New Housing Voucher Policy Would Broaden Opportunity

The Department of Housing and Urban Development (HUD) proposed today to expand a promising effort to help families with Housing Choice Vouchers move to higher-opportunity areas, by tying their voucher subsidies to rents in a given neighborhood rather than an entire metropolitan area.  Early evidence suggests that the policy, known as small-area fair market rents (SAFMRs), enables families to live in neighborhoods with less poverty and crime without raising federal costs. 

Living in lower-poverty neighborhoods has substantial benefits for families, research shows, including improving adults’ mental and physical health and raising children’s college attendance and adult earnings considerably.

Voucher subsidies are usually capped based on fair market rents (FMRs) that HUD sets to reflect typical rents for modest units of a given size in each metropolitan area or rural county.  But metro-level FMRs are frequently higher than needed to cover market rents in some neighborhoods and too low in others. 

When they are too low — as often occurs in neighborhoods with low poverty, low crime, and high-performing schools — many families struggle to find units they can afford to rent with their voucher.  When they are too high, families can afford units that are larger than they need or have more amenities than typical mid-market housing, and owners can potentially charge above-market rents (unless housing agencies strictly enforce rules requiring that rents be reasonable in the local market).  This makes the voucher program less cost-effective and encourages families to use vouchers in neighborhoods with lower rents but often more crime and poverty.

SAFMRs are based on data for individual zip codes, so they more accurately reflect market rents in particular neighborhoods.  HUD today proposed a regulatory change to require housing agencies in about 30 metropolitan areas where vouchers are heavily concentrated in low-income neighborhoods to replace metro FMRs with SAFMRs in their voucher programs.  The proposal would also let agencies in other parts of the country use SAFMRs.

HUD has been testing SAFMRs at certain housing agencies since 2010, and the evidence so far suggests that they significantly expand opportunities for voucher holders.  Three years after the shift to SAFMRs in the Dallas area, people who used vouchers to move lived in neighborhoods with 17 percent less violent crime and poverty rates two percentage points lower than they would have lived in under metro FMRs, researchers found.

Moreover, average voucher costs in the Dallas area fell 5 percent in the first four years SAFMRs were in place, even while rising 2 percent nationally and in neighboring Fort Worth.  Average costs have also fallen at agencies testing SAFMRs in other parts of the country.

Housing vouchers already help families move to lower-poverty neighborhoods, particularly African American and Hispanic families with children.  But they don’t do so as effectively as they could, and 343,000 children in voucher families live in “extreme-poverty” neighborhoods, where more than 40 percent of residents are poor.  Today’s HUD proposal would take a major step to make the voucher program more effective in expanding opportunities for poor families.