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New 2016 Housing Assistance Laws

In July 2016 Congress passed the Housing Opportunity through Modernization Act of 2016, the first major US housing assistance reform since 1998. Here's what the new law means to people who are receiving or applying for assistance.



What The New Laws Mean
The recently-passed Housing Opportunity Through Modernization Act provides new tools to help individuals and families find safe, secure places to live. This much-needed reform touches nearly every aspect of housing assistance for families under financial stress and for special-needs populations who are at risk of homelessness or living in unsuitable conditions.

After years of haggling and delays, legislators have come together to address the greatest areas of concern. H.R. 3700 provides reforms in the voucher program, home recertification, deductions, rent determinations, condominium financing, public housing, access, the review process, benefits for former foster care youth, manufactured home purchase, veteran's assistance, rural housing, and contracts. The reform is extensive and promises the double benefit of providing help to the most needy while at the same time saving millions in federal spending.

Public, private, and community-based organizations, realtors, and current Section 8 recipients are all celebrating this new legislation, which is set to replace the 1998 Quality Housing and Work Responsibility Act, which was widely viewed as obsolete.

Who Benefits?
Rental-assistance recipients. Approximately 2 million families and individuals now receive Section 8 vouchers. Legislators listened to the pleas of providers, landlords, and voucher recipients, and simplified and streamlined the application and renewal process. With passage of the legislation, renters can gain access to higher-income neighborhoods; and because landlords have more and better options, more suitable homes will become available.

The new income review process allows families to keep 100% of increased earnings for a longer period of time. With this one provision, families get a powerful incentive to increase their personal earnings and hold on to the buying power of their dollars. Under the previous provision, with increased earnings came a decrease in benefits so that families did not receive an immediate payoff for their increased labor. That policy has been reversed so that more work with more income means more money in the pockets of the wage earner.

Aspiring homeowners. The nation's realtors recognized the need to lobby Congress on behalf of low- and middle- income wage earners. A limited supply of houses, rising prices, and heavily-restricted loan policies created an environment where this community of workers faced overwhelming challenges when attempting to purchase suitable homes. Now, creditworthy borrowers have more options. Tom Salamone, president of the National Association of Realtors, believes that the 2016 act puts "home ownership back in reach for more Americans."[1]

Though manufactured homes and condos have always been one of the most affordable options for first-time home buyers, financing for these homes has been tightly guarded. The new law relaxes restrictions, making these homes a viable option. Previously, condos were required to maintain an owner-occupancy rate of 50% in order to qualify for financing. That restriction has been dropped to 25%. Furthermore, in an effort to promote neighborhoods with a balance of residences and business establishments, financing is increasingly available in a condo with greater than 25% commercial property. These changes equal more condos meeting the requirements for the favorable rates available through FHA financing.

Agencies and landlords. Every benefit to agencies and landlords is ultimately designed to benefit the community of low-income tenants. Authorities are now empowered to use funding more readily to redevelop, repair, and even replace existing public housing. Landlords have better options for yearlong rental agreements. Initial contracts have been extended to 15-20 years. Up to 25 units or 25% of all units (whichever is greater) within a development can be project-based vouchers. Project-based voucher contracts have greater flexibility, and the initial inspection procedures have been simplified.

Because the procedure to determine tenant income and rent requirements has been modified, landlords who previously shied away from providing subsidized housing may be more willing to become part of the program.

If all the talk of project-based vouchers leaves you more confused than educated, take heart in knowing that, most likely, agencies and landlords are cheering the changes; and the changes will provide more and better options for the public.

Former foster care youth. Legislators acknowledge that youth who spent time in foster care after the age of 14 are generally at a greater risk for homelessness than those who did not. For this reason, modification has been put into place to expand access to a home subsidy. Previously, youth were eligible for entitlements up to age 21 and for a period of up to 18 months. Under the reform, additional time has been granted to support youth in gaining self-sufficiency. Assistance now extends up to age 24 and is available for up to 36 months for those who left foster care after age 14 or who are targeted to leave foster care within 90 days. It is hoped that the additional support will have the long term benefit of seeing youth leave the subsidy program for good.

Special-needs populations. A full 10% of vouchers can be used to assist special-needs populations. This includes persons with disabilities, seniors, veterans, and the formerly homeless. These populations have a special designation that gives them a better chance at living in a supportive setting. More and better options will become available in rural, economically-challenged areas. This reform is targeted to benefit areas with the greatest housing crises.

If you're looking for all the specifics and a side-by-side comparison of the 1998 act and the 2016 reform, check out the Center of Budget and Policy Priorities report [PDF] from February 2016.

While the Housing Opportunity through Modernization Act should benefit all sectors of American society, it is specifically designed to bring the greatest initial benefits to Section 8 voucher recipients. If it accomplishes what legislators are hoping for, families will have immediate, tangible, real help in securing affordable, livable homes. Meeting this need is hoped to have the long term benefit of reducing dependency on other entitlement programs. It stands to be a significant move to reduce poverty and the perpetuation of dependency on subsidy programs.

Update (Nov 15, 2016)
Most HOTMA provisions will not become final and cannot be fully evaluated until the Det. Of Housing and Urban Development (HUD) develops implementing rules and regulations, which can be an extended process. There are, however, five self-implementing provisions that are effective immediately.

  1. Rent subsidies are often based on HUD estimates of Fair Market Rent (FMR) in an area. HOTMA allows local Public Housing Authorities (PHAs) to request a re-evaluation of FMRs in their area, giving greater latitude for changes due to local market provisions.
  2. Renters already receiving subsidies will not have those subsidies reduced if HUD reduces the FMR assessment in their area.
  3. HOTMA expands eligibility for the Family Unification Program (FUP) and increases the time limits for eligible youth. These provisions make it easier for youths who have been in foster care or other out-of-home care to rejoin their families.
  4. In a provision applying only to Guam, HOTMA gives US citizens and nationals priority in receiving housing benefits.
  5. PHAs in the County of Los Angeles and the states of Mississippi, Alaska, and Iowa are exempted from the requirement that PHA boards must include at least one public housing resident.
HUD will implement other provisions of the Housing Opportunity Through Modernization Act as they develop specific rules and procedures: this will take time, but the new law is expected to be in full effect between one and two years from passage. The recent change in administrations is not expected to have a major impact on the implementation of HOTMA, which was supported by legislators from both parties.

Notes
1. "Senate Housing Modernization Bill" . NationalMortgageProfessional.com
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