New Data on True Cost of Voucher Administration

HUD is trying to get better data on the true cost of administering the Housing Choice Voucher program, but is a new formula enough to make up for the fact […]

HUD is trying to get better data on the true cost of administering the Housing Choice Voucher program, but is a new formula enough to make up for the fact that voucher administration has been intentionally underfunded for years?

Officials from HUD’s Departments of Policy Development and Research, and Public and Indian Housing were recently on hand to answer questions from industry stakeholders about a new report they commissioned from Abt Associates on administrative fees for Housing Choice Vouchers. Also known as “Section 8,” Housing Choice Vouchers could play a major role in cementing HUD’s identity as the “Department of Opportunity” because they assist people in renting units on the open market, meaning they can move to areas with better schools, less crime, and other features associated with leaving poverty.
But housing authorities have struggled to just stay program compliant in recent years, let alone do the extra outreach and counseling work required to place low-income residents in areas of opportunity, because Congress has capped appropriations for administrative fees. In 2013, the year of the study, sequestration drove the administrative fee proration down to 69 percent of the formula-driven total. While this has driven some real cost savings via automation, housing authorities also laid off staff and let vouchers go un-leased to manage costs.

Housing Choice Vouchers have essentially been prevented from living up to their potential as change agents. According to a 2014 report by the MacArthur Foundation, 41 percent of Housing Choice Voucher residents live near low-performing schools, compared to 25 percent of households living in apartments subsidized by the Low Income Housing Tax Credit.

The existing formula calculates fees based on the number of vouchers under lease and the local Fair Market Rent as a proxy for local wage rates. The newly proposed formula from Abt incorporates cost drivers that were discovered by actually tracking the time spent on various activities and costs of efficiently managing the program.

Readers looking for the new formula to increase voucher resident mobility (to areas with better schools, lower crime, and more opportunity) will be disappointed. While Abt found that many housing authorities felt that it was important to provide services such as lease counseling to increase mobility to areas of opportunity, few felt that they could afford to, and the new formula does not fund these activities. All it does is reduce PHA disincentives for mobility by better accounting for the time spent recruiting new landlords, inspecting new units, etc.

Moreover, the study’s focus on “high performing” PHAs leaves in place some anti-mobility aspects of the PHA assessment system that previous Rooflines authors have called out, such as getting high numbers of fast lease-ups. In light of the importance of housing issues in the recent unrest in Baltimore, it is important to note that Baltimore’s class action lawsuit–driven mobility program is creating some impressive results. If this is the policy moment for administrative fee reform, why not push for enough funding to actually implement mobility programs on a wider scale and create better outcomes for residents? 

Like mobility concerns, cost savings were not part of Abt’s scope of work, but their findings did suggest some ideas to look into. The new formula is projected to save 5 percent over the old formula, if you believe that Abt was able to account for the fact that their study took place during sequestration, some of the leanest months of the program’s history. The study doesn’t recommend any procedural changes to bring costs down from an average of $70 per unit per month (one wonders what voucher residents could do with $70 a month instead).

Instead, the authors chose to focus on the fact that the administrative money most housing authorities would receive under the new formula would be more than the fraction of the old formula they have been receiving since 2008—far before sequestration. If this seems like small cause for celebration to you, you’re not alone, but I guess it would still be good news for programs that have been operating at less than three quarters of the old definition of full funding.  At the very least, having better data about the true costs of administering housing choice vouchers should provide a policy defense against future pro-rations of funding.

HUD plans to provide housing authorities with the source data so that they can model their own fee structures and plan for the future of their voucher administration departments. In the longer term, HUD plans to issue proposed rules based on the study’s findings and open a comment period in fall 2015.

(Photo credit: Port of San Diego, via Flickr, CC BY 2.0)

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