April/May 2010
In this Issue
Building Sound Housing Policy
Historical Building Blocks for Housing Demonstration Research
Past Research Demonstrations Pave Future Roads to Policy
Surveying HUD's Surveys
In the next issue of ResearchWorks
Historical Building Blocks
for Housing Demonstration
Research
Over the past 25 years, HUD's Housing Choice Voucher program — better known as Section 8 vouchers — has proven to be one of the agency's most successful tools for delivering decent, safe, and affordable housing. Since 1975, the year tenant-based rental assistance was formally enacted, the total number of households receiving certificates and vouchers has risen from 162,000 to 2 million. Indeed, Section 8 is so ingrained in the policy firmament that it's difficult to imagine that policymakers, housing economists, and low-income housing advocates once viewed tenant-based rental subsidies skeptically.
Two sets of experiments with tenant-based subsidies sponsored by HUD fundamentally altered the way the federal government approaches subsidized low-income housing. In 1970, the Experimental Housing Allowance Program (EHAP) set out to determine whether tenant-based housing subsidies could help low-income renters find safe, affordable housing in the private market. In the 1980s, HUD's Freestanding Housing Voucher Demonstration gauged how different subsidy structures affected housing choices among low-income families. Together, these two demonstration projects laid the foundation for one of HUD's most successful programs.Toward Demand-Driven Housing: The Experimental Housing Allowance Program
In 1970, Congress authorized HUD to experiment with tenant-based housing allowances as a possible tool for national housing policy. Previously, housing policy focused largely on increasing the supply of affordable housing. By providing cash payments directly to eligible households, EHAP instead emphasized increasing demand. EHAP supporters believed that, by stimulating consumer demand, the government could effectively encourage the private market to provide affordable housing. From April 1973 to February 1976, researchers followed 3,600 low-income households in two cities — Pittsburgh, Pennsylvania and Phoenix, Arizona. In each city, half of the participants were given payments to supplement the "housing gap" — the difference between the prevailing fair market rent (FMR) for a "standard" unit and 30 percent of the family's net income. The other half served as a control group and received no subsidy.
According to the final EHAP evaluation in 1980, one major concern was the potential for housing allowances to distort the market by pushing up rents for poor-quality homes, a situation that would mainly benefit landlords. Another key question was whether such a program would stimulate repairs, substantial rehabilitation, and new construction.
In both cases, the answer was no. As Mark Shroder noted in a 2000 HUD research article on EHAP, "The single most important finding of this experiment is the extreme [low] elasticity of housing demand among low-income people."1 On one hand, rents stayed relatively stable. On the other hand, the allowances failed to stimulate much new construction or major rehabilitation. Instead, landlords tended to make modest but significant improvements to numerous homes. In many cases, the most egregious defects in health and safety hazards were easily remedied. In addition, the report found that the program was responsible for modest improvements — thus helping, however incrementally, to preserve housing stock.
Flexibility Equals Choice: The Freestanding Housing Voucher Program
In 1985, HUD launched the Freestanding Housing Voucher Demonstration, which tested how the structure of housing allowances influenced the consumption of subsidized low-income housing. From 1985 to 1988, researchers followed 12,390 participants in 19 sites around the country who were given structured subsidies to bridge the gap between 30 percent of household income and the HUD-determined fair market rent (FMR). Half of the sample received housing certificates that required participants to put 30 percent of their income toward an apartment at or below the FMR for a standard unit — with HUD making up the difference. By contrast, the voucher program gave recipients a flat payment equal to the difference between the FMR and 30 percent of household income. Voucher payments were effectively an income supplement, and recipients were free to rent a lower-cost unit (and keep the difference), or rent a more expensive unit and make up the difference themselves (as long as their total contribution did not exceed 40 percent of household income).2
As it turned out, the alternate payment structure had a profound influence on how recipients shopped for housing. Because household expenditures for rent were fixed under the program, certificate holders had little incentive to find units priced below the program ceiling. Consequently, certificate households tended to overpay for lower quality units. In contrast, the Housing Voucher program encouraged recipients to shop more diligently in the lower price ranges because they were allowed to pocket any savings. Yet they also had the freedom to pay the difference between the voucher amount and the above-market rent. Not surprisingly, 57 percent of voucher recipients who moved from their original homes had rents above the FMRs — meaning that they were able to obtain better quality housing while still keeping their rent burdens below 40 percent of household income.3
The Evolution of Tenant-Based Subsidies: The Section 8 Voucher
Tenant-based subsidies have continued to evolve over the years. In 1998, the certificate and voucher programs were merged and the Section 8 rules streamlined to make the program more attractive to landlords. HUD research has shown that success rates for tenant-based assistance are universally high — between 86 and 92 percent — regardless of racial or ethnic group, age or disability status, or primary source of income.4 By allowing families to live in any neighborhood they choose, if the unit is affordable and meets the program's quality standards, Section 8 gives low-income families greater choice and mobility. Relieved of the financial burden of managing subsidized units, public housing authorities are able to serve more people through vouchers, and the fee structure leaves room for landlord outreach and tenant counseling. And residential choice and mobility, bedrock principles of the once-experimental voucher program, are now central to the way HUD approaches subsidized housing.
1 Mark Shroder, "Social Experiments in Housing," Cityscape 5:1 (2000), 244–46.
2 Ibid.
3 U.S. Department of Housing and Urban Development, "Final Comprehensive Report of the Freestanding Housing Voucher Demonstration," Vols. I-II, 1990.
4 U.S. Department of Housing and Urban Development, "Section 8 Tenant-Based Housing Assistance: A Look Back After 30 Years," 2000.
