Wednesday, August 24, 2005
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Robert Greenstein
Executive Director

Iris J. Lav
Deputy Director

Board of Directors

David de Ferranti, Chair
The World Bank

John R. Kramer, Vice Chair
Tulane Law School

Henry J. Aaron
Brookings Institution

Ken Apfel
University of Texas

Barbara B. Blum
Columbia University

Marian Wright Edelman
Children’s Defense Fund

James O. Gibson
Center for the Study of Social Policy

Beatrix Hamburg, M.D.
Cornell Medical College

Frank Mankiewicz
Hill and Knowlton

Richard P. Nathan
Nelson A Rockefeller
Institute of Government

Marion Pines
Johns Hopkins University

Sol Price
Chairman, The Price Company (Retired)

Robert D. Reischauer
Urban Institute

Audrey Rowe
AR Consulting

Susan Sechler
German Marshall Fund

Juan Sepulveda, Jr.
The Common Experience/
San Antonio

William Julius Wilson
Harvard University

New Report Includes Data on Bills’ Local Impact

Press Release: HTM | PDF
Report: HTM | PDF
State-by-State Fact Sheets
Summary Appendix: HTM | PDF
National Summary Table
   "How Would Your Housing Agency Fare"
NLHA Sign-on Letter
Highlights Package, 7pp.

View Related Analyses

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The Senate Appropriations Committee’s HUD funding bill for 2006 would do a better job than the comparable House bill of repairing recent damage to the housing voucher program, a new Center report finds.  The report shows how each of the bills would affect state and local housing agencies across the nation.

Both bills would change the way voucher funds are divided among housing agencies, but the House’s approach is less efficient and would underfund some agencies and overfund others.  Under the House bill, more than 1,000 agencies would receive insufficient funds to maintain all their current vouchers, the study finds, while nearly $80 million in overfunding to other agencies would go unused.  Both bills also would increase voucher funding for 2006, enabling housing agencies to restore some (but not all) of the vouchers that were cut over the past two years as a result of funding shortages.

The Housing Choice Voucher Program provides roughly two million low-income households with vouchers they can use to rent housing in the private market.  Vouchers help make housing affordable for these families, and research suggests that vouchers can have positive effects on employment, earnings, education, and children’s health and well-being.  

“Over the last few years, several changes to the voucher program, driven by concerns about rising costs that now appear to have been overblown, have adversely affected housing agencies and the families they serve,” stated Barbara Sard, the Center’s director of housing policy and the report’s lead author.  “Congress can restore stability to the program by ensuring that each agency’s budget is based on recent cost data, rather than on a rigid, out-of-date formula, and by reinstating funding for the lost vouchers.”

Fixing Voucher Funding Policy the Top Priority

Congress and HUD have made substantial changes to voucher funding policy in each of the last three years.  These changes, sometimes introduced in the middle of the fiscal year, have created funding volatility and shortfalls for many local housing agencies, while fostering fears among landlords and families with vouchers that the program may no longer be reliable.  When combined with a shortfall in voucher funding this year, these changes also have led to a decline in the number of families receiving voucher assistance, as well as a marked drop in landlords’ confidence in the program.

The House bill would establish a new funding policy under which each agency’s funding in 2006 would be tied to its funding level for 2005, which in turn was based on the agency’s voucher costs during a three-month period in 2004.  For the first time in the program’s history, voucher funding would no longer be linked to an agency’s most recent actual costs.  Since some agencies see much larger cost changes over time than others (depending on the local housing market and other factors), severing the link between an agency’s funding level and its most recent actual costs makes it likely that voucher funds will not be distributed efficiently.

Indeed, because the House funding policy relies on out-of-date information about agencies’ actual costs, its effect would be to underfund some agencies and overfund others.  Center analysis of HUD data shows that under the House approach, more than 1,000 agencies would receive less than the amount they need to maintain vouchers currently in use, placing nearly 28,000 vouchers at risk of being cut.  At the same time, some 541 agencies would be overfunded by a total of $79 million.  Since agencies are not allowed to use excess funds to create additional vouchers, this $79 million — enough money to fund nearly 12,000 vouchers — would essentially be wasted.

 “At a time when millions of low-income families around the country with severe housing problems cannot receive housing assistance because of funding limitations, wasting scarce voucher funds through an inefficient funding formula would not be responsible,” said Sheila Crowley, president of the National Low Income Housing Coalition.

The funding policy proposed in the Senate bill, in contrast, would distribute voucher funding more efficiently and set a better foundation for the long term.  The Senate bill would base voucher funding on agencies’ actual costs over the most recent 12-month period.  This approach would be more likely to give agencies the funds they need to renew vouchers in use without overfunding some agencies and underfunding others.

“One of the reasons the voucher program has been so successful over the years is that Congress has always given agencies the funding they need to continue the vouchers in use,” said Denise Muha, executive director of the National Leased Housing Association, an organization of housing developers, owners, and some state and local housing agencies.  “That stability has given landlords the confidence that they can rent units to families with vouchers and not have the rug pulled out from under them later.  Unfortunately, the frequent funding policy changes of the past few years have begun to undermine that confidence.  Congress can help repair the damage by adopting the Senate’s new funding policy.”

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The Center on Budget and Policy Priorities is a nonprofit, nonpartisan research organization and policy institute that conducts research and analysis on a range of government policies and programs.  It is supported primarily by foundation grants.