Revised November 4, 1997

Housing Bills Could Weaken Welfare Reform
and Create Problems For The Working Poor
by Barbara Sard, Ed Lazere, Robert Greenstein and Jennifer Daskal

Overview

Housing legislation passed by the House and Senate and ready to go to conference would alter the "income targeting" rules that affect which households gain admittance to federal low-income housing assistance programs. These changes could limit access to low-income housing programs for poor families — including working poor families — while allowing greater numbers of moderate-income and middle-class families to obtain housing subsidies.

Sponsors of these bills, particularly in the House, have promoted these changes as necessary to allow more of the working poor to receive federal housing subsidies and thereby to lessen the concentration of very poor, non-working families in housing projects. Some supporters also note that these changes would allow public housing authorities to raise more in rental income, a key source of the funds used to operate public housing projects. Since rents in public housing are set as a portion of a tenant's income, working tenants tend to pay higher rents than do tenants on public assistance with very low incomes.

The push to direct a substantially larger share of the available housing assistance to non-poor families stems from the need to lessen concentrations of poverty and unemployment in public housing projects and to raise adequate rental revenue to operate and maintain these projects. Yet public housing represents only one of the three major federal programs that provide housing assistance to low-income households. Moreover, public housing is the smallest of the three programs in terms of providing housing assistance to families with children. Nevertheless, the House and Senate bills would reduce the availability of housing assistance to poor households in all three programs. (See the box below for a description of the three major housing assistance programs.)

Working poor families are in substantial need of housing assistance. In 1995, two-thirds of all working poor renter families with children that did not receive housing assistance either paid at least half of their income for housing or lived in physically inadequate housing.(1) The provisions of the House and Senate bills are inconsistent with the stated goal of directing more help to this group. The changes the Senate bill and especially the House bill would make in the income targeting rules for housing assistance programs would reduce rather than increase access to subsidized housing for working poor families.

Among the families adversely affected would be those making the transition from welfare to work. As a result, the housing legislation could weaken efforts to help families moving from welfare to work stabilize their situations and remain employed and off welfare.

Who Gets Housing Subsidies that Become Available?

The major federal low-income housing programs are not entitlements and can accommodate only a fraction of those who meet the programs' eligibility criteria. For example, only one-third of poor renter households receive any housing assistance. With the number of families seeking assistance greatly outstripping the number the programs can aid, rules are needed to govern the distribution of the limited housing assistance that becomes available each year. (Housing units and rental vouchers become available as a result of turnover and, to a lesser extent, because of rehabilitation of vacant units.)

Until 1996, federal rules required that families with what are known as "urgent housing needs" be given preference for a substantial share of the housing subsidies that became available. Families with urgent needs are defined as those that pay more than half their income for rent, live in substandard housing, are homeless, or have been involuntarily displaced from their housing, including victims of domestic violence. Most of those who have met these "federal preference rules" are households with incomes sufficiently low that their housing costs consume more than half of their income. Since poor households are far more likely than non-poor households to be in this situation, households receiving assistance under the preference rules generally have been poor.

The HUD appropriations acts for fiscal years 1996, 1997, and 1998 suspended the requirements that public housing authorities and private owners of subsidized housing use these preference rules. The housing authorization bills that the House and Senate have passed and are now ready to go to conference would repeal the preference rules permanently. One of the principal issues Congress faces in crafting the housing authorization legislation is what "targeting provisions" to put in place of the federal preference rules.

The House and Senate bills both target specified percentages of the housing assistance becoming available on a newly defined category of families, those with "extremely low incomes." The use of the term "extremely low incomes" may connote that this category consists of the poorest of the poor, but that is not the case; the term "extremely low incomes" is something of a misnomer. This category actually consists of all households with incomes up to 30 percent of the median income in their area, which is roughly equivalent to the poverty line. Most poor households thus fall into this category, including millions of working poor families.

Under both the House and Senate bills, the proportion of the subsidies becoming available that would be reserved for poor families (i.e., for those below 30 percent of the area median income) would be much smaller than the proportion effectively reserved for poor families under the federal preference rules being repealed. Under the Senate bill, the number of subsidies becoming available each year that would be reserved for those below 30 percent of the area median income would be nearly one-third lower than the number reserved for needy families under the federal preference rules. Under the House bill, the number would be nearly two-thirds lower. Under both bills, most of this decline would occur in housing programs other than public housing.

While reducing substantially the proportion of subsidies that must be targeted on poor families — including the working poor — the bills would increase substantially the proportion of subsidies that may be provided to lower middle-income families, including families with incomes of up to $35,000 (or up to still higher income levels in many of the nation's largest metropolitan areas). This is particularly true of the House bill, which goes much farther in this regard than the Senate bill. How to design these targeting rules will be one of the principal issues House and Senate negotiators must resolve.

Descriptions of Major Federal Low Income Housing Programs

Tenant-based Vouchers and Certificates - Recipients use these subsidies to rent housing in the private market.  Tenants with certificates rent modest-cost units and pay the landlord 30 percent of their income for rent.  Tenants with vouchers may pay somewhat more than 30 percent of income for rent if they rent more expensive units and somewhat less than 30 percent of income if they rent very low-priced units.  (The pending House and Senate bills would merge the certificate and voucher programs, with rent payments determined on a voucher-type model.) Public housing authorities administer the voucher and certificate programs locally.  Using federal funds, the PHA pays the landlord the difference between the rental charge and the tenant's rental payment. 

There are approximately 1.4 million tenant-based certificates and vouchers across the United States.  Of these, 955,000 are used by families with minor children.  (Some 890,000 are used by families with minor children in which the household head is not elderly or disabled.) 

Public Housing - Public housing consists of rental units owned and operated by public housing authorities ("PHA"), which are public or quasi-public entities authorized by state or local law.  Public housing units are found in a variety of housing structures, including garden-style apartments, high-rise buildings, and even single family homes.  (Construction of high-rise public housing has been prohibited since the late 1960s.) Rents are generally set at 30 percent of tenants' incomes.  Rental payments go to the PHA and are used to help meet the operating and maintenance costs of public housing.  Federal subsidies also help cover PHA operating costs; these subsidies are distributed to PHAs through a formula based in part on tenants' rental payments. 

Nationally, there are approximately 1.2 million public housing units available for occupancy.  Some 540,000 are occupied by families with minor children.  (Approximately 510,000 are used by families with children in which the household head is not elderly or disabled.) 

Project-based Section 8 - These are rental units in buildings owned and operated by private owners; the owners may be either for-profit or non-profit entities.  Section 8 project-based subsidies can cover all of the units in a given housing development or a designated number of a building's units.  Tenant rents, which are paid to the project's owner, are set at 30 percent of the tenant's income.  The remainder of the rent, the subsidy amount, is paid by the federal government.  The project-based Section 8 programs are not administered by the local public housing authority.  Owners contract either directly with HUD or indirectly with HUD through an intermediary state housing finance agency.  Owners of the units maintain their own waiting lists and decide whom to admit, subject to federal requirements. 

Of the 1.7 million project-based Section 8 units, approximately 630,000 are occupied by families with minor children.*
__________________________________
* Approximately 110,000 of these 1.7 million units are available through the Section 8 moderate rehabilitation program. These units are administered in part by local public housing authorities, but the subsidies are attached to particular privately owned units and are paid to the private owners

 

Many Working Families Have "Extremely Low Incomes"

As noted, the House and Senate bills establish a new category of households for targeting purposes — households with "extremely low incomes" — defined as those with incomes below 30 percent of the area median income. Given the modest share of housing assistance that the bills, particularly the House bill, reserve for these families, it appears policymakers may believe few working families fall into this income category. That, however, is not the case.

The Housing Needs of Poor Households

 In 1995, more than half of poor renter households spent over 50 percent of their income for housing.  Only eight percent of those above the poverty line did.  Of those between 100 percent and 200 percent of the poverty line, slightly less than one fifth spent more than half of their income for housing.*
__________________________
* U.S. Department of Housing and Urban Development and Bureau of the Census, U.S. Department of Commerce, American Housing Survey, 1995.

Like all poor families, working poor families are much more likely than non-poor families to face serious housing affordability or quality problems. Among poor renter households with children that do not receive housing assistance and in which at least one household member works, about three-fifths — 59 percent — spent at least half of their income for housing in 1995. In fact, working poor renter households with children make up a majority of all poor renter households with children that spend more than half of their income for housing.

 

Congressional Bills Would Reduce Assistance For Working Poor Families

Prior to 1996, nearly 200,000 subsidies — including vouchers, certificates, and units in public and private housing projects — were made available each year, as a result of turnover, to families with children that had "urgent housing needs" (i.e., to families that met the federal preference rules). Most of these families had incomes below 30 percent of the median income in their area.

Under the targeting provisions of the House and Senate housing bills, the number of families with incomes below 30 percent of the area median income that would be assisted each year as subsidies became available could drop dramatically.

The most important — and from the standpoint of the working poor, the most damaging — change the pending bills would make is to reduce substantially the number of tenant-based vouchers and certificates targeted on poor families. The federal preference rules targeted 90 percent of the certificates and vouchers becoming available on families with urgent housing needs, a group that, as noted, consists overwhelmingly of poor families. The Senate bill would drop to 65 percent the proportion of newly available certificates and vouchers that must be targeted on poor households (i.e., on those below 30 percent of the area median income). The House bill would reduce this figure to 40 percent, allowing the majority of the newly available certificates and vouchers to go to non-poor households. The ability of poor households to obtain certificates or vouchers could diminish sharply under the new legislation.

This change is particularly significant because families use tenant-based vouchers and certificates to rent apartments in the private market, not in housing projects. Vouchers and certificates can enable families to move closer to a work site or an area with better job opportunities. They consequently can be useful in helping poor families move from welfare to work.

The changes the House and Senate housing bills would make in the rules governing the targeting of tenant-based certificates and vouchers are important for another reason as well — the number of vouchers and certificates that become available each year for families with children is nearly double the number of public housing units that become available for such families. While there is a popular impression that low-income families with children are more likely to live in public housing projects than in private apartments for which the rent is subsidized through a voucher or certificate, this is not the case.(7)

Table 1:
Number of Housing Units Made Available to Poor Families Each Year Due to Turnover
*

 

Total Number of Subsidies Becoming Available for Families with Children Annually Due to Turnover

Number of Subsidies Targeted to Needy Families with Children under the Federal Preference Rules

 

Number of Subsidies the House Bill Targets to Families with Children that Have Incomes at or below 30% of AMI

Change under the House Bill in Number of Subsidies Targeted to Needy Families

 

Number of Subsidies the Senate Bill Targets to Families with Children That Have Incomes at or below 30% of AMI

Change under the Senate Bill in Number of Subsidies Targeted to Needy Families

Tenant-based Vouchers and Certificates**

109,440

98,496

43,776

-54,720

71,136

- 27,360

Public Housing Units***

66,745

33,372

23,360

-10,012

26,698

- 6,674

Sec. 8 Project-Based Units****

84,086

58,860

0

-58,860

33,634

-25,226

Total

260,271

190,728

67,136

-123,592

131,468

-59,260

* Except where otherwise noted, families with children means families with minor children in which the household head (and spouse, if any) is not elderly or disabled. These figures reflect the number of subsidies expected to become available due to turnover, multiplied by both the percentage of subsidies that has been provided in recent years in this program to families with children and the percentage of subsidies becoming available that the legislation requires be targeted to households with incomes below 30 percent of the area median income.
** Based on HUD data showing that in the last two years, 64 percent of tenant-based vouchers and certificates were issued to nonelderly, nondisabled families with dependents.
*** Based on HUD data showing that 43 percent of public housing units, excluding Indian housing, are occupied by nonelderly, nondisabled families with minor children.
**** Based on HUD data showing that 35 percent of units in Section 8 project-based programs (excluding Section 8 moderate rehabilitation units) house families with children and that 56 percent of moderate rehabilitation units are occupied by families with children. (These figures include all families with minor children; the data on the Section 8 project-based programs do not distinguish nonelderly, nondisabled families from other families with children.)

The House and Senate bills also would reduce the share of public housing units targeted on families below 30 percent of the area median income. In addition, the House bill would require no targeting whatsoever of Section 8 "project-based assistance" on families in this income category. (Section 8 project-based assistance helps families rent units in privately owned projects.) Owners of these projects would be free not to admit any poor families when units become available. That would be a change of significant consequence since the number of units becoming available in Section 8 projects each year for families with children exceeds the number becoming available in public housing projects.

Shifting Subsidies up the Income Scale

At the same time that the bills would reduce the share of available assistance targeted to poor families (i.e., to those at or below 30 percent of the area median income), they — and especially the House bill — would expand substantially the availability of housing assistance for families with incomes up to about $35,000. HUD data show that few families at these income levels face serious housing affordability or quality problems.

HUD data show that few families with incomes in the 50-to-80 percent range have serious housing problems. HUD analyses found that only five percent of families with incomes between 50 percent and 80 percent of area median income had "urgent housing needs" in 1993.(10)
 

Would the Senate's 60-Percent Threshold Be Effective As a Targeting Mechanism?

 Some have argued that the Senate provision limiting most certificates and vouchers not reserved for poor households to those with incomes below 60 percent of the area median income is largely symbolic.  Whether the law limits certificates and vouchers to households below 60 percent or 80 percent of area median income does not matter, this argument goes, because few families with income exceeding the 60-percent threshold would benefit from a certificate or voucher anyway. 

 In the certificate and voucher programs, a family generally must pay 30 percent of its adjusted income towards the rental cost of a private apartment.  The public housing authority, with funds from HUD, pays the landlord the difference between the tenant's rental obligation and the "Fair Market Rent" that HUD has set for the area.  If the family's income is sufficiently high that 30 percent of its income equals or exceeds the Fair Market Rent, the family receives no subsidy.  Those contending the Senate provision is symbolic argue that families with incomes above 60 percent of the area median income will not qualify for subsidies because 30 percent of their income will exceed the Fair Market Rent. 

 The belief this provision is merely symbolic is, however, not correct.  In the jurisdictions covered by more than half of the nation's 21 largest public housing authorities, families with incomes above 60 percent of area median income would qualify for a rental subsidy if given a voucher or certificate.  In New York, for example, a family of three at 60 percent of area median income would receive a subsidy through a certificate or voucher of $225 a month, or $2,700 a year.*  In addition, the number of families in the 60 percent to 80 percent of area median range that would qualify for a rent subsidy, and the amount of rent subsidy they could receive, would grow in public housing authorities that exercise an option the House and Senate bills would give them to raise the local rental standard used in the certificate and voucher program up to 120 percent of the Fair Market Rent. 

 Some may think it desirable to extend housing subsidies to families with incomes this high in areas with particularly high rents.  It is precisely in these areas, however, that families with incomes below 60 percent of the area median income — and especially those below 30 percent of area median income — face the most severe rent burdens without some form of housing subsidy.
_______________________________
* Such a family would pay $637 in rent, while the Fair Market Rent for a two-bedroom apartment in New York is $862. (The family's share of this rent is calculated by subtracting the $480 dependent allowance for each of two dependents from the income level that equals 60 percent of the area median income, and then multiplying by 30 percent.)

 

Are These Targeting Changes Needed to Increase The Number of Working Families in Subsidized Housing?

Proponents of the bills argue these changes are necessary to improve the income and employment mix in subsidized housing developments and to enable public housing authorities to raise more rental income. Some proponents also observe that without such changes in income targeting, PHAs will face reductions in rental income as some tenants who receive public assistance lose a portion or all of their income as a result of welfare time limits and other welfare system changes.

The goals of improving the income and employment mix in housing projects and raising the rental revenue that PHAs collect are important. But the changes the Senate bill and especially the House bill make in the income targeting rules go well beyond what is needed to meet these goals. This is especially true in the case of tenant-based certificates and vouchers.

Certificates and Vouchers

Because recipients use certificates and vouchers to rent private apartments and do not live in housing projects, a high level of targeting of this type of assistance on poor families does not concentrate poor, non-working families in such projects. To the contrary, retaining a high level of targeting in the certificate and voucher program may lessen poverty concentrations by enabling poor families to move out of heavily impacted neighborhoods to areas they otherwise would not be able to afford. Nor does targeting certificates and vouchers on poor families adversely affect rental revenues of public housing authorities (tenants with certificates or vouchers pay rent to their landlords, not the PHA) or result in higher cost to the federal Treasury.(11) None of the reasons advanced for limiting the degree of targeting on poor families apply to tenant-based certificates and vouchers.

Shifting a majority of the vouchers and certificates that become available to families with incomes up to $35,000, as the House bill would permit, would substantially lessen the number of poor families aided, crimping aid to the working poor. While the Senate bill would continue to require that a majority of vouchers and certificates go to poor families, it still would allow one-quarter of the newly available tenant-based certificates and vouchers to go to families with incomes up to approximately $25,000 per year and another 10 percent of these subsidies to go to families with incomes up to approximately $35,000.

Allowing substantial proportions of tenant-based vouchers and certificates to go to lower-middle-income families in this manner is unnecessary to direct more of this aid to working families. With the repeal of the federal preference rules, public housing authorities will be able to establish local preferences for working families (and/or families making the transition to work) among those with incomes below 30 percent of the area median income.

Moreover, reducing the availability of certificates and vouchers to poor families would diminish the ability of such families to live in housing created through either of the two principal federally supported construction and rehabilitation programs, the HOME block grant program and the Low Income Housing Tax Credit. Poor families can generally reside in HOME-funded rental units or units financed through the tax credit only if they have tenant-based rental assistance. HUD data show, for example, that of the 15,000 HOME-funded rental units occupied as of early 1996, only six percent were affordable for households below 30 percent of the area median income without rental assistance.(12)

A final point bears noting. If changes made in the targeting rules for public housing and Section 8 project-based housing result in most of the subsidies that become available in housing projects being directed to non-poor families, it will become still more important to reserve most of the available tenant-based certificates and vouchers for families with incomes below 30 percent of the area median.

Targeting in Public Housing

Issues of income and employment mix matter most in public housing. The targeting changes in the bills, however, go beyond what is needed even in public housing to improve income and employment mix.

Targeting Changes Also Would Adversely Affect Elderly and Disabled Poor

 This analysis of the impact of the changes the House and Senate bills would make in the income targeting rules focuses on families with children.  The changes in targeting rules would, however, also heavily affect poor elderly and disabled households.  The targeting changes could make it substantially more difficult for elderly and disabled people who live in poverty to receive housing assistance, while making it easier for better-off elderly and disabled households to secure these subsidies. 

 The need of poor elderly and disabled households for housing assistance is substantial.  HUD data show that more than one million elderly renters who have incomes below 30 percent of area median income and do not receive housing assistance have "urgent housing needs."*  Most of these households pay more than half of their limited incomes for rent. 

 Under the preference rules that would be repealed, approximately 160,000 housing subsidies were made available each year as a result of turnover to elderly and disabled households with urgent housing needs, most of whom were poor.  Under the House bill, the number of subsidies reserved for poor elderly and disabled households — those with incomes below 30 percent of the area median income — would be less than 43,000.  Even under the Senate bill, the number of turnover subsidies reserved for elderly and disabled households with incomes below 30 percent of the area median income would be nearly one-third less than the number of subsidies formerly targeted on elderly and disabled people with urgent housing needs.**  Meanwhile, the number of subsidies that could be provided to elderly and disabled households with incomes closer to 80 percent of area median income would climb.  

 The bills consequently could cause poor elderly and disabled individuals to languish on waiting lists for much longer periods, while elderly and disabled people with incomes well above the poverty line began receiving housing assistance in greater numbers.  The arguments for such substantial shifts in the allocation of housing subsidies are even weaker with regard to the elderly and disabled than with regard to families with children.  Whatever their income level, elderly and disabled individuals who might receive housing assistance generally are retired or unable to work.  A weakening of the targeting rules for such households cannot be defended on grounds it will promote a better employment mix.
_________________________
*
Office of Policy Development and Research, U.S. Department of Housing and Urban Development, A Report to Congress on Worst Case Housing Needs, March 1996.
** Calculated from data provided in Office of Policy Development and Research, U.S. Department of Housing and Urban Development,
A Picture of Subsidized Households, 1997

 

A policy that targets half of public housing units becoming available on families with incomes at or below 30 percent of the area median income, while granting preference among this low-income group to working households, would strike an appropriate balance among competing social goals. It should raise more rental income for PHAs and increase the proportion of public housing tenants who work while targeting assistance on working poor families and thereby promoting welfare reform goals. It would enable more newly employed families to have the stability of affordable housing. It also would continue to direct a substantial share of scarce housing assistance resources to those with the most serious housing needs.

If, nevertheless, the targeting of public housing units to poor families is to be reduced, the less-extreme changes of the Senate bill would be more consistent with the principles espoused here than the House provisions are. In addition to targeting 40 percent of the public housing units that become available on households below 30 percent of the area median, the Senate bill requires that an additional 30 percent of such units go to households with incomes below 60 percent of the area median income. The House bill contains no similar targeting provision regarding households below 60 percent of area median income; thus, it allows nearly two-thirds of the public housing units becoming available in an area to be directed to families at income levels above 60 percent of area median income. (Under the House bill, all units not reserved for those below 30 percent of the area median income could be directed to those in the 60 percent to 80 percent of AMI range.) The House bill consequently would permit most major metropolitan public housing authorities to direct nearly two of every three public housing units becoming available to households with incomes close to or exceeding $30,000 per year. This is a more drastic reordering than is justified by concerns about income mix and PHAs' financial circumstances.

Furthermore, the House bill would permit those public housing authorities that target more than the minimum required number of tenant-based vouchers and certificates on households with incomes below 30 percent of the area median to reduce by a corresponding amount the number of public housing units they must target on households in that income category. This provision, known as "fungibility," could mean that some public housing authorities would not have to admit any families with incomes below 30 percent of the area median into public housing.

Consider a PHA with annual turnover of 1,000 certificates and vouchers and 600 public housing units. Under the House bill, the PHA would be required to provide 400 certificates and vouchers (40 percent of the 1,000 that become available) and 210 public housing units (35 percent of the units becoming available) to families with incomes below 30 percent of the area median income. If the PHA provided 610 of the 1,000 turnover certificates and vouchers to families in this income category — exceeding its target by 210 — it would not need to provide any public housing units to families in this income range. The PHA would be targeting 61 percent of the certificates and vouchers on needy families — a much smaller proportion than the 90 percent required under the old preference rules, and also a smaller proportion than the 65 percent the Senate bill would require — while eliminating entirely its obligation to admit poor families to public housing.

Project-based Section 8 Assistance

The targeting rules for the project-based Section 8 program also are of considerable importance. As noted, the number of housing units that become available for families with children each year through the project-based Section 8 program exceeds the number of units that become available for such families in public housing.

The Senate bill's targeting provisions for project-based Section 8 units are identical to its targeting provisions for public housing. The House bill, by contrast, contains no targeting rules requiring Section 8 project owners to admit any poor families to their units. Although the House bill maintains existing statutory provisions requiring that most of the project-based Section 8 units go to families with incomes below 50 percent of the area median, it establishes no targeting rules favoring poor families to replace the federal preference rules it repeals.

As a consequence, working poor families could, under the House bill, be denied entry to most units that become available in Section 8 projects. The private landlords who operate the projects would have carte blanche effectively to bar entry to poor families by favoring families at somewhat higher income levels.

Section 8 projects that house families with children already are more likely to have a better income mix and to be located outside high-poverty areas than public housing projects. Adopting the House bill's stance of declining to target any of these units on families with incomes below 30 percent of the area median is not necessary to avoid heavy concentration of poor families in these projects.

The income targeting rules established for section 8 projects should be at least as stringent as those established for public housing projects. Moreover, given the fact that Section 8 projects have better income mixes and are less likely to be located in high-poverty areas than public housing projects are, targeting rules for Section 8 project-based assistance probably should be somewhere between the targeting rules for public housing and those set for tenant-based vouchers and certificates.(15) It also should be noted that repeal of the federal preference rules will enable private project owners to accord preference to working poor families in meeting any targeting requirements established for households below 30 percent of area median income.

 

Conclusion

The income targeting provisions of the pending legislation would make it more difficult, rather than easier, for working poor families to secure housing assistance. The Senate bill's targeting provisions would have less severe effects in this regard than the House provisions and are clearly preferable to the House proposals. Even the Senate bill, however, would reduce substantially the number of subsidies reserved for poor families.

The provisions in these bills that would enable PHAs to shift subsidies from the poor (including the working poor) to families far above the poverty line largely reflect concerns about public housing projects. Yet the bills would weaken the targeting rules for all three forms of assistance, including the tenant-based certificate and voucher program where concerns about concentrating poor, unemployed families in projects do not apply. The House provision reserving fewer than half of the tenant-based certificates and vouchers that become available for households at or below 30 percent of area median income — as well as the provisions of both bills that would allow a portion of federally funded certificates and vouchers to be provided to households with incomes exceeding 50 percent of the area median — seem hard to justify.

Also troubling is the House provision enabling Section 8 project owners, who enjoy the benefits of substantial federal subsidies, to decline to admit any poor families — including working poor families — to their projects. The House provisions that would allow close to two-thirds of the public housing units becoming available to be directed to families close to or above $30,000 a year also seem unwise. The goals of promoting work and raising rental revenues can be advanced, even in public housing and project-based private housing, without such radical moves to shift housing assistance away from poor families and toward those with more middle-class incomes.

This legislation is now approaching its final stage; negotiations between the House and Senate are beginning. If Members of Congress wish to ensure that the housing legislation adequately assists the working poor and does not undercut welfare reform efforts by directing housing assistance away from those struggling to remain off welfare and to raise their families on low-wage jobs, they will need to strengthen the targeting provisions.  

Appendix I
HUD Estimates of 30 Percent, 50 Percent, and 80 Percent of Area Median Income for 
the 20 Largest Metropolitan Areas

Twenty Largest
Metropolitan Areas
(by size)

30% of AMI for a
Family of 3 in

1997

50% of AMI for a
Family of 3 in

1997

80% of AMI for a
Family of 3 in
1997

New York/Northern NewJersey/Long Island

$13,250

$22,050

$35,300

Los Angeles

$13,850

$23,100

$36,950

Chicago

$15,050

$25,100

$39,150

Washington, DC/MD/VA

$19,000

$31,650

$39,150

San Francisco

$17,400

$29,000

$40,450

Philadelphia

$13,850

$23,100

$36,950

Boston

$16,100

$26,800

$39,150

Detriot

$14,400

$24,000

$38,400

Dallas/Fort Worth

$14,150

$23,550

$37,650

Houston

$13,250

$22,100

$35,350

Miami

$12,050

$20,050

$32,100

Seattle

$14,900

$24,800

$39,150

Atlanta

$14,350

$23,900

$38,250

Cleveland

$12,650

$21,100

$33,750

Minneapolis/St.Paul

$15,500

$25,800

$39,150

San Diego

$13,100

$21,850

$35,000

St. Louis

$12,400

$20,650

$33,050

Pittsburgh

$10,750

$17,900

$28,650

Phoenix

$12,800

$21,350

$34,200

Tampa

$10,900

$18,200

$29,150

Denver

$14,800

$21,950

$34,800

The projected poverty line for a family of three is $12,873 in 1997.

    


End Notes

1. Data tabulated from U.S. Department of Housing and Urban Development and Bureau of the Census, U.S. Department of Commerce, American Housing Survey, 1995.

2. The "typical" area among the 21 areas these PHAs serve is the area in which the median income is higher than the median income in 10 of these 21 areas and lower than the median income in the other 10 of these areas.

3. Some 90 percent of poor families with children in 1995 had parents who were not ill, disabled, or retired.

4. Daniel R. Meyer and Maria Cancian, Life After Welfare: The Economic Well-Being of Women and Children Following an Exit from AFDC, Institute for Research on Poverty, University of Wisconsin, Discussion Paper No. 1101-96, August, 1996, p. 20. The $10,315 figure cited here reflects the study's finding as measured in 1997 dollars.

5. This wage figure reflects the median hourly wage in 1995 for single working mothers nationally who also received AFDC benefits at some point in 1995. It was tabulated by the Center on Budget and Policy Priorities based on data from the Census Bureau's Current Population Survey. In this comparison, full-time year-round work is defined as 40 hours of work per week for 50 weeks of the year.

6. These estimates assume that for each of the three principal housing assistance programs, the proportion of newly available subsidies that will go to families with children under the new 30-percent-of-area-median-income rules will be the same as the proportion of subsidies that has gone to families with children in each of these housing programs in the recent past. As used here with regard to tenant-based vouchers and certificates and public housing, "families with children" refers to families with minor children in which the household head (and spouse, if any) is not elderly or disabled. For Section 8 project-based housing, "families with children" refers to all families with minor children; data distinguishing families in which the household head or spouse is elderly or disabled are not available for this type of housing assistance.

7. In 1995, approximately 540,000 families with children lived in public housing projects, while 955,000 families with children received assistance through tenant-based certificates or vouchers.

8. Current law allows a modest percentage of the units becoming available in housing projects to go to households with incomes up to 80 percent of the area median income. No tenant-based vouchers or certificates can go to households with incomes that high except when a tenant currently in a housing project faces displacement.

9. The pending House and Senate bills, like previous housing legislation, use the term "low income" to describe households with incomes up to 80 percent of the area median income. This term, too, is something of a misnomer.

10. Office of Policy Development and Research, U.S. Department of Housing and Development, Rental Housing Assistance at a Crossroads: A Report to Congress on Worst Case Housing Needs, March 1996, page 18.

11. Rents paid by families with vouchers and certificates go to landlords, not public housing authorities. Federal costs are constrained by the limits that HUD places on the amount of resources each PHA is provided for tenant-based vouchers and certificates. If a PHA provides vouchers and certificates primarily to families that are poor, the total number of vouchers and certificates it provides will be somewhat smaller than if these subsidies are given to lower-middle-income families. Costs to the federal Treasury are not affected.

12. Office of Policy Development and Research, U.S. Department of Housing and Urban Development, A Report to Congress on Worst Case Housing Needs, March 1996, p. 50.

13. American Housing Survey data for 1993 show that nearly nine of 10 families with children in this income range work. Office of Policy Development and Research, U.S. Department of Housing and Urban Development, A Report to Congress on Worst Case Housing Needs, March 1996, p. iii.

14. Ricardo Diaz, Director, Milwaukee Public Housing Authority, "Milwaukee's Application of the Community Building Strategy in the Coordination of Housing and Welfare Reform Initiatives," paper presented at an Urban Institute conference, September 9, 1997.

15. For both public housing projects and project-based Section 8 subsidies, there is value in having a mix of income in the projects and a substantial proportion of residents who are employed. Achieving these goals, however, does not require loosening the targeting rules as much in the project-based Section 8 program as in the public housing program, because substantially more of the project-based Section 8 stock used for families with children than of the comparable public housing stock is already mixed-income and located outside high-poverty census tracts. See Jill Khadduri and Marge Martin, "Mixed Income Housing in the HUD Multifamily Stock: Lessons from Income Diversity in Privately Owned Assisted Rental Projects," City Scape, Vol. III (2), September 1997: 33-69.