Backgrounder Update #88
September 23, 1988
CONGRESS HURTS THE POOR BY SIASHING HOUSING VOUCHER PROGRAM(Updating Backgrounder No. 582, "Vouchers: A Way to Provide Better Housing for America's Poor," May 27, 1987.) The United States Department of Housing and Urban Development (HUD) sought funding for 100,000 new housing vouchers for low-income families in the President's 1989 budget, sent to Congress earlier this year. In the recently enacted HUD budget, however, Congress provides funds for only 47,000 vouchers. This is a victory for public housing bureaucrats and developers. It is a defeat for the poor, who need more vouchers. It is also a defeat for budget balancers, for housing vouchers are half the cost of the housing programs approved by Congress.
Vouchers are certificates of a certain face value that may be used by low-income families to pay part of their rent in the private sector housing of their choice. The value of a family's voucher is an amount equal to the prevailing local rent for housing deemed adequate for the family's needs (the so-called "fair market rent") less 30 percent of the household income. Upon receiving the vouchers as partial rent payments, the landlords turn them in to the federal government for cash reimbursement. Vouchers currently help close to 150,000 low-income families live in the apartments and neighborhoods of their choice.
Vouchers can assist a low-income family for less than half the cost of constructing a new low-income housing unit under other federal housing program . This means that more than twice as many low-income families can be helped with the same federal outlays spent on new housing. Vouchers also provide immediate assistance to low-income families; by contrast, funding, planning, and construction of new units requires three to five years.
Giving Families a Choice. With vouchers, low-income families can choose the housing unit they prefer. If they wish, they can spend more than 30 percent of their income on rent and obtain better housing. Or if they can find adequate housing at lower cost, they can save money for uses other than housing. Thus the family has an incentive to "shop around" for the best housing deal. Tenants in public housing projects have no such incentive. Nor do tenants in the other major federal low-income housing program, known as Section 8. In Section 8 housing, the government pays a private landlord - not the tenant - the difference between the fair market rent and 30 percent of the tenant's family income. So the tenant gains nothing by seeking the best value for money.
Vouchers also allow families to choose a unit in the location they prefer, relocating elsewhere within a city, or to the suburbs, or even to a different state or across the country. Low-income workers can choose to live where employment or training opportunities are the greatest, or where relatives or friends could help them with child care, transportation, and other needs. Thus vouchers further housing integration.
Tying Down the Poor. In public housing programs, by contrast, the poor are assigned to specific units, without any real choice. They are tied to the specific location of the assigned unit, which typically is not a promising spot for employment or training. They cannot relocate to where better opportunities may exist without losing their housing assistance. They are segregated from the rest of the community and concentrated in deteriorating projects that often become plagued by crime and drugs.
Developers and landlords predictably prefer new construction of low-income units and other non-voucher subsidy programs because the government guarantees them high profits. The Public Housing Authorities (PHAs), the local bodies managing public housing, retain bureaucratic control over newly constructed units or other subsidiaries tied to their districts. They lose this control when low-income families take vouchers and move out of the PHA district altogether, taking the federal assistance dollars with them. Consequently, PHAs, along with landlords and real estate developers, favor the non-voucher housing programs.
Congress seems to have fallen for the special interest pleading of these groups. In the new HUD budget, lawmakers provide funds for constructing 5,000 highly expensive new public housing units and money for developers to reconstruct 4,200 federally supported units. Congress also is funding 18,000 Section 8 certificates.
Needed: 100,000 New Vouchers. Budget policy for this year is already set. Congress should make up for its failure to fund vouchers fully this year by funding 100,000 additional new vouchers in next year's budget. Moreover, Congress in fiscal 1990 is scheduled to consider reauthorization of Section 8 certificates. Congress should take that opportunity to replace the 880,000 outstanding Section 8 certificates with housing vouchers.
In addition, federal subsidies for housing units previously built under federal programs gradually will be phased out over the next twenty years under established schedules, as the debt for each project's construction is paid off. Congress should authorize HUD to issue new vouchers in place of these subsidies as they expire. Similarly, instead of building more public housing in the future, Congress should grant HUD authority to issue new vouchers to replace existing public housing units as they become uninhabitable.
These reforms would establish vouchers as the centerpiece of America's low-income housing policy. They would shift policy from subsidizing expensive construction, benefiting developers and landlords, to empowering low-income families to make their own housing choices and pursue their best opportunities. In this way, the U.S. would get out of the business of building housing and subsidizing developers and into the business of helping poor Americans directly.
Peter J. Ferrara John M. Olin Fellow Associate Professor of Law George Mason University Law School