For other versions of this document, see http://wikileaks.org/wiki/CRS-RL32284 ------------------------------------------------------------------------------ Order Code RL32284 An Overview of the Section 8 Housing Programs Updated January 29, 2008 Maggie McCarty Analyst in Housing Domestic Social Policy Division An Overview of the Section 8 Housing Programs Summary The Section 8 low-income housing program is really two programs: the voucher program and the project-based Section 8 program. Vouchers are portable subsidies that low-income families can use to lower their rents in the private market. Vouchers are administered at the local level by quasi-governmental public housing authorities (PHAs). Project-based Section 8 is a form of rental subsidy that is attached to a unit of privately owned housing. Low-income families who move into the housing pay a reduced rent, on the basis of their incomes. The Section 8 program began in 1974, primarily as a project-based rental assistance program. However, by the mid-1980s, project-based assistance came under criticism for seeming too costly and concentrating poor families in high- poverty areas. Congress stopped providing new project-based Section 8 contracts in 1983. In their place, Congress created vouchers as a new form of assistance. Today, vouchers -- numbering more than 2 million -- are the primary form of assistance provided under Section 8, although over 1 million units still receive project-based assistance under their original contracts or renewals of those contracts. Congressional interest in the Section 8 program has increased in recent years, particularly as the program costs have rapidly grown, led by cost increases in the voucher program. In order to understand why costs are rising so quickly, it is important to first understand how the program works and its history. This report presents a brief overview of that history and introduces the reader to the program. For more information, see CRS Report RL33929, Recent Changes to the Section 8 Voucher Renewal Funding Formula; CRS Report RL34002, Section 8 Housing Choice Voucher Program: Issues and Reform Proposals in the 110th Congress; and CRS Congressional Distribution Memorandum, Factors Behind Cost Increases in the Section 8 Housing Choice Voucher Program, FY2000-FY2004, all by Maggie McCarty. This report will be updated as warranted. Contents Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Background Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Early Section 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 New Construction and Substantial Rehabilitation . . . . . . . . . . . . . . . . . . . . . 3 Moderate Rehabilitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Existing Housing Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 The Voucher Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Today's Section 8 Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Section 8 Project-Based Rental Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Section 8 Tenant-Based Housing Choice Vouchers . . . . . . . . . . . . . . . . . . . 7 Project-Based Vouchers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Tenant Protection or Enhanced Vouchers . . . . . . . . . . . . . . . . . . . . . . . 9 Special Purpose Vouchers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Family Self-Sufficiency Coordinators . . . . . . . . . . . . . . . . . . . . . . . . . 10 Demonstrations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 List of Tables Table 1. The Experimental Housing Allowance Program . . . . . . . . . . . . . . . . . . 2 Table 2. What Do Long Term Contracts Mean for Congress? . . . . . . . . . . . . . . . 4 Table 3. What is Fair Market Rent (FMR)? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Table 4. Income Thresholds for a Three-Person Family in Selected Areas in 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Table 5. How is a Voucher Subsidy Calculated? . . . . . . . . . . . . . . . . . . . . . . . . . 8 An Overview of the Section 8 Housing Programs Introduction The rental assistance programs authorized under Section 8 of the United States Housing Act of 1937 (42 U.S.C. § 1437f) -- Section 8 project-based rental assistance and tenant-based vouchers -- have become the largest component of the Department of Housing and Urban Development's (HUD) budget, with appropriations of more than $22 billion in FY2008. The rising cost of providing rental assistance is due, in varying degrees, to expansions in the program, the cost of renewing expiring long- term contracts, and rising costs in housing markets across the country. The most rapid cost increases have been seen in the voucher program. Partly out of concern about cost increases, and partly in response to the administrative complexity of the current program, the Administration has called for reform of the voucher program and its funding each year since 2002. In response, Congress has enacted changes to the way that it funds the voucher program and the way that PHAs receive their funding. Congress has not enacted the program reforms advocated by the Administration, although it has considered its own reform proposals. In order to understand why the program has become so expensive and why reforms are being considered, it is first important to understand the mechanics of the program and its history. This paper will provide an overview of the Section 8 program and its history. For more information, see CRS Report RL33929, Recent Changes to the Section 8 Voucher Renewal Funding Formula; CRS Report RL34002, Section 8 Housing Choice Voucher Program: Issues and Reform Proposals in the 110th Congress; and CRS Congressional Distribution Memorandum, Factors Behind Cost Increases in the Section 8 Housing Choice Voucher Program, FY2000-FY2004, all by Maggie McCarty. Background Information From 1937 until 1965, public housing and the subsidized mortgage insurance programs of the Federal Housing Administration (FHA) were the country's main forms of federal housing assistance. As problems with the public housing and other bricks and mortar federal housing construction programs (such as Section 235 and Section 236 of the National Housing Act) arose -- particularly their high cost -- interest grew in alternative forms of housing assistance. In 1965, a new approach was adopted (P.L. 89-117). The Section 23 program assisted low-income families CRS-2 residing in leased housing by permitting a public housing authority (PHA)1 to lease existing housing units in the private market and sublease them to low-income and very low-income families2 at below-market rents. However, the Section 23 program did not ameliorate the growing problems with HUD's housing construction programs and interest remained in developing and testing new approaches. The Experimental Housing Allowance Program is one example of such an alternative approach. Table 1. The Experimental Housing Allowance Program The Experimental Housing Allowance Program (EHAP) began with a mandate to HUD from Congress in 1970 to test the impacts and feasibility of providing low-income families with allowances to assist them in obtaining existing, decent rental housing of their choice (P.L. 91-152). Congress was interested specifically in finding the answers to several key questions: ! How many families would make use of allowance payments? ! What kind of housing would they choose and in what neighborhoods? ! How would housing markets respond to the increased demand for housing? ! At what cost could a housing allowance program be administered? In order to answer these questions, HUD contracted for the conduct of three experiments: the Demand Experiment to test how families would respond to a housing allowance, the Supply Experiment, to test how markets would respond to subsidies and the Administrative Agency Experiment, to test the administrative capacity and funds required to administer a housing allowance program. The first reports came out in 1973, and a final report was issued in 1980. The EHAP's key findings are listed below: ! In order to ensure housing quality, subsidies have to be tied to housing standards; however, stricter housing standards limit participation. Participation is also linked to subsidy amount; as the subsidy increases, so does participation. ! Mobility and location of residence are mainly governed by ties to relatives, neighbors, and friends and are not affected by housing allowance payments. ! A housing allowance program has virtually no effect on the price of housing and does not stimulate new construction or major rehabilitation. However, it does help preserve the existing housing stock by stimulating repairs. ! A housing allowance program can be effectively administered at the local level. The early findings of EHAP helped to set the tone for the debate that created the Section 8 program. (Raymond Struyk, "Policy Questions and Experimental Responses," in Housing Vouchers for the Poor: Lessons from a National Experiment, edited by Raymond Struyk and Marc Bendick Jr. [Washington: Urban Institute Press, 1981].) 1 PHAs are state-chartered, quasi-governmental bodies that administer public housing and Section 8 vouchers. 2 HUD uses a relative measure of income for determining benefits and eligibility for Section 8. "Low-income families" have adjusted gross incomes at or below 80% of the local area median income; "very low-income" families have adjusted gross incomes at or below 50% of the local area median income; and "extremely low-income" families have adjusted gross incomes at or below 30% of the local area median income CRS-3 Due to criticisms about cost, profiteering, and slumlord practices in federal housing programs, President Nixon declared a moratorium on all existing federal housing programs, including Section 23, in 1973. During the moratorium, HUD revised the Section 23 program and sought to make it the main assisted housing program of the federal government. However, at the same time, Congress was considering several options for restructuring subsidized housing programs. After all the debates and discussions that typically precede the passage of authorizing legislation were completed, Congress voted in favor of a new leased housing approach, and the Section 8 program was created. Early Section 8 The Section 8 program is named for Section 8 of the United States Housing Act of 1937. The original program, established by the Housing and Community Development Act of 1974 (P.L. 93-383), consisted of three parts: new construction, substantial rehabilitation, and existing housing certificates. The 1974 Act and the creation of Section 8 effectively ended the Nixon moratorium. In 1978, the moderate rehabilitation component of the program was added, but it has not been funded since 1989. In 1983, the new construction and substantial rehabilitation portions of the program were repealed, and a new component -- Section 8 vouchers -- was added. In 1998, existing housing certificates were merged with and converted to vouchers. New Construction and Substantial Rehabilitation Under the new construction and substantial rehabilitation components of the early Section 8 program, HUD entered into long-term (20- or 40-year) contracts with private for-profit, non-profit, or public organizations that were willing to construct new units or rehabilitate older ones to house low- and very low-income tenants. Under those contracts, HUD agreed to make assistance payments toward each unit for the duration of the contract. Those assistance payments were subsidies that allowed tenants residing in the units to pay 25% (later raised to 30%) of their adjusted income as rent. The program was responsible for the construction and rehabilitation of a large number of units. Over 1.2 million units of housing with Section 8 contracts that originated under the new construction and substantial rehabilitation program still receive payments today. By the early 1980s, because of the rising costs of rent and construction, the amount of budget authority needed for the Section 8 rental assistance program had been steadily increasing while the number of units produced in a year had been decreasing. At the same time, studies emerged showing that providing subsidies for use in newly constructed or substantially rehabilitated housing was more expensive than the cost of providing subsidies in existing units of housing. Also, because contracts were written for such long terms, appropriators had to provide large amounts of budget authority each time they funded a new contract (see below for an illustration of the implication of long-term contracts). As the budget deficit grew, Members of Congress became concerned with the high costs associated with Section 8 new construction and substantial rehabilitation, and these segments of the Section CRS-4 8 program were repealed in the Housing and Urban-Rural Recovery Act of 1983 (P.L. 98-181). Table 2. What Do Long Term Contracts Mean for Congress? The following example illustrates how Congress appropriates funds for long-term contracts, compared to one-year contracts. In 2003, a housing subsidy cost an average of $6,000 per year. If Congress wanted to fund 10 new Section 8 subsidies in 2003, the cost of doing so would depend on the length of the contract Congress decided to fund: If the contract was a 40-year contract, as was the case in the beginning of the Section 8 program, then Congress must appropriate: 10 vouchers x $6,000 x 40 years = $2.4 million.* If the contract was a one-year contract, as is the case with Section 8 contracts today, then Congress must appropriate: 10 vouchers x $6,000 x 1 year = $60,000. Thus, it would have cost Congress less in 2003 to provide one year contracts than it would have to provide multiyear contracts. The trade-off is the cost in subsequent years. For example, assume that Congress intends to maintain those 10 subsidies in 2004. If Congress funded those subsidies under 40-year contracts in 2003, then the subsidies would not require new funding again until 2043, meaning Congress would not have to provide appropriations in 2004; however, if Congress funded those subsidies under one-year contracts in 2003, then the subsidies would require another year's worth of funds in 2004. * Note, this example does not include an estimate for inflation. When funding multi-year contracts, Congress generally includes an estimate of inflation and adds it to the total cost. Moderate Rehabilitation. The Housing and Community Development Amendments of 1978 (P.L. 95-557) added the moderate rehabilitation component to the Section 8 program, which expanded Section 8 rental assistance to projects that were in need of repairs costing at least $1,000 per unit to make the housing decent, safe, and sanitary. Over the next 10 years, however, this component of the program was fraught with allegations of abuse; the process of awarding contracts was considered unfair and politicized. Calls for reform of the moderate rehabilitation program led to its suspension. It has not been funded since 1989. Existing Housing Certificates The existing housing certificate component of the Section 8 program was created in the beginning of the Section 8 program and continued until 1998. Under the existing housing certificate program, PHAs and HUD would enter into an Annual Contributions Contract (ACC) for the number of units that would be available to receive assistance. Contracts were originally written for five years and were renewable, at HUD's discretion, for up to 15 years. In the contract, HUD agreed to pay the difference between the tenant's rental payment and the contract rent of a unit. The contract rent was generally limited to the HUD-set Fair Market Rent (FMR) for the area. CRS-5 Table 3. What is Fair Market Rent (FMR)? FMRs are gross rent estimates that include both shelter rent paid by the tenant to the landlord and the cost of tenant-paid utilities, except telephones. Each year, HUD sets FMRs either at the 40th percentile rent or at the 50th percentile rent for each metropolitan or non-metropolitan statistical area in the nation, as well as for each state. For most areas, the FMR is set at the 40th percentile rent paid by recent movers, which means that 40% of all standard quality rental housing units rented within the past 18 months have rents at or below the FMR. For some high cost areas, the FMR is set at the 50th percentile rent or the median rent, so that 50% of standard units fall at or below the FMR. In some low-cost communities, the FMR is raised to the statewide FMR, if it is higher. After entering into a contract with HUD, PHAs would advertise the availability of certificates for low-income tenants. The existing housing certificate program was primarily tenant-based, meaning that the assistance was attached to the tenant. Families selected to receive assistance were given certificates as proof of eligibility for the program; with their certificates, families could look for suitable housing in the private market. Housing was considered suitable if it rented for the FMR or less and met Housing Quality Standards (HQS).3 Once the household found a unit, they signed a lease and agreed to pay 30% of their adjusted income for rent. The remainder of the rent was paid by HUD to the landlord on behalf of the tenant. If a family vacated a unit in violation of the lease, HUD had to make rental payments to the landlord for the remainder of the month in which the family vacated, and pay 80% of the contract rent for an additional month. If the family left the unit at the end of their lease, they could take their certificate with them and use it for their next home. HUD also paid the PHA an administrative fee for managing the program. The amount of this administrative fee was set by Congress in appropriations legislation each year. PHAs were permitted to use up to 15% of their Section 8 certificates for project-based housing. In project-based Section 8 existing housing, the subsidy was attached to the unit, which was selected by the PHA, and not to the tenant. This meant that when a tenant vacated a unit, another eligible tenant would be able to occupy it, and HUD would subsidize the rent as long as a contract was in effect between the PHA and the owner. In 1998, the Quality Housing and Work Opportunity Reconciliation Act (QHWRA) (P.L. 105-276) merged the Section 8 existing housing certificate program with the voucher program (see below) and converted all certificates to vouchers, effectively ending the Section 8 existing housing certificate program. The Voucher Program. The largest component of today's Section 8 program, the voucher program, was first authorized by the Housing and Urban-Rural Recovery Act of 1983 (P.L. 98-181). It was originally a demonstration program, but was made permanent in 1988. Like the Section 8 existing housing certificate program, the voucher program is administered by PHAs and is tenant-based, with a 3 Housing Quality Standards (HQS) are minimum standards set by HUD that set acceptable conditions for interior living space, building exterior, heating and plumbing systems, and general health and safety. CRS-6 project-based component. However, under the voucher program, families can pay more of their incomes toward rent and lease apartments with rents higher than FMR. Today's Section 8 Program Today's Section 8 program is really two programs, which, combined, serve almost 3.5 million households. Section 8 Project-Based Rental Assistance The first program under Section 8 can be characterized as Section 8 project- based rental assistance. This program includes units created under the new construction, substantial rehabilitation, and moderate rehabilitation components of the earlier Section 8 program that are still under contract with HUD. Although no new construction, substantial rehabilitation, or moderate rehabilitation contracts have been created for a number of years, about 1.3 million of these units are still funded under multiyear contracts that have not yet expired and do not require any new appropriations, or multiyear contracts that had expired and are renewed annually, requiring new appropriations. Families that live in Section 8 project-based units pay 30% of their incomes toward rent. In order to be eligible, families must be low-income; however, at least 40% of all units must be available for very low-income families. If a family leaves the unit, the owner will continue to receive payments as long as he or she can move another eligible family into the unit. Owners of properties with project-based Section 8 rental assistance receive a subsidy from HUD, called a Housing Assistance Payment (HAP). HAP payments are equal to the difference between the tenant's payments (30% of income) and a contract rent, which is agreed to between HUD and the landlord. Contract rents are meant to be comparable to rents in the local market, and are typically adjusted annually by an inflation factor established by HUD or on the basis of the project's operating costs. Project-based Section 8 contracts are managed by contract administrators. While some HUD regional offices still serve as contract administrators, the Department's goal is to contract the function out entirely to outside entities, including state housing finance agencies, PHAs, or private entities. When project-based HAP contracts expire, the landlord can choose to either renew the contract with HUD for up to five years at a time (subject to annual appropriations) or convert the units to market rate. In some cases, landlords can choose to "opt-out" of Section 8 contracts early. When an owners terminates an HAP contract with HUD, either through opt-out or expiration -- the tenants in the building are provided with enhanced vouchers designed to allow them to stay in their unit (see discussion of enhanced vouchers below). In 2008, about 4,000 Section 8 project- based rental assistance contracts were expected to expire; it is unclear how many will choose to renew. CRS-7 In 2000, about 60% of the households that lived in project-based Section 8 units were elderly households, about 15% were disabled households, and about 21% were non-elderly, non-disabled households with children. Of the non-elderly, non-disabled households (including the approximately 5% who did not have children), about half received income solely from work, about 16% received income solely from welfare, about 10% combined work and welfare, and about 20% reported no income or income from other sources (such as child support). The average earnings of the non- elderly, non-disabled households were a little more than $11,000 per year.4 Section 8 Tenant-Based Housing Choice Vouchers When QHWRA merged the voucher and certificate programs in 1998, it renamed the voucher component of the Section 8 program the Housing Choice Voucher program. The voucher program is funded in HUD's budget through the tenant-based rental assistance account. The federal government currently funds more than 2 million Section 8 Housing Choice Vouchers. PHAs administer the program and receive an annual budget from HUD. Each has a fixed number of vouchers that they are permitted to administered and they are paid administrative fees. Vouchers are tenant-based in nature, meaning that the subsidy is tied to the family, rather than to a unit of housing. In order to be eligible, a family must be very low-income (50% or below area median income (AMI)),5 although 75% of all vouchers must be given to extremely low-income families (30% or below AMI). To illustrate the regional variation in these definitions of low-income and their relationship to federal definitions of poverty, Table 1 compares HUD's income definitions to the Department of Health and Human Service's (HHS) poverty guidelines for several geographic areas. Note that HHS poverty guidelines are uniform in all parts of the country (except for Alaska and Hawaii, not shown in the following table). Table 4. Income Thresholds for a Three-Person Family in Selected Areas in 2007 HUD Very Low- Hud Extremely HHS Poverty Income Limits Low-Income Limits Guidelines Jefferson County, MS $17,450 $10,500 $17,170 Missoula, MT 24,550 14,700 17,170 New York, NY 31,900 19,150 17,170 San Francisco, CA 50,900 30,550 17,170 Source: Department of Housing and Urban Development 2007 Income Limits and Department of Health and Human Services 2007 Poverty Guidelines. 4 CRS calculation of data in Jeffrey M. Lubell, Mark Shroder, Barry Steffen, "Work Participation and Length of Stay in HUD-Assisted Housing," Cityscape, vol. 6, no. 2 (2003). 5 In some limited circumstances, families can earn up to 80% of AMI and still be eligible. CRS-8 Families who receive vouchers use them to subsidize their rents in private market apartments. Once an eligible family receives an available voucher, the family must find an eligible unit. In order to be eligible, a unit must meet minimum housing quality standards (HQS) and cost less than 40% of the family's income6 plus the HAP paid by the PHA. The HAP paid by the PHA for tenant-based vouchers, like the HAP paid for Section 8 project-based rental assistance, is capped; however, with tenant-based vouchers, PHAs have the flexibility to set their caps anywhere between 90% and 110% of FMR (up to 120% FMR with prior HUD approval). The cap set by the PHA is called the payment standard. Once a family finds an eligible unit, the family signs a contract with HUD, and both HUD and the family sign contracts with the landlord. The PHA will pay the HAP (the payment standard minus 30% of the family's income), and the family will pay the difference between the HAP and the rent (which must total between 30% and 40% of the family's income). After the first year, a family can choose to pay more than 40% of their income towards rent. PHAs may also choose to adopt minimum rents, which cannot exceed $50. (See box below for an example.) Table 5. How is a Voucher Subsidy Calculated? First, a PHA sets a payment standard. A payment standard is a maximum subsidy level that is equal to anywhere between 90% and 110% of Fair Market Rent (FMR). Then, a PHA calculates a maximum Housing Assistance Payment (HAP). A HAP is the amount that the PHA will pay the landlord and it is equal to the greater of the rent for an apartment or the payment standard, minus 30% of a family's income. The family can then go out to the rental market and find an apartment. In order to be approved that apartment cannot rent for more than the maximum HAP plus 40% of a family's income. If the rent for the unit is less than the HAP plus 30% of a household's income, the household must still pay 30% of their income toward rent, but the HAP will be reduced. For example, consider a family who earns $900 per month and lives in a community with an FMR of $800 per month for the appropriate size apartment. If their PHA has a payment standard of 110% of FMR, then the maximum HAP a family can receive is $610 per month [($800 * 110%) - ($900 * 30%)]. The family can therefore shop for an apartment with a rent of up to $970 per month [$610 + ($900 * 40%)]. If the family finds an apartment for $970 per month, the PHA will pay the maximum HAP ($610) and the family will pay 40% of their income per month ($360). If the family finds an apartment for less than the payment standard, say $750 per month, the family will pay 30% of their income toward rent, and the PHA will pay the difference between the rent and 30% of the family's income. In this case, the family will pay $270 [$900 * 30%] and the PHA will pay $480 [$750 - (900 * 30%)]. Once a family is using a voucher, the family can retain the voucher as long as the PHA has adequate funding for it and the family complies with PHA and program requirements. If a family wants to move, the tenant-based voucher can move with the family. Once the family moves to a new area, the two PHAs (the PHA that 6 This 40% cap on a tenant's contribution is in effect only for the first year. After the first year, if rent increases and the family wishes to continue to live in the unit, then the family can choose to contribute more than 40% of its income toward rent. CRS-9 originally issued the voucher and the PHA that administers vouchers in the new area) negotiate regarding who will continue to administer the voucher.7 The voucher program does not contain any mandatory time limits. Families exit the program in one of three ways: their own choice, non-compliance with program rules (including non-payment of rent), or if they no longer qualify for a subsidy. Families no longer qualify for a subsidy when their incomes, which must be recertified annually, have risen to the point that 30% of that income is equal to rent. At that point the HAP payment will be zero and the family will no longer receive any subsidy. In 2000, about 17% of households with vouchers were elderly households, about 22% were disabled households, and about 53% were non-elderly, non-disabled households with children. Of the non-elderly, non-disabled households (including the approximately 8% that did not have children), about half received their income solely from work, about 20% received their income solely from welfare, about 6% combined work and welfare, and about 22% reported no income or income from other sources (such as child support). The average earnings of the non-elderly, non- disabled households were a little more than $12,000 per year.8 Project-Based Vouchers. Vouchers, like Section 8 existing housing certificates, can be project-based. In order to project-base vouchers, a landlord must sign a contract with a PHA agreeing to set-aside up to 25% of the units in a development for low-income families. Each of those set-aside units will receive voucher assistance as long as a family that is eligible for a voucher lives there. Families that live in a project-based voucher unit pay 30% of their adjusted household income toward rent, and HUD pays the difference between 30% of household income and a reasonable rent agreed to by both the landlord and HUD. PHAs can choose to project-base up to 20% of their vouchers. Project-based vouchers a portable; after one year, a family with a project-based voucher can convert to a tenant-based voucher and then move, as long as a tenant-based voucher is available. Tenant Protection or Enhanced Vouchers. Another type of voucher, called a tenant protection voucher, is given to families that were already receiving assistance through another HUD housing program, before being displaced. Examples of instances when families receive tenant-protection vouchers include when public housing is demolished or when a landlord has terminated a Section 8 project-based rental assistance contract. Families that risk being displaced from project-based 7 The feature of a voucher that permits a family to move from one jurisdiction to another while retaining their assistance is referred to as portability. The administration of portability has proven to be complicated for PHAs. In some cases, the originating PHA is billed for the cost of the family's voucher by the receiving PHA; in other cases, the receiving PHA transitions the new family onto one if its vouchers and the original voucher reverts to the originating PHA. PHA advocacy groups have called for HUD to make regulatory reforms to ease the administration of portability. 8 CRS calculation of data in Jeffrey M. Lubell, Mark Shroder, Barry Steffen, "Work Participation and Length of Stay in HUD-Assisted Housing," Cityscape, vol. 6, no. 2 (2003). CRS-10 Section 8 units are eligible to receive a special form of tenant-protection voucher, called an enhanced voucher. The "enhanced" feature of the voucher allows the maximum value of the voucher to grow to be equal to the new rent charged in the property, as long as it is reasonable in the market, even if it is higher than the PHA's payment standard. They are designed to allow families to stay in their homes. If the family chooses to move, then the enhanced feature is lost and the voucher becomes subject to the PHA's normal payment standard. Special Purpose Vouchers. The voucher program also has several special programs or uses. These include family unification vouchers and vouchers used for homeownership. Family unification vouchers are given to families for whom the lack of adequate housing is a primary factor in the separation, or threat of imminent separation, of children from their families or in preventing the reunification of the children with their families. According to the Child Welfare League of America, HUD has awarded 33,497 family unification vouchers to PHAs since the inception of the program.9 While there are no specifically authorized "homeownership vouchers," since 2000 certain families have been eligible to use their vouchers to help pay for the monthly costs associated with homeownership. Eligible families must work full-time or be elderly or disabled, be first-time homebuyers, and agree to complete first-time homebuyer counseling. PHAs can decide whether to run a homeownership program and an increasing number of PHAs are choosing to do so. According to HUD's website, more than 5,700 families have closed on homes using vouchers.10 Family Self-Sufficiency Coordinators. The Family Self Sufficiency (FSS) program was established by Congress as a part of the National Affordable Housing Act of 1990 (P.L. 101-625). The purpose of the program is to promote coordination between the voucher program and other private and public resources to enable families on public assistance to achieve economic self-sufficiency. Families who participate in the program sign five-year contracts in which they agree to work toward leaving public assistance. While in the program, families can increase their incomes without increasing the amount they contribute toward rent. The difference between what the family paid in rent before joining the program and what they would owe as their income increases is deposited into an escrow account that the family can access upon completion of the contract. For example: 9 HUD awarded 33,497 FUP vouchers from 1992 to 2001. Each award included five years of funding per voucher and the voucher's use was restricted to FUP-eligible families for those five years. At the end of those five years, PHAs were eligible to convert those FUP vouchers to regular vouchers. While the five-year use restrictions have expired for all FUP vouchers, according to surveys conducted by the Child Welfare League of America, the vast majority of PHAs have continued to use their original FUP vouchers for FUP-eligible families and some have even chosen to use some regular-purpose vouchers for FUP families. As a result of these two factors, it is unclear how many families are receiving FUP vouchers at this time. 10 [http://www.hud.gov/offices/pih/programs/hcv/homeownership/publiclist_vhosites.xls], accessed January 4, 2007. CRS-11 If a family with a welfare benefit of $450 per month begins working, earning $800 per month, the family's contribution towards rent increases from $135 per month to $240 per month. Of that $240 the family is now paying towards rent, $105 is deposited into an escrow account. After five years, the family will have $6,300 plus interest in an escrow account to use for whatever purpose the family sees fit. PHAs receive funding for FSS coordinators, who help families with vouchers connect with services, including job training, child care, transportation and education. Demonstrations. Two large-scale demonstrations are currently under way in the Section 8 voucher program. The Moving to Opportunity Fair Housing Demonstration (MTO) was authorized in 1992 (P.L. 102-550, P.L. 102-139). MTO combines housing counseling and services with tenant-based vouchers to help very low-income families with children move to areas with low concentrations of poverty. The experimental demonstration was designed to test the premise that changes in an individual's neighborhood environment can change his or her life chances. Since participating families were selected between 1994 and 1998, the full results of the 10- year demonstration are not yet available. However, HUD has published several interim evaluations of the short- and mid-term impacts of MTO. They have found some improvements in housing quality, neighborhood conditions, safety and child and adult health for families that moved to lower-poverty areas. Mixed effects were found on youth delinquency and risky behavior. Small positive impacts were found on child education, but no impacts have yet been seen on employment, earnings, or receipt of public assistance.11 The Moving to Work Demonstration, authorized in 1996 (P.L. 104-134), was created to give HUD and PHAs the flexibility to design and test various approaches for providing and administering housing assistance. The demonstration directed HUD to select up to 30 PHAs to participate. The goals were to reduce federal costs, provide work incentives to families, and expand housing choice. MTW allows participating PHAs greater flexibility in determining how to use federal Section 8 voucher and Public Housing funds by allowing them to blend funding sources and experiment with rent rules, with the constraint that they had to continue to serve approximately the same number of households. It also permits them to seek exemption from most Public Housing and Housing Choice Voucher program rules. An evaluation for MTW published in January 2004 reported: The local flexibility and independence permitted under MTW appears to allow strong, creative [P]HAs to experiment with innovative solutions to local challenges, and to be more responsive to local conditions and priorities than is often possible where federal program requirements limit the opportunity for variation. But allowing local variation poses risks as well as provides potential benefits. Under MTW, some [P]HAs, for instance, made mistakes that reduced the resources available to address low-income housing needs, and some implemented changes that disadvantaged particular groups of needy households currently served under federal program rules. Moreover, some may object to the 11 Moving to Opportunity Fair Housing Demonstration Program Interim Impacts Evaluation, US Department of Housing and Urban Development, Prepared by Larry Orr, et al., Abt Associates; and Lisa Sanbonmatsu, et al., National Bureau of Economic Research, September 2003. CRS-12 likelihood that allowing significant variation across [P]HAs inevitably results in some loss of consistency across communities.12 Conclusion The combined Section 8 programs are the largest direct housing assistance program for low-income families. With a combined FY2008 budget of more than $22 billion, they reflect a major commitment of federal resources. That commitment has led to some successes. More than 3 million families are able to obtain safe and decent housing through the program, at a cost to the family that is considered affordable. However, these successes come at a high cost to the federal government. Given current budget deficit levels, Congress has begun to reevaluate whether the cost of the Section 8 programs, particularly the voucher program, are worth their benefits. Proposals to reform the program abound, and whether the current Section 8 programs are maintained largely in their current form, changed substantially, or eliminated altogether are questions currently facing Congress. 12 Housing Agency Responses to Federal Deregulation: An Assessment of HUD's "Moving to Work" Demonstration, U.S. Department of Housing and Urban Development, Prepared by Martin D. Abravanel et al., Urban Institute, January 2004. ------------------------------------------------------------------------------ For other versions of this document, see http://wikileaks.org/wiki/CRS-RL32284