Funding Shortfalls Causing Cuts in Housing Vouchers
Tens of Thousands of Low-Income Families Facing Higher Rents, Loss of Assistance This Year
End Notes
[1] This estimate assumes that: (1) agencies sustain voucher usage at the May 2009 level; (2) per-voucher costs change during the June to December period at the same monthly rate as they changed from October 2008 to May 2009; and (3) agencies draw down all available voucher funding reserves, excluding an amount equal to 1 percent of their total estimated expenditures for 2009. Agencies participating in the Moving to Work demonstration were excluded from the analysis, as their funding eligibility is not based on actual voucher usage and costs.
[2] The Housing Choice Voucher program is funded on a calendar-year basis, in part through an advance appropriation that covers most of the program costs from October through December of the following fiscal year. The fiscal year 2009 appropriations act included $4 billion in advance funding for vouchers that will become available on October 1, 2009 (i.e., at the beginning of fiscal year 2010). A small portion of these funds could be used to address current voucher funding shortfalls at some agencies, while leaving adequate funds to meet other program needs. However, HUD requires explicit authority from Congress to allocate the funds in this manner.
[3] Other factors, including an increase in the number of families using vouchers in late 2008 and early 2009 and, in some local areas, rising rents, have exacerbated funding shortfalls at some agencies.
[4] Not anticipating a shortfall in funding, some agencies also drew down funding reserves to assist additional families early in the year in the face of rising need, which reduced resources that otherwise could have been used later to fill shortfalls.
[5] The shortfall figures are Center estimates based on data from HUD’s Voucher Management System. Reserves are unspent voucher funds received in prior years. It is good program management for agencies to maintain modest funding reserves to serve as a backstop against unanticipated cost increases.
[6] The rate of program attrition is declining due to the recession, as the poor job market is making it more difficult for families to increase their incomes and exit the program. This estimate — as well as the attrition estimates provided in the examples below — assume that 6 percent of the families using vouchers will exit the program this year, which is roughly half of the typical attrition rate during non-recession years and consistent with anecdotal reports received from housing agencies. While nearly all housing agencies facing shortfalls are no longer reissuing vouchers upon turnover, many did not implement this policy until later months, which reduced the potential cost savings.
[7] “Payment standards” are the maximum rents that may be subsidized using a housing voucher, and are set by local housing agencies. In other words, the housing assistance payment cannot exceed the difference between the mandated contribution of the low-income family (an amount equal to roughly 30 percent of family income) and the payment standard. If the rent is higher than the payment standard, then the low-income family must pay the difference, in addition to the mandated contribution. In normal circumstances, reductions in payment standards apply immediately only to families who are new to the program or moving to a new apartment. For current tenants remaining in place, changes in payment standards apply at the second annual review. This means that significant savings can be achieved only over an extended period of time.
[8] Families can avoid rent increases only by moving to a lower-cost apartment, if one can be found and the owner will accept a housing voucher.
[9] HUD Resident Characteristics Report as of August 31, 2009.
[10] From 2003 to 2008, the Consumer Price Indices for residential rents and utility costs rose 3.7 and 8.5 percent per year, respectively, while the average cost of a housing voucher rose 2.5 percent per year (all figures are nominal). The voucher cost figure is based on the Center’s analysis of data from HUD’s Voucher Management System, excluding data from agencies participating in the Moving to Work Demonstration.
[11] See Leslie Griffy, “Monterey County Agency Votes to Increase Section 8 Rent,” The Californian, August 5, 2009; Jim Johnson, “Low-Income Renters Face Increase,” Monterey County Herald, August 15, 2009; and press releases from the Monterey Housing Authority on July 31 and August 17, 2009. Figures not reported in these sources are Center estimates.
[12] Jeremy Gray, “Some Birmingham Tenants Will Get Evicted Due to Lack of Federal Funding, “ Birmingham News, July 21, 2009. Figures not reported in the article are Center estimates.
[13] T.J. Greaney, “CHA to Raise Section 8 Rent; Agency is Facing Budget Squeeze,” Columbia Daily Tribune, September 1, 2009. Figures not reported in the article are Center estimates.
[14] Erin Grace, “A Section 8 Funding Reprieve,” Omaha World Herald, July 31, 2009. Figures not reported in the article are Center estimates.