner and Senator Jennifer McClellan requested a budget amendment to establish the Virginia Housing Stability Fund. The budget amendment would have appropriated $73 million to help low, very low, and extremely low income renters from being cost burdened. The budget amendment was not approved by the House, while only language was approved in the Senate to have DHCD:

“… shall convene a stakeholder workgroup to develop model guidelines for the creation of a program to provide long-term rental assistance to low-income, very low-income, and extremely low-income renters to enable them to afford housing costing 30 percent of their income… The stakeholder workgroup shall consist of housing developers, homeless services providers, housing providers, landlords, tenants, tenant advocates, and others to develop recommendations for the program. The stakeholder group shall complete its work and issue a report with recommendations to the Senate Finance and Appropriations and the House Appropriations Committees no later than November 30, 2022.”

That report can be found here.

Why this matters: The importance of rental assistance amid a tight housing market and slow growing wages is an issue that stretches across the political spectrum.

Coming up next time

In the next edition of this series, we’ll begin exploring the HB854 study’s exploration of utility rate reductions to assist in housing affordability.

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