Bipartisan Bill in House Would Make Marked Improvements in Housing Voucher Program
But Bill’s Waiver Provision Raises Concerns
August 16, 2006
On May 22, 2006, a bipartisan group of leaders of the House Financial Services Committee introduced the Section 8 Voucher Reform Act (SEVRA), which would make a series of changes in the housing voucher program and other housing assistance programs. The bill (H.R. 5443), which the Housing and Community Opportunity Subcommittee of the House Financial Services Committee is expected to consider during the week of June 5, offers a thoughtful alternative to Administration proposals to replace the voucher program with a block grant. This analysis reviews SEVRA's main elements.
The Section 8 housing voucher program is the nation's largest low-income housing assistance program. Vouchers help about 2 million low-income households -- most of them working families, elderly people, or people with disabilities -- afford modest housing in the private market. The voucher program has proven to be highly effective in meeting the nation's most severe housing problem: rents that exceed families' ability to pay.
The Administration's block-grant proposal, the State and Local Housing Flexibility Act, would eliminate many features of the voucher program, including features that have made it effective. This proposal was introduced as H.R. 1999 by Representative Gary Miller (R-CA) and as S. 711 by Senator Wayne Allard in April 2005, but Congress has taken no action on it. Like the voucher proposals put forward by the Administration in 2003 and 2004, it would replace the voucher program with a block grant and eliminate or significantly weaken key program rules that protect low-income families. In addition, the proposal would eliminate federal rules for setting rents in public housing and grant HUD sweeping authority to waive statutory provisions governing both the voucher program and public housing programs.
In contrast to the Administration's approach, SEVRA attempts to build on the voucher program's success, making the program simpler and more flexible while retaining the key federal standards that protect low-income families. SEVRA was introduced on May 22, 2006 by four senior House Financial Services Committee members: Bob Ney (R-OH), chair of the Housing and Community Opportunity Subcommittee; Maxine Waters (D-CA), ranking member of that subcommittee; Barney Frank (D-MA), ranking member of the full committee; and Christopher Shays (R-CT). If enacted, SEVRA would be the first major "authorizing" legislation altering the basic statutes governing federal housing assistance since the Quality Housing and Work Responsibility Act of 1998.
SEVRA would make a series of concrete changes to address issues facing the voucher program:
- Establish a more efficient voucher funding policy. SEVRA's most important change would be to establish a new formula for distributing voucher renewal funds to state and local housing agencies. Since 2004, funds have been provided under a series of flawed formulas that have given some agencies less funding than they need to cover the costs of their vouchers -- forcing them to cut back on assistance to needy families -- while providing other agencies with more funds than they can use. SEVRA would replace this flawed formula with one that would match funding more closely to an agency's actual needs and reward agencies that use more of their voucher funds. That would encourage housing agencies to put more vouchers into use, while at the same time ending the waste that occurs under the current system.
If the proposed funding policy were used in 2007 to distribute the level of funding that the Administration's budget requests, we estimate that every agency would receive sufficient funds to cover all vouchers it had in use in 2005 or 2006. That is, no proration would be required, in contrast to the 6.7 percent across-the-board reduction in formula funding that we estimate will otherwise be required under the Administration's budget request.
- Streamline the rules for determining tenants' rent payments. Tenants in HUD's rental assistance programs are required to pay 30 percent of their income for rent, after certain deductions are applied. SEVRA would streamline several aspects of the process for determining tenants' incomes and deductions in order to reduce administrative burdens on housing agencies and private owners of subsidized housing.
For example, SEVRA would replace the complex set of provisions intended to encourage work among tenants with a simple provision, under which 10 percent of the earned income of employed individuals would be deducted when determining a household's income for purposes of calculating its rent. SEVRA also would allow housing agencies to review the incomes of tenants with fixed incomes (such as elderly individuals on SSI) every three years instead of every year and to assume that in the intervening two years, the tenant's income rose at the rate of inflation (which is used to make annual cost-of-living adjustments to many fixed-income benefits). In addition, SEVRA would require agencies to base rents of working families on actual earnings in the previous year rather than on anticipated earnings in the coming year, which would minimize the need for subsequent mid-year adjustments in rents.
- Make income targeting rules more flexible. Currently, a housing agency must allocate 75 percent of the vouchers it issues each year to households with incomes at or below 30 percent of the area median income. In areas with unusually low median incomes, this requirement prevents agencies from serving certain needy families, including some low-wage working families. SEVRA would address this issue by requiring agencies to issue 75 percent of their vouchers each year to households with incomes at or below (a) 30 percent of the local median income or (b) the federal poverty line, whichever is higher. This would give added flexibility to agencies in the lowest-income areas while maintaining the program's emphasis on assisting the families most in need.
- Modify housing inspection rules. The voucher program requires housing agencies to inspect apartments where a voucher holder will live to certify that they meet federal quality standards. SEVRA would give agencies the option of making modest changes in their inspection rules, such as conducting inspections every two years rather than annually, in order to ease burdens on agencies and encourage landlords to make apartments available to voucher holders.
One provision of SEVRA, however, stands in contrast to the positive changes outlined above: an expansion of the number of housing agencies participating in the Moving-to-Work (MTW) program. Under MTW, HUD can grant agencies broad waivers allowing them to experiment with different policies to promote work among voucher holders and residents of public housing or merely to achieve "cost effectiveness." Agencies can use these waivers to raise rents on tenants substantially or to establish time limits on housing assistance even for working families that cannot afford market-rate housing on their own. Agencies in MTW also can shift assistance away from the neediest households to those with higher incomes.
While the size of the MTW expansion proposed in SEVRA appears modest at first glance (an increase from the current 25 agencies to 40), as many as one million households - one-third of all families receiving public housing and voucher assistance nationally -- could eventually fall under MTW if HUD were to target waivers on the largest agencies. HUD has provided waivers disproportionately to large agencies in the past. As a result, the expansion could cause a large number of working-poor families and other needy households to face substantially higher rent burdens, or to go without assistance entirely because subsidies were being shifted to households with less serious needs.
It is unlikely that the experimentation allowed under the expansion would generate many valuable housing policy lessons, because SEVRA does not require that waivers be designed to test particular policies or be accompanied by rigorous evaluations. Targeted, rigorously-evaluated housing policy demonstrations (such as Moving-to-Opportunity and Jobs Plus) have generated a far greater quantity of useful findings than the existing MTW demonstration, with much less disruption to tenants.
The MTW provision could undercut the positive impact of various other provisions of SEVRA. Of particular concern, HUD could use it as a backdoor way to implement, in MTW areas, many of the changes the Administration is seeking in the voucher program. HUD could encourage (or pressure) housing agencies to request waivers that further Administration policy preferences. The MTW provision should be removed or its scope significantly narrowed.
 For further information on SLHFA, see Center on Budget and Policy Priorities, "Administration Proposal Lays Groundwork for Planned Funding Reductions," May 9, 2005.