Arkansas’ two largest public housing agencies – in Little Rock and North Little Rock – face revenue shortfalls after enacting a federal program that guarantees funds to renovate their buildings, officials from both agencies said. .
While the Rent Assistance Demonstration Program freed up more money for capital improvements, it presented budget problems, leading to staff cuts and a critical review of spending.
Other housing authorities have avoided any financial shortfall for the program, agency officials said, through preemptive management decisions.
The US Department of Housing and Urban Development, however, does not see how the rental aid demonstration could create a net loss of revenue for the housing authorities who implement it.
“There is no structural design of RAD that would consistently result in less funding,” a department spokesperson told the Arkansas Democrat-Gazette via email.
Still, housing authorities across the state report that the program can have negative fiscal impacts.
The Rent Support demonstration converts Section 9 public housing into Section 8 housing choice vouchers. Local and regional housing authorities own and operate Section 9 properties, while choice vouchers housing allow beneficiaries to choose their own residence within the jurisdiction of a housing authority.
The administration of former President Barack Obama created the Rental Assistance Demonstration Program in 2012 to give the public housing sector a new source of funding after decades of underfunding. The Department of Housing and Urban Development estimates a backlog of $ 35 billion in capital spending on public housing complexes, a spokesperson said.
Through the rental assistance demonstration, private companies typically take over most or all of a public housing complex, although the housing authorities still own the land. This private ownership allows housing authorities to contract with banks and finance companies – whether through loans, tax credits, grants, or some combination – to receive the millions of dollars. for plumbing, flooring, roofing, electrical and other repairs and maintenance.
If a private company rents the buildings, the housing authorities have to pay them a certain amount in management fees. Some housing authorities get around this by using their own nonprofit development organizations to rent and manage properties.
The Federal Department of Housing first authorized the City of Little Rock Housing Authority, publicly known as the Metropolitan Housing Alliance, to begin the rental assistance demonstration at nine properties in 2015. Five conversions have been completed and four are ongoing, said Kenyon Lowe, chairman of the Metropolitan Housing Alliance’s board of commissioners.
The North Little Rock Housing Authority converted three buildings via the Rental Assistance Demonstration, starting in 2019. The agency has also combined the vouchers from the program with those administered by Section 18, which allows for the demolition of older buildings. , for three other properties, executive director Belinda Snow said.
Lowe and Snow said their agencies needed new sources of revenue since the rental aid demonstration diverted property management revenue from housing authorities to private entities.
“Housing authorities need to become more entrepreneurial and more transformative in how to increase their income streams,” Lowe said.
The two are still in the process of determining where the additional income will come from. Lowe said developing vacant land was an option, and Snow said staff cuts had made a difference.
REDIRECTION OF FUNDS
Housing authorities have lower organizational overheads, or costs that are not directly involved in housing assistance, after they complete the housing assistance demonstration, according to the Federal Housing Department and officials. local housing authorities. These overheads include accounting, bookkeeping and management.
Even with less overhead, Lowe and Snow said, operating grants from the federal Department of Housing are not enough to cover those costs. Housing authorities receive less money in operating grants for administering vouchers than they do for Article 9 public housing because they now only administer rental assistance in some buildings, and do not manage the buildings themselves.
Housing authorities in Texarkana and Fort Smith have avoided this problem by outsourcing their nonprofits to rent and manage the converted properties, the executive directors of both agencies said. The Texarkana Housing Authority used Rental Assistance Demonstration to convert 390 units in nine buildings, and the Fort Smith Housing Authority converted 288 units in a single building.
The not-for-profit management of the agencies prevented the loss of revenue that other housing authorities have seen, Texarkana Housing Authority director Brandy Bradley and Fort Smith Housing Authority director said, Mitch Minnick.
“I can see where [other agencies] would have a little more difficulty adjusting their mode of operation in order to continue to operate, ”said Minnick. “Fortunately, because we already had the Section 8 program and had set up under the management of social housing assets, through our central office we received the bookkeeping and accounting fees each month for the units. that we manage. We have taken this model forward. Our finances and administration are managed by the bookkeeping and accounting fees that we have received for the administration of the supporting documents of article 8. ”
The Metropolitan Housing Alliance created the Central Arkansas Housing Corp. nonprofit. in 2006 “to facilitate the development, financing and construction of multi-family and single-family residential housing in the city of Little Rock and the central Arkansas region,” according to the housing authority’s website.
Central Arkansas Housing Corp. owns three buildings in Little Rock that have rental assistance demonstration contracts. Gorman and Co. Inc., a Wisconsin-based development and investment company, leases and operates the Fred W. Parris, Cumberland and Jesse Powell towers, Lowe said. The association plays no role in the day-to-day management of the three properties.
The North Little Rock Housing Authority does not have an adjacent non-profit organization.
Bradley said bringing in an outside entity to manage the converted properties would have made it impossible to retain all of the agency’s staff after completing the rental assistance demonstration.
“If you still have your full office of 10 people, and you could finance them from social housing [subsidies], you won’t be able to fund those 10 people through Section 8, “Bradley said.” The only money you get is the administration fee for the vouchers. “
Snow said the North Little Rock Housing Authority saved money after cutting some jobs through attrition.
“We knew the fee reduction was going to happen, so we started not filling the positions very early on, and everyone is just doing a little bit more than before,” Snow said.
The staff of 50 previously is now reduced to 18, forcing the remaining staff to multitask, she said. She hopes new sources of revenue will ease the load by allowing the agency to hire more staff, but she said the agency will not hesitate to move forward with aid demo conversions. for the rental that it has planned for the next few years.
“Our main concern and goal is to modernize these facilities, so this is what is going to be the first and then we will adjust if necessary,” Snow said.
She added that she and the agency’s board of commissioners would not make any decisions that “put the agency in a position where we cannot operate”.
Lowe said the Metropolitan Housing Alliance board will need to seriously consider its budget before making decisions on new revenue streams.
“Everything is at the development stage,” he said. “We have to do this what-if analysis. If the expenses are so heavy that they exceed the income, why do it? “
Metropolitan Housing Alliance CFO Andy Delaney told the Council of Commissioners at a special meeting on June 3 that the agency would need to make significant changes to its budgeting and spending in order to maintain its financial solvency.
Delaney’s suggestions included limiting spending to “absolutely necessary” purchases, training property managers on the budgeting process, and reallocating some executive salaries and benefits to “various program budgets”. He also suggested requiring Assistant Manager Lisa Dickerson to pre-approve all purchases.
Commissioner Leta Anthony told the meeting that the agency needs to assess its staff to ensure that everyone is qualified for their positions, especially positions with higher salaries.
“For this board, when we are constantly spending and haven’t identified new sources of revenue, fiduciary responsibility for us is a real concern,” said Anthony.
Lowe told the Arkansas Democrat-Gazette that the board is always looking at what executive salaries will be redistributed into which program budgets. The agency currently has fewer than 15 employees, he said.
He also said a potential new source of income could come from building single-family homes on some of his vacant lots, including some on Cumberland Street and Washington Street.
The Metropolitan Housing Alliance is not operating on a deficit, Lowe said, but is simply working on “long-term planning” that any organization would do.
“We’re just trying to be good stewards of public money and use our resources to the best of our ability,” Lowe said.