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No Steep Benefit Cliff for Housing Vouchers

At a recent House subcommittee hearing, Illinois Policy Institute Senior Fellow Erik Randolph asserted that Housing Choice Voucher recipients face a very steep benefit cliff that punishes those who raise their incomes by sharply curtailing their housing assistance.  He’s wrong.  As household income rises, voucher assistance declines only gradually, by roughly 30 cents for every added dollar in income (see chart). 

Under federal rules, families with incomes up to 80 percent of the median income in their area can enter the voucher program, although housing agencies can set their limit at 50 percent.  But those limits apply only to a family’s initial eligibility; they play no role in determining the amount of a family’s assistance or when it ends.  Randolph incorrectly assumed that a family loses its voucher when its income exceeds 50 percent of the area median.  In reality, slightly more than 5 percent of voucher households in 2014 — roughly 110,000 households — had incomes above that 50-percent level, according to our analysis of Department of Housing and Urban Development data.

Moreover, there’s no hard income limit above which housing assistance abruptly ends; rather, as income grows, benefits shrink until 30 percent of a family’s income (the required family contribution to rent under the program) equals or exceeds the allowable rental cost.  If the voucher subsidy remains at zero for six months, a family is no longer eligible for the program.   

This gradual phase-down helps the voucher program balance its multiple goals:

  1. Targeting assistance on households with the greatest needs.  The program requires that three-quarters of newly admitted households have incomes below 30 percent of the area median.
  2. Ensuring that housing is affordable for assisted households.  The program limits recipients’ housing costs to roughly 30 percent of household income.
  3. Meeting the above goals cost-effectively.  The program phases down assistance as income rises.