Congress cuts funds from Section 8 program Congress rescinded $2.3 billion from the Section 8 rent subsidy program to offset spending in a fiscal 1998 supplemental appropriations bill, despite warnings from the Clinton administration that the funding cut could jeopardize the future of hundreds of thousands of low-income families.

The funds were taken from excess Section 8 reserves - money previously appropriated by Congress that so far hasn't been needed. However, the administration was counting on those reserves to reduce the additional funding that will be needed in fiscal 1999 to renew expiring Section 8 contracts.

According to the administration, contract renewals will require about $10.9 billion in 1999, and its budget proposal includes $7.2 billion in new funding, with $3.7 billion in reserves making up the difference.

Although the rescission will boost the requirement for additional Section 8 funding through the fiscal 1999 appropriations process, the Republican congressional leadership has promised to provide whatever is needed to renew all expiring contracts.

The controversy illustrates the problems the congressional budget process has caused for the Section 8 program, with its multiyear contracts. Each year, Congress appropriates money (budget authority) to cover the full cost of Section 8 units leased in that year. If a unit has a five-year contract, Congress provides the estimated budget authority needed to cover the subsidy cost over the five-year period.

The actual amount spent in the first year will depend on the actual unit rent and the tenant's income, and the remainder will go into a reserve account to cover the costs in years two through five. If the tenant's income is higher than anticipated or rents don't rise as much as projected, the reserve may exceed the amount needed for the full contract term.

These excess reserves can be used, as the administration has proposed, to reduce the funding needed to renew expiring Section 8 contracts, but they also present a tempting target when Congress is looking for cuts to offset other spending.

This whole exercise won't have any real-world impact on Section 8 tenants or owners so long as Congress and the administration remain committed to renewing all expiring contracts, and so far there has been no suggestion that anyone wants to put poor people out on the street.

HUD issues rule to merge certificate, voucher programs HUD has issued final regulations to complete the administrative merger of the Section 8 certificate and voucher programs, though legislation will still be needed to create a single tenant-based rental assistance program.

The fundamental difference between the two programs relates to rent limits and tenant payments. Certificates generally can be used only for units with rents that don't exceed HUD established fair market rent (FMR) limits. The tenant typically pays 30% of income, and the Section 8 subsidy covers the rest of the rent.

With vouchers, there are no limits on unit rents, but the subsidy is limited to the difference between 30% of income and a payment standard tied to the FMR. Accordingly, voucher holders can rent more expensive units if they pay the additional cost.

The regulations implement two statutory changes that minimize - though they don't eliminate - these differences. Under one change, certificates can now be used to a limited degree for units with rents above FMR limits. Specifically, public housing agencies administering the certificate program can allow up to 10% of the certificate holders to lease above FMR units, but the subsidy will still be limited to the difference between the FMR and 30% of tenant income. The PHA must determine that the tenant's payment is reasonable, taking other family expenses into account.

The second change adds a rent reasonableness test to the voucher program. Under the merged rule, a PHA must determine that the initial rent for a unit leased with a certificate or voucher is reasonable, based on the rents for comparable unassisted units. The PHA also must redetermine the reasonable rent before the rent to the owner can be increased, if there is a 5% reduction in the FMR or if directed by HUD.

Support services won't bar tax credits for project The availability of support services for homeless persons with alcohol or drug problems won't bar a project from receiving low-income housing tax credits, according to Internal Revenue Service Private Letter Ruling 9814006.

The services won't be provided at the housing project, but they will be available at an adjacent location. While most of the project residents are expected to use the services, such use won't be required as a condition of occupancy. Each tenant must sign a lease with a minimum term of 30 days.

The IRS concluded that occupancy of the project won't be considered transient and that the project will be available for use by the general public. Thus, it will be eligible for tax credits.