Evaluating Cohort #2 of the MTW Expansion: Tiered and Stepped Rent Demonstration

In the second cohort of the MTW Expansion, 10 PHAs will test alternative rent policies known as tiered rents and stepped rents. Typically, HUD-assisted households pay rent equal to 30% of their income, so when a household increases their income, they also pay more rent. Under a tiered rent, households are grouped by income into tiers, and everyone in a tier pays the same rent. Small income changes would not affect a household’s rent. Under a stepped rent, households start out paying an income-based rent, but in subsequent years their rent will increase by a small amount regardless of their income. Both of these policies might encourage HUD-assisted households to earn more, and the policies might be easier for PHAs to administer. HUD’s evaluation will focus primarily on testing those hypotheses.

In the Cohort 2 Tiered and Stepped Rent Demonstration, five PHAs will implement a tiered rent policy designed by HUD. This policy will use tiers of $2,500, and the rent for each tier will be affordable to households in the middle of the tier. Each household’s rent will be fixed for three years (unless they experience a hardship and have their rent temporarily reduced). The PHAs implementing this policy are: Everett (WA) Housing Authority, Housing Authority of Washington County (OR), Akron (OH) Metropolitan Housing Authority, and Charleston-Kanawha (WV) Housing Authority.

Five PHAs will implement a stepped rent policy designed by HUD. Under this policy each household will start out paying rent equal to 30% of their income. Each subsequent year, rents will increase by a small amount (between 2% and 4% of the Fair Market Rent, which is roughly $10 to $50 in most places). The PHAs implementing this policy are: Housing Connect (Housing Authority of Salt Lake County, UT), Housing Authority of the County of Kern (CA), Asheville (NC) Housing Authority, Portsmouth (VA) Redevelopment and Housing Authority, and Fort Wayne (IN) Housing Authority.

One PHA – the Houston (TX) Housing Authority – developed its own tiered rent. Their policy is similar to the one designed by HUD but uses smaller tiers ($2,000) and sets rents to be affordable at the low end of each tier.

Because these rent policies limit the connection between income and rent, it is important to note that each PHA will have a hardship policy to help households when they experience job loss, reduced income, or other challenges. HUD’s evaluation will also monitor whether these hardships adequately protect participating households. The study will also exclude households that are elderly, disabled, or participating in other special HUD programs.

The Tiered and Stepped Rent Demonstration will use a randomized controlled trial framework. Eligible households will be randomly assigned to have the regular rent rules or the new rent rules. HUD expects the new rent rules to be in place beginning in the summer of 2022. The study is expected to last six years.

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