August 24, 2005
HIGH STAKES FOR THE HOUSING VOUCHER PROGRAM IN THE 2006 APPROPRIATIONS BILL:
Senate Bill’s Proposed Funding Policy Would Distribute
Funding More Efficiently and Restore Program Stability
By Barbara Sard, Douglas Rice and Will Fischer
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.
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Since 2002, Congress and HUD have implemented a series of substantial changes in funding policy for the “Section 8” Housing Choice Voucher Program. These changes have been driven in part by concerns over the rising costs of the program. Those concerns have been overblown, according to an analysis of HUD’s recent voucher cost data. Moreover, the year-to-year changes in funding policy, along with a funding shortfall in 2005 and, at times, poor implementation by HUD, have produced a series of troublesome effects: funding instability and shortages among state and local housing agencies, a decline in the number of vouchers leased, and growing fears among landlords that the program is unreliable. The results have been damaging to the voucher program, as well as to the two million low-income families that rely on voucher assistance.
Congress’ challenge for fiscal year 2006 is to restore stability to the voucher program. This challenge includes two major goals: first, to restore funding for vouchers that have been lost in 2004 and 2005; and second, to implement a stable voucher funding policy that will distribute funding to public housing agencies equitably and efficiently over the long term.
To their credit, both the House and Senate Appropriations Committees have acknowledged these challenges, and have attempted to meet them in their HUD funding bills for 2006. Both bills would provide a sizeable increase in voucher funding in 2006, with the goal of restoring at least some of the voucher funding that was lost in 2005. In addition, each bill proposes modifications of funding policy for 2006 that aim, at least in part, at improving upon the shortcomings of the past few years.
Our analysis of recent HUD data shows that, while the House bill falls far short of these goals, the Senate bill – and, in particular, the Senate-proposed voucher funding policy – would provide a solid foundation for the efficient distribution of voucher funding in coming years. Our key findings are as follows:
Restoring lost vouchers would require an appropriation of $14.3 billion for voucher renewals in 2006. By our estimate, funding is needed for approximately 2,055,000 vouchers in 2006 to restore the vouchers in use in 2004 and to provide renewal funding for new vouchers issued in 2005 to families that have lost other forms of federally-assisted housing. (Such vouchers are known as “tenant-protection vouchers.”) It is important to note that Congress could provide full funding for voucher renewals while remaining within the President’s proposed overall budget of $15.8 billion for tenant-based voucher assistance.
The funding levels of the House and Senate HUD spending bills for 2006 would restore most, but not all, of the 75,000 vouchers that were left unfunded in 2005. The House and Senate bills (HR 3058) would provide $14.19 billion and $14.09 billion, respectively, to renew housing vouchers. If the funding were distributed efficiently, the Senate funding level would restore funding for all but about 32,000 vouchers in 2006. The additional $100 million provided by the House bill would restore an additional 14,000 vouchers left unfunded in 2005. That analysis assumes, however, that the renewal funding would be distributed efficiently to the housing agencies that need it most, which would not be the case under the funding policy proposed in the House bill.
Although both the House and Senate bills propose budget-based voucher funding policies, the formula proposed in the Senate bill would distribute voucher funding among housing agencies more efficiently and would set a better foundation for long-term renewal policy. The Senate bill would distribute voucher renewal funding based on the actual leasing rates and voucher costs of housing agencies over the most recent 12-month period. Under this approach, funding would be more likely to be distributed to agencies that need it to renew vouchers currently being used. In contrast, the voucher renewal formula proposed in the House bill would base funding on out-of-date leasing and cost data, and effectively convert voucher funding into an inflation-adjusted block grant. Under this formula, agencies would be less likely to receive a share of funding that matches their actual leasing rates and costs.
Our analysis of the HUD data shows that, under the House-proposed funding policy, some 541 state and local housing agencies would be overfunded by a total of $79 million, while more than 1,000 agencies would be left underfunded, placing at risk nearly 28,000 vouchers currently in use. The inefficiency of the House formula also would result in every state and local agency’s funding being prorated by more than 2 percent, nearly 10 times the rate that would be required under the Senate formula (assuming the higher House funding level is applied to each bill’s funding formula).
The most recent Voucher Management System (VMS) data from HUD show that the growth in the average cost of vouchers peaked in 2003, and has since declined for seven consecutive quarters through January 2005, the last month for which we have data. The average cost of a voucher grew by less than 0.1 percent over the six months ending in January 2005, and by only 2.1 percent over the previous year, well below the overall rate of inflation. This trend should ease Congress’ concerns about voucher costs, allowing Members to focus on the two remaining challenges – restoring vouchers lost in 2004 and 2005, and putting into place a stable voucher funding policy that will distribute funding equitably and efficiently.
While the Senate has taken the critical step of basing voucher renewal funding on the most recent 12 months of leasing and cost data, further improvements would help agencies meet their commitments to landlords and families. Funds should be made available to agencies during the funding year to cover costs associated with allowing families to benefit from the “portability” feature of housing vouchers. In addition, steps should be taken to assist agencies in restoring their reserves. Finally, funding adjustments should be allowed in special circumstances — such as an existing commitment to “project-base” vouchers — to support vouchers that were not fully in use during the base period used to determine annual funding. These recommendations are discussed in more detail below.
A table comparing the key provisions of the two bills and the final fiscal year 2005 appropriations bill is included as Appendix 1.
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