PAYING THE RENT:

An evaluation of the Section 8 Existing
Housing Program in New York City

A CHPC Research Report

October, 1997

Preface

As we set the wheels in motion to undertake an evaluation of the Section 8 program, President Clinton and Secretary Cisneros issued their "blueprint" for reinventing the Department of Housing and Urban Development. In reaction, controversy raged over the viability of converting all federal project-based housing assistance to tenant-based rent subsidies. It struck us that the administration was exaggerating the choice and mobility benefits that tenants would enjoy from a conversion to tenant-based subsidies, but criticism of the plan echoed too closely the initial objections to demand-side housing policies that were voiced during the early 1970s. Neither proponents nor critics seemed to take much account of the actual performance of the primary rent subsidy program, the Section 8 Existing Housing program, through its 20 years of operation.

Several months later the political tides shifted dramatically. The new Republican Congress realized that however congenial the Section 8 program was to their policy preferences, the quirks of federal budget accounting had produced a Section 8 contract renewal crisis that threatened their plan to slash discretionary federal spending. They promptly rescinded all fiscal 1995 appropriations for new Section 8 rent subsidies, and have not appropriated any new funding since. Local critics of federal rent subsidies, in turn, quickly changed gears, assailing Congress for ending the flow of a critical source of housing assistance.

In the changed political environment, the detached, objective posture toward the Section 8 program we had intended became difficult to maintain. We were genuinely open-minded about the feasibility of converting project-based to tenant-based rent subsidies; that federal rent subsidies of some form are essential to the low-income housing apparatus in New York City is beyond dispute.

The disheartening turn of events prompted us to proceed with the study along two parallel tracks. On one level, the study can be read as an explication of the various ways the Section 8 rent subsidy program underlies many of the most innovative and successful housing development techniques in use in New York City. Although we think that even sophisticated housing professionals will find some of its conclusions surprising, our greatest hope is that it will contribute to a proper appreciation of the program's importance by public officials, the press and the informed public.

On another level, we hope that the study fulfills its original objective of providing a fair evaluation of the advantages and shortcomings of tenant-based rent subsidies in the New York market. Despite the current budget issues that have put Section 8 in disfavor in Congress, we believe that demand-side housing assistance is too fundamental a tool to be eschewed by policymakers indefinitely. When Congress is ready to restore this basic element of the national housing policy mix, studies such as this may help it to fashion the most efficient and useful program possible.

Although I was the principal author of the report and thus take credit for any errors or omissions, several people and organizations deserve a special note of thanks for making it possible. First and foremost among those is the Uris Brothers Foundation, which was quick to appreciate the far-reaching implications of Congress's budget actions for the city, and generously underwrote the costs of researching and publishing the study. The New York City Housing Authority was gracious in its cooperation, asking us for nothing more than an objective and honest appraisal of the program. Harold Sole, NYCHA's director of leased housing programs, was particularly helpful, satisfying our numerous requests for information with promptness and precision. Carol Lamberg, Rosanne Haggerty, Bob Davis, Irene Fanos and Bill Green provided helpful insights and criticism. At CHPC, Curtis Skinner and Steve Williams helped get the project started, and Micah Berul and Kristin Morse helped get it done. I hope the final product justifies all their exertions.

Frank Braconi
October 15, 1997

Introduction & Overview

In New York City the Section 8 Existing Housing program is both ubiquitous and elusive. It has permeated the foundation of low-income housing over the past two decades, providing a critical tool for housing the homeless, facilitating community reinvestment lending, and relieving pressures on the public housing stock that threaten to undermine its social and financial health. Yet, few people are in a position to fully appreciate the various ways tenant-based subsidies serve the city's housing needs. Because its tenants are dispersed and its benefits are often indirect, the program has no vocal constituency to defend it in times of budget austerity.

In 1995 Congress rescinded appropriations previously made for additional Section 8 certificates and vouchers, and subsequently enacted appropriation bills for FY1996 and FY1997 that provided no further funding. Moreover, it legislated subtle program changes aimed at contracting the pool of certificates and vouchers already in use. Perhaps because of the program's diffuse nature, esoteric rules or inelegant name, discussion of these cuts has been almost totally absent from the national debate on poverty and welfare policy. Even as Congress reversed a 20-year old national goal--that rent subsidies should be made available to all eligible low-income families--the issue was virtually ignored by the national media. The "zeroing out" of Section 8 is still not fully recognized for what it was: the abrupt elimination of a basic component of the social safety net. Section 8 rent subsidies are, however, every bit as important to poor families as are earned income tax credits, food stamps or Medicaid.

When Congress mandated the contraction of the Section 8 program, it did so solely for budgetary reasons. The program featured no corruption scandals or socially counterproductive consequences for opponents to decry. Indeed, it is among the most efficient of the non-bureaucratic, choice-oriented anti-poverty programs originally championed by conservative theorists. A year ago, while Congress was passing a housing appropriation bill which contained no funding for new rent certificates or vouchers, the Republican candidate for president was touting them as the most effective means of providing housing to the poor.

To some degree, public support for rent subsidies may suffer from an association with welfare and the legitimate social policy concerns it raises. As a form of income support not linked to work status, however, rent subsidies are fundamentally different from welfare. They are, in principle, available to low-income working families and involve work disincentives no different from those introduced by a graduated income tax. If they are provided disproportionately to non-working households, it is only because Congress imposed allocation rules that led to that result.

Rather than being part of the "welfare problem," Section 8 rent subsidies should be seen as part of the solution. The experience of Chicago's Gautreaux program demonstrates that rent subsidies can, by helping poor families locate in closer proximity to available jobs, contribute to a reduction in welfare dependency. Since the success of the new federal welfare law is predicated on a massive movement from welfare to jobs, the simultaneous elimination of this basic tool for lowering one of the barriers to work reveals a fundamental contradiction in government policy.

Congress's cutback of Section 8 is, however, consistent with its welfare policy in a different respect. Both actions are intended to place more of the cost of social welfare programs on state and local governments. Much has been made of the new federal block grant approach to funding public assistance programs; most observers agree that it will result in a shift in expenditures from the federal to state and local budgets. The contraction of the Section 8 program will have much the same effect, except that no federal block grants are provided to cushion the impact. States and cities have used Section 8 rent subsidies to offset the costs of placing homeless families into permanent housing and to mitigate the high rent burdens that can cause families to become homeless. This is especially true in New York, where rent certificates and vouchers have become an integral part of the city's homeless placement effort. With the flow of new rent subsidies evaporating, the cost of rehousing homeless families and individuals will be increasingly borne by state and local taxpayers.

Overall, the new federal welfare law and Governor Pataki's proposals to implement welfare reform in New York State are likely to intensify the problems arising from the contraction of Section 8 availability. Foremost among those impacts are likely to be increased homelessness, accelerated housing disinvestment and abandonment, and a reduced ability of developers and banks to rehabilitate or create affordable housing. Less visibly, the termination of the Section 8 flow will result in thousands of families struggling to pay rent bills that absorb more than half their incomes with no prospect of help in the offing.

When CHPC initiated this study, housing professionals were only just beginning to appreciate the impact of Congress's elimination of funding for new rent certificates and vouchers. Our motive in undertaking it was to better educate ourselves about the role of Section 8 subsidies in New York City in order to anticipate the dislocations the cutbacks would cause and to define the adjustments that would be required. There had been no comprehensive, independent review of the program in at least fifteen years, during which time it has evolved into a policy instrument of much greater importance and versatility than envisioned when it was created.

This report details the statutory evolution of the Section 8 program and related changes in how it is utilized, the population it serves and the housing it provides. It portrays a program that has become increasingly integral to the city's efforts to avert or ameliorate homelessness and to promote housing preservation and rehabilitation. Unfortunately, our research uncovers no ready substitutes for these critical subsidies, so those important social objectives are likely to suffer with Section 8's demise.

Our study also details some of the shortcomings of the tenant-based subsidy approach. The city's tight housing market apparently did lessen the usefulness of rent certificates and vouchers to many potential beneficiaries, at least until administrative changes were introduced that enhanced their appeal to landlords and provided greater placement services to potential tenants. Also, contrary to the hopes of fair-housing activists and poverty scholars, Section 8 rent subsidies do not appear to have promoted significant racial desegregation or poverty deconcentration in New York City.

Our principal findings and conclusions are:

There are now approximately 100,000 families in the city receiving tenant-based Section 8 rent subsidies. The majority of recipients during the past 15 years were either formerly homeless, living in substandard housing or had rent/income burdens of over 40 percent. The Section 8 program has become increasingly crucial to the city's efforts to rehouse homeless families. The linkage of the Emergency Assistance Rehousing Program (EARP) with Section 8 appears to be extremely effective in expanding private housing opportunities for homeless families. Section 8 subsidies have been instrumental in supporting the New York City Department of Housing Preservation and Development's (HPD) housing rehabilitation and production programs. The frequency with which program participants successfully find eligible housing accommodations has soared since 1990. The Section 8 program does not contribute to racial desegregation or poverty deconcentration. Minority certificate and voucher holders are no more likely to move to middle-income minority neighborhoods than to predominantly white neighborhoods.

The remainder of this report is organized as follows. Chapter I describes the origins of the program, traces federal allocations of certificates and vouchers to the city, and provides a basic description of the way the Section 8 program has been administered by the New York City Housing Authority (NYCHA) and the municipal housing agency (HPD). Chapter II profiles the tenant population and discusses how federal income targets and tenant selection preferences have interacted with the city's own political and housing needs to transform the program into one serving primarily the homeless and others in extreme poverty. Chapter III investigates the type and location of the housing provided through Section 8 and the evidence on tenant mobility. The Epilogue describes in more detail recent congressional actions aimed at contracting the program.

To Next Chapter

Chapter 1: The Program | Chapter 2: The Tenants | Chapter 3: The Housing | Epilogue

Disclaimer: The New York City Rent Guidelines Board has converted this CHPC report to an electronic format and posted it on its web site. We do so to inform the public and the housing community, and further the debate on rent-subsidized housing. The Rent Guidelines Board did not participate in this study and does not necessarily agree with the findings of this report. The report is solely a production of the Citizen's Housing and Planning Council.