Environment, Energy and Transportation Program

Section 8 or Housing Assistance for Needy Families: What's in a Name?

August 2003

Cathy Atkins, Program Principal

In his budget for the U.S. Department of Housing and Urban Development (HUD) for fiscal year 2004, President George W. Bush proposed that all housing funds from the existing Section 8 program be converted to block grants to states, allowing the states to determine how best to use the funds to meet the housing assistance needs of their populations. This proposal has met with mixed reviews as advocates on both sides of the issue have weighed in on the effects this sweeping change would have both to states and to those who receive rental assistance under the Section 8 program. Legislation in support of the changes to the Section 8 program have been introduced in both houses of Congress-S 947 (sponsored by Senator Wayne Allard) and HR 1841 (sponsored by Congressman Bob Ney).

What Is "Section 8"?

The housing program commonly referred to as Section 8 provides rental assistance to low-income, elderly or disabled individuals primarily in the form of housing vouchers. These vouchers pay a landlord the rent for a unit that exceeds 30 percent of the income of the assistance recipient. The person receiving assistance can use the voucher wherever he or she wants so long as the landlord is willing to participate in the Section 8 program and the housing unit meets the housing standards established by HUD. The money for the vouchers is currently set by Congress and allocated to housing authorities according to HUD formulas.

The Section 8 program, established in 1974, generally provides two types of rental subsidies: project-based assistance and tenant-based assistance. Under project-based assistance, the housing unit itself is subsidized and the tenant loses the assistance if he or she moves from the unit. Tenant-based assistance, as the name implies, provides money to the tenant in the form of a voucher that can be used in any housing unit where the property owner is willing to accept the voucher as part of the rental payment. The tenant then pays the difference between the amount of the voucher and the "Fair Market Rent," a figure established annually by HUD for the unit. This amount is usually about 30 percent of the tenant's income.

The Millennial Housing Commission, in its report to Congress on affordable housing needs in the next 10 years, recognized the overall success of the voucher part of the Section 8 program in helping maintain housing affordability for the 1.6 million households served by the program. The commission also expressed its support for additional annual funding for the program in congressional appropriations. The commission noted that some program changes are needed to make it more attractive to property owners. Specifically, the commission expressed its concern about disincentives to property owners resulting from program administration and regulatory complexity.

Why the Attempt to Change?

As part of the development of the Temporary Assistance to Needy families (TANF) programs, generically referred to as welfare reform, some states have used TANF funds to provide assistance to families as they move from welfare to work. The participating states and local governments have been allowed to shift some TANF funds to housing assistance programs to accomplish goals set forth as part of the welfare to work initiative. States that have been involved in this effort include Connecticut, Kentucky, Maryland, Minnesota, North Carolina, New Jersey, Michigan, Pennsylvania and Virginia. Counties that have been part of this effort include Denver, Colorado; San Mateo, California; and Los Angeles, California.

The participating states and counties have used the flexibility allowed under the TANF rules to provide a variety of housing assistance to those families included in the program. In some states and localities, the assistance takes the form of tenant-based rental assistance to program participants (Connecticut, Maryland, Minnesota, New Jersey, North Carolina, and San Mateo). Some programs have focused on helping families who are homeless or at risk of being homeless (Minnesota, Virginia and Denver). Still other states have attempted to use their flexibility to increase home ownership opportunities for low-income families.

In addition to the innovations by states and other localities, the congressionally established Millennial Housing Commission recommended, as part of its report to Congress on housing affordability in the new century, that states be given more flexibility in meeting the housing needs of their respective populations. As mentioned above, the commission recognized the successes of the Section 8 program but also believed that some flexibility to meet specific needs is warranted.

What Are the Changes?

The HUD budget proposed by President Bush would allocate the money currently contained in vouchers to a block grant that would be given to a state. According to the supporters of the change, the state then would be able to provide housing assistance that is tailored to the state's specific needs rather than having to abide by a generalized dictum. States could choose to contract with the local public housing authorities or with another entity to run the program.

Advantages of the Proposed Changes

Supporters point out that in 2002 about $11 billion in unused voucher funds were recaptured and returned to the federal budget. They believe the new proposal would allow state and local governments the flexibility they need to eliminate this loss of support for affordable housing by shifting funds to the most needy areas and to address other specific needs not covered by the generic program that currently is in place. Supporters also point out that states could use the block grant funds to coordinate with other programs, including the TANF program. States also could elect to coordinate the block grant with the One-Stop Career Center system under the Workforce Investment Act to support the efforts of those who now are receiving public assistance but are striving for self-sufficiency. HUD Secretary Mel Martinez in his testimony to Congress regarding the proposed changes, referred to the Workforce Investment Act as a program that is being successfully administered by the states.

States also would be allowed to enhance the home ownership element in the housing choice program under the proposed changes if they choose to do so. Included among the other changes that could come from the proposed block grant shift are rent simplification and decreased frequency of housing quality inspections.

Currently, HUD establishes annually the Fair Market Rent (FMR) for every housing market. According to the National Low Income Housing Coalition (NLIHC), which compiles the FMR figures for every housing market in every state, the FMR is generally the 40th percentile rent for most areas, i.e., the dollar amount below which 40 percent of the standard quality rental housing units rent. Given the time it takes to conduct such a survey, HUD FMR figures can easily fail to reflect drastic changes in a housing market. Under the new proposal, FMR would be calculated by the state, leading to a more accurate assessment of the housing market.

Housing quality inspections are conducted each year by the public housing authority (PHA) that administer the voucher assistance, using HUD guidelines. Supporters for the new proposal believe that state and local governments are in a better position to conduct these inspections. They also can use state or local standards that may be more appropriate to assess the quality of the housing than are the national standards established by HUD.

Concerns About the Proposed Changes

Opponents of the change appear to be most concerned about future funding levels of the housing block grants given what they believe has happened to other block grant programs. When establishing the funding levels, Congress currently allocates money for housing vouchers and provides for inflation and increases in market rents. HUD conducts rental market surveys to establish the fair market rent for an area and then sets the amounts of its rental subsidies that are available for each voucher accordingly.

Under the new proposal, opponents point out, states would be responsible for establishing the amounts of vouchers, among other things. However, there appears to be no guarantee that the block grant amounts provided to states would address changes in rental rates in the rental market or be adjusted for inflation.

Another fear of those who are opposed to the changes is that the amount of the block grant would remain stagnant or decrease while rents increased due to either a strong rental market or inflationary effects. If this happens, opponents argue, states would have to do one of three things: supplement the block grant from state funds to ensure continuation of rental assistance to those receiving it, decrease the amount of assistance given to each family, or reduce the number of vouchers given.

Opponents also have expressed concern that block grants could reduce the choices of voucher recipients of where to live thereby adversely affecting the ability of recipients to use the vouchers to move closer to jobs. They believe this may occur if subsidies are lowered or if states restrict vouchers to particular buildings or bar their use in certain neighborhoods. Opponents also point out that the current ability to use vouchers to promote home ownership might be damaged if lenders are not assured of sufficient or ongoing funding that will enable the voucher recipient to make mortgage payments.

Opponents argue that states could shift the vouchers from one area of a state to another, based solely upon the political influence wielded in a certain area. Concern also exists that states may try to impose time limits on housing assistance (as was done with welfare reform).

What Happens Next?

The primary proponents of the changes currently are the Bush Administration and HUD. As specifics of the proposal emerge or are worked out, other supporters are likely to emerge. The National Housing Council and the National Council of State Housing Agencies, among others, have remained neutral on the proposed changes.

Several organizations have expressed concerns or oppose the proposed changes to the Section 8 program. These include the National Low Income Housing Coalition, the Center on Budget and Policy Priorities, National Affordable Housing Management Association and the National Association of Housing and Redevelopment Officials.

As Congress considers the administration's proposed budget, many of the concerns raised may be addressed to the satisfaction of some opponents. However, it would appear that the current changes being proposed are far from being accepted by many of those involved in providing housing assistance programs.

References

Center on Budget and Policy Priorities Web site.

Fannie Mae Foundation Knowledgeplex database on housing issues.

Fannie Mae Foundation Web site.

HUD Testimony: Statement of The Honorable Mel Martinez before the U.S. House Committee on Appropriations, Subcommittee on Veterans Affairs, Housing and Urban Development, and Independent Agencies, March 19, 2003, http://www.hud.gov/offices/cir/test31903.cfm.

Millennial Housing Commission, Meeting Our Nation's Housing Challenges, Report of the Bipartisan Millennial Housing Commission Appointed by the Congress of the United States, Washington, D.C., Government Printing Office 2002.

Millennial Housing Commission Web site.

National Council of State Housing Agencies.

National Housing Conference Web site.

NCSL Housing Web site.

National Low Income Housing Coalition Web site.

The "NCSL/Annie E. Casey Project on Strengthening Families and Neighborhoods" Web site.

U.S. Department of Housing and Urban Development Web site.

Key Contact:
Cathy Atkins, National Conference of State Legislatures

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