Last Minute Tips to Increase Your HAP Funding in 2018

November 2017

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Every public housing authority (PHA) that administers a Housing Choice Voucher (HCV) program will be funded based on the Congressional approved funding methodology. The funding period is January to December (calendar year) for all PHAs, regardless of their fiscal year. The funding formula is typically VMS reported HAP expenses from the prior calendar year plus inflation and proration factor. For example, HUD will provide HAP funding for calendar year 2018 from 2017 calendar year reported VMS HAP expenses. So the idea is to maximize HAP expenses to maximize HAP revenue in the following year. 

We understand it is challenging to monitor HAP funding and expenditures monthly and have a few last minute suggestions to help maintain PHA funding levels in 2018. To begin, funding is measured on a calendar year and any excess HAP reserves that a PHA has as of December 31st could be subject to offset. HAP reserves consist of HUD-Held Reserves (HHR) and Restricted Net Position (RNP). HUD will measure a PHA’s HAP reserve by combining HHR and RNP. If HUD decides to implement an offset provision, then HUD will determine a PHA’s excess HAP reserves. It has changed over the years, but a good rule of thumb would be to have no more than one month of HAP expense in combined HHR and RNP as of December 31st. If the PHA is of a larger size, then the PHA may want to consider two weeks of HAP expense. There is no HUD guidance published to determine target reserve levels at calendar year-end, but there are a few items to consider:

1. The more HAP expenses the PHA will incur during the calendar year, the more funding the PHA will receive the following year. The fewer HAP expenses a PHA incurs during the calendar year, the less HAP funding the PHA will receive the following year.

2. The more unit months the PHA has under-lease, the more administrative fees the PHA will earn.

3. If there is too much combined HHR and RNP, HUD could offset future funding, “use it or lose it.”
 

EXAMPLE
Description    Amount    Data Sources        Calculation

 
 
 
Annual Budget Authority 2017   $12,000,000   Two Year Tool   Prior calendar year VMS reported HAP costs, plus inflation and proration factor

 
 
 
RNP as of 12/31/16   300,000   Two Year Tool    Excess HAP funds held by PHA

 
 
 
HHR as of 12/31/16   1,000,000   Two Year Tool   Excess ABA at calendar year-end held by HUD 

 
 
 
Total HAP funding available   $13,300,000        
             

 
 
 
Total HAP Expenses thru 10/31   11,000,000   VMS    

 
 
 
HAP remaining for November and December   $2,300,000         


Based on the example above, this particular PHA has $2,300,000 remaining for HAP expenses for the remaining calendar year. Ideally the PHA would want to try to utilize as much as the $2,300,000 of HAP funding that is available to maintain HAP funding in the following year. PHAs should review previous submitted VMS HAP costs for accuracy. If the PHA submitted HAP expenses incorrectly, then the PHA could lose funding in the following year. Also, the PHA may want to absorb as many portables as possible for December. This will help with funding the following year as well.

If you have questions regarding matters discussed above, please contact Brian Alten.

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