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DCHA Reverses Stance On $21M Voucher Rent Shortfall, May Pay Landlords More

All summer, landlords, tenants and advocates have been preparing for a potential wave of evictions after the D.C. Housing Authority said it may lower the rents it pays in certain neighborhoods for its housing choice voucher recipients.

But after saying in May that the authority was paying $21M more in rent than it should be and initiating a review of its rent standard, DCHA’s stance has flipped, Director Brenda Donald said in a meeting with stakeholders Tuesday. Bisnow was invited to watch the virtual meeting by an attendee.

DCHA Executive Director Brenda Donald speaks during the mayor's Fair Shot Friday event on March 25, 2022.

Donald said the agency is not overpaying landlords in 99% of its vouchers. What’s more, it believes certain apartment owners have been underpaid and are in need of a small raise.

“Where we are now is not to make any immediate changes, but we do realize that our published rents need to be increased,” Donald said at the Aug. 30 meeting.

DCHA didn't respond to a request from Bisnow to answer questions for this story.

The authority’s about-face on overpayment comes after months of meetings with over 100 stakeholders to discuss a proposed change to the rent reasonableness tool that DCHA uses to determine how much it’s willing to pay in a given neighborhood. The tool is based on several factors, including a percentage of the fair market rent for the entire metropolitan area – including suburban Maryland and Northern Virginia – set by the U.S. Department of Housing and Urban Development — and an analysis of the average rents in 50 neighborhoods determined by DCHA.

The change to the standard would have followed ZIP codes instead of neighborhood boundaries and lowered the ceiling of rents the authority was willing to pay overall. Critics said the change would actually price voucher recipients out of more expensive neighborhoods, undoing progress DCHA had made to give them access to more areas of the city.

“We got a lot of panicked calls. Landlords started sending letters to tenants saying they were going to get evicted,” said Amanda Korber, supervising attorney in the Housing Law Unit of Legal Aid DC. “A lot of that was just completely unnecessary.”

At a board meeting for the authority’s operations committee Thursday, DCHA Deputy Director Victor Martinez said faulty data for nearly 6,000 of the authority’s units caused the perceived overpayment. He said that once the authority’s data was cleaned up, few problems with overpayment remained. 

“6,000 is 33% of the whole universe that we're talking about,” Martinez said. “That's why we were working from a very flawed premise when we were first coming to you at the beginning of May.”

DCHA is evaluating a new payment standard analysis done by outside research firm Novogradac. Agency leaders said it should keep the current standard used to determine rents while it determines the fairness of Novogradac’s standard, potentially switching to the new one in 2024.

The authority is also advocating for a more regular process to analyze rent increases going forward. Leaders proposed that it should conduct a market study once every three years and determine the areas in which rents can be increased based on that study.

A slide from an Aug. 23 presentation from D.C. Housing Authority to voucher program stakeholders shared with Bisnow.

As for the rent bump, targeted for the second quarter of next year, the authority estimates a 2% increase for eligible landlords would cost $4.3M in total, with $2.7M covered by federal funding and $1.6M from the local budget set by the D.C. Council. DCHA anticipates the federal portion of such an increase would be completely covered, but it will need additional funding from the District.

DCHA also posed a 1.03% increase option, with a correspondingly lower fiscal impact. Eligible landlords must have passed an inspection and had a contract through the voucher program for more than one year.

“We don't know what increases will happen ... but what we do know is there will be no decreases,” said Dean Hunter, CEO of the Small Multifamily Owners Association. “People were running around saying the sky is falling and that DCHA is destroying the rental market, and that's just not how government works.”

Korber, who has worked with voucher recipients for years, said she feels reassured that DCHA won’t dramatically change its rent standard, preventing a potential wave of evictions. But the fight now moves to funding, as DCHA must make its case to the District that the increase is necessary.

Last year, the authority paid $441M to landlords through the voucher program for roughly 19,000 tenants. The authority froze rent increases in 2019, and since that time has drawn criticism and legal action from D.C. Attorney General Karl Racine for neglecting a 40,000-person waitlist and failing to advocate for tenants with disabilities.

D.C. AG Karl Racine at a 2017 press conference. Racine sued the D.C. Housing Authority on June 16, alleging the authority of having a dysfunctional bureaucracy that "forced hundreds of residents with disabilities to wait years" for housing.

Korber said every year, she advocates for a larger budget for the DCHA than the authority asks for itself. But she’s not advocating for a rent increase for landlords, and she said a “blanket approach” for a rent increase speaks to the same concerns of overpayment that launched this summer-long saga.

Instead, she said the budget should grow to begin to draw down that waitlist.

“Just giving everyone an increase without determining which units are actually deserving of an increase is part of the problem,” Korber said.

At least one proposal to address the funding gap has already begun circulating. Hunter, who has represented small landlords since founding his organization in 2020, said the money could come from the mayor’s Housing Production Trust Fund, which is approaching half a billion dollars in funding in the latest District budget.

“The funds are to be used for the provision of affordable housing. The voucher program is our largest affordable housing program,” Hunter said. “These are immediate needs, so let's put that money to use right now.”

Others see the ballooning budget for the fund compared to the housing authority budget’s relative stasis as a sign of the District’s priorities – namely, that new housing beats housing assistance. 

“I think the District has plenty of money. They seem to be doing pretty well fiscally. I think it’s just priorities,” said Alex Rossello, director of policy communications at the Apartment and Office Building Association of Metropolitan Washington. “[The voucher program] is clearly one of the most, if not the most, effective way of getting housing for low-income renters. If more money means you can house more people then you should do it.”