Bond Case Briefs

U.S. public housing authorities (PHAs) are mainly federally funded agencies that work in local communities to solve affordable housing problems. And while they function in a local government’s area, their ties to it can vary. Some have a tight reporting relationship with local government administration while others are entirely separate -– they just happen to serve in the same area. Also varying is the degree of policy coordination, which does not necessarily rely on a close administrative relationship.

Although a local government and a PHA both work to benefit residents of the same area, the factors that influence their respective credit quality differ greatly, resulting in divergent ratings. Standard & Poor’s Ratings Services rates 16 PHAs and 15 of the cities and counties in which these PHAs operate. City ratings fall into a wider range and are generally higher than the respective PHA ratings. This is because city and county governments typically have a stronger and more diverse revenue stream and greater control over revenues than do PHAs, which rely on federal funding that is largely beyond their control. (Watch the related CreditMatters TV segment titled, “How Standard & Poor’s Ratings On U.S. Public Housing Authorities And Their Local Governments Measure Up,” dated April 1, 2014.)

Revenue Streams Are The Key Credit Difference

In general, cities have more flexibility in determining their revenue sources — whether they be through taxes, fees, or assessments. Of course, some of this mix depends upon the makeup of a local economy: A tourist-based economy may rely more on sales and use taxes, whereas a major city that is growing slowly may rely more on property taxes and assessments.

PHAs, by comparison, have virtually no control over their funding source — the federal government — nor how much they receive. A PHA’s federal funding is determined by Congress based on a formula determined by cost to operate a unit in a particular city although Congress can modify this. Those PHAs that have expanded into other lines of business, such as affordable nonpublic housing, have more flexibility but assume real estate market risk. As such, the ties to the local economy are stronger for PHAs with nonpublic housing development than for those that operate under the more traditional public housing model. However, among PHAs we rate, those with an emphasis on market-based development are located in cities with strong economies (Howard County, Md.) or have operated as nontraditional affordable housing providers with minimal disruption to revenues (Vancouver, Wash.).

Relative Economic Strength Affects Local Government More Than PHA Ratings

Under our local government criteria, released Sept. 12, 2013, the relative strength of a city or county local economy accounts for 30% of the indicative rating score. Although very weak scores on other factors, such as debt and pension liabilities or financial management, may ultimately constrain the rating, a higher general obligation (GO) rating in many cases indicates a strong underlying economic base linked to a broad and diverse metropolitan region. In these cases, the rating on the local government is likely higher than that on the PHA. In instances where the local economy is weak, the city GO rating may be closer to (or even below) that on the local PHA. Our economic analysis considers the health of the asset base on which local tax revenues rely, as well as the likelihood of demand for services that may arise as a result of economic deterioration.

Local governments can adjust their economy-dependent revenues . . .

Standard & Poor’s data suggests that 79% of municipal and county revenues are locally sourced while direct federal government funding represents just 4% of local government revenues, much of which is dedicated to capital spending. The historical stability of ratings in this sector, even throughout the recent economic downturn, speaks to the overall diversity and stability of local taxing entities’ revenue bases, as well as their financial flexibility relative to other sectors. This stability results from the way in which properties are assessed in many states, which effectively delinks tax base growth from overall market volatility. In addition, the lag between market cycles and their effect on revenues allows public officials to adjust rates to offset market effects. As the current economic recovery progresses, we expect local tax bases to stabilize and economically sensitive revenue growth to contribute to improving credit conditions for many local government entities (see “U.S. State And Local Government Credit Conditions Forecast: 2014 Will Be A Balancing Act,” published Dec. 17, 2013 on RatingsDirect).

. . .But pensions may be a weakness

Cities with ratings lower than those on their respective housing authority often have weak to very weak debt and contingent liability profiles, which account for 10% of the total score in our local government GO rating methodology. Large pension obligations pressure Chicago; New Haven, Conn.; Bridgeport, Conn.; and Philadelphia. Among these four, only Philadelphia has presented a credible plan, in our view, to address these rising pension costs. While we view Chicago as having a strong economic profile, its four pension plans together are just 35% funded, and state legislation aiming to improve this funding status will cause Chicago’s current contributions to rise sharply in 2016 (see Chicago, published Feb. 24, 2014). In our opinion, Chicago’s lack of progress in making structural changes in pension funding is a significant negative credit factor. While high debt burdens can limit a housing authority rating, liabilities are typically limited to debt service, and retirement obligations do not present significant challenges. (We rate Chicago’s housing authority ‘AA’ and Chicago itself at ‘A+’.)

The local economy is less important to PHA ratings

For PHAs, which are federally funded, the local economy has a less direct influence on credit quality than it does for taxing entities. PHAs that we rate have waiting lists that may reach into the tens of thousands of households regardless of the economy. Vacancies are low, but so are rents, and subsidies are subject to federal appropriations, which are not correlated to the economy. In some cases, a strong economy results in a better subscore in economic fundamentals for a PHA, but that component contributes only 25% to the enterprise profile that we assign when rating a PHA. As other factors reduce the impact of a strong economy, no PHA receives a boost in its enterprise profile score to “extremely strong” from “very strong,” meaning that even an extremely strong economy cannot bump up the rating on a PHA. On the other hand, weak economies can affect a PHA’s rating. Two PHAs in adequate or vulnerable economies, Fall River, Mass. and Bridgeport, Conn., have “strong” enterprise profiles, which are one level down from the norm of “very strong” for PHAs. The resulting ratings are lower than they might be for Fall River Housing Authority and the Bridgeport Housing Authority, at ‘A-‘ and ‘A+’, respectively.

The main factors we use to determine the rating on a PHA are its level of federal government support, market position, financial performance, and debt profile. The economy figures into this only indirectly as the third most important of three factors that constitute the enterprise profile. The general mood for federal appropriations can vary, but not necessarily in accordance with that of the local area. Public housing appropriations are set by federal law, which are distinct from economic conditions or the demand for low-income housing. The condition of housing stock, the makeup of the programs the PHA offers (relative amount of Section 8 vouchers versus in-house development), and management strength are all factors that can augment or take away from the level of government financial support.

Reliance on the federal government boosts some PHA ratings but caps others

Because we consider PHAs to be government-related entities with a moderate likelihood of government support, a few PHAs benefit from this relationship in terms of the rating. The three lowest-rated PHAs — Bridgeport, Conn.; Fall River, Mass.; and San Francisco — have ratings higher than their stand-alone credit profiles would indicate because of the federal government support. However, significant reliance on the federal government can result in a cap on the rating to the U.S. sovereign rating. For example, just two PHAs we rate, Howard County Housing Commission, Md., and the Vancouver Housing Authority, Wash., receive less than half of their income from federal sources. Vancouver HA is one of five PHAs with the highest rating for the sector: ‘AA’. The revenues VHA has been able to generate resulted in a “very strong” financial profile score, one of only four at that level among the rated PHAs.

PHAs’ reliance on U.S. Department of Housing and Urban Development dollars insulates them somewhat from local economic fluctuations but leaves them vulnerable to unpredictable federal funding decisions. Even when the national economy grows, appropriations for public housing often do not increase. There has been very little correlation between changes in spending on public housing and U.S. GDP (see chart). Tenant rental payments represent a small share of revenue and are not based on the rental market but on the resident’s income. Although strong demand for services enables housing providers to maintain waiting lists and reduce vacancy rates, their financial performance and credit quality ultimately depend on federal subsidies and rent payments from low- and moderate-income tenants, neither of which is strongly correlated with the local economy.

Criteria Revisions Give Local Government Ratings A Boost, While PHA Ratings Remain Stable

In recent months, Standard & Poor’s has raised a significant number of city and county ratings based on our new local government GO criteria. As our review of cities and counties under the new criteria began in September 2013, the pace of rating actions across U.S. public finance spiked to nearly three times the historical quarterly average, and nearly six out of seven actions were positive. As we apply the criteria to more cities and counties, positive rating actions will likely continue to outnumber negative changes in this sector. We expect that PHA ratings will remain more stable than in the local government sector although we have made two rating changes in recent months based on financial performance. The recent upgrades of many local governments may amplify the divergence between local government and local housing agency ratings.

Standard & Poor’s baseline economic forecast calls for lower unemployment and stronger GDP growth in 2014 than in 2013 and both the baseline and pessimistic scenarios call for stronger GDP growth in 2015 (see table 1). Local economies could benefit from such growth to varying degrees while PHAs will probably not see much impact. Because PHA ratings are tied to that of the U.S. sovereign (AA+/Stable/A-1+), the U.S. sovereign rating is more likely to result in rating changes to PHAs than the state of the respective local economies.

Table 1  |  Download Table

2014-2015 Economic Outlook for U.S. Public Finance Housing
	Forecast / Scenarios						Actual
	Downside		Baseline		Upside
	2014	2015	2014	2015	2014	2015	2013
Macroeconomic indicators
30-year fixed mortgage rate (%)	4.09	4.41	4.63	4.98	5.40	6.49	3.96
10-year Treasury note yield (%)	2.00	2.41	3.03	3.30	4.18	4.85	2.32
Unemployment rate (%)	7.59	7.68	6.47	5.82	6.05	5.00	7.45
Real GDP (% change)	0.58	1.84	2.77	3.25	4.13	4.01	1.68
Total nonfarm payrolls (% change)	0.75	0.78	1.76	2.03	2.46	2.58	1.64
CPI (% change)	0.80	1.95	1.44	1.77	2.13	1.61	1.44
Households (mil.)	122.84	124.20	123.10	124.72	123.29	125.02	121.41
Median single-family existing-home price ($000s)	194.80	190.37	198.71	198.47	202.09	200.72	195.57
Median new-homes sale prices ($000s)	261.67	254.38	265.77	266.02	263.72	252.29	264.53
Existing single-family home sales (mil. units)	4.42	4.70	4.70	5.12	5.22	5.28	4.52
Single-family housing starts (mil. units)	0.56	0.74	0.82	1.05	0.90	1.19	0.62
Multi-family housing starts (mil. units)	0.26	0.33	0.35	0.43	0.36	0.49	0.29
Federal government spending	(3.00)	0.10	(1.10)	0.00	(0.60)	0.90	(4.60)
Standard & Poor’s U.S. economic team’s forecasts are constructed using the Global Insight model of the U.S. economy. Forecasts are from the “U.S. Economic Forecast: Two Economies Diverged in A Wood,” published Dec. 5, 2013 on RatingsDirect. CPI–Consumer Price Index.

Table 2  |  Download Table

Local Area Economy And Public Housing Rating Factors
City or county		Housing authority
Rating	Analyst	Stand-alone credit profile (SACP)	Rating	Social rent as a % of market rent*	Analyst
Baltimore		Housing Authority of Baltimore City
AA-/Stable	Nicole Ridberg	a+	A+	18.4	Kib Park
Baltimore is a job center for the region with large education, health care, and government employers. At the end of fiscal 2012, the city had a $20.7 million surplus, increasing available reserves to a very strong 16.5% of expenditures. Management’s financial practices are “strong,” and its debt profile is low at 2.7% of market value. Offsetting factors include its large pension and OPEB liabilities, with annual costs at about 15% of expenditures. The Housing Authority of Baltimore City (HABC) ranks “very strong” in its enterprise profile and “strong” in its financial profile, resulting in an SACP of ‘a+’. The component rankings are typical of U.S. PHAs. HABC’s scores differ in that it has lower marks for financial performance but the highest possible marks for debt profile and liquidity. The authority also has the highest possible score for asset quality and operational performance. The average social rent as a percentage of market rent is 18.4%, among the lowest for rated U.S. PHAs.
Boston		Boston Housing Authority
AAA	Victor Medeiros	a+	A+	20.6	Stephanie Morgan
Boston has a deep and strong economy that historically has resulted in unemployment rates lower than those of the commonwealth and the nation. The city posted a $61.6 million surplus in fiscal 2012 (2.4% of budget). Debt service is 5% of total governmental fund expenditures, and the city’s net debt is low at 1.4% of market value. A long-term credit consideration involves the city’s pensions and OPEBs, but the city has improved its position through negotiations with unions and funding of obligations. The Boston Housing Authority (BHA) ranks “very strong” in its enterprise profile and “strong” in its financial profile, resulting in an SACP of ‘a+’. BHA’s scores differ from those of other PHAs in that it has lower marks for financial performance but the highest possible marks for debt profile and liquidity. The authority also has the highest possible score for economic fundamentals, due to steady population growth; average social rent as a percentage of market rent, at 17.6%; along with other ratios and qualitative factors.
Bridgeport, CT		Bridgeport Housing Authority
A	Victor Medeiros	a	A+	17.9	Raymond Kim
Bridgeport has a weak economy, with per capita effective buying income at 69% of the U.S. and an unemployment rate of 12.2%. The city has weak budgetary flexibility with reserves equal to 2.3% of expenditures. Budgetary performance has been adequate, with a slight deficit of 0.7% in fiscal 2012. Debt and contingent liabilities are very weak, with governmental fund debt service representing 11.8% of total expenditures. Bridgeport has large unfunded OPEB and pension liabilities; it has been funding less than its full annual required contributions, and expenses will likely increase. The Bridgeport Housing Authority (BHA) is one of only two PHAs to score as low as “strong” in its enterprise profile, compared with other PHAs that we consider “very strong.” The low ranking is driven by the weak economy that also affects the city’s rating. Low population growth and a deflated housing market are key factors in the economic analysis. .
Chicago		Chicago Housing Authority
A+	Helen Samuelson	aa	AA	16.9	Kib Park
Chicago has been downgraded over the past four years, reflecting very weak budgetary performance, a very weak debt and contingent liabilities position, and a weak institutional framework. On the other hand, the city has a broad and diverse economy; however, the Cook County unemployment rate is historically higher than that of the state and nation, and stood at 9.3% in 2012. The city ended fiscal 2012 with a $101 million general fund shortfall, and the funding levels of the four major city pension plans ranged from around 60% to only about 25%. The Chicago Housing Authority (CHA) ranks “very strong” in its enterprise and financial profiles, resulting in an SACP of ‘aa’. The financial ranking is higher than that of almost all U.S. PHAs, and its three-year EBITDA-to-revenue average of 33.6% is in line with the best-performing international social housing providers. Despite a debt portfolio of $340 million, CHA has a debt-to-EBITDA ratio of 1.1x, low among global social housing entities. CHA’s social-rent-to-market-rent ratio of 16.9% is the fourth-lowest among rated U.S. PHAs.
Cuyahoga County, OH		Cuyahoga Metropolitan Housing Authority
AA	Carol Hendrickson	a+	A+	16.44	Moraa Andima
Cuyahoga County benefits from the diverse economy of Cleveland, but we consider the economy weak given that the population has been declining at an annual average of 6.7% over the past 10 years, and assessed value decreased 7.1% in 2012. The county does have “very strong” management and has reserves of about 70% of general fund expenditures. The Cuyahoga Metropolitan Housing Authority (CMHA) has a “very strong” enterprise profile and “strong” financial profile, typical for U.S. PHAs. CMHA has the highest possible asset quality and strategy and management scores, with a slightly lower economic fundamental score due to its having the greatest population decline among the locations with PHAs we rate. Despite the declining population and the lowest home purchase price of any rated PHA, CMHA’s social rents as a percentage of market rents are similar to those in much more expensive cities.
Fall River, MA		Fall River Housing Authority
A-	Victor Medeiros	bbb+	A-	27.76	Kib Park
Fall River has an adequate economy that has been vulnerable to economic downturns. In 2012, the city’s unemployment rate was 13%. The city produced an operating surplus of just 1% of expenditures. State aid represents 64% of revenues, which is a high proportion. The city has very strong liquidity based on low debt service from a small amount of outstanding bonds. The city appears to have improved its financial management, which previously received “material weakness” findings in its audit. Pension and OPEB liabilities remain a long-term risk. The Fall River Housing Authority (FRHA) is the only rated U.S. PHA to score as low as “vulnerable” in two categories in the financial profile category, leading to a financial profile score of “adequate,” lowest among PHAs. Most importantly, the PHA has a “vulnerable” subscore for liquidity. The social rent as a percentage of market rent is higher than average, at 27.8%.
Houston		Houston Housing Authority
AA+	Russell Bryce	a+	A+	43.8	Stephanie Morgan
Houston has a large and diverse economy and fared better than many areas during the Great Recession. Unemployment in Harris County was 6.8% in 2012, below the national average. The city had general fund reserves equal to 9.4% of operating expenditures in 2013, and we expect that figure to remain fairly constant at 8.55% in 2014. Houston has a “strong” financial position with a budget surplus of about 10%. The debt and contingent liability profile is very weak, with total governmental fund debt service at 11.5% of total governmental fund expenditures and 151% of total governmental fund revenue. Still, the city’s financial position is improving, with projected growth in property tax revenues of 3.8% and sales tax revenues of 4.7% in 2014. We view Houston Housing Authority’s (HHA) financial performance as “vulnerable” mainly due to its volatile net operating income and depleting reserves to cover its ongoing housing cost voucher program deficit. The authority has one of the lowest EBITDA-to-revenues ratios at 11%, which contributes to its low score for financial performance. However, we still view its financial profile as “strong,” given other factors such as debt profile, liquidity, and financial policies. The second-highest population growth among localities of rated U.S. PHAs boosts HHA’s enterprise profile to “strong.” The percentage of social rent to market rent is high at 44%.
Howard County, MD		Howard County Housing Commission
AAA	Timothy Barrett	a+	A+	38.1	Kib Park
Howard County has a deep and diverse economy that benefits from significant employment opportunities in the county and throughout the Washington-Baltimore region. Income is very strong with per capita effective buying income at 165% of the national average, and the county fared better than many areas during the most recent recession. Unemployment has historically been well below state and national rates, about 5% in 2012. The county has reserves of about 9% of operating expenses. In addition, Howard County maintains a budget stabilization fund that contains another 15% of operating expenditures. Net debt is just 2% of market value. Howard County Housing Commission (HCHC) is one of only two rated PHAs that derives less than half of its income from HUD subsidies. Despite this, we still view HCHC’s financial performance as vulnerable due to its low EBITDA-to-revenue ratio of 20%. HCHC has a relatively high social-rent-to-market-rent ratio of 38%.
New Haven, CT		New Haven Housing Authority
BBB+	Hilary Sutton	a+	A+	10	Kib Park
New Haven has a history of budget shortfalls, contributing to a downgrade in 2013. A number of revenue shortfalls led the city to draw $8 million from the general fund in 2012, leaving a balance of 0.7% of expenditures, which is below the city’s target of 5%. The significant presence of educational institutions in New Haven stabilizes the economy but depresses income indicators. Its May 2013 unemployment rate of 11.9% was significantly higher than the national rate. We consider the overall net debt burden moderately high at 6.4% of market value, and New Haven’s pension and OPEB liabilities are significant. The plans are 46% and 50% funded, respectively. The New Haven Housing Authority (NHHA) has financial scores similar to those of most PHAs with the exception of liquidity, which we consider adequate. NHHA is just one of two rated U.S. PHAs with a liquidity score that low, but its financial performance, also “adequate,” is better than that of most PHAs. The social rent as a percentage of market rent is among the lowest, at 10%.
Norfolk, VA		Norfolk Redevelopment & Housing Authority
AA+	Timothy Barrett	a+	A+	44.9	Adam Cray
Norfolk has a strong economy based on the military sector with more than 83,000 regional employees, nearly two-thirds of whom are stationed in the city. The city has very strong budgetary flexibility with available reserves at approximately 20% of general fund expenditures. Overall net debt is moderate at roughly 3% of market value, and the city’s pension liability is about 80% funded. Norfolk Redevelopment and Housing Authority (NRHA) has a very strong enterprise profile and a strong financial profile, which mostly reflect very strong demand for public housing in Norfolk, as well as the authority’s excellent strategic planning, very high liquidity, and low debt burden; however, a low EBITDA-to-revenue ratio (9.6%) and significant volatility in operating performance weaken NRHA’s financial profile score.
Philadelphia		Philadelphia Housing Authority
A+	Hilary Sutton	aa	AA	15.4	Moraa Andima
Philadelphia’s economy is weak given high unemployment of 10.8% in 2012 and projected per capita effective buying income of 76.3% although the property tax base has been growing. Philadelphia encountered financial stress in the early 1990s, but state oversight has helped the city maintain strong budgetary performance and adequate reserves at 7.2% of expenditures. Management practices are strong. City pension and OPEB obligations were a high 13% of expenditures in fiscal 2012. We consider the strategy and management of the Philadelphia Housing Authority to be extremely strong, the highest-ranked indicator in its enterprise profile, which we rank “very strong.” Philadelphia HA also is one of only four U.S. housing authorities to rank “very strong” in its financial profile, with the highest possible rankings for debt profile and liquidity. The authority is one of the minority of PHAs that receives a ranking as high as “adequate” for financial performance. The PHA’s average rent is 15.4% of market rent, the third-best among rated U.S. PHAs.
San Diego		San Diego Housing Authority
AA	Misty Newland	aa	AA	70.5	Jose Cruz
San Diego has a very strong regional economy that has historically benefited from the presence of the high-tech, tourism, and military and defense sectors. Although unemployment in San Diego County remains close to the statewide level, assessed value in the city grew 4.3% from 2013 to 2014 following several years of modest declines and weak growth. The city’s debt profile, burdened by very large retiree benefit obligations, remains a credit weakness, and pending legal challenges to attempted benefit reform have the potential to thwart efforts to restructure these obligations. The San Diego Housing Commission (SDHC) ranks “very strong” in both its enterprise and financial profiles. We consider the management and strategy of the authority to be extremely strong, but the economic fundamentals have a relatively low ranking of “strong” despite an extremely expensive housing market. The reason for the comparatively low economic ranking is that SDHC operates only subsidized Section 8 housing, which charges higher rents than public housing. The average rent paid by an SDHC voucher recipient is 70.5% of market rent, among the highest of our rated U.S. PHAs, and exposes the authority to more market risk than do traditional PHAs. We also view the financial performance of SDHC as vulnerable because of a low EBITDA-to-revenue ratio of 14%, surpassing only three other rated U.S. PHAs. However, SDHC is the only PHA to achieve the highest ranking in the three other financial profile components.
San Francisco		San Francisco Housing Authority
AA+	Misty Newland	a	A+	11.6	Jose Cruz
San Francisco’s economic strength stems from its concentration of high-wage, high-skilled jobs in finance, business services, and technology, which have recovered quickly following the recession, as well as its status as a global destination for tourism and industry conventions. Employment and assessed value have begun to rebound, fueling recent revenue growth that has contributed to budgetary performance we consider adequate. The city and county’s finances are supported by very strong management conditions although relatively high pension and OPEB liabilities weaken its debt profile, in our opinion. The San Francisco Housing Authority has a lower enterprise profile ranking (“strong”) than most rated U.S. PHAs while the financial profile is strong like that of almost all rated U.S. PHAs. The main weaknesses of SFHA is its highly vulnerable financial performance and vulnerable strategy and management. The authority has the highest economic fundamentals ranking, based on a social rent as a percentage of market rent of just 11.6%, the strongest measure among rated U.S. PHAs by a significant margin.
Seattle		Seattle Housing Authority
AAA	Chris Morgan	aa	AA	36	Aulii Limtiaco
Seattle’s status as a regional economic center with deep ties to export markets and a number of major high-tech and manufacturing employers has supported its recent recovery, as unemployment in King County fell to 6% in 2013, and assessed value began to stabilize. The recovery has also led to a surge in economically sensitive and development-related revenue, which, together with management practices we view as very strong, has helped the city balance its budget and contribute to recent surpluses. The city’s debt burden is notably “very strong,” with moderate debt service carrying charges and low overall net debt relative to revenues. The Seattle Housing Authority’s (SHA) enterprise profile ranking of “very strong” reflects extremely strong management and strategy, and economic fundamentals, while the financial profile ranking of “strong” reflects a very strong debt profile and adequate financial performance that is better than most PHAs. SHA’s EBITDA-to-revenue ratio of 22% is stronger than that of most PHAs. Despite an average social rent of 36% relative to market rent, SHA scores high in economic fundamentals due to annual population growth of 2%, which is among the highest for rated PHAs.
Vancouver, WA		Vancouver Housing Authority
AA	Chris Morgan	aa	AA	64.5	Adam Cray
Vancouver’s location within the Portland-Vancouver metropolitan area provides a strong and stable employment base while its Columbia River port connects the Pacific Northwest agricultural regions to global export markets. Recent declines in market value have not yet stabilized although we expect a return to growth as early as 2014. Despite flagging revenues throughout the recession, the city expects balanced operations for the 2013-2014 biennium. Its credit profile is strengthened by financial management conditions we view as strong with a moderate debt burden. The Vancouver Housing Authority (VHA) is the only rated U.S. PHA to score at least very strong in every category under Standard & Poor’s social housing criteria. VHA is the only rated U.S. PHA to rank very strong in financial performance, based upon an EBITDA-to-revenues ratio of 41%, significantly above all other PHAs. This is the result of the authority’s limited reliance on federal subsidies, which represent only 44% of VHA’s revenues and makes VHA one of the few PHAs to receive less than half its income from the U.S. Department of Housing and Urban Development. On the other hand, the emphasis on workforce housing results in higher social rents in comparison to the market, 40%, which is the second-highest and exposes the authority to market risk.
*Social rent–Average rent charged by social housing providers or PHAs. OPEB–Other postemployment benefit.

Primary Credit Analyst:	Lawrence R Witte, CFA, San Francisco (1) 415-371-5037; larry.witte@standardandpoors.com
Secondary Contacts:	Carol A Hendrickson, Chicago (1) 312-233-7062; carol.hendrickson@standardandpoors.com
	Sarah Sullivant, San Francisco (1) 415-371-5051; sarah.sullivant@standardandpoors.com