Get it right the first time. Two formulas every development specialists needs

A new and improved HUD-Certified Housing Counseling Program is upon us with additional requirements and great opportunities for community development specialists. In December 2016, HUD published the Final Rule for Housing Counseling Certification in the Federal Register. The rule revised regulations governing the program and now all—yes, all-- HUD programs must be provided by HUD-Certified Housing Counselors. The requirement for housing counseling programs to employ certified housing counselors that meet minimum professional standards and pass an industry exam offers an opportunity to quantify and set a baseline for housing counseling programs.

CERTIFYING THE TEAM In order to become a HUD-Certified Housing Counselor, the counselor or community developer must work for a HUD-approved housing counseling program and pass a 90-question exam with a minimum scaled score of 500. Community developers and housing counselors working at a HUD-approved housing counseling agency will then be armed with a professional certification that authenticates their additional expertise in the housing field. They will be certified in financial management, housing affordability, fair housing, homeownership, avoiding foreclosure, and tenancy. The deadline to become certified is August 1, 2021.

The requirement for a professional certification along with an organization’s adoption of national industry standards and commitment to pay counselors a living wage motivates an organization to effectively create a budget and efficiently followed in order to deliver quality housing counseling. Frequently, the budget for offering homeownership counseling differed from one agency to another and following it seemed to be hit or miss, partly due to fluctuating funding. It is understood in the community development arena that there is no specific method for operating a housing counseling program, however, we now have an opportunity to establish a baseline budget formula for housing counseling agencies. This formula supports high-level program delivery, livable wages for core staff, and market-rate salary for management. It is offered as a starting point that can be modified as necessary for individual agencies to successfully implement.

FORMULATING THE OPTIMAL BUDGET

In the absence of actual expenses from previous years, an efficient budget formula for housing counseling programs is

A x 1.5 = B

B x 8% =C

B + C = Total budget

The formula begins with A which is the total salary and wages of three employees. In order for a housing counseling program to enter the arena and be of benefit to the community, it is recommended to strive to have a team with a minimum of three employees i.e. manager-counselor, HUD Certified counselor, and an administrator. Identify the market rate salary for the manager/counselor and the livable wage for the counselor based on your MSA. Most organizations are flexible in determining the wage for administrative support and offering benefits. Input that total in for A in step one of the formula.

The budget expands to cover the total of direct and indirect costs like facilities and other operational costs. Based on experience and operating an efficient housing counseling program, the factor of 1.50 to 1.60 is used. It is added in the formula as A x 1.50 = B.

Sustainability can sometimes be overlooked in the nonprofit arena. However, it is essential to include sustainability as a line item in order to continue doing good work. Step two computes the organization’s sustainability factor which is anywhere from 8% to 10% of B, the total operational cost. The cost is added to the sustainability factor in order to determine the organization’s total housing counseling program budget.

Example - The total expense for the housing counseling staff (A) is $120,000. $120,000 (A) X 1.50 = $180,000 (B)

$180,000 (B) x 8% = $14,400 (C)

$180,000 (B) + $14,400 (C) = $194,400 (Total Housing Counseling Program Budget)

TARGETING HOUSING COUNSELING PRODUCTION When the housing counseling budget is determined using this formula, the focus turns to Housing counseling production which is many times anchored in one-on-one counseling. With an organization having an average target efficiency of six counseling hours per client, estimated production can be projected.

Accounting for holidays, vacations, sick days, workshops, time completing reports, group education, and time attending meetings, there are approximately three hours available per day for one-on-one client counseling. There are 240 working days for each full-time counselor which will allow for 720 hours of counseling time over a 12-month span.

The 720 hours of counseling with a six-hour-per-client efficiency target will allow for 120 customers to be served within a 12-month period for each full time certified housing counselor. Based on the player-coach model and the three-person housing counseling team it is safe to anticipate production based on 1.6 full-time housing counselors. The fulltime counselor dedicating 100% of time to counseling and the manager dedicating 60% of the time to one-on-one counseling.

Combined, the target production would be one-on-one counseling of 192 clients for the 12-month period. (Explanation 60% of 120 is 72, the calculation is 120 + 72 = 192)

BECOMING INNOVATIVE

Using the above optimal budget of $194,400, the cost per client is $1,012.50. ($194,400/192 = $1,012.50). This calculation allows the organization to have a realistic view of the targeted hourly billable rate. Considering a billable rate of $1,012.50 and the average amount of $500 shown as a fee on closing disclosures, it is evident that many organizations experience a gap in funding, in this case of $512.50 per client. The funding gap highlights the importance of strategic fundraising, automating processes, and developing innovative methods to generate revenue for quality housing counseling to continue as a benefit to the community and overall economy.

As Community Development Specialists, it is beneficial to have formulas to create realistic budgets and understand production costs for the organization to thrive. This approach upholds efforts to monitor and report the cost per client within an accurate budget. Consistently adjusting the ongoing management of programs will ensure sustainability and allow the organization to benefit from the professional certification and robust standards.

By Edward A. Gaston

@cutthegrasstoo