Earlier this month, a report in Chicago pointed to some of the tensions implicit in a desegregation-oriented federal affordable housing program.

The Sun-Times, with that city’s Better Government Association, published a “watchdogs” feature on housing choice vouchers. The big news: while some voucher holders pay relatively large proportions of their rents, others pay much less, or nothing, for apartments that cost much, much more—sometimes well over what an employed, working-class family could afford.

These findings aren’t necessarily scandalous: different voucher holders living in very different neighborhoods and paying different amounts of money is how the system is designed to work. But it’s a good excuse to take a closer look at a program that serves over five million people in 2.2 million households, but whose details remain muddy to many people.

Housing choice vouchers, previously known as Section 8, were created by Congress in 1974 as a response to perceived failures in the traditional public housing program, whose modernist towers had been tarnished with poor construction and maintenance, extreme economic and racial segregation, and high crime rates. (Notably, however, some academics have challenged this narrative of failure—for one example, look to Nicholas Bloom’s Public Housing that Worked.)

The Pruitt-Igoe public housing complex in St. Louis, before its 1972 demolition. Credit: US Geological Survey
The Pruitt-Igoe public housing complex in St. Louis, before its 1972 demolition. Credit: US Geological Survey

 

The idea was that rather than living in government-owned buildings, low-income people would receive rental subsidies to live in privately-owned buildings of their selection. That way, they could—in theory—choose where to live, and break the patterns of segregation that public housing projects had often reinforced. For the architects of the program, then, the news that some voucher holders were living in wealthy downtown neighborhoods while others lived in more modest communities would have been exactly what they hoped for.

And what about paying different amounts? Well, what vouchers are worth depends on two things: how much rent is, and how much income the voucher holder has. In general, voucher holders pay 30 percent of their income towards rent, and the voucher picks up the difference between that and the total cost of their apartment up to a HUD prescribed maximum limit, calculated to reflect the price of a modest apartment in the local market. So if you make $1,000 a month, and your rent is $1,000, you pay $300 and the voucher will cover the other $700. If you make $500 a month and your rent is $1,200, you pay $150 and the voucher covers $1,050. Because the point is to help low-income people expand their housing choices while requiring them to pay according to their financial ability, different people receiving very different amounts of money for their voucher is pretty much built into the DNA of the program.

But there is a wrinkle. Vouchers are only supposed to allow their recipients to live in “reasonable” apartments, and so each year HUD calculates a “fair market rent” (or FMR) figure for each metropolitan area, which is supposed to roughly approximate the cost of a slightly below-average apartment in the region. Vouchers will only cover rents up to this FMR.

But FMR essentially averages rents across what can be vast geographic, social, and economic distances, including far-flung suburbs, tony downtown districts, and very poor neighborhoods. As a result, the final number might be too low to afford many neighborhoods with good access to jobs, high-performing schools, and other amenities—the very places that vouchers are supposed to allow low-income people to live.

One strategy for getting around this problem has been “exception rents.” Several public housing authorities, under a little-appreciated demonstration program called Moving to Work, have received permission to give vouchers for apartments with rents above FMR. In some cases, the limit is 120 percent of FMR; in others, 150 percent. Chicago appears to be an outlier in having granted permission for payments going up to 300 percent of FMR, leading to situations in which a handful of voucher recipients could afford to live in extremely high-end new buildings—though the Chicago Housing Authority has announced that it is phasing out those rents and lowering the limit to 150 percent of FMR over the next few years.

While reporting on these “exception rents” has led to hand-wringing about how well voucher recipients “deserve” to live, the policy is responding to a serious problem: namely, the failure of vouchers to actually challenge the patterns of segregation they were meant to dismantle. (We would also point out that, if the question is about “fairness” of housing subsidies, the entire voucher program is smaller than tax giveaways to relatively affluent homeowners.) Voucher recipients do live in neighborhoods that are somewhat less racially segregated, and have lower levels of poverty, and better access to some resources than residents of traditional public housing projects, but the differences are far more modest than proponents might have hoped.

Part of the problem, surely, is discrimination against voucher holders—which is perfectly legal in most places, and rampant even where it’s illegal. Another issue is transportation costs, which can make some suburban, car-dependent locations unaffordable even if the housing costs themselves are not. Another issue may simply be that voucher recipients have social support networks in their current neighborhoods that they can’t afford to give up by moving away. But as important as these other issues may be, to the extent that HUD’s “fair market rents” are simply too low to reach many neighborhoods, that’s clearly a barrier.

Besides “exception rents,” HUD is also testing a new strategy for getting around this problem: “small-area FMRs.” Essentially, instead of calculating fair market rents for entire metropolitan areas, they’ll be determined by ZIP code. So in Chicago’s south suburb of Thornton, vouchers would only cover 78 percent of FMR, or $830 for a two-bedroom apartment. In the wealthier West Loop neighborhood, vouchers would cover about 148 percent of FMR, or $1,560 for a two-bedroom apartment.

But even here, “small area” FMRs would be capped at 150 percent of the regional average, even if local rents are far higher. So in north suburban Lincolnwood, vouchers will cover no more than $1,590 for a two-bedroom apartment—even though HUD’s own figures suggest that local rents are nearly $500 higher.

Of course, some would argue that vouchers don’t need to make every neighborhood available. Much of the outrage generated by the Sun-Times/BGA piece revolved around the idea that some living conditions are too good for people receiving vouchers.

Ironically, though, what counts for some people as “abuse” of the federal voucher program is exactly what one of the most popular local affordable housing policies is all about. Inclusionary zoning is premised on the idea that new, often luxury buildings should be setting aside some units for low-income people. The difference isn’t the kind of units that low-income people get to live in—it’s whether there’s any direct cost to taxpayers.

But as we’ve written before, there’s no getting around it: below-market housing is necessary, and it costs money. When it comes to other major social priorities, like food stamps, public schools, or Medicaid, most people realize that the only way to fund the necessary programs is with broad-based taxes: “impact fees” on grocery stores or doctors just don’t cut it.

But when it comes to housing, we too often expect that if developers are just squeezed a little more, we’ll have all the low-cost housing we need. It’s not true. As it is, funding is so sparse that only a quarter of households that qualify for low-income housing assistance receive it; meanwhile, voters are happy to approve much larger subsidies for middle- and upper-class homeowners. Figuring out how to make vouchers as the poverty- and segregation-fighting tools they were intended to be, in as financially efficient a way as possible, is an important goal. But whatever the answer is, it will require us to decide we care enough about affordable housing to pay for it.