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Making the Poorest of the Poor Pay More for Housing

Several hundred thousand extremely poor families that receive federal housing assistance could face rent increases totaling $300 a year or more under a provision of draft housing reform legislation now before Congress.  While the legislation as a whole (the Section 8 Savings Act) contains important improvements to the Section 8 housing voucher program and other federal rental assistance programs, Congress should strip out the proposed rent increase.

As our new report explains, the proposal concerns the rent that public housing agencies and owners of certain federally assisted properties can charge the poorest people they help.  Assisted families generally must pay 30 percent of their income for rent, but agencies can require families to pay a minimum rent of up to $50 per month even if that’s more than 30 percent of their income.

The proposal would raise the minimum rent that families can be charged from $50 a month to either $75 a month or 12 percent of the local Fair Market Rent (FMR), whichever is higher.  The FMR is HUD’s estimate of the rent and utility costs of a moderately priced housing unit in a given area.

Raising monthly rents from $50 to $75 would raise annual housing costs by $300.  Moreover, most of the families affected by the new policy, in every state, would face rents of more than $75 per month under the FMR-based minimum rent.  Many of these families would be at high risk of homelessness if their rents rise abruptly.

The higher minimum rents would be optional for housing agencies, but agencies could face considerable pressure to impose them to make up for funding shortfalls.  As we’ve noted, the 2012 appropriations bills before Congress contain inadequate funding for key rental assistance programs, and funding for these programs will likely remain tight in future years as Congress seeks to reduce long-term deficits.

Under the current draft legislation, the option would only be available to housing agencies that offer HUD-approved programs to help tenants become economically self-sufficient, and it wouldn’t be available to private owners of “project-based” Section 8 units.  But there is a strong chance that Congress will modify or eliminate these limitations as the legislation moves forward.  If Congress allows all housing agencies, as well as owners of Section 8 project-based units, to raise their minimum rents, we estimate that up to 685,000 families could be affected.

To be sure, the proposal would generate revenues that would lower costs in the housing assistance programs.  But as fiscal commission co-chairs Erskine Bowles and Alan Simpson have stated, making the nation’s poorest people still poorer is the wrong way to reduce deficits.

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