Vouchers Can Help Families Afford Homes, With Little Impact on Market Rents
End Notes
[1] Will Fischer, Douglas Rice, and Alicia Mazzara, “Research Shows Rental Assistance Reduces Hardship and Provides Platform to Expand Opportunity for Low-Income Families,” Center on Budget and Policy Priorities, December 5, 2019, https://www.cbpp.org/research/housing/research-shows-rental-assistance-reduces-hardship-and-provides-platform-to-expand.
[2] Alicia Mazzara, “Expanding Housing Vouchers Would Cut Poverty and Reduce Racial Disparities,” CBPP, May 11, 2021, https://www.cbpp.org/blog/expanding-housing-vouchers-would-cut-poverty-and-reduce-racial-disparities.
[3] Over the last five years for which data are available (October 2016 to September 2021), agencies received $83.7 billion in voucher subsidy funds and spent $83.1 billion or 99.3 percent of that amount. These figures exclude agencies participating in the Department of Housing and Urban Development’s (HUD) Moving to Work demonstration, which are permitted to shift voucher funds to other purposes. HUD, “Housing Choice Voucher (HCV) Data Dashboard,” accessed December 3, 2021, https://www.hud.gov/program_offices/public_indian_housing/programs/hcv/dashboard.
[4] Sonya Acosta and Brianna Guerrero, “Long Waitlists for Housing Vouchers Show Pressing Unmet Need for Assistance,” CBPP, October 6, 2021, https://www.cbpp.org/research/housing/long-waitlists-for-housing-vouchers-show-pressing-unmet-need-for-assistance.
[5] The exact number of vouchers funded will depend in part on how HUD implements the expansion. Our estimate assumes that HUD will scale up the number of vouchers evenly over the five-year phase-in period and provide administrative funding equal to the full amount for which agencies are eligible under the current formula.
[6] Lance C Barnett, “Expected and Actual Effects of Housing Allowances on Housing Prices,” Journal of the American Real Estate and Urban Economics Association, Vol. 7, Issue 3, 1979.
[7] Michael D. Eriksen and Amanda Ross, “Housing Vouchers and the Price of Rental Housing,” American Economic Journal: Economic Policy, Vol. 7, No. 3, August 2015. One study found that vouchers raised markets rents substantially (Scott Susin, “Rent Vouchers and the Price of Low-Income Housing,” Journal of Public Economics, Vol. 83, Issue 1), but assessments by other researchers have generally concluded that this finding resulted wholly or partly from weaknesses in the study’s methodology and that it is more plausible that vouchers have little overall impact on market rents. For assessments that reached this conclusion, see: Marybeth Shinn and Jill Khadduri, In the Midst of Plenty: Homelessness and What to Do About It, Wiley-Blackwell, 2020, p 160; Edward L. Glaeser and Joseph Gyourko, Rethinking Federal Housing Policy: How to Make Housing Plentiful and Affordable, AEI Press, 2008, pp 117-118 and 182; Edgar O. Olsen, “Housing Programs for Low-Income Households,” in Means Tested Programs in the United States, edited by Robert A. Moffitt, University of Chicago Press, https://www.nber.org/chapters/c10259.pdf, pp. 422, January 2003.
[8] The study categorized areas based on housing supply elasticities — that is, by how responsive the supply of housing in the area is to increases in housing costs — and found that rent rose in markets where the price elasticity of supply was lower than 0.83. Eriksen and Ross, p. 172.
[9] See Jerome Rothenberg et al., The Maze of Urban Housing Markets: Theory, Evidence, and Policy, University of Chicago Press, 1991.
[10] Gregory Mills et al., “Effects of Housing Vouchers on Welfare Families,” prepared for Department of Housing and Urban Development Office of Policy Development and Research, September 2006, https://www.huduser.gov/portal//Publications/pdf/hsgvouchers_1_2011.pdf.
[11] Eriksen and Ross found that rents dropped more for low-end units than they rose for mid-market units. They note that this may be explained by owners’ tendency to be slower to take housing units out of use when demand drops (as it does at the bottom of the market when voucher holders move out) than they are to provide more units when demand increases. As a result, rents and housing prices tend to drop more rapidly in markets and submarkets with declining demand than they rise in markets with growing demand. Eriksen and Ross, p. 174; Edward L. Glaeser and Joseph Gyourko, 2005, “Urban Decline and Durable Housing,” Journal of Political Economy, Vol. 113, No. 2, pp. 345–75.
[12] We average four quarters of metropolitan area data because single-quarter metropolitan area data are less reliable due to small sample sizes. CBPP analysis of U.S. Census Bureau, Housing Vacancy Survey.
[13] For example, the housing agencies serving the cities of Boston, Los Angeles, New York, and San Francisco each put to use 99.4 percent or more of the voucher funds they received over the most recent five years for which data are available (October 2016 through September 2021).
[14] BBB also provides $530 million for services and landlord incentives to help families use vouchers in a wide range of neighborhoods.
[15] The bill would provide $128 billion for renovation and development, $26 billion to expand vouchers and other rental assistance, and $18 billion for other housing-related purposes.
[16] This estimate reflects the number of units that could be built through the bill’s expansion of the Low-Income Housing Tax Credit (LIHTC) if the expansion is accompanied by proportional increases in funding available through housing subsidies typically used in combination with LIHTC. The authors conclude that this is a reasonable assumption given the large amount of funding provided in the bill for other housing programs such as the Housing Trust Fund and HOME Investment Partnership. Dirk Wallace and Peter Lawrence, “More Than $12 Billion in LIHTC Provisions and Nearly $6 Billion for Neighborhood Homes Tax Credits in Nov. 3 Draft of the Build Back Better Reconciliation Bill Would Finance Close to 1 Million Affordable Homes Over 2022-31,” Novogradac, November 9, 2021, https://www.novoco.com/notes-from-novogradac/more-12-billion-lihtc-provisions-and-nearly-6-billion-neighborhood-homes-tax-credits-nov-3-draft.
[17] The average extremely low-income renter household had an income of $11,139 in 2018. Government programs and private-sector owners and lenders often consider housing affordable if it costs no more than 30 percent of household income, which for this household works out to $280 a month for rent and utilities. Many households, including those most at risk of homelessness, have much lower incomes and can afford even less in rent. But in 2019 the average market rental unit’s operating cost was $520 a month (and over $580 when the owner pays for utilities), according to National Apartment Association data. Paula Munger and Leah Cuffy, “Strong Performance to Close Record Economic Expansion: 2020 NAA Survey of Operating Income and Expenses in Rental Apartment Communities,” National Apartment Association, October 2020, https://www.naahq.org/sites/default/files/2020_ies_exec_summary_final.pdf.
[18] Just 18 percent of voucher holders paid rent between 95 and 100 percent of the payment standard, while another 33 percent paid more than 100 percent of the payment standard and consequently covered the excess rent themselves. These figures include contract rent and utilities allowances for households with tenant-paid utilities. Data exclude housing agencies participating in the Moving to Work Demonstration. CBPP analysis of HUD administrative data.
[19] HUD has in recent years expanded use of small area fair market rents (SAFMRs) to set voucher payment standards. SAFMRs are based on rents in a particular ZIP code and therefore better reflect neighborhood rents than traditional FMRs, which are based on rents in an entire metropolitan area or county. Research shows that SAFMRs are more effective at limiting overpayments in the lower-rent areas where most voucher holders live. A 2016 HUD rule required voucher agencies in 24 metropolitan areas to use SAFMRs and allowed agencies in other metro areas to voluntarily adopt them. Center on Budget and Policy Priorities, “A Guide to Small Area Fair Market Rents,” May 4, 2018, https://www.cbpp.org/research/housing/a-guide-to-small-area-fair-market-rents-safmrs; Robert A. Collinson and Peter Ganong, “How Do Changes in Housing Voucher Design Affect Rent and Neighborhood Quality?” American Economic Journal: Economic Policy, Vol. 10, No. 2, May 2018.
[20] ORC/Macro, “Quality Control for Rental Assistance Subsidies Determination,” U.S. Department of Housing and Urban Development, June 20, 2001, p. ES-iv, https://www.huduser.gov/portal/Publications/pdf/qualitycontrol.pdf,.
[21] Edgar O. Olsen, “Does HUD Overpay for Voucher Units, and Will SAFMRs Reduce the Overpayment?” Cityscape, Vol. 21, No. 3, 2019, p 100.