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A new Section 8 policy would give poor families access to wealthier neighborhoods

Jun 21, 2016

The Obama administration proposed new rules last week that would help poor families afford to live in more expensive neighborhoods.

Over 2 million American households are assisted through the Housing Choice Voucher Program. Through the program, a federal housing – or Section 8 – voucher holder finds an apartment, pays 30% of their income toward rent, and the rental subsidy pays the rest.

The program is designed to help low-income families move to neighborhoods with less poverty, lower crime and better schools. Studies have found direct links between a person's neighborhood and factors like health, education, and personal outcomes.

Fair Market Rents are used to calculate the maximum subsidies families receive. Right now those FMRs are determined across an entire metropolitan area, meaning that tenants receive roughly the same subsidy, with some adjustments, no matter the relative expense of the areas in which they wanted to live.

The proposed changes would instead determine those market rents by ZIP Code, giving a bigger subsidy to voucher holders living in more expensive neighborhoods. This would help them make up the difference between what they can afford and higher rents.

But it also means the government will start paying less in high-poverty neighborhoods.

According to The Wall Street Journal, the proposal has caused outrage from landlords, low-income tenant advocates and left-leaning local officials, especially in New York City, which has the country’s largest Section 8 program.

Mitch Posilkin is counsel for the Rent Stabilization Association, a New York trade association representing landlords. He told The WSJ:

It is going to put landlords in an untenable position, where tenants through no fault of their own will see subsidies reduced and have to pay more or face eviction.

Supporters of the changes point to the positive impact a better neighborhood can have on a person's life. U.S. Department of Housing and Urban Development Secretary Julián Castro said in a press release:

In some areas of the country, the Housing Choice Voucher Program offers little choice to families about where they can live, limiting opportunities for themselves and their children. We propose to use a tested new approach that would offer these households greater choice to move into higher opportunity neighborhoods with better housing, better schools and higher paying jobs.

In 2011, Dallas implemented a version of this policy. A 2014 Harvard-NYU study found the change yielded positive results:

Because price increases in expensive ZIP codes were offset by larger decreases in low-cost ZIP codes, absent any behavioral response, this policy would have been cost-saving for the government. Incorporating tenants’ improved neighborhood choices, the Dallas intervention had zero net cost to the government.

The proposed changes are subject to public comment, and HUD hopes to produce a final version by the fall.