Consideration and Approval: Section 8 Security Deposit Assistance Program - a loan program to assist voucher holders to overcome the barrier of high-security deposits.

The Section 8 (S8) Security Deposit Assistance Program (SDAP) has been developed to help voucher holders overcome the barrier that high-security deposits create. Many voucher holders do not have the resources to pay a security deposit or are severely burdened by the payment. This program will assist voucher holders in securing an affordable rental housing unit by providing up-front funding for these expenses. Participating households will repay the housing authority loan over six to twelve months, depending on household income.

This program can be funded with administrative fees provided by HUD for the administration of Section 8 and other voucher programs. The CARES Act provided $144,009 in additional funds to be used for Section 8 eligible administrative costs and for additional COVID-related expenses. This CARES Act funding frees up standard administrative fee funding to be used for this program-related expenditure. Thus, the $75,000 loan fund is fully covered by HUD funding.

This will be a revolving loan fund with all loan terms under 12 months, and, as such, it is not anticipated the funding will need to be replenished.

Priority Based Budget Key Community Priorities and Objectives
Safe and Healthy Community
   Inclusive and Engaged Community
   Robust Resilient Economy
           Livable Community

Regional Plan
Goal NH.1. Foster and maintain healthy and diverse urban, suburban, and rural neighborhoods in the Flagstaff region.
Goal NH.3. Make available a variety of housing types at different price points, to provide housing opportunity for all economic sectors.
Policy NH.3.3. Increase the availability of affordable housing for very low-income persons, through innovative and effective funding mechanisms.

There is no previous Council action regarding this program.

The program was considered by the Housing Board of Commissioners at the January 21, 2021, meeting. The Board was in support of the program and requested that unit transfers due to employment changes be included as eligible loans. This change was incorporated into the program and the Board unanimously approved forwarding it to City Council for consideration.

• Approve the program as proposed.
• Approve the program with amendments as directed during the meeting.
• Request that alternate policy be written.
• Not approve the program.

Households participating in voucher programs have limited resources to pay security deposits and application fees. This vulnerability is a substantial barrier to successful participation in Section 8 and other voucher programs, which can effectively limit the number of units available to voucher holders and either delay or prohibit the lease-up of an affordable unit due to household lack of funds for the security deposit/ and application fees. The award of a loan to cover these costs enables the household to participate in the programs quickly, expands housing opportunities by increasing the number of units available to the household, and enhances household's ability to budget for the security deposit by providing monthly repayment.

The proposed program parameters are outlined below. Full plan details are set forth in the attached Section 8 Security Deposit Assistance Program (attached).

• The program is available for all voucher types issued by the Housing Authority and for use within the Flagstaff, Arizona jurisdiction.
  • This includes Veterans Administration Supportive Housing (VASH) and Foster Youth for Independence (FYI) program
• The SDAP program will provide zero interest loans to voucher holders for the security deposit and application fees at the time of unit lease up.
• SDAP loans will have a term of 6 to 12 months, based on household income.
• SDAP assistance will be for new move-ins and for unit transfers in limited circumstances. In general, SDAP assistance for unit transfers will be available only every three years and for moves that are beyond the control of the household or change in employment.
• Eligible costs shall include up to one month’s rent on the new unit plus up to two application fees per adult family member.  Only refundable portions of the security deposit will be covered.  Households with income below 30% of Area Median Income (AMI) are eligible for loan amount up to 100% of eligible costs. Households with income between 30% and 50% of AMI will be eligible for loans of half of eligible costs.
• SDAP loans will be documented by a Promissory Note between the Housing Authority and the household. No interest will be charged. The loan term will be twelve months for households with income below 30% of AMI and six months for households with income between 30% and 50% of AMI.
• SDAP loans will be due in full if the household moves out of the unit. As with other repayment agreements utilized with voucher programs, failure to repay will be grounds for termination from the program.

Administration of this program is minimal and can be absorbed within existing and anticipated staffing.

The program was considered by the Housing Board of Commissioners at the January 21, 2021, meeting. The Board was in support of the program and requested that unit transfers due to employment changes be included as eligible loans. This change was incorporated into the program and the Board unanimously approved forwarding to City Council for consideration.
 

There is no General Fund impact.  All funds have been received from HUD and this program is an eligible use of funds. As this program is being established as a revolving loan program, no additional funds are needed.

The SDAP program will provide a tool for very low-income voucher participants to compete more effectively for rental units by providing up-front funding for security deposits and application fees.  This enhances housing stability for the vulnerable populations served and children in assisted families; this housing stability improves participant quality of life and enhances workforce stability. The community benefits are targeted to at-risk populations and increases community equity by serving disadvantaged communities first.
 

On December 14, 2020, a description of the proposed program and a request for comments were sent to all current voucher holders. More than 30 calls/emails were received in support of the program. Many asked for more details and/or to apply for the program. Support of the program was strong; no negative comments were received.

The program was considered by the Housing Board of Commissioners at the January 21, 2021, meeting. The Board was in support of the program and requested that unit transfers due to employment changes be included as eligible loans. This change was incorporated into the program and the Board unanimously approved forwarding it to City Council for consideration.