August 3, 1998
Proposed Housing Legislation Would Divert Subsidies
From the Working Poor and Weaken Welfare Reform Efforts
by Jeff Lubell and Barbara Sard
Table of Contents
Congress may pass major legislation overhauling the nation's low-income housing programs before adjourning for the year. The House of Representatives recently took a step in this direction when it attached the housing bill it had passed last year as a rider to the fiscal year 1999 appropriations bill funding the Departments of Veterans Affairs and Housing and Urban Development. Although the Senate version of this appropriations bill does not contain a similar rider, the conference report on the appropriations bill may include the housing legislation. Both the House and Senate passed versions of the housing legislation in 1997.
Although the housing legislation contains a number of consensus provisions, it also includes highly controversial "income targeting" provisions. These provisions would authorize public housing authorities (PHAs) and private owners of subsidized housing developments to limit the access of poor families to low-income housing programs and re-direct substantial portions of federal subsidized housing resources to moderate-income families. Should housing authorities and private owners take advantage of this authority, federal housing aid to poor families, including working poor families, would decline substantially. The House version of the housing bill could reduce the number of housing subsidies provided to poor families each year as a result of normal turnover in the housing programs by 69 percent. The Senate version of the bill could lead to a 38 percent reduction.
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. In reality, the legislation would divert housing subsidies from working poor families, providing them instead to families with incomes as high as $39,000.
Proponents of these provisions defend them as necessary to lessen concentrations of poverty and unemployment in public housing projects. The diversion of assistance from poor families to families at higher income levels, however, would apply not only to public housing which serves only about one-quarter of the families with children that receive a federal rent subsidy but to the other major low-income housing programs as well. In particular, the income-targeting provisions in the housing bills that the Senate and especially the House have passed would authorize the diversion from poor families to families with more adequate incomes of a substantial number of housing vouchers, which families use to rent apartments in the private market rather than to live in housing projects. Since vouchers enable families to move to safer neighborhoods with better job opportunities, thereby lessening concentrations of poverty (and families with these vouchers do not live in housing projects), the arguments for promoting more income-mixing in public housing projects do not apply to vouchers. Proponents of the income-targeting provisions have yet to advance a sound rationale for shifting vouchers up the income scale.
There can be little doubt that working poor families, as well as other poor families, are in substantial need of housing assistance. In 1995, two-thirds of all working poor renter families with children not receiving any housing assistance either paid at least half of their income for housing or lived in physically inadequate housing.(1) The provisions of the Senate and especially the House housing legislation that would divert aid from poor families are inconsistent with the stated goal of directing more help to this group.
Among those who would be adversely affected by these provisions would be families making the transition from welfare to work. Unless modified, the housing legislation thus could weaken efforts to help families that are moving from welfare to work stabilize their situations and consequently have a better chance of remaining employed and off welfare.
Who currently receives housing subsidies that become available?
The major federal low-income housing programs are not entitlements; they can accommodate only a fraction of those who meet the programs' eligibility criteria. 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 each year as a result of turnover and, to a lesser extent, rehabilitation of vacant units; in some years, new subsidies also become available through incremental assistance provided by Congress.)
Until 1996, federal rules required that families meeting certain criteria be given preference for a substantial share of the housing subsidies that became available. The families meeting these standards were those that paid more than half their income for rent, lived in substandard housing, were homeless, or had been involuntarily displaced from their housing, including victims of domestic violence. Most of those who met these preference rules were households with incomes sufficiently low that their housing costs consumed 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 these preference rules generally were 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. Nevertheless, pending approval by Congress of new, permanent targeting rules, many housing authorities and private owners have continued to implement most or all of the federal preference requirements.
Federal Housing Programs Serving Poor Families
Tenant-based Vouchers and Certificates - These subsidies help tenants rent housing in the private market. The subsidies cover the difference between the apartment rental and the tenant's rent payments, usually set at 30 percent of the tenant's income. There are currently about 1.5 million vouchers and certificates nationwide.
Public Housing - Public housing consists of rental units owned and operated by public housing authorities (PHAs), which are public or quasi-public entities. There are approximately 1.2 million units of public housing available for occupancy. 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. In addition to tenant rents, PHAs receive an operating subsidy from the federal government.
Project-based Section 8 Housing - These are subsidized rental units in buildings owned and operated by private owners. 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. Under this program, the federal government pays private owners the difference between a unit's rent and the tenant's rent payment, which is fixed at 30 percent of income. There are approximately 1.4 million project-based Section 8 units nationwide.
There are three major federal housing programs serving poor families: public housing, the voucher and certificate program, and the project-based Section 8 program. (See box on page 3.) Recent HUD data show that approximately 78 percent of newly available public housing units, 81 percent of newly available vouchers and certificates, and 75 percent of newly available project-based Section 8 units are provided each year to families with incomes below 30 percent of the area median income (AMI).
Who would get housing subsidies under the new legislation?
The housing bills the House and Senate have passed would permanently repeal the federal preference rules and replace them with new income targeting provisions. The House and Senate bills target specified percentages of the housing assistance becoming available on households with incomes up to 30 percent of the area median income.
Nationally, 30 percent of AMI, as adjusted for a family of three, is close to the poverty line for a family of three. Most poor households consequently fall into this category, including most of the working poor.(2)
Under both the House and Senate housing bills, the proportion of newly available subsidies that would be reserved for families below 30 percent of the area median income would be much smaller than the proportion effectively reserved for such families under the federal preference rules being repealed. Under the Senate bill, the number of newly available subsidies that would be reserved for households below 30 percent of AMI would be nearly two-fifths lower than the number now going to such families. Under the House bill, the number would be more than two-thirds lower. Under both bills, the majority of this decline would occur in housing programs other than public housing.(3)
While reducing substantially the proportion of subsidies targeted on poor families, including the working poor, the bills would increase the proportion of subsidies that may be provided to families at higher incomes levels, including families with incomes of up to about $39,000. This is particularly true of the House bill, which goes farther in this regard than the Senate bill. How to design these targeting rules is one of the principal issues that must be resolved if the housing bills are to be enacted into law either on their own or as an attachment to appropriations legislation.
The Loss in Housing Subsidies for Poor Households Under these Bills
Table 1 and Figure 1 show the potential impact of the income targeting provisions in the House and Senate housing bills on households with incomes below 30 percent of the area median income (AMI). The figures in Table 1 and Figure 1 represent the difference between estimates of: (1) the current number of poor families newly receiving housing assistance each year, as indicated by recent HUD data; and (2) the number of poor families that would receive new subsidies each year under the proposed legislation if housing authorities and private owners of subsidized housing took full advantage of the authority the pending legislation provides to shift subsidies to families at higher income levels and serve poor families only to the extent the law required. (This analysis looks at housing subsidies becoming available through normal turnover.(4) Appendix 1 provides further detail on how this analysis was conducted.)
The House bill authorizes the diversion of up to 270,000 federal housing subsidies per year from poor families (i.e., families below 30 percent of the area median income) to families at higher income levels. This could reduce by 69 percent the number of poor families newly receiving federal housing assistance each year.
Potential Yearly Subsidy Loss for Poor Households
Vouchers/Certificates Project-based Sec. 8 Potential Yearly Subsidy Loss Current Share Given to Poor* Percent Targeted to Poor** Under Pending Bills Potential Yearly Subsidy Loss Current Share Given to Poor* Percent Targeted to Poor** Under Pending Bills Potential Yearly Subsidy Loss Current Share Given to Poor* Percent Targeted to Poor** Under Pending Bills Potential Yearly Subsidy Loss House Bill 270,000 78% 35% 67,000 81% 40% 67,000 75% 0% 136,000 Senate Bill 148,000 40% 59,000 65% 26,000 40% 63,000 * "Current share given to poor" represents the proportion of newly available subsidies provided in recent years to households with incomes below 30 percent of AMI.
** "Percent targeted to poor" represents the percentage of newly available subsidies reserved for households with incomes below 30 percent of AMI under the proposed legislation.
- While more modest in its impact, the Senate bill nevertheless authorizes the redirection of up to 148,000 subsidies per year away from poor families. This could reduce by 38 percent the number of subsidies newly provided to poor families.
By reducing the share of housing assistance reserved for poor families, the legislation would increase the proportion available for families at higher income levels. The House bill would authorize housing authorities to provide up to 65 percent of public housing units and 60 percent of vouchers and certificates to families with incomes up to 80 percent of the area median. As Table 2 shows, 80 percent of AMI can be as high as approximately $39,000 in some major metropolitan areas.
What Effect Would the New Legislation Have on Working Poor Families?
Sponsors of the pending legislation, particularly in the House, claim it is necessary to ensure the availability of housing subsidies for the working poor. Since the great majority of working poor families have incomes below 30 percent of AMI, however, the working poor would likely suffer a substantial reduction of housing assistance under the new legislation.
Examples of HUD's 1997 Income Limits for 3-Person Families(5)
30 percent of AMI
60 percent of AMI
80 percent of AMI
Atlanta $14,350 $28,700 $38,250 Boston 16,100 32,200 39,150 Chicago 15,050 30,100 39,150 Detroit 14,400 28,800 38,400 Houston 13,250 26,500 35,350 Los Angeles 13,850 25,800 36,950 New York 13,250 25,500 35,300 Philadelphia 13,850 27,700 36,950 Washington, DC 19,000 38,000 39,150 Source: HUD Section 8 income limits for a family of three, fiscal year 1997.
Notes: AMI=area median income. As HUD does not yet publish income limits for the proposed category of 60 percent of AMI, these figures have been estimated by the Center on Budget and Policy Priorities.
In 1995, there were approximately 1.7 million renter families with children whose incomes fell below the federal poverty line despite substantial work effort. (These families had earnings that equaled or exceeded earnings from half-time, year-round work at the minimum wage.) About 1.1 million renters with children were poor in 1995 despite having earnings equal to or greater than earnings from full-time, year-round work at the minimum wage.(6) The vast majority of these working poor families have incomes below 30 percent of AMI.
Indeed, persons working full time at the minimum wage have incomes below 30 percent of the 1997 area median (as adjusted for a family of three) in 54 of the 55 largest U.S. metropolitan areas. (See Appendix 2.) HUD data show that almost 80 percent of the U.S. population lives in areas where a person working full time at the minimum wage would make less than 30 percent of AMI.
Most families making the transition from welfare to work also have earnings below 30 percent of AMI. Several states have recently conducted studies of the earnings of former welfare recipients. Each found that recipients who had left welfare and were working shortly after exiting the rolls had low earnings. For example, researchers in Maryland found that former Maryland recipients who were employed in the three-month period following their welfare exit earned an average of about $800 per month, which is less than $10,000 a year and significantly below 30 percent of national median income (which equals $13,050 per year).(7) Similarly, a study of former recipients in South Carolina found those who were employed worked an average of 34 hours per week for an average wage of $6.00 per hour. Even if these former recipients were able to work at this level throughout the year, their annual incomes would be less than 30 percent of national median income.(8) (Moreover, many employed former recipients are not able to work every week during the year. Some have periods of unemployment, while others may be forced to take some unpaid leave from their jobs to attend to family matters. A recent study of welfare recipients in Florida found that only 36 percent received paid sick leave from their employers.)(9)
The findings in these recent studies of former welfare recipients mirror those found in a number of evaluations of welfare-to-work programs across the country. These studies provide information on the earnings levels of recipients who find jobs. Recipients who find jobs typically earn between $2,000 and $2,700 per quarter (i.e., per three-month period), or between $8,000 and $10,800 per year.(10)
Finally, two sources of national information on the earnings of former recipients confirm that most have earnings below 30 percent of the area median income. Census data indicate that in 18 of the nation's 20 largest metropolitan areas, the typical hourly wage in 1995 of single working mothers who had recently received welfare roughly $6.00 per hour, as measured in 1997 dollars leaves a family of three below 30 percent of the area median income even if the parent works full time.(11) In addition, a national study of single mothers who were working five years after leaving welfare found that their earnings averaged just $10,315 per year.(12)
By reducing the proportion of housing assistance provided to families with incomes below 30 percent of AMI, the housing authorization legislation would likely shrink the proportion of housing assistance provided to working poor families. Yet such families have substantial need for housing assistance. A recent HUD report found that the growth during the early 1990s in the number of families with severe housing needs i.e., those paying at least half of their income in rent or living in severely substandard housing was greatest among working families. By 1995, more than 1.6 million unsubsidized renters with incomes below 30 percent of AMI and earnings as their primary income source had severe housing problems. Two of every three unassisted renter families with children that had incomes below 30 percent of AMI and earnings as their primary income source had severe housing needs in 1995.(13)
How Would the New Housing Legislation Affect Welfare Reform?
Few welfare recipients will find work paying close to 80 percent of AMI, which equals $39,150 in a city such as Chicago. The increased availability of housing subsidies for families with incomes this high thus would be unlikely to function as an incentive for welfare families to go to work. To the contrary, by reducing the number of poor families newly receiving federal housing assistance, the legislation would likely hinder welfare reform efforts.
Housing subsidies can help families move from welfare to work in at least three ways.
- Housing subsidies can help to stabilize the living situations of poor families, enabling them to focus more on obtaining and keeping jobs.
- Housing subsidies free up funds within the budgets of poor families for work-related expenses, such as child care, work clothes, and transportation.
- Vouchers and certificates that help families rent apartments in the private housing market, as well as some project-based units, can help families move to areas offering greater economic opportunities.
Housing Subsidies Can Help Stabilize Poor Families' Living Situations: Many housing and welfare professionals believe that poor families need a stable housing situation to focus more fully on finding and retaining employment. This belief is grounded in experience helping families move from welfare to work. Reflecting on site visits to 21 nonprofit organizations involved in self-sufficiency efforts in 13 states, Rachel G. Bratt of Tufts University and Langley G. Keyes of MIT noted that their "field work underscored the importance of housing being secured first, before people could pay serious attention to non-housing issues....Housing is at the core of family stability."(14)
Housing subsidies can help free families from distractions that can cause them to lose their jobs. Particularly in low-wage positions, the need to leave work to attend to a family emergency can lead to loss of employment. In various ways, housing subsidies can help to reduce the amount of time that families need to devote to such nonwork activities. For example, by reducing housing costs to a smaller share of families' budgets, subsidies permit poor families to spend more money on food, potentially reducing child health problems caused by inadequate nutrition and minimizing the resultant interruptions from work. A study in Boston found that children of families on a waiting list for housing assistance were six to seven times more likely to have low growth parameters (slower than normal growth) than children of families receiving housing subsidies.(15)
Similarly, families that cannot afford housing of their own may be forced to move frequently from the home of one friend or relative to that of another. While necessary to ensure continued shelter, such moves can interrupt work schedules and jeopardize employment.
Recent Research Confirms the Likely Contribution of
Housing Subsidies to Welfare Reform Efforts
Data from several recent studies suggest that residence in subsidized housing may contribute to welfare reform efforts.
- Minnesota Family Investment Project (MFIP). A recent evaluation of Minnesota's welfare reform initiative by Manpower Demonstration Research Corporation (MDRC) found that residents of public and subsidized housing benefitted more from welfare reform than poor families not residing in such housing. The average earnings over 18 months among long-term welfare recipients in urban counties who received full MFIP benefits and lived in public or subsidized housing exceeded by more than 40 percent the average earnings of full-MFIP participants not residing in such housing.(16)
- Voucher and Certificate Program in California. Analyzing data collected in four California counties (Alameda, Los Angeles, San Bernardino, and San Joaquin), researchers from UCLA found that, on average, families receiving both Aid to Families with Dependent Children (AFDC) and Section 8 tenant-based vouchers or certificates worked significantly more hours than AFDC families living in other forms of housing, including unsubsidized housing. The study concluded that the most "plausible explanation [for these results] is that Section 8 housing offers recipients residential choice and mobility that improve opportunities for employment."(17)16
16 Paul Ong, "Subsidized Housing and Work Among Welfare Recipients," unpublished manuscript, p.1.
Housing Subsidies Can Help Families Afford Necessary Work-Related Expenses: In 1995, three of every four unassisted poor renters spent more than half of their income on housing. Such high housing costs can leave families with little remaining income for
basic necessities or to pay for child care, work clothing, transportation, and other expenses that often must be met if families are to move from welfare to work. Housing subsidies can help families making the transition to work afford necessary work-related expenses.
Housing Subsidies Can Help Families Move to Areas With Greater Job Opportunities. Households receiving tenant-based subsidies such as vouchers and certificates use them to rent housing in the private market. There are few formal restrictions on the locations in which tenant-based subsidy holders may live; they generally may rent wherever they find an agreeable landlord. By helping recipients rent apartments they could not otherwise afford, tenant-based subsidies can enable poor families to move to areas with greater employment opportunities. (Some housing developments also are situated near job opportunities. Promoting access by poor families to these developments can similarly help to support welfare reform goals.)
Given the potential for housing subsidies to help poor families make the transition from welfare to work, the reduction in housing assistance for poor families that would result from the pending legislation would be more likely to hinder than to bolster the cause of welfare reform.
Are The New Income Targeting Rules Necessary to Increase Income Diversity in Public Housing?
Proponents of the House and Senate housing bills contend that the new income targeting rules are necessary to lessen the concentration of very poor families in public housing projects. Public housing, however, is only one of the three major subsidized housing programs serving poor families with children. The rationale driving the diversion of assistance from poor families in public housing does not apply to the voucher and certificate program the largest of the three housing programs and has less applicability to the project-based Section 8 program. Nevertheless, the pending legislation would authorize large reductions in assistance to poor families in all three programs.
Public Housing: Approximately 27 percent of families with children receiving federal housing subsidies live in public housing. Since many public housing units are in large developments with high concentrations of poverty, it makes sense to seek greater income diversity and a greater percentage of working families in such housing. Such diversity can be accomplished, however, without the radical surgery advanced in the pending proposals. In recent years, approximately 78 percent of newly available public housing units have been provided to households with incomes below 30 percent of the area median income. The House bill would reserve only 35 percent of newly available public housing units for families with incomes below 30 percent of AMI. The Senate bill would reserve 40 percent of newly available public housing units for such households. These proposals would authorize up to 59,000 - 67,000 public housing units per year to be redirected away from poor families.
The New Targeting Rules Also Would Affect
the Elderly and Disabled Poor
The changes in targeting rules would apply equally to programs serving elderly and disabled households. The new legislation thus could make it substantially more difficult for poor elderly and disabled households 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 750,000 elderly renters who have incomes below 30 percent of AMI and do not receive housing assistance have severe housing needs. Most of these households pay more than half of their limited incomes for rent.
The arguments for substantial shifts in the allocation of housing subsidies are even weaker with regard to the elderly and disabled than 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.
As explained in more detail in other Center analyses, a policy that targets half of the public housing units becoming available to households with incomes at or below 30 percent of AMI while granting preference within this group to working poor households would strike an appropriate balance among competing social goals.(18) By permitting up to half of new admissions to public housing to have incomes up to 80 percent of AMI, such a policy could lead to a significant increase in the median income of public housing tenants, which currently stands at 21 percent of AMI.(19) By granting preference among poor households to working families, the policy would further increase the proportion of working families in public housing. In addition, a focus on working poor families would assist those working families that have the most serious housing affordability problems; in 1995, there were more than 1.6 million working renter households with incomes below 30 percent of AMI that received no housing assistance and had severe housing needs.(20)
Vouchers and Certificates: Almost half of families with children receiving federal housing subsidies are in the "tenant-based" voucher and certificate program, which subsidizes the rents of families in private housing. Since recipients of vouchers and certificates are generally free to rent wherever they find a willing landlord, they are dispersed among the private rental stock rather than concentrated in particular developments. As a result, voucher and certificate holders are less likely to live in areas of high poverty concentration than residents of either public housing or project-based Section 8 housing.
Given the inherent dispersal effect of vouchers and certificates and the fact that households with tenant-based vouchers and certificates do not live in housing projects there is no need to redirect them to higher-income families to reduce concentrations of poverty and achieve more income mixing. Accordingly, HUD has proposed reserving 75 percent of newly available vouchers and certificates for households with incomes below 30 percent of AMI. The House bill, however, targets only 40 percent of newly available vouchers and certificates to households with incomes below 30 percent of AMI; the targeting figure for vouchers and certificates in the Senate bill is 65 percent. In recent years, approximately 81 percent of newly available vouchers and certificates have been provided to families with incomes below 30 percent of AMI.
The House bill would authorize up to 67,000 vouchers and certificates per year to be diverted from poor families. While more moderate in its impact, the Senate bill could lead to a yearly loss of up to 26,000 vouchers and certificates for poor families.
Vouchers and certificates can be a critical tool in helping working poor families, including those making the transition from welfare to work, afford housing that is accessible to jobs and adequate transportation networks. In light of the value of vouchers and certificates to the working poor and the lack of a need to bring families at higher income levels into this program to lessen poverty concentrations there is no sound reason to redirect certificates and vouchers away from poorer, needier families.
Proposed House-Senate Deal
In late June, legislators released the details of a proposed deal among House and Senate Republicans on a number of elements of the housing authorization legislation, including income targeting. Styled as a "compromise" between the House and Senate bills, the deal would reserve 35 percent of newly available public housing units and 55 percent of newly available vouchers and certificates for families with incomes under 30 percent of AMI. It also would eliminate any targeting of assistance in the project-based Section 8 program to families with incomes below 30 percent of AMI.
The deal would authorize the diversion of up to 245,000 housing subsidies per year from poor families, reducing by as much as 63 percent the number of poor families newly receiving a federal housing subsidy each year. It could cause poor families to lose up to 67,000 public housing units, 42,000 vouchers and certificates, and 136,000 project-based Section 8 units each year.
The potential reduction in the share of housing assistance provided to poor families under the deal (up to 63 percent) is much closer to that of the House bill (a reduction of up to 69 percent) than the Senate bill (a reduction of up to 38 percent).
Given the ongoing negotiations between the House and Senate, the status of this deal remains unclear.
Project-Based Section 8 Housing: One-quarter of families with children receiving federal housing subsidies lives in project-based Section 8 housing. These are private developments, or portions of developments, made affordable to low-income families through federal subsidies. Such developments tend to be smaller than public housing projects with a better mix of incomes, and are more likely than public housing projects to be located outside high poverty areas. Accordingly, there is somewhat less need for these projects than for public housing projects to change targeting rules to increase the mix of incomes. On balance, a targeting percentage somewhere between that used for public housing and that applied to vouchers and certificates would be appropriate for project-based Section 8 housing.
Approximately 75 percent of households recently admitted to project-based Section 8 units have incomes below 30 percent of AMI. The Senate bill would reserve 40 percent of newly available units for such families, authorizing the diversion of up to 63,000 project-based Section 8 subsidies per year from poor families. The House bill contains no requirement that any proportion of these units be reserved for families with incomes below 30 percent of AMI. The House bill could lead to the loss of up to 136,000 project-based Section 8 subsidies per year for poor families.
The House bill would permit those PHAs that provide more than the minimum required number of vouchers and certificates to households below 30 percent of AMI to reduce by a corresponding amount the number of public housing units they must target on households in this 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 AMI to public housing.
For example, in Los Angeles, the PHA administers approximately 28,000 vouchers and certificates and 9,000 public housing units. About 1,200 of the PHA's public housing units and about 3,000 of its certificates and vouchers become available each year. (This assumes the national "turnover" percentages apply.) Under the income targeting provisions in the House bill, the PHA would be required to reserve 35 percent of the 1,200 newly available public housing units (420 units) and 40 percent of the 3,000 newly available certificates and vouchers (1,200 such subsidies) for families with incomes below 30 percent of AMI.
An Income Targeting Proposal
In the Center's opinion, an appropriate balance between the need for housing assistance among poor families and the goals of promoting increased income diversity and a higher percentage of employed families in public housing would be achieved by reserving 50 percent of public housing units, 75 percent of vouchers and certificates, and 60 percent of section 8 project-based units for families with incomes below 30 percent of AMI.
Under the House bill's fungibility provision, if the PHA provided an additional 420 vouchers and certificates to poor families (for a total of 1,620 such subsidies), its obligation to admit poor families to public housing would be reduced by an equal amount, eliminating any requirement that it admit poor families to public housing. In this example, the complete exclusion of poor families from newly available public housing units could be accomplished if the PHA issued just 54 percent of the available certificates and vouchers to poor families, even though that is well below the 81 percent of newly available certificates and vouchers currently issued nationally to families with incomes below 30 percent of AMI.(21)
The Senate bill does not include a fungibility provision.(22)
The income targeting provisions in both the House and Senate bills would likely lead to substantial reductions in housing assistance provided to poor families, including the working poor and families making the transition from welfare to work. This sharp reduction in assistance to poor families, which could weaken welfare reform efforts, is not necessary to achieve legitimate housing policy goals.
Technical Notes to Table 1 and Figure 1
Table 1 and Figure 1 chart the potential impact of the new income targeting provisions in the House and Senate bills on households with incomes below 30 percent of the area median income (AMI). The figures on which these illustrations are based represent the difference between estimates of: (1) the current number of poor families newly receiving housing assistance each year, as indicated by recent HUD data; and (2) the number of poor families that would receive new subsidies each year under the proposed legislation if housing authorities and private owners of subsidized housing took full advantage of the authority provided in the pending legislation and admitted poor families only to the extent the law required.(23) The analysis shows the maximum impact the proposed legislation could have in shifting subsidies from poor households to households at somewhat higher income levels. Since some housing authorities and private owners of project-based Section 8 housing may choose to provide more subsidies to families with incomes below 30 percent of AMI than the law would require, the actual number of subsidies lost under the new legislation is likely to be somewhat less than these maximums.
This analysis looks at housing subsidies that become available through normal turnover as some families receiving subsidies leave public or subsidized housing. It does not reflect additions to the subsidized housing stock that Congress could choose to make.
Data on the proportion of households newly admitted to subsidized housing that have incomes below 30 percent of AMI comes from HUD; it is based on the most recent data available (the February 1997 MTCS and June 1997 TRACS databases). Data on the total number of households in subsidized housing 1.2 million in public housing, 1.5 million in the voucher and certificate program, and 1.4 million in Section 8 project-based housing also come from HUD, as do data on the yearly turnover percentages (which are approximately 13 percent in public housing and project-based Section 8 housing and 11 percent in the voucher and certificate program).
Ratio of Full-Time Minimum Wage Earnings to Area Median Income
For a Family of Three for the 55 Largest Metropolitan Areas
Metropolitan Area Percentage of 1997 AMI That Equals Full-time Minimum-Wage Earnings Metropolitan Area Percentage of 1997 AMI That Equals Full Time Minimum-Wage Earnings Los Angeles-Long Beach, CA 22% Kansas City, MO-KS 24% New York, NY 23% Portland-Vancouver, OR-WA 25% Chicago, IL 21% San Jose, CA 16% Philadelphia, PA-NJ 22% Cincinnati, OH-KY-IN 24% Detroit, MI 21% Norfolk-Virginia Beach, VA 26% Washington, DC-MD-VA 16% Milwaukee-Waukesha, WI 23% Houston, TX 23% Indianapolis, IN 23% Boston, MA-NH 19% Fort Worth-Arlington, TX 23% Atlanta, GA 22% Columbus, OH 24% Dallas, TX 22% Sacramento, CA 24% Nassau-Suffolk, NY 17% San Antonio, TX 29% Riverside-San Bernardino, CA 26% Bergen-Passaic, NJ 18% Minneapolis-St. Paul, MN-WI 20% New Orleans, LA 30% San Diego, CA 24% Fort Lauderdale, FL 24% St. Louis, MO-IL 25% Orlando, FL 27% Orange County, CA 18% Buffalo-Niagara Falls, NY 27% Pittsburgh, PA 29% Charlotte-Gastonia, NC 24% Baltimore, MD 21% Hartford, CT 19% Phoenix-Mesa, AZ 24% Providence-Fall River, RI 24% Cleveland-Lorain-Elyria, OH 24% Salt Lake City-Ogden, UT 24% Oakland, CA 19% Rochester, NY 24% Tampa-St. Petersburg, FL 28% Greensboro-Winston-Salem, NC 26% Seattle-Bellevue-Everett, WA 21% Middlesex-Somerset, NJ 16% Miami, FL 26% Memphis, TN-AR-MS 27% Newark, NJ 18% Monmouth-Ocean, NJ 20% San Juan-Bayamon, PR 43% Nashville, TN 24% Denver, CO 21% Oklahoma City, OK 28% San Francisco, CA 18% Full-time, minimum-wage work defined as 2,000 hours per year at $5.15/hour.
1. Data tabulated by the Center on Budget and Policy Priorities from the 1995 American Housing Survey.
2. While the concepts of poverty and area median income (AMI) are technically distinct, this paper uses the phrase "poor" to mean households with incomes below 30 percent of AMI.
3. A third "income targeting" proposal, advanced by HUD, also would increase the mix of incomes in public housing. It would, however, reserve 75 percent of vouchers and certificates for families below 30 percent of the area median income. This proposal would divert less housing assistance away from poor families than would the House and Senate bills.
4. The analysis does not reflect any additions to the subsidized housing stock that Congress could choose to make.
5. Portions of this paper, including Table 2 and Appendix 2, were previously published in Kathryn P. Nelson, Barbara Sard, and Jeffrey M. Lubell, "How Housing Programs' Admissions Policies Can Contribute to Welfare Reform," presented at the conference Managing Affordable Housing Under Welfare Reform: Reconciling Competing Demands sponsored by the Fannie Mae Foundation and the Center on Budget and Policy Priorities. Washington DC, June 26, 1998.
6. Jennifer Daskal, In Search of Shelter: The Growing Shortage of Affordable Rental Housing. Washington, DC: Center on Budget and Policy Priorities, 27-28 (1998).
7. "Life After Welfare: Second Interim Report," School of Social Work, University of Maryland, March 1998.
8. "Survey of Former Family Independence Program Clients: Cases Closed During January Through March, 1997," South Carolina Department of Social Services, March 1998.
9. A Washington State study of former recipients did find somewhat higher wages than have been found in other states. In this state, the median wage of former recipients who went to work was $7.40 per hour. On average, these former recipients worked 34 hours per week. If these former recipients were able to work year round, their incomes would roughly equal 30 percent of national median income.
10. Such evaluations have recently been published on programs in California, Delaware, Florida, Georgia, Michigan, Minnesota, and Oregon.
11. 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.
12. 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. These mothers were not necessarily employed continuously throughout the five-year period, and some may have received some welfare assistance since initially leaving the rolls.
13. U.S. Department of Housing and Urban Development. "Rental Housing Assistance The Crisis Continues: The 1997 Report to Congress on Worst Case Housing Needs." Washington, DC. April 1998.
14. Rachel G. Bratt and Langley C. Keyes. "New Perspectives on Self-Sufficiency: Strategies of Nonprofit Housing Organizations." Medford, MA: Department of Urban and Environmental Policy, Tufts University (1997), at 77, n. 3.
15. Allan R. Meyers et al. "Housing Subsidies and Pediatric Undernutrition." Archives of Pediatric Adolescent Medicine (1995).
16. Unpublished charts prepared by MDRC. The MFIP results are discussed in more detail in Nelson, Sard, and Lubell (1998).
17. Paul Ong. "Subsidized Housing and Work Among Welfare Recipients." Unpublished manuscript, February 12, 1996.
18. See Barbara Sard, Ed Lazere, Robert Greenstein and Jennifer Daskal, "Housing Bills Would Reduce Assistance Available to Poor Families: Working Poor and Families Moving from Welfare to Work Would be Adversely Affected," November 1997; and Jennifer Daskal and Barbara Sard, "Public Housing Admissions Preferences: Recent Changes in New York City Illustrate the Flexibility of Existing Rules," January 1998.
19. U.S. Department of Housing and Urban Development, Office of Policy Development and Research, "Characteristics of Households in Public and Assisted Housing," Recent Research Results, March 1998.
20. HUD, PD&R, April 1998.
21. While certificates and vouchers often are more advantageous for poor families than public housing units, there are places where the reverse is true. Public housing may be the better option where it is well situated near employment centers and there is a shortage of low- to mid-cost rental housing in which to use certificates and vouchers. It is precisely in such locations, however, that housing authorities would be most likely to use fungibility, since it is easier in such locations to attract higher income families to public housing developments. Another advantage of public housing in some instances is affordability; because of the way rents are calculated in the two programs, public housing may be more affordable to some poor families than housing they can rent with vouchers.
22. If fungibility is to be included in the final legislation, Congress should adopt stronger targeting rules for public housing and the Section 8 certificate and voucher program than those in the House or Senate bills. This would be necessary to ensure that some public housing continues to be newly available in all jurisdictions to assist poor families. If fungibility is to be adopted, it also should be limited to a modest proportion of turnover units and applied only to large public housing developments in areas of high poverty concentration.
23. An analysis the Center issued in November 1997 took a somewhat different approach, comparing the proposed targeting rules with the federal preference rules in effect until 1996. In addition, that analysis examined the impact of the proposals only on families with children.
Additional housing reports.