A Brief History Of The Section 8 Housing Voucher Program

Congressman Paul Ryan’s review of poverty programs at the 50^th anniversary of the declaration of the War On Poverty included 20 housing programs, including the Low Income Housing Credit (LIHTC) which were the topic of my last few posts. Next to the LIHTC the Housing Choice Voucher (HCV) often called Section 8 is the biggest workhorse in the barn of federal housing subsidies. The 2023 budget for the Department of Housing and Urban Development (HUD) includes more than $32 billion for the HCV program which pays for 200,000 vouchers. It’s worth covering the history of the program. Looking back, it’s clear that the effort to use existing rental housing in the market to help people with less money has always suffered from the same problem, finding the right balance between federal and local requirements on both tenant and housing provider and maintaining flexibility and portability of the voucher system.

One of the best histories of the Housing Choice Voucher program (however, I’m going to refer to it throughout at Section 8), is by the Congressional Research Service (CSA), An Overview of the Section 8 Housing Programs: Housing Choice Vouchers and Project-Based Rental Assistance. The review gives a good overview of where the program originated and evolved. The program has been called Section 8 because it was authorized under Section 8 of the U.S. Housing Act of 1937.

Like food access, housing has been a perennial issue in industrial economies. Wage earners often find that their wages don’t keep up with the prices of consumer items like housing that have no substitutes in the market. Rather than subsidize production and reduce barriers to the market for private profit motivated actors, governments have typically stepped in by either building and operating housing for people with low or no incomes, or they have subsidized others to create and manage that housing. The Section 8 program has its origins in an effort to give people with less money struggling to pay rent financial resources to acquire rental housing from private actors.

Section 23

The Section 23 program was the result of legislation passed by congress in 1965, and created the ability of local public housing agencies to contract with private housing entities to house people struggling to pay rent. Section 23 allowed HUD to pay housing owners on an annual basis on behalf of qualified tenants. The tenants would qualify based on their income and housing owner was defined as a nonprofit housing provider. What’s compelling about this earlier form of leveraging other entities buying land, building, and operating housing is that it originated from a realization that government wasn’t having much success as a developer and manager of housing. This is a recurrent theme in postwar World War II America, government trying to ameliorate housing price problems while struggling whether to build and manage housing or pay others to do it.

Experimental Housing Assistance Program (EHAP)

The CSA’s history describes the beginnings of the EHAP in 1970, as a test of the “impacts and feasibility of providing low-income families with allowances to assist them in obtaining existing, decent rental housing of their choice.” That word “choice” is key, because it will inform the underlying idea of the Section 8 program as it developed over the decades, providing people who need housing with the ability to shop the private market with federal money. There were four questions the government wanted to answer with the experiment.

• How many families would participate?
• What kind of housing would they choose and where?
• What would private housing providers do?
• How much would the program cost?

Again, these are the themes of almost any evaluation of cash-based program. What’s amazing is that it took until 1980 to get the answers, and the results sound as familiar as the questions. Categorically, the results were (from the CSA history),

• Housing quality and participation – A determination was made in the conclusion that, “subsidies have to be tied to housing standards,” but that was tied, wisely, to the understanding that, “stricter housing standards limit participation,” and that “as the subsidy increases, so does participation.”
• Staying connected – Where people chose to use the payments was based on staying close to and maintaining ties with “relatives, neighbors, and friends and are not affected by housing allowance payments.” In other words, people getting assistance were just like any other human being trying to make a decision about where to live, balancing price with other factors.
• No effect on price – “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.”
• Run it at the local level – The recommendation in 1980 was to delegate the management of a voucher program to local Public Housing Agencies.

What’s really compelling here is how, in 1980, the results of the experiment lay down the exact issues still facing today’s Section 8 program; and how these results and conclusions continue to be discovered again, and again, yet ignored. Participation by housing providers continues to lag, and the reasons are right there in the report from 42 years ago; when the rules and requirements get to stringent, private housing providers opt out because of the cost and risk. This was validated again in a HUD study I often cite.

And the issue of portability and choice is right there as well. I’ve pointed out again, and again, that the expectation that a family that gets a voucher should have to uproot themselves after an extended hunt for a qualifying unit is unfair for the family and unnecessary. The family has made a living choice based on a variety of factors, if they are happy with where they live, why can’t they just apply the voucher there, today?

At another time, I’ll dig deeper into the inflationary implications of the experiment, but from the surface, the results found that a cash-based program didn’t appear to fuel rent hikes in response. One of the worries about a cash program, which I have myself, is that flushing out cash payments for rent would have the effect of increasing rents across the market. I have no quantitative sense of how this inflation compares with the inflation created by the LIHTC when it subsidized multimillion dollar construction projects. But the good news from 1980 is that cash for rent doesn’t result in discernable inflation.

Section 8 and Housing Choice Vouchers Now

The Center on Budget and Policy Priorities sums up the chronology of Section 8 well.

“The Section 8 program was established in 1974 during the Nixon-Ford Administration. Major changes to the tenant-based portion of the program were made by legislation passed in 1983, 1987, and 1998. As part of the 1998 legislation, Congress merged the two previous components of the tenant-based Section 8 program — certificates and vouchers — into a single housing program.”

Today, there are two programs under Section 8, Housing Choice Vouchers, a program that allows local PHAs to issue vouchers to qualifying households, and project-based vouchers which allocate a voucher to a housing unit in a qualifying project. In the first, case a family has a voucher and looks for a private owner that will accept the voucher, and in the second case, a voucher is used as part of assumed rental income in a newly constructed project, usually nonprofit owned and operated and frequently a project with 9% LIHTC and other capital subsidies.

What is most important to note is that from the very beginning and throughout its history, the voucher program conceived of the opportunity of letting people with less money make a choice about where they would live and the limits of those opportunities when being able to apply that choice with too many rules and limits. Managing housing quality comes at a cost, specifically less choice for voucher holders. Worries about private profiteering at the expense of taxpayers and voucher holders has driven more and more regulation but has also tended to push private housing providers away from participation. As we continue the review of the program, this will be a continuing and relentless theme.