It's Not the Source, It's the Strings
Congress and HUD must act now to improve the Section 8 Housing Choice Voucher Program and maximize its capacity for success.
Renters who rely on Section 8 Housing Choice Voucher (HCV) subsidies suffer when process gets in the way of good sense. “Because of the complicated nature of rent ‘reasonableness’ requirements that are established by HUD and enforced by the Public Housing Authority (PHA), I lost an existing customer,” said Travis Yates, President and CEO of Beacon Property Management/SOCAYR, Inc. “I requested a rent increase to bring the rate to market level, as the PHA is paying a higher rent for all new move-ins at this participating property. The PHA denied the request, stating that the increase exceeded the percentage allowed in their guidelines, so the existing HCV resident moved out. Now, another HCV-holder is scheduled to move into the same unit, at the higher rent amount.” This scenario illustrates the complications inherent in the HCV Program and the challenges it creates for residents and operators. The situation at present also is exacerbated by a number of factors related to housing affordability problems across the nation: the technological revolution and automation increasingly displacing the working-class; stagnating wages lag rising housing costs; a growing demand for rental housing necessitating the country to build at least 4.6 million new apartment homes at all price points by 2030 (as well as many as 11.7 million older existing apartments that could require renovation during the same period), notwithstanding the barriers to apartment construction in many of these same markets.
The challenge to resolve this crisis looms large. For starters, more resources are needed to invest into federal housing programs like the HCV Program to help bridge the growing gap for severely cost-burdened renters. Congress and the U.S. Department of Housing and Urban Development (HUD) must act now to improve the HCV Program and maximize its capacity for success.
Since the establishment of the Section 8 HCV Program in 1974, the program has served as a critical component of the nation’s strategy in ensuring access to housing for low- and moderate-income households. The HCV Program functions as a public-private partnership that has the potential to be the nation’s most effective tool to address the housing affordability crisis in the short-term, but only if the levels of bureaucracy and red tape associated with the program can be reduced or eliminated altogether.
Although many rental housing providers across the country are staunch supporters of the program and actively participate, HUD faces significant barriers in convincing the lion’s share of the industry that the program is worthwhile. “HUD estimates that the United States has 10 to 12 million total [rental housing providers] and only a fraction of them participate in the HCV program,” according to research and analysis performed by HUD’s Office of Policy Development and Research (PD&R). In “Landlords: Critical Participants in the Housing Choice Voucher Program,” PD&R “reports that between 2009 and 2016, the number of unique [owners and operators] participating in the HCV program declined from 775,000 to 695,000.”
It’s the Program, Not the Participants
One of the most common misconceptions among critics is that rental housing owners and operators intentionally discriminate against Section 8 voucher holders by denying them housing opportunities. Often, renters’ rights advocates and some policymakers use this notion to justify adopting “source of income” laws at the state or local level under the guise of fair housing protections for voucher holders. However, in theory and in reality, these laws do nothing to effectively increase housing choice and opportunity for voucher recipients.
The truth is that housing providers do not accept vouchers because of legitimate business reasons. Even in areas where source of income laws are policy, housing providers can still deny applications from voucher holders if the applicant did not otherwise qualify according to the company’s screening criteria. Additionally, it may not be cost-effective or feasible for a rental housing provider to adhere to the program’s requirements to accept a single voucher holder. Many affordable housing providers dedicate their business entirely to managing the multi-level process that is required to participate in the HCV Program. It can be (and often is) a full-time job to coordinate with the PHA. In simpler terms, it is the strings—not the source—that has caused owner participation rates to flatline.
Additional Regulatory Requirements
HUD and more than 2,000 local PHAs that administer the HCV program require participating property owners and operators to comply with additional regulatory requirements that otherwise are not imposed in a standard apartment leasing transaction. These requirements often vary depending on the PHA and result in financial and administrative burdens. The requirements include, but are not limited to, the following:
- Prescribed tenancy approval requirements, subject to processing delays.
- Execution of HUD’s tenancy addendum to be attached to every voucher holder’s lease.
- Rent “reasonableness” requirements.
- Possible delays and inconsistencies in disbursements of subsidies.
- Limits on rent increases that are subject to approval by the PHA and often do not keep pace with local market rates.
- Inspection delays, often with duplicative requirements.
The program’s requirements do little to encourage owners and operators to accept vouchers when they can otherwise focus on providing market-rate housing to the communities they serve without contending with these types of restrictions. These challenges create uncertainty in rental housing operations, often undermine the ability of owners to properly manage risk and, most importantly, lead to negative outcomes for owners and residents alike. Any improvements to the HCV Program that streamline the leasing process and make it comparable to the standard leasing transaction would considerably benefit low- and moderate-income recipients.
To do so would increase voluntary participation by rental housing providers and, in turn, increase choice and access to quality housing opportunities for voucher holders. It’s a win-win.
Revitalization of the Section 8 Housing Choice Voucher Program is a key priority for the National Apartment Association (NAA) and the industry it represents. In 2018, NAA gathered experts among its membership to identify the most significant challenges that deter owners and operators from participating in the program. NAA’s members deliberated and came to a consensus on practical solutions that would incentivize voluntary participation in the HCV Program and optimize its potential for success.
NAA is exploring the following options to move forward:
- Strengthen the set of standards that HUD requires PHAs to follow.
- Simplify the subsidy payment process to function more like the Electronic Benefits Transfer (EBT) system for the federal Supplemental Nutritional Assistance Program (SNAP).
- Establish a pool of funding to mitigate risk for owners and operators who rent to voucher holders—to recover lost rent or the cost of repairs or damages caused by voucher holders.
- Increase owner participation through sign-on bonuses for new provider participants.
- Offer re-rent incentives to participating housing providers; encourage them to retain available housing for voucher holders.
- Provide prequalifying inspections to allow housing providers to lease-up apartments more quickly.
- Allow for automatic annual rent increases that align with local market rates and are not contingent on a request from the housing provider.
- Allocate more funding for vouchers to ease pressure on existing waiting lists and allow more individuals to obtain assistance.
- Dedicate more funds to program administrators for the purposes of increasing capacity and creating more consistent service delivery across jurisdictions.
In the revitalization of the Section 8 HCV Program—whichever path is followed—it remains critical to ensure that incentivizing
participation leads to successful outcomes for residents and operators alike.
“In a tight leasing market, it is difficult to hold a unit awaiting a voucher inspection and paperwork processing knowing that there is no rent being paid for that holding period,” says Michael Clark, Principal, Alpha Barnes Real Estate Services, which has over 14,000 voucher holders in the company’s portfolio. “The approval process moves much faster in the conventional side of a leasing transaction, which results in the unit getting leased to another family. Finding a way to pay a lease bonus to the owner to compensate for the lost revenue would help improve the acceptability of the program to owners.”
NAA continues to work with its partners to determine the best course of action moving forward. For more information on our advocacy efforts related to the Section 8 HCV program or source of income legislation, please visit the Policy Issues Section of the NAA website or contact Jodie Applewhite, Manager of Public Policy.