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Direct Rental Assistance Should Be Tested Through Local Pilots and a National Demonstration

The Department of Housing and Urban Development (HUD) has called for private philanthropies to fund local pilots testing direct rental assistance, which is provided directly to tenants instead of landlords. These pilots could help identify ways to improve federal rental assistance. However, since there is already evidence that direct rental assistance has promise, Congress should simultaneously fund a national demonstration to test it on a larger scale. This would complement small, privately funded local pilots and allow for more systematic comparisons of different policy and administrative approaches to see which work best.

HUD seeks to test whether rental assistance is more effective if it’s provided directly to families, with no requirement that the landlord enter a contract with a housing agency or meet other administrative requirements of the Housing Choice Voucher program, the most common form of federal rental assistance. The direct assistance approach could potentially make it easier for families to find a place to live, including in a wide range of neighborhoods, and may also reduce administrative costs.

Research shows that vouchers are highly effective at reducing homelessness, overcrowding, and housing instability. But too many families aren’t able to use their vouchers before they expire, in part because many landlords do not accept vouchers and most states and localities lack non-discrimination laws. In addition, even though vouchers theoretically offer a pathway for those who wish to move to lower-poverty neighborhoods with high-performing schools and other resources, voucher holders do not locate in low-poverty areas at significantly higher rates than other families with low incomes. This partly stems from the difficulty of finding landlords in lower-poverty neighborhoods who will participate in the voucher program.

Direct rental assistance could be one of the ways to overcome this challenge. It could also be designed to allow families to keep some savings if they find lower-cost housing, using program resources more efficiently and giving families more flexibility to address other pressing needs.

While direct rental assistance is a promising idea, it will be important to evaluate it to determine its effects. Questions that local pilots and a federal evaluation could help answer include:

  • whether families prefer direct rental assistance to regular vouchers;
  • how direct assistance affects outcomes such as housing quality, housing stability, and access to well-resourced neighborhoods;
  • how its effects vary depending on local conditions, such as the vacancy rate and extent of racial and ethnic segregation; and
  • whether the assistance is more effectively administered by the mostly local agencies that run the voucher program today and have extensive experience administering rental assistance, or by state agencies that could coordinate it with other state-run programs such as Medicaid and the Supplemental Nutrition Assistance Program and potentially make it easier for families to move from one local jurisdiction to another.

In the years to come, policymakers should aim to expand federal rental assistance, which today only assists 1 in 4 eligible households due to funding limitations, to reach all people with low incomes who need help to afford housing. As they move toward that goal, it will also be crucial to improve rental assistance to make it as effective, efficient, and user friendly as possible. The local pilots HUD has called for and a national direct rental assistance demonstration would be valuable steps in that direction.