The case for CityFHEPS voucher program
The case for CityFHEPS voucher program
What is CityFHEPS?
CityFHEPS is a growing voucher program for owners in NYC to take advantage of higher-than -market rents and to hedge against inflation, while also doing their part to house New Yorkers.
CityFHEPS is the go-to voucher program for those who are housing insecure in NYC that need rental assistance. New Yorkers who are formerly or currently homeless are eligible to apply for the program through caseworkers at the Department of Social services (DSS). If people qualify for CityFHEPS, they will be able to move into any apartment available in NYC and have the DSS cover their rent and related expenses. DSS will cover between 70%-100% of the monthly rent and sometimes will also cover expenses. Since 2018, the program has successfully housed 26,000 households, or upwards of 75,000 people if it is assumed that there are 3 people per household.
Housing insecurity is growing
During the pandemic years, the homeless population in NYC shrunk, but the number of rent burdened and housing insecure people, increased. The eviction moratorium staved off evictions, and that prevented tenants from being forced to leave their homes. The federal government and the state of NY provided relief to tenants who had experienced hardships in the form of Emergency Rental Assistance Program, or ERAP/LRAP. When the dust settled and vaccines were rolled out in 2021, the economy jump started back up. Due to a combination of factors: peak demand for apartments, high inflation, and rising construction costs, rents surged. Street easy research showed that in Q2 of 2022, Brooklyn residents were, on average, paying 60% of their incomes towards rent (monthly rent / borough’s area median income).
Though inflation is expected to soften in Q4 2023 and into 2024, there will be continued pressures on housing costs in NYC due to the supply and demand imbalance. As an example of the demand for NY housing, Manhattan median rents broke a record for the third month in a row reaching an all-time high of $4,400, according to Miller Samuel appraisers. One can also look at the higher costs to purchase a home due to higher interest rates as an indicator that demand for multifamily rentals will continue to grow. Notwithstanding this, eviction moratoriums have gone away, rent freezes have thawed out, and efforts at limiting eviction without cause haven’t been successful. Without government safety nets, tenants may struggle to pay their rent, they may end up behind on rent, or in the worst case they may end up on the streets unhoused.
A situation where tenants who cannot afford to pay rent is a lose-lose for tenants and landlords alike. Owners of multifamily need to not only cover their expenses, but to turn a profit on their properties. Housing providers can only really do the following to try and begin collecting rents on time again:
Allow tenants to pay below market rents and in doing so, earn less money
Litigate tenants when they can no longer pay rent to get them removed
ERAP/LRAP(no longer an option today)
Well - almost all the options. Option 3 is ruled out now that ERAP and LRAP have expired. That leaves two options. Housing providers can either collect rents that are lower than the market will support if times get tough for tenants. In many cases though, lowering the rent, just won’t work for tenant or landlord. In those instances, the only way to start getting satisfactory income on an apartment is to remove the tenant. As difficult and trying an experience as eviction becomes for tenants, it’s painful and laborious for owners – especially given how slow housing courts are currently moving. Owners today are between a rock and a hard place when it comes to working with tenants who can no longer afford rent. A government assisted rent payment like a voucher could work well to keep tenants housed and prevent landlord from losing cashflow.
Why CityFHEPS?
I have made the case for Section 8 before so perhaps I am biased, but running a CityFHEPS housing model should be a strategy considered by landlords and housing providers across NYC. Here’s why:
Rent collections will be at 100%: The government always pays their share of the rent. At the height of the pandemic 25% of renters did not pay rent to their multifamily property owners. This will not happen with government tenants because the federal government will not be late on its payments.
Inflation-adjusted rents: voucher tenants have rents that are perpetually adjusted according to the cost of consumer goods in each MSA. As an example, Fair Market Rents for 3 bedrooms in Queens County went from $2,280 in 2018 up to $3,078 in 2023, representing a near $700 increase.
Rents are sometimes above market. In the Bronx, a 3-bedroom apartment leased to CityFHEPS can collect over $3,000 per month. Most neighborhoods in the Bronx will not achieve that rent for a 3 bedroom, no matter how well amenitized the buildings are. Providing program tenants with housing pays.
On the right side of politics: the political tides are turning and affordable housing and providing stable housing for the housing insecure is a bigger priority politically than it has ever been. Further, migrants have entered NYC in great number, and they are filling up the homeless shelters, taking the homeless population up to 100,000, the NYT reported. Besides migrants, affordable housing is desperately needed in NYC as the city heads towards a real crisis of housing. The city has been supportive of the nascent CityFHEPS program since 2018, often improving it and making it more accessible to tenants and landlords alike. If there were ever a time to look at embracing government support it would be now, to take advantage of any tailwinds that may come from it.
Okay so CityFHEPS sounds great, but is this a real program? How come I haven’t heard of it?
CityFHEPS did not adopt its current name until late 2018 when the program was rebranded by ex Mayor Bill DeBlasio. Under DeBlasio, all the existing housing insecurity programs were folded into CityFHEPS, under the department of Homeless Services (DSS).
Homeless prevention funding from 2015- 2018, was but a fraction of what it is today (see chart below). With less funding available, fewer owners would have known about the program because outreach efforts would likely be smaller and fewer tenants would have secured housing.
Prior to 2021, the voucher amounts for City FHEPS tenants were much lower than Section 8 vouchers, and this prevented voucher candidates from getting apartments in NYC. In 2020, when Section 8 offered $1,945 for 1-bedroom apartments, CityFHEPS offered only $1,265. Data from Streeteasy, the rental listing platform in NYC, taken during 2H 2020 showed that City FHEPS voucher recipients could only qualify for 564 apartments, whereas Section 8 voucher holders could qualify for ~71,934 apartments (7% of free market building stock). This changed in fall 2021, when the rent levels for vouchers were set to match Section 8’s Fair Market Rents, set by Housing and Urban Development (HUD).
For landlord inquiries about how CityFHEPS works, or why, please reach out to me at 212 658 1471
Sources: Streeteasy, CityFHEPS FAQs