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Protecting Housing Mobility in the Section 8 Program

(February, 2005) PROTECTING HOUSING MOBILITY IN THE SECTION 8 HOUSING VOUCHER PROGRAM

Over the past 20 years HUD has struggled to address the legacy of segregation and discrimination that has historically infected its low income housing programs. One of the Section 8 Housing Choicer Voucher Program's most attractive features is that, appropriately administered, it offers low income minority families the opportunity to escape the high poverty, racially isolated environments to which they have often been restricted. The role that Section 8 can play in providing a remedy for decades of discrimination and segregation in federal low income housing programs has been recognized by courts and policy makers, and is well documented.

The effect of the new funding system on housing mobility

The most damaging recent change in the program is the shift from a budgeting system that reimbursed PHAs for the total number of vouchers in use to a new funding system, beginning in 2004, that generally limit PHAs to a fixed sum of funds for the year, with no right to receive extra funds when costs increase. This funding scheme creates a financial conflict on the local level between the number and the quality of housing placements In other words, since apartments in segregated, higher poverty neighborhoods are more likely to have lower rents, an agency will face pressure to serve more families by approving tenancies in those areas rather than paying the higher cost of subsidies for families to move to housing located in better areas. This type of conflict is bad for fair housing, deprives poor families of choice, and it will lead inexorably to more segregation.

Targeting subsidy costs - HUD Approval of Exception Payment Standards, Fair Market Rents, and Rent Reasonableness.

The current system, permitting exception payment standards in higher cost areas, was intended to allow PHAs to pay higher rents in selected communities when warranted, upon careful documentation to HUD. This system was fair and efficient when properly administered, but in order for it to work in high cost areas HUD has to be willing to approve Exception Payment Standards. Unfortunately, HUD has effectively suspended this option since the fall of 2003.

HUD should immediately lift the suspension in approval of exception payment standards and advise local PHAs that exception payment standards will again be considered. Ideally HUD would factor any additional subsidy cost into the PHA's reimbursement formula so that requesting exceptions would not mean that the PHA would serve fewer households. Rather than penalize PHAs for helping families to become more self-sufficient, HUD should provide them additional incentives as had previously been provided for “hard to house” families.

In fact, at the outset HUD could reduce the need for Exception Payment Standards approvals -- and make the process easier for PHAs -- by setting the FMRs on which the Payment Standards are based at levels that reflect the differences in rents between central city vs. suburban areas, rather than setting them for an entire region. Doing so could cut costs significantly, without jeopardizing mobility.

HUD's office of PD&R now has available the detailed census data that was used in computing the Fair Market Rents. This data allows a PHA to see the actual rent cost differentials between the MSA and their central cities, broken down by the number of bedrooms. HUD should insure that this data is available in a useable format by the PHAs. In doing so, HUD should also remind and encourage PHAs that in some cases, even under current rules, PHAs may be able to facilitate mobility moves without having to request approval for exception payment standards. By setting their payment standards to reflect more precisely neighborhood cost differences PHAs may be able to target their subsidy dollars more effectively -- particularly when done in conjunction with the more critical use of “rent reasonableness” determinations. HUD should assist PHAs in evaluating rental cost data to identify areas where payment standard differentials are justified by fair housing and poverty deconcentration goals.

Reforming other aspects of program administration to promote mobility, in the context of dollar-based budgeting

Assuming that the current, fixed-reimbursement approach to Section 8 remains in effect for the next few years, there are several steps that Congress and HUD can take to preserve housing mobility in the program, in spite of the built in anti-mobility incentives of a fixed-sum budget.

Portability
  1. In the context of full retention of portability rights by voucher families, require direct reimbursement to PHAs for the extra cost of vouchers used in lower poverty areas with higher rents (reimburse PHAS from voucher renewal fund or from a similar reserve fund not yet in existence)

    1. option a: reimbursement for all higher cost areas
    2. option b: reimbursement only for deconcentrative moves (moves from areas of higher to lower poverty)

  2. Resolve portability administration issues by specifying that the voucher travels with the family so that receiving jurisdiction responsible for administration, after year of transfer, receives all related funds directly from HUD until time of voucher turnover, at which point the voucher reverts to the sending PHA for use by another family.

    1. issue: need to provide adequate funding to continue administering program at small PHAs with a large out-flow of vouchers

  3. Adoption of a single application form and consolidated regional waitlists to equalize access to all housing opportunities in a region, and to reduce the administrative burden of waitlist shopping and maintaining duplicative lists.

    1. elimination of residency preferences and conforming of admission criteria within a region

    Administrative fees and housing mobility

  4. Administrative fee: restructure administrative fees to guarantee a base amount, with additional administrative fee incentives tied to performance on deconcentration scores in the Section 8 management assessment tool - SEMAP (and include portability in the SEMAP calculation).

  5. Count (and heavily weight) portability moves in an agencies' SEMAP score, where moves are to lower poverty communities.

  6. Funding for housing mobility programs

Current HUD proposals that interfere with housing choice and mobility

In addition to fixed-sum budgeting, there are several new Administration proposals that would undermine mobility and tenant choice.

First, the Administration's proposal for a one-year waiting period for new voucher families before they are allowed to move to another town is, in the context of city to suburban transfers, a harsh restriction on mobility. Unlike the current, optional one year waiting period used by some local agencies, the Administration's proposal would be mandatory and would even apply to families who are already living in the community that issues the voucher. This proposal is contrary to basic principles of fair housing and housing choice. It says to African American and Latino families who are new to the Section 8 program that they are not wanted in the suburbs, and they must wait at least one year before they can move.

Second, the Administration's continuing efforts to eliminate “income targeting” of vouchers to the most needy families in the Section 8 program, would disproportionately harm Black and Latino families, and would steer vouchers away from the most poverty concentrated city neighborhoods.. Currently, the Section 8 program requires that public housing authorities distribute at least 75 percent of their vouchers in each fiscal year to "extremely low-income families" (earning 30 percent or less of the area median income). This income-targeting requirement has meant that Black and Latino families, who are disproportionately concentrated in the extremely low-income bracket, have been successful in receiving the majority of vouchers. Eliminating income targeting will could potentially deprive over 300,000 Black and Latino families of essential housing opportunities during the next 5-10 years, and would undermine efforts to deconcentrate poverty, by allocating fewer vouchers to the most deeply segregated and poverty concentrated neighborhoods.

Third, recent HUD restrictions on portability must be rescinded. For example, the recent HUD Notice PIH 2005-1, adopted in response to the fiscal constraints imposed by recent HUD budgets, provides that “a PHA has the authority to deny a family's request to move under the portability procedures to a unit in another jurisdiction that would require the PHA to pay a higher subsidy cost for the same family's assistance if the PHA determines it does not have sufficient funding available under their calendar year 2005 budget…and the receiving PHA will not absorb the family into its own program.” This guidance, repeating earlier guidance from 2004, flies in the face of portability rights contained in the statute and regulations. Recent surveys by NAHRO and the Center on Budget & Policy Priorities show that, because of these new restrictions, PHAs around the country are now denying families the right to move, and legal services advocates are now beginning to take on cases against local PHAs who have refused to permit their clients to move. Our proposals for reform of portability are set out above.

The impact of HUD's refusal to grant exception payment standards is also addressed above.

Conclusion

The freedom to choose what community to live in -- available since the 1960s and 1970s to most middle class families of all racial groups -- has often been denied to low income families, especially minority families living in our poorest neighborhoods. The Section 8 program has provided an important opportunity to families who have chosen to move to lower poverty, higher opportunity areas. The Administration's single-minded focus on cost savings ignores the Section 8 program's underlying goal of promoting housing choice.

It is true that it is somewhat more expensive to assist poor families who wish to move to low poverty neighborhoods. It has always been programmatically cheaper to segregate low income minority families in high poverty, racially segregated neighborhoods. But the limited additional costs confer substantial benefits. These benefits include the basic civil right of housing choice, the value to society from increased racial integration in schools and communities, and the benefits to individual families and children that come from moving out of high poverty environments. Any additional costs of such deconcentrative moves can easily be offset if HUD takes a more aggressive approach to contain inflated rent levels within traditional “Section 8” markets.

2-11-05
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