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Voucher Legislation Passes House and Has Some Good Features

MPLP Summer 2007 Housing Law Section Newsletter Article

                Issue 34, Summer 2007

Voucher Legislation Passes House and Has Some Good Features
by Harish Nandagopal, MPLP Summer Law Clerk


Having passed the House of Representatives on July 12th, 2007 by a vote of 333-83, the Section 8 Voucher Reform Act (SEVRA) should generally be viewed with praise. Some of the proposed Act’s provisions, however, should be greeted more cautiously. Nonetheless, the Act overall promises to enhance the voucher program, providing the first major update to the voucher program since 1998. This article summarizes the Center on Budget and Policy Priorities recently released legislative analysis.[1]


Better funding mechanisms


Among the most significant improvements SEVRA promises is a more stable and evenhanded funding policy for local housing agencies. From 2004 to 2006, a flawed funding formula provided some agencies with excess fund while shortchanging others. These inefficient formulas reduced the number of low-income families assisted by the voucher program by around 150,000. 


Further, SEVRA would provide an incentive for agencies to maximize voucher spending. Currently, many agencies under-allocate vouchers as a buffer against unexpected costs—such as rental market price fluctuations.  The Act would allow agencies to maintain a small reserve, 12.5% during the first year, while recapturing any unused funds. The recaptured funds would be used to supplement the funding of agencies that have high utilization rates. Also, agencies that overspend will be allowed to borrow funding received from their next fiscal year.


Portability improvements


Another important SEVRA enhancement eliminates hurdles to voucher portability. While the current voucher program allows tenants to transfer (“port”) vouchers from ones agency’s jurisdiction to another’s; the original issuing agency must agree to continue covering the tenant unless the destination agency agrees to cover (“absorb”) the cost of the voucher. Not surprisingly, destination agencies are hesitant to incur the added costs at the expense of assisting applicants on their own waiting lists. SEVRA would mandate that destination agencies assume the costs, while providing them funding via the unused funds pool.


More responsive fair market rents


SEVRA would also better correlate mandatory voucher caps with local market conditions. Generally, agencies are not allowed to fund vouchers beyond 10% of “fair market rent”—a figure that HUD establishes. Unfortunately, HUD currently determines the “fair market rent” solely based upon the whole metropolitan area, which can often shortchange voucher recipients because of varying prices in a large region. When the HUD’s “fair market value” is disproportionately low, families must either pay a higher percentage of their income towards their rent or live in an area with high poverty and crime. Under SEVRA, HUD would be required to separate a large metropolitan region into areas that have similar rental rates when calculating the area’s “fair market value.”  This change would allow many low-income families a greater degree of freedom in choosing where to live.


Other changes


SERVA would also establish a number of other improvements, such as clearer methods of determining a tenant’s rental payments. For example, SERVA would require agencies to determine a tenant’s rental payments based upon their income earned their previous year rather than estimating future income, which sometimes requires readjustments partway through the year. Other advances in SERVA, such as relaxed housing inspection rules and reduced obstacles for agencies pursuing project based vouchers are also noteworthy. While, SERVA would only requires agencies to inspect apartments once every two years, the act allows Agency’s to administer inspections more frequently. More importantly, SERVA stipulates relocation rights for tenants living in apartments that fail to rectify problems discovered during inspections.


MTW/HIP concerns


However, SERVA is not without certain pitfalls. Specifically, the Act’s expansion of the “Moving-to-Work” (MTW) demonstration—which SERVA re-labels the “Housing Innovation Program” (HIP)—raises considerable concern. While only 25 agencies are currently involved in the program, SERVA would allow HUD to increase participation to 80 agencies. Under MTW, participating agencies can ignore most federal regulations and tenant safeguards. While the central goal behind MTW was to facilitate housing policy innovation, the plan inherently did not provide any significant mechanism of evaluating its success.   While SERVA would require better evaluation standards for HIP and improved procedural safeguards for tenants, the program would disproportionately affect a significant number of voucher recipients, greatly contributing to its potential hazards.


HIP’s guidelines, which are similar to MTW’s, would allow HUD to prefer the enrollment of larger agencies. For instance, while the number of agencies participating in MTW is 1%, the large size of the agencies involved impacts more than 10% of voucher and public housing recipients. (there are no MTWs program in Michigan currently)  Based on proportional estimates, one million families could fall under the experimental auspices of HIP, raising two major issues. Firstly, there is significant concern that the unevaluated policies agencies adopt under HIP could negatively impact a great number of families. Secondly, there are questions of whether HUD would have the adequate resources to oversee and evaluate the varying policies that the various agencies adopt. While, the House of Representatives did not seem to adequately address these issues; it fortunately did, by a floor amendment,  preserve protections for domestic violence victims, ensuring that an agency’s “innovative” policies will not run counter to the Violence Against Women’s Act.


ID Requirement Concerns


Another successful floor amendment to the SEVRA the House passed requires all household members, even those not receiving assistance as a result of proration, to supply a social security card and a government issued ID as a prerequisite to receiving aid. The Act would have a negative impact on both  “mixed households,” those having both documented and undocumented residents and households with citizens that are unable for furnish the required identification. It remains to be seen whether the Senate would support a similar measure.


Despite the HIP and identification provisions, the House’s approval of SEVRA has been received with optimism. And indeed, there is much to be optimistic about. Assuming, however, that the Act passes the Senate and is signed by the President (who has voiced opposition to the bill), close scrutiny must be given to the various agencies enrolled in HIP to ensure that low income families have adequate housing opportunities. Depending on the program’s impact and performance, Congress should not be afraid of revisiting the issue.


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