HB 5336 — AN ACT IMPLEMENTING THE RECOMMENDATIONS OF THE CONNECTICUT HOUSING AND SEGREGATION STUDY.

(g) The commissioner shall adopt regulations in accordance with the provisions of chapter 54 to carry out the purposes of this section.

The regulations shall establish maximum income eligibility guidelines for such rental assistance and criteria for determining the amount of rental assistance which shall be provided to elderly persons, provided (1) the amountofassistance forelderlypersonswhoarecertificateholdersshall be the difference between thirty per cent of their adjusted gross income, less a utility allowance, and the base rent, and (2) such regulations shall require that the commissioner conduct a reexamination concerning any eligible elderly person's continued eligibility for rental assistance not more frequently than biennially.

Sec.

5.

ThissHB5336 act/ shallFile takeNo. effect as follows and shall amend the following sections:

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110 This act shall take effect as follows and shall amend the following sections:

3 October 1, 2024 New8-72 sectionSec. LCO No.

20614 2October of1, 32024 Raised8-119kk(g) BillOctober No.53361, Statement2024 ofSec. Purpose:

To5 adoptNew certainsection recommendationsStatement of theLegislative ConnecticutCommissioners: Housing and Segregation Study concerning (1) the equalization of state housing assistance payments with federal Housing Choice Voucher rental assistance payments, (2) requiring biennial inspections of any housing unit participating in the rental assistance program, and (3) the modification of certain scores under the Qualified Allocation Plan adopted by the Connecticut Housing Finance Authority and the Commissioner of Housing.

[ProposedIn deletionsSection are3(c),"adopted" enclosedwas inadded brackets.for clarity;

Proposedin additionsSections are3(c), indicated(d) byand underline,(e), except"Commissioner that when the entire text of aHousing" billwas orchanged resolutionto or"commissioner" afor sectionconsistency; of a bill or resolution is new, it is not underlined.] LCO No.

2061and 3in ofSection 33(g), "twelve-month" was changed to "twenty-four-month" for accuracy.

HSG Joint Favorable Subst.

sHB5336 / File No.

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110 The following Fiscal Impact Statement and Bill Analysis are prepared for the benefit of the members of the General Assembly, solely for purposes of information, summarization and explanation and do not represent the intent of the General Assembly or either chamber thereof for any purpose.

In general, fiscal impacts are based upon a variety of informational sources, including the analyst’s professional knowledge.

Whenever applicable, agency data is consulted as part of the analysis, however final products do not necessarily reflect an assessment from any specific department.

OFA Fiscal Note State Impact:

Agency Affected Fund-Effect FY 25 $ FY 26 $ Department of Housing GF - Potential See Below See Below Cost Department of Housing GF - Cost Potential At least 1 million CHFA FF - Revenue None Potential Loss Note:

GF=General Fund;

FF=Federal Funds Municipal Impact:

None Explanation The bill makes significant changes to state rental assistance programs which are anticipated to result in various costs and potential costs to the Department of Housing (DOH) beginning in FY 25.

The bill could also jeopardize the state’s allocation of federal Low Income Housing Tax Credits (LIHTC) in FY 26, administered by the Connecticut Housing Finance Authority (CHFA).

Elderly Rental Assistance Program Cost The bill requires DOH to amend regulations to ensure that Elderly Rental Assistance Program (ERAP) participants’ rent contributions are increased no more frequently than once every two years.

Assuming it takes DOH approximately one year to adopt such regulations, this results in a cost that could exceed $1 million to DOH beginning in FY 26 and biennially thereafter.

Currently, annual increases to the cost of operating the state-assisted sHB5336 / File No.

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110 elderly rental housing developments are split between DOH (in the form of higher grants) and ERAP tenants’ contributions, which reflect increases to their income (e.g., from inflation adjustments or Social Security benefits).

Since most program participants’ incomes would have been reexamined in FY 25 under the current process, the state would bear nearly the full cost of inflationary increases in FY 26 when those tenants’ contributions cannot be updated.

DOH can control costs in the program to some extent by not allowing new participants into the program when existing tenants stop receiving rental assistance, but the savings generated are unlikely to cover the biennial cost resulting from the bill.

For reference, in FY 23, there were 952 tenants receiving rental assistance through ERAP at properties managed by 28 housing authorities and non-profits.

Rental Assistance Program Impacts Assessment.

The bill requires DOH to conduct an assessment of housing assistance payments (HAP) under the federal Housing Choice Voucher (HCV) program by January 1, 2025 and annually thereafter.

To the extent this requirement is limited to theHCV program administered by DOH, there is no cost.

If DOH must assess HAP across all Connecticut public housing authorities (PHA), there could be a cost of up to $75,000 annually beginning in FY 25 for a vendor to collect and analyze such data.

Equalization.

The bill is anticipated to result in significant Rental Assistance Program (RAP) subsidy changes beginning in FY 25, to the extent DOH implements the requirement to equalize HAP under RAP with payments under the federal HCV program (also known as Section 8).

DOH administers RAP and is one of 45 PHA administering HCV in Connecticut.

Subsidy amounts in both programs depend on:

(1) the rent of the chosen unit and (2) the share of the tenant’s income that must be contributed towards rent, among several other factors.

For reference, the average annualized RAP rental subsidy in January 2024 was $11,750 per certificate and DOH funds approximately 6,500 RAP certificates.

sHB5336 / File No.

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110 Equalizing HAP across the two programs DOH administers will result in significantly different costs for RAP as described below;

however, the program is generally managed within available funding (including administration costs) by restricting the turnover of certificates to new households if there is insufficient budgeted funding.

Cumulative Impact to RAP Because RAP is not an entitlement program and is currently operating near full capacity, the impacts to per-voucher and administrative costs described below are not anticipated to result in a permanent cost or savings to DOH.

It is not clear which impacts will prevail, so the bill may result in a significant DOH temporary cost in FY or FY 26 until the number of certificates can be reduced to match the available funding.

Lower Maximum Allowable Rents (MAR) Under current law, DOH allows RAP tenants to select units with the same or higher maximum allowable rent amounts as the U.S.

Department of Housing and Urban Development (HUD) allows for the HCV program.

This means RAP tenants can generally rent a more expensive apartment than DOH’s federally subsidized voucher holders.

Equalizing the payment standards by unit size and location as requiredbythebillwillsignificantlyreducethevalueofRAPcertificates for most current and future recipients.

This will correspondingly lower per-voucher costs to DOH, since changes in rent are fully incurred by the state if tenant income and other family attributes remain the same.

Lower RAP values may also reduce certificate utilization rates if recipientsstruggletofindunitsofferedatthelowerallowablerents.

The savingsto DOHcouldoffset higher per-certificate costsdescribedbelow or be used to issue additional lower-value certificates.

Asanexample,theDOHmaximumallowablerentforaone-bedroom unit in Guilford is $1,885 per month.

HUD gives the public housing authority administering the HCV program some flexibility in setting sHB5336 / File No.

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110 payment standards for their allotment of vouchers, which DOH utilizes by setting its HCV payment standard at 110% of HUD-calculated Fair Market Rents (FMR).

This equates to an allowable monthly rent of $1,511 for the same one-bedroom unit in Guilford for DOH HCV voucher holders, which is $374 (20%) less per month.

Lower Tenant Contribution for Some Another difference between the programs’ subsidies is the share of thefamily’sincome that must becontributedtowardsrent.RAPfamilies that are not elderly or disabled must contribute 40% of their adjusted household income towards rent, while HUD rules require tenants to contribute 30% of their adjusted income for HCV.

As most RAP recipients are disabled or elderly, the estimated cost to DOH to reduce tenant contributions for those RAP recipients impacted is between $1 million and $3 million per year for existing RAP voucher holders.

Less Frequent Recertification of Income The bill results in a potentially significant cost to the RAP program beginning in FY 26, to the extent the bill prohibits the current requirement in DOH regulations for certificate holders to notify them about income increases that occur between recertifications.

If tenant contributions are not increased as frequently, DOH will incur higher subsidy costs for those families.

Administrative Costs The bill may result in an administrative savings for RAP beginning in FY 26, due to the change from annual to biennial recertification.

RAP is currently administered by a vendor at cost to the state of $48 per unit per month.

Administrative costs will be rebid for FY 25.

1DOH increases HCV rents up to 120% of FMR with HUD approval on a case-by-case basis.

The bill is not likely to standardize payment standards across all tenant-based rental assistance programs in Connecticut, as other public housing authorities operating the HCV program within their own jurisdictions also have some flexibility 2o set payment standards for their allotted vouchers.

There is also an adjustment for utilities.

sHB5336 / File No.

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110 Potential Cost to Adopt Regulations The bill requires DOH to modify ERAP and RAP regulations.

To the extenttheagencyrequiresoutsideassistancetodoso,thereisapotential cost to DOH in FY 25 of up to $50,000 for legal services.

Qualified Allocation Plan (QAP) Changes The bill requires DOH to make certain changes to the state’s QAP, which governs the way CHFA distributes Connecticut’s allocation of federal Low Income Housing Tax Credits (LIHTC).

To the extent CHFA adopts a QAP that conflicts with federal Internal Revenue Code requirements, there is a risk of CHFA not receiving such tax credits to allocate beginning in FY 26.

Moderate Rental Housing Program There is no fiscal impact to the state or municipalities for biennial reexamination in the Moderate Rental Housing Program because any related tenant rent and administrative cost changes will not be incurred by the state or municipalities.

Housing authorities, which operate many such properties, are autonomous public corporations.

The Out Years The annualized ongoing fiscal impact identified above would continue into the future subject to inflation.

Sources:Department of Housing, Annual Report 2022-2023 Department of Housing, RAP Maximum Allowable Rent Schedule 2024 Department of Housing, Section 8 HCV Payment Standards 2024 sHB5336 / File No.

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110 OLR Bill Analysis sHB 5336 AN ACT IMPLEMENTING THE RECOMMENDATIONS OF THE CONNECTICUT HOUSING AND SEGREGATION STUDY.

SUMMARY This bill makes several changes to laws on affordable housing programs in the state.

Specifically, it requires:

1.

the Department of Housing (DOH) to assess housing assistance payments under the federal Housing Choice Voucher (HCV) program and attempt to equalize housing assistance payments under state housing voucher programs to the HCV standards;

2.

that reexaminations to determine continued eligibility for certain housing programs (e.g., the Rental Assistance Program, Moderate Rental Housing Program, and Elderly Rental Assistance Program) occur no more frequently than biennially;

and 3.

the DOH commissioner, in coordination with the Connecticut Housing Finance Authority (CHFA), to adopt a qualified allocation plan for federal low-income housing tax credits that prioritizes municipalities based on (a) their need for affordable housing units, as determined in their fair share allocation, and (b) having no previous developments that received these tax credits.

Finally, the bill makes technical and conforming changes.

EFFECTIVE DATE:

October 1, 2024 § 1 — HOUSING ASSISTANCE PAYMENTS FOR VOUCHERS The bill requires DOH, annually beginning by January 1, 2025, to sHB5336 / File No.

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110 assess housing assistance payments for state residents under the federal HCV program.

It also requires DOH, to the extent practicable, to equalize housing assistance payments under the state’s Rental Assistance Program (RAP), or any other housing voucher programs it administers, with the payments available under the HCV program.

DOH must do so based on (1) housing unit size, location, or other physical characteristics, and (2) the income level of households that may live in the units.

Under the HCV program and RAP, “housing assistance payments” are generally the portion of a tenant’s rent that the administering entity pays.

Existing lawrequiresDOHto (1)set maximumrent levelsunder RAP for each municipality in a way that promotes the use of the program in all municipalities (CGS § 8-345(e)) and (2) adopt regulations determining the amount of rental assistance provided to eligible households.

(The bill adds a requirement to these regulations;

see below.) §§ 2-4 — INCOME REEXAMINATIONS FOR CERTAIN HOUSING PROGRAMS Under the bill, DOH’s RAP regulations must require the department to conduct income reexaminations for eligible households no more than biennially.

Current RAP regulations require DOH to (1) conduct annual reexaminations of participating families’ income and composition and (2) adjust the amount of each household’s assistance payment to reflect changes in the family’s adjusted gross income.

The regulations also require participating families to report changes in income or family composition to the department within 30 days (Conn.

Agencies Regs., § 17b-812-9).

Additionally, DOH’s Administrative RAP Plan requires the department to process interim reexaminations when households have an increase in income that results in an increase of at least $50 per month in tenant rent.

Similarly, the bill prohibits households living in certain state- supported housing projects (e.g., the Moderate Rental Housing sHB5336 / File No.

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110 program) from having their income reexamined more than biennially unless the unit is subject to federal law requiring more frequent reexaminations.

Under existing law and unchanged by the bill, entities operating or managing these housing units may reexamine a household’s income more frequently if it is based on an income reduction.

Current DOH regulations generally require annual income verifications under the Moderate Rental Housing program (Conn.

Agencies Regs., § 8-79a-16).

Lastly, under the bill, DOH’s regulations for the Elderly Rental Assistance Program (ERAP) must require the department to conduct a continued eligibility reexamination for elderly people receiving rental assistance under the program no more than biennially.

Current ERAP regulations require grantees to conduct a reexamination of household income and composition annually and adjust the amount of each household’s assistance payment accordingly (Conn.

Agencies Regs., § 8-119kk-6).

§ 5 — LIHTC PROGRAM QUALIFIED ALLOCATION PLAN The bill requires the DOH commissioner, by August 1, 2025, and in coordination with CHFA, to adopt a qualified allocation plan (QAP) for federal low-income housing tax credits that replaces certain existing priority scores or other point allocations.

Specifically, the QAP must replace a score or allocation based on a proposed housing development’s location with one that is based on the extent to which the development meets a need for affordable housing units, as determined in the municipal fair share allocation the Office of Policy and Management (OPM) must calculate under existing law (see BACKGROUND).

Additionally, it must replace a score or allocation based on a proposed development’s lowest credit per qualified unit with one that is based on whether the proposed development is in a municipality that has not previously received funding under the Low- Income Housing Tax Credit (LIHTC) program.

It is unclear whether the bill’s QAP provisions conflict with federal sHB5336 / File No.

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110 requirements (see BACKGROUND).

BACKGROUND Fair Share Allocation PA 23-207, § 18, requires the OPM secretary, by December 1, 2024, to create a methodology for each municipality’s fair share allocation of affordable housing by generally (1) determining the need for affordable housing units in each of the state’s planning regions and (2) fairly allocating this need to each region’s municipalities.

It also requires the secretary, by this date, to use the methodology to determine the minimum need for affordable housing units for each planning region and a municipal fair share allocation for each region’s municipalities.

Hemustsubmitthefairshareallocationmethodologyto(1)theHousing and Planning and Development committees and (2) each chamber of the General Assembly for approval.

LIHTC Program The LIHTC program is the federal government’s primary policy tool for developing affordable rental housing.

Tax credits are awarded to developers of eligible projects to offset the cost of constructing rental housing in exchange for agreeing to reserve a specified portion of rent- restricted units for lower-income households.

Developers typically use the credits as a financing tool by selling them to private investors, who benefit from a reduction in tax liability.

The proceeds from the sales generate equity for the development, thus reducing the need for debt and other financing that would otherwise be required.

QAP Requirements.

Under the LIHTC program, allocating agencies are responsible for awarding tax credits to qualifying projects that meet their QAP.

(In Connecticut, CHFA is the allocating agency.) Federal law requiresQAPstogivepreferencetocertainprojects,includingthosethat (1) serve the lowest-income tenants, (2) are obligated to serve qualified tenants for the longest periods, and (3) are located in qualified census tracts and whose development contributes to a concerted community revitalization plan.

Additionally, QAPs must incorporate certain selection criteria (e.g., project location, housing needs characteristics, sHB5336 / File No.

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110 public housing waiting list, etc.) (26 U.S.C.

§ 42(m)).

Related Bills sSB 6 (§ 25) and sSB 146 (§ 2), both reported favorably by the Housing Committee and containing nearly identical provisions, require DOH to take certain actions related to its administration of RAP and other housing voucher programs.These actionsinclude conducting anannual assessment on maximum rent amounts under these programs and adjusting the amounts based on certain considerations.

COMMITTEE ACTION Housing Committee Joint Favorable Substitute Yea 11 Nay 4 (03/07/2024) sHB5336 / File No.

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