Meet the Local Rent Supplement Program

February 28, 2012

The Local Rent Supplement Program was created in 2007 help address the need for affordable rental housing for very low income families who are currently on the Housing Choice Voucher Program waiting list. The program is funded locally by the DC government, through the DC Housing Authority,  and is modeled on the federal Housing Choice Voucher Program.

The Local Rent Supplement Program gives individual “tenant-based” vouchers to individuals and families using the same criteria as the Housing Choice Voucher Program. The voucher allows the tenant to pay only 30 percent of their income in rent, with the voucher covering the difference between that amount and the cost of rent on the open market.

The program also creates “project-based” or “sponsor-based” agreements between the Housing Authority and affordable housing providers. The city commits to providing 20 years of subsidy to nonprofit and for-profit housing providers in exchange for providing affordable units on an ongoing basis to qualified individuals and families. This long-term commitment of the Local Rent Supplement Program provide the ongoing revenue providers need to operate these units and make them affordable to extremely low income residents.

The project/sponsor-based program is often essential to producing and maintaining permanent supportive housing for those with special needs, including the chronically homeless.

To date, the Local Rent Supplement Program has provided rent subsidies for nearly 700 families, who previously were on the public housing waiting list, enabling them to rent in the private market. The program is also supporting the production of more than 1,000 additional units of rental housing, all for extremely low income households earning less than 30 percent of area median income. As we mentioned before, there is not a hard line between “Supportive Housing” and “Affordable Rental Housing” in the Continuum of Housing. The Local Rent Supplement Program provides rental assistance to very low income residents, and is often a crucial piece of the funding for supportive housing programs.

The story of funding the Local Rent Supplement Program

The Local Rent Supplement Program was started in response to federal cuts to the Housing Choice Voucher Program, D.C’s largest rental assistance program. Funding for the program started in the FY 2007 Budget at $12 million and increased to $19 million in FY 2008. After that time, it has had a rocky history.  The budget for FY 2009 continued funding for the program with no increase, even for inflation. In FY 2010, the local funding appropriation for the Local Rent Supplement Program was reduced by $5.9 million to $13.1 million, with a directive to DCHA to use some previously unspent  Local Rent Supplement Program funds to offset the cut.  Each year, the city has directed the DC Housing Authority to repeat this practice. This year, we expect that there will be no unspent funds to fill this hole, and the city will need to invest millions to keep the program whole.

The early changes in the  Local Rent Supplement Program funding weakened the new program. As a result of the FY 2010 changes, the funding level for the program was inadequate to cover inflation-based rent increases for units currently subsidized by  Local Rent Supplement Program. This inconsistent and inadequate funding lead lenders and investors view the program as an unreliable source of operating income for nonprofits and for profits that hoped to use the funds. Because the private market found it to be too risky a an investment without stable city support, there has been less private investment through loans or equity financing. This put additional burden on the city to help fund the projects, drawing from programs like the Housing Production Trust Fund to fully fund the cost of developing affordable rental housing. With a stable commitment of city funds, private investors, rather than private dollars could have been used to fund greater portions of these projects.

The FY 2012 budget had the most dramatic change in the Local Rent Supplement Program’s funding. Starting when the FY 2012 budget was implemented October 1, 2011, the Local Rent Supplement Fund is no longer funded like other programs out of the city’s general fund, instead, the program costs now draw from the Housing Production Trust Fund. While this does not impact the Local Rent Supplement Program this year, it took $18 million that had been committed by the city for new production and preservation (in line with the Trust Fund’s mandate), and allocated it for the ongoing cost of the Local Rent Supplement Program. This move also jeopardizes the future of the Housing Production Trust Fund, since in this model, needed expansions in the Local Rent Supplement Program to cover increasing costs of housing, inflation, and serving new residents would further draw down the already-limited Housing Production Trust Fund.

 

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