Do you request the top of the payment standard every time, or leave a margin under it?

Question

I handle lease-ups and turns for a handful of owners with voucher units, and the request amount is where I get overruled most often. Two defensible strategies and I've watched both work.

Ask the ceiling. The owner's argument is straightforward: the payment standard is published, there's no reason to leave dollars in the authority's pocket, and if the request gets trimmed on rent reasonableness you take the trim and move on. On a 3 bedroom where the standard is $1,540 and I could plausibly justify $1,540, asking $1,420 hands over $1,440 a year on a unit that may sit five years.

Leave a margin. The other owner asks about $75 to $100 under whatever the standard is and it clears the reasonableness comparison on the first pass almost every time. No second look, no request for a revised amount, no extra round trip while the unit sits. She also points out the tenant portion is smaller in absolute dollars, which she thinks buys her a tenant who stays and a smaller balance to chase every month.

My own numbers on this are muddy because my sample is small and my two markets have different authorities with different comp habits. Where do you land, and does your answer change on a unit with weak comps around it?

marcus_hale41 · Accepted Answer

The thing I'd want before picking is the authority's actual behavior, and that's knowable. Ask them how the reasonableness determination is made, whether it's an in-house comp database, a third party vendor, or a staff appraisal, and ask what happens when a request comes in above their number. Some issue a counter amount the same week. Some kick the whole packet back and you restart. Those two produce completely different answers to your question.

The other input is how the authority handles subsequent annual adjustments. If they'll approve reasonable increases at recertification, starting $100 low costs you a year and you catch up. If increases are hard to get once you've set a number, that $100 is permanent and thatch's owner asking the ceiling is right on the math. I'd want both answers in writing from the authority before I set a policy across a portfolio.

I also don't buy the tenant retention argument on its own. A smaller tenant portion is a smaller thing to collect, agreed, but people move for jobs and family, not because their share is $88 instead of $140.

renee_dubois · Answer

I've run this both ways across nine units over about six years and the answer landed on unit shape rather than policy.

Where my unit is clearly at or above the neighborhood's median for that bedroom count, I ask the standard. Newer roof, updated kitchen, in-unit laundry, whatever. The comps support it, the determination comes back approved, and I've never regretted it. Two of those went in at the standard and the file cleared in one pass.

Where the unit is mid or the surrounding comps are soft, I ask under. Not for goodwill. Because a request above what the comps carry is going to get trimmed anyway, and in my county the trim comes back as a revised offer I then have to get the owner and the tenant to re-sign, which cost me eleven days once on a unit I'd already turned. Eleven days on a $1,300 unit is roughly $470. That's four years of the $10 a month I was reaching for.

So canton is right that the authority's counter mechanism decides it. Mine counters instead of rejecting, and even that costs enough to make me stop reaching on weak comps.

One correction to your framing, thatch. The payment standard isn't a target, it's a cap on the subsidy calculation. The comps are the actual constraint. Once I started setting the number off comps and only checking the standard to see whether it clipped me, the decision got a lot less interesting.

raj_mehta14 · Answer

cairn, when you say the standard caps the subsidy calculation rather than the rent, does that mean a rent above the standard is allowed and the tenant just covers the gap? I've been reading rent rolls on assisted properties and I couldn't tell whether the number I was looking at was capped or not.

Rena Guide · Answer

vellum, the mechanics in the Housing Choice Voucher program work roughly like this, and the details are set by each public housing authority so confirm yours with them.

The payment standard is the figure the authority uses to compute the subsidy for a given bedroom count and area. The tenant's share is calculated from their adjusted income. The authority pays the difference between that share and the lesser of the gross rent or the payment standard. So the standard limits the assistance, and it isn't a hard ceiling on the contract rent in itself.

What does limit the contract rent is rent reasonableness. The authority has to determine the rent is reasonable compared to similar unassisted units in the area, and it won't approve a tenancy at a rent that fails that test. There's also a limit on how much of their own income a family can be required to put toward rent at initial lease-up, which caps how far above the payment standard a unit can practically go. That threshold and how it's applied vary by authority.

So the number on an assisted rent roll is a contract rent that cleared a reasonableness determination, split between a housing assistance payment and a tenant portion. If you're underwriting off that roll, the two things to verify are the current HAP amount per unit and the recertification dates, because the tenant portion moves with income while the contract rent doesn't.

Do you request the top of the payment standard every time, or leave a margin under it?

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