Housing Counseling Process Evaluation and Design of ... - HUD User

Chapter Five.
Sources of Agency Funding and
Costs of Providing Services
According to responses to the counseling agency survey, the most significant challenge agencies face
is obtaining funding for organizational operations. A large majority of agencies report that obtaining
funding for organizational operations is a significant problem, including 59 percent that identify it as
an extremely significant problem and an additional 27 percent reporting it as a moderately significant
problem.
A fundamental challenge for agencies in funding their operations is that clients are generally not
charged for education or counseling services. One important reason for this is that up until September
2007 HUD regulations did not allow agencies to charge fees to clients assisted using HUD funding.
This rule reflected the fact that HUD funding is intended to ensure that low-income individuals
needing assistance are able to access these services free of charge. However, as of September 2007
HUD modified its housing counseling rules to allow agencies to charge reasonable fees to all of their
clients in recognition of the challenge agencies face in funding these services and that some clients
may be able to pay reasonable fees. 26 But even beyond the HUD regulation, as a practical matter a
large share of housing counseling clients are low-income and would have difficulty paying fees that
would cover the costs of these services. This is particularly true for renters and homeless clients, but
even those seeking to buy a home or to resolve a mortgage delinquency might decline to seek help if
they were to be charged several hundred dollars in fees. Even with the new regulation, client fees are
unlikely to become a significant source of funding.
Aside from client fees, agencies are forced to rely on grants or fees from government agencies,
donations from private individuals or organizations (including organizations involved in business
activities that are likely to benefit from the education and counseling provided), or the agencies’ own
revenue from its broader operations (such as housing development and management or client services
for which fees are charged). Many of these sources of funds present their own challenges, in addition
to the time and effort needed to secure these funds from multiple sources. Applying for government
grants or fees can impose additional operational and reporting requirements on agencies beyond those
required by HUD or intermediaries. The need to turn to donations from private sector firms that are
likely to benefit from the counseling services provided, such as lenders, realtors, or housing
developers, also creates potential conflicts of interest for agencies. The use of the agencies’ own
revenue to support counseling draws funds away from other parts of the organization’s mission.
While it has been well understood that counseling agencies rely on a broad range of funding sources,
there has not been detailed information on the types and amounts of funding that agencies use for a
broad cross section of the industry. The agency survey conducted for this study provides important
information on the sources of funds used by agencies for their housing counseling services and the
amounts coming from these sources. It also sheds light on the relative importance of HUD funding
for counseling agencies.
26
Department of Housing and Urban Development, Housing Counseling Program; Final Rule, 24 CFR Part
214, September 28, 2007.
Chapter 5. Sources of Agency Funding and Costs of Providing Service 59