Ryan’s Take On HUD’s Section 8 Housing Voucher Program

The Section 8 program was the first on Congressman Paul Ryan’s review of housing programs when he took a look at the War On Poverty a decade ago. Section 8 was the biggest federal housing program then and it is now; the program at more than $32 billion dollars is roughly three times bigger than the Low Income Housing Tax Credit. As I posted previously, the Section 8 program emerged out from a realization by the federal government that it would be far more efficient to subsidize households living in privately owned housing – even if that owner is a nonprofit – that to build and operate housing itself. Although Section 8 has housed many over the years, Ryan is critical of it for its failure to improve other outcomes like employment and mobility.

Note: Ryan’s review of housing programs can be found at this link and all references that follow are to that document unless otherwise noted.

More Spending and More Demand for Vouchers

Ryan’s critique begins with a history and then a note about the budget of the program at the time. Out of the $49.6 billion spent on low-income housing programs by the federal government in 2012, Ryan notes, “$17.9 billion (about 36 percent of the total) funded Section 8 vouchers. Roughly 2.2 million households receive voucher subsidies through the program.” Ryan also points out that the program is administered and managed on the ground by 2,350 local Public Housing Authorities (PHA). There has been debate about whether this is an efficient way to do things. In 2016, The Center on Budget and Policy Priorities has suggested consolidating many of the overlapping PHAs. It’s an idea worth looking into.

Ryan’s document explains how the program worked then, and not much has changed in the last decade. Households qualify for the Section program if they have an income of 50% of Area Median Income (AMI) although federal law required 75% of vouchers be set aside for households at 30% of AMI or below including set asides for disabled heads of households and elderly applicants. As I mentioned in the last post, eligible units face requirements for quality, safety, and health which include inspection of the units. Also, a unit sets a Fair Market Rent (FMR) at about 40 percent of market rents and can adjust them higher. The FMR can be adjusted, residents can pay more out of their own pocket, and I’ve posted before about local efforts to set aside FMR requirements in order to increase utilization.

In 2012, HUD reported that in 2012 “the average total rent of voucher recipients was $955 per month. Of this, the average tenant contribution was $336, and the average Housing Assistance Payment [HAP] was $617.” Households can move and take their voucher with them, even to a different state, and local PHAs must continue to pay HAP even if the eligible rent is higher. Households lose their voucher six month after their incomes go up enough to push them above the qualifying threshold. Not surprisingly, “according to HUD’s Resident Characteristics Report, which considers data from October 2012 through January 2014, 30 percent of current voucher holders remain on Section 8 assistance for ten years or longer.”

According to Congressman Paul Ryan’s review of housing programs included in his critique of the War On Poverty, “evidence on the effectiveness of Tenant-Based Rental assistance is mixed. While some families use their Section 8 voucher to relocate to a neighborhood with lower poverty and greater opportunity, the evidence suggests many families make an initial move to a low-poverty neighborhood but then move back to a high-poverty neighborhood. Or many never move from a high-poverty neighborhood at all. Evidence also suggests voucher recipients do not experience substantial improvement in education or earnings upon obtaining a voucher.”

“Low Opportunity Neighborhoods”

Ryan places a lot of value on whether a family is moves to a “neighborhood with lower poverty.” I’ll look at this later on, but it is true that the Experimental Housing Assistance Program (EHAP) in the 1970s was concerned about where families took their vouchers. Given the fact that PHA’s are required to emphasize households with “extremely low” incomes and those families have stronger to connections to family and friends in higher poverty neighborhoods this makes sense. The EHAP found that connections made the biggest difference for households in where they chose to live.

Ryan cites a study that “reports that even when families use a voucher to move to suburbs, they are more likely to live in “low-income suburbs with inferior access to jobs.” Ryan seems to have the expectation that once a household gets a voucher, they ought to move to a higher income neighborhood, and he seems to accept this as a given. But why would that be the expectation and why would that be desirable? Ryan doesn’t stop to make that case but instead criticizes the program for not achieving that outcome.

Ryan notes disapprovingly that “many families ultimately moved back to a higher-poverty neighborhood after one or two years.” This is too complex of an issue to address here, but it has been assumed by both left and right that moving out of the poor neighborhood of origin is a good thing or that “concentration of poverty” is a bad thing. Yet, there is often concern about neighborhoods that are predominately made up of people of color should stay that way. Ryan seems to buy into the notion that Section 8 should be judged based on movement to higher income neighborhoods without much explanation of why.

Spending Up on Section 8 but So Was Demand

Ryan also calls out the fact that while spending on Section 8 increased over the life of the program, the number of eligible households hasn’t declined but increased. Section 8 costs grew “from $10 billion in 2005 to almost $18 billion in 2012, a cumulative increase of 79 percent. From 1998 to 2004, voucher outlays grew 93 percent, or 71 percent after an inflation adjustment.” Ryan cites a 2006 report by the Government Accountability Office (GAO) and other government statistics that highlight several reasons for this increase. They included,

• Increases in household subsidies because of increases in market rent and lagging income growth.
• Households in extreme poverty and paying half their gross monthly income in rent and living in substandard housing “increased from 7.1 million in 2009 to 8.5 million in 2011.”
• The Great Recession that was the result of massive mortgage defaults in 2008 was also a factor in pushing up demand for the program and thus spending.

The GAO suggested streamlining administration as a way of reducing non-housing costs.

Health and Employment

Ryan acknowledges that “the academic community lacks consensus,” about how getting a voucher effects employment. that this effect exists for the majority of voucher recipients. But Ryan cites studies that found that voucher holders had “an average annual decline in earnings of $858 in the initial year of voucher receipt” and that “the negative income effect decreased to $277 five years after voucher receipt.”

Ryan seems to believe that in spite of the mixed data, vouchers either discourage employment or limit income growth. As with movement to higher income neighborhoods, it’s unclear why Ryan thinks that that the Section 8 program – a housing program – should be judged on its impact on employment. It’s obviously important, especially if somehow getting a voucher leads necessarily to lower incomes, but that is not established and he admits that.

When it comes to health, Ryan cites another evaluation that found “that while members of the Section 8 group and experimental group had better health outcomes than members of the control group, they did not have better educational, employment, or income outcomes.” But that same study suggests that “a more comprehensive approach is needed to reverse the negative consequences of living in neighborhoods with heavily concentrated poverty.”

Ryan’s Take on Section 8: People Were Housed, but Their Lives Didn’t Get Better

While Ryan argues that Section 8 is more efficient that the LIHTC, he still doesn’t think that the program pushes back poverty because it doesn’t result in poor people leaving poor neighborhoods and it seems to discourage work. The critique has a logic to it: keep paying people’s rent and they won’t try as hard as they might if they had to pay rent themselves. This is implicit and mostly unsubstantiated as a criticism, and behind it is a deeper assumption about low opportunity and high opportunity neighborhoods and concentration of poverty, an argument he doesn’t fully make but takes as axiomatic.

In a review of poverty programs, it’s fair to criticize Section 8 for not having done much to solve underlying poverty. However, Ryan seems to expect too much from one program that helps pay the rent. Ryan misses the problems with low participation and the way that limits on use of vouchers might end up influencing where people end up living aiming instead at outcomes unrelated to housing. Up next, we’ll take a look at how the Section 8 program is working today.