Even when Congress provides “full eligibility” funding for the Housing Choice Voucher (HCV) program, many agencies still find themselves struggling with shortfalls. On paper, the money is there. In reality, rising costs and depleted reserves are making it harder for PHAs to keep programs stable.
During a recent Housing Updates from Washington webinar, NAHRO’s Legislative Manager Gabriel Smith put it plainly: “Hundreds of agencies across the country are experiencing shortfall, even though the program received its full eligibility.”
At AMA Consulting Group, we work with agencies every day who are navigating these pressures. Here’s what NAHRO shared, and how you can apply these insights to your program.
Why Housing Choice Voucher Shortfalls Happen
The funding challenge isn’t a lack of support from Congress—appropriators have fought hard to provide full eligibility. The real issue is that forecasting program costs is difficult.
As NAHRO’s Senior Policy Manager Tushar Durjil explained: “Because it’s a forecast, it’s not necessarily accurate… post-pandemic, it’s been a little tough to get that forecast right. Getting those inflation numbers down in individual jurisdictions can be a little tough.”
The funding challenge is less about intent and more about forecasting.
- Forecast vs. Reality: Every year, Congress sets HCV funding levels based on a forecast of program costs. Post-pandemic inflation has been harder to predict, especially at the local level. Even when Congress “fully funds” the forecast, agencies may not receive enough to cover actual program costs.
- Rising Program Costs: Rents continue to rise faster than inflation factors used in funding formulas, pushing housing assistance payments higher.
- Offsets and Reserves: To protect agencies in shortfall, HUD uses offsets such as taking from PHAs with larger reserves to assist others. After two years of offsets (with stricter rules on what counts as “protected”), many agencies have depleted reserves, leaving little cushion.
The result: even with “full eligibility” funding, PHAs are facing gaps between what’s needed and what’s available.
Step One: Plan Ahead with HUD Tools
The first step is careful planning. The most effective agencies are the ones that plan.
Using the Two-Year Tool & Payment Standard Tool
HUD recommends using the Two-Year Tool and Payment Standard Tool to project costs. Running the numbers now helps you avoid scrambling later. In a letter released in May 2025, HUD encouraged PHAs to carefully review their funding, what they’ve received, and the projected HAP cost for the year and use the two-year tool and the payment standard tool.
Running the numbers now helps agencies avoid scrambling later.
Step Two: Apply HUD’s Cost-Saving Guidance
HUD guidance offers clear steps if funding looks tight:
- PIH 2011-28 → Practical shortfall strategies.
- PIH 2025-13, Appendix B → Shortfall funding process, the Shortfall Prevention Team, and exceptions to voucher issuance pauses.
Cost-Saving Options Include:
- Verifying income and preventing under-reporting so families pay their fair share.
- Reviewing rents more often to ensure they’re reasonable and comply with local laws.
- Checking that utility allowances are accurate, not inflated.
- Managing portability wisely (bill vs. absorb, with HUD notification if moves must be limited).
- Raising minimum rent up to $50 where appropriate.
- Slowing or pausing voucher issuance (with exceptions for special purpose vouchers like FYI).
We recently supported an agency with a backlog of 1,200+ recerts and rising SEMAP risk. By restructuring processes and reinforcing accountability, they stabilized their reporting rate within months. Proof that small shifts can have big impacts on performance.
Step Three: Consider Reassessing FMRs
For PHAs in higher-cost markets, a Fair Market Rent (FMR) reassessment can strengthen long-term funding.
As Durjil explained: “If you reassess your 2026 FMR, it will impact your 2026 inflation factor… If you got a higher FMR, especially in a high-cost area, you’ll get a new inflation factor based on that.”
How FMR Reassessments Affect Inflation Factors
- How it works: Commission a rent survey. HUD’s Policy Development & Research team may adopt new FMRs based on the data.
- Why it matters: FMRs directly influence your inflation factor. A higher FMR today means stronger funding eligibility tomorrow.
Who should consider it:
- Larger PHAs with resources to fund studies.
- Smaller PHAs working together regionally to share costs.
- Agencies in markets where HUD’s FMR doesn’t reflect reality.
Durjil added a practical tip: “If you have a local university who can help, maybe find a postdoc or PhD… you might get better data and a little bit of a discount.”
For large PHAs in high-cost markets, investing in FMR reassessments could result in funding increases that far outweigh the cost of the surveys. For smaller PHAs, collaboration is key. Partnering with neighboring agencies can make this approach affordable.
While not every agency will benefit, those who know their markets often find the return on investment worthwhile.
The Bottom Line for PHAs
Shortfalls don’t have to take your program by surprise. By:
- Planning carefully with HUD’s tools,
- Implementing cost-saving measures, and
- Exploring FMR reassessment where it makes sense,
You can strengthen your program’s stability and continue serving families without disruption.
About AMA Consulting Group
At AMA, our mission is to help agencies like yours navigate these challenges with confidence. We’ve seen first-hand how the right strategies can turn a shortfall risk into long-term stability.
One agency facing a backlog of 1,200+ recerts and rising SEMAP risk stabilized their reporting rate within months after we stepped in to restructure processes.
This is an example of how thoughtful planning and proactive action can protect your program’s performance.
If you’d like support running projections and evaluating cost-savings, we’re here to partner with you.
Contact us today to talk through your agency’s options.