HomeMy WebLinkAbout2025-07-17; Housing Choice Voucher (aka Section 8) Rental Assistance Program Potential Funding Shortfall (Districts - All); Barberio, GaryTo the members of the:
CITY COUNCIL
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July 17, 2025
Council Memorandum
{city of
Carlsbad
Memo ID# 2025042
To:
From:
Honorable Mayor Blackburn and Members of the City Council
Gary Barberio, Deputy City Manager, Community Services
Mandy Mills, Director of Housing & Homeless Services
Via:
Re:
Sheila Cobian, Assistant City Manager b~
Housing Choice Voucher (aka Section 8) Rental Assistance Program Potential
Funding Shortfall (Districts -All)
This memorandum provides information about the City of Carlsbad's Housing Choice Voucher
rental assistance program. The U.S. Department of Housing & Urban Development (HUD) has
put the Carlsbad Housing Agency (CHA) on notice that there is a potential funding shortfall at
the end of calendar year 2025 based on forecasted costs.
Background
The City of Carlsbad receives funding from the HUD for the Housing Choice Voucher (HCV)
rental assistance program, commonly referred to as Section 8. Each year the CHA receives a
funding allocation to provide for a maximum of 709 households for its primary HCV rental
assistance program (the Carlsbad Agency serves more people through other funding sources).
Because of the high cost of Carlsbad's rental market, the city has historically provided
assistance to approximately 500 households through the HCV rental assistance program in
order to stay within the maximum budget authority.
Discussion
Budget authority is based on past costs, so many Public Housing Authorities (PHAs) are
projected to be short of the funding needed to maintain current leasing levels with rapidly
increasing housing costs. In 2024, the HUD analyzed the financials of nearly 800 PHAs and
found that nearly 400 PHAs were at risk of experiencing a budget shortfall by the end of 2024,
also known as "shortfall". At that time Carlsbad was not in a potential shortfall position.
The HUD has previously been able to make adjustments to renewal allocations for PHAs that,
despite taking reasonable cost savings measures, would otherwise be required to terminate
participating families from the program due to insufficient funding. The HUD found that many
PHAs would enter 2025 with very limited program reserves at a time when the availability and
amount of future funding from the HUD is uncertain. City staff have been monitoring costs
compared to budget and limiting new participation accordingly.
Community Services Branch
Housing & Homeless Services Department
1200 Carlsbad Village Drive I Carlsbad, CA 92008 I 442-339-2810 t
Council Memo -Housing Choice Voucher (aka Section 8) Rental Assistance Program
July 17, 2025
Page 2
In recent months, there have been numerous changes and budget discussions at the federal
level. The high cost of housing in our community and others has prompted the HUD to take
action to rein in costs based on budget concerns. While the House and the Senate have not yet
approved appropriations for the HUD budget, it is expected that funding levels will, at best,
remain flat. With no increases to address increases in housing costs, it is expected that housing
subsidies per household in Carlsbad will have to be reduced and/or the number of people
receiving housing assistance will have to be reduced through natural attrition.
Projected Budget Shortfall
As of June 24, 2025, the HUD noticed the CHA that the annual funding authorized for
2025 ($9,822,889) is projected to be short of the funding needed to maintain current leasing
levels, putting Carlsbad in potential shortfall status. If per unit subsidies continue to increase at
the rate the city has been experiencing, the HUD projects a potential shortfall of $140,856 for
the 2025 calendar year authorized budget.
This funding shortfall is mainly attributed to a disproportionate increase in housing cost
compared to the increase in income for program participants. This is particularly the case for
elderly and disabled households on a fixed income, of which comprise approximately two-thirds
of Carlsbad's rental assistance households. Those households have seen average rent increases
of approximately 8.8% compared to 2.5% increases in their Social Security income. That
difference has increased the per unit monthly subsidy necessary to continue assistance to
existing participants. City staff have been monitoring costs compared to budget and limiting
new participation accordingly. Through attrition, staff have reduced the number of
participants by 2.8% {14 households) while the monthly amount necessary to cover rent
subsidies for a lower number of participants increased by over 5% (approximately $120 per
household).
The HUD has directed the CHA to implement immediate cost-saving measures, as follows:
1. CHA will continue to pause its application processing of vouchers for new applicants
(pulling from the waitlist), other than Mainstream Vouchers (a program for non-
elderly disabled persons that is not experiencing a funding shortfall).
2. CHA will not process and deny requests to move to higher cost units within
Carlsbad.
3. CHA will not process and deny requests to port (transfer) out to higher cost areas
outside of Carlsbad unless the other Housing Authority takes on the financial
responsibility of the Voucher for the tenant.
At this time, nearly all San Diego County PHAs are in shortfall status, with all having to initiate a
pause on pulling applicants from the waitlist, even to fill based on attrition, and implement the
above listed measures.
Council Memo -Housing Choice Voucher (aka Section 8) Rental Assistance Program
July 17, 2025
Page 3
Seek Additional Funding
In addition to the cost savings measures identified above, city staff will submit an application
for shortfall funding when authorized by the HUD to do so. Shortfall funding is one of the
eligible categories for PHAs that are at risk of terminating participating families from the
program due to insufficient funding. The HUD will automatically determine the PHA's eligibility
for additional funding and the HUD will provide additional funding in accordance with its
established Housing Assistance Payment (HAP) set-aside funding priorities and available
funding.
Next Steps
By following HU D's guidance, the CHA will be able to balance HCV funding to ensure that
current voucher holders remain supported and families currently receiving housing assistance
remain housed regardless of uncertainties in federal funding. City staff will prioritize careful
leasing and funding utilization decision making, to ensure that families currently assisted are
not placed at risk of termination due to funding shortfalls.
cc: Geoff Patnoe, City Manager
Cindie McMahon, City Attorney
Laura Rocha, Deputy City Manager, Administrative Services
Zach Korach, Finance Director