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# Legislative Bulletin........................................................July 12, 2007

**Contents:**

**H.R. 1851**---Section 8 Voucher Reform Act

H.R. 1851---Section 8 Voucher Reform Act (*Waters, D-CA*)

**[Order of Business]{.underline}**: The bill is scheduled to be
considered on Thursday, July 12^th^, subject to a likely structured
rule. Summaries of the amendments made in order under the rule will be
provided in a separate RSC document.

**[Background]{.underline}**: As the Congressional Research Service
(CRS) reports, the Section 8 Housing Choice Voucher program provides
monthly rental assistance to about two million low-income households
each year. It is administered at the local level by nearly 2,500
quasi-governmental public housing agencies (PHAs). While some form of
Section 8 rental assistance has been in place since the mid-1970s, the
modern program was shaped largely by the 1998 Public Housing Reform Act
(Public Law 105-276).

The current voucher program provides a federally-defined subsidy, called
a voucher, that a family can use to help pay its housing costs in the
private market. That voucher pays roughly the difference between a
unit's rent and the tenant's contribution towards the rent. Families are
required to pay roughly 30% of their adjusted incomes toward rent (with
special allowances for up to 40%).

Annual income, for the purpose of rent determination, is defined as all
amounts that are anticipated to be received by all members of a
household during the [subsequent]{.underline} year, with some exclusions
(such as foster care payments). PHAs are expected to verify families'
incomes using third-party sources. Once the total amount of income has
been determined, the family could qualify to have certain amounts
deducted from total income, such as \$480 per dependent, \$400 for
elderly and disabled households, and reasonable child care expenses,
disability expenses, and certain medical expenses of the elderly or
disabled.

The current voucher program sets initial eligibility for assistance at
50% or below of area median income (AMI), with a requirement that 75% of
all vouchers be targeted to extremely low-income families (30% or below
AMI).

CRS confirms that the current voucher program does not have time limits
or work requirements. Families that receive voucher assistance can
retain that assistance until either they choose to leave the program,
they are forced to leave the program (due to non-compliance with program
rules or "insufficient" funding of the program), or their income rises
to the point that 30% of their income equals their housing costs (at
which point their subsidy would be zero).

Before a PHA can approve a housing unit selected by a tenant, the unit
must first be inspected to ensure that it complies with the Housing
Quality Standards (HQS) adopted by the Department of Housing and Urban
Development (HUD). If the unit is approved, it must be reinspected at
least annually. If the unit fails inspection, the PHA cannot make
payments to the landlord until the unit is in compliance.

Section 8 vouchers are nationally portable, which means that families
can take their vouchers and move from the jurisdiction of one PHA to the
jurisdiction of another PHA.

[Project-based]{.underline} Section 8 housing, as CRS reports, is a form
of rental subsidy that is attached to a unit of privately owned housing.
Low-income families who move into the housing pay a reduced rent, based
on their incomes. Families that live in Section 8 project-based units
pay 30% of their incomes toward rent. In order to be eligible, families
must be low-income; however, at least 40% of all units must be available
for very low-income families. If a family leaves the unit, the owner
will continue to receive payments as long as he or she can move another
eligible family into the unit.

Owners of properties with project-based Section 8 rental assistance
receive a subsidy from HUD, called a Housing Assistance Payment (HAP).
HAP payments are equal to the difference between the tenant's payments
(30% of income) and a contract rent, which is agreed to between HUD and
the landlord.

Today, vouchers are the primary form of assistance provided under
Section 8, although over one million units still receive project-based
assistance under their original contracts or renewals of those contracts
(primarily from the 1970s).

In short, Section 8 vouchers follow the [family]{.underline}, whereas
Section 8 project-based assistance follows the housing
[unit]{.underline}.

For more information on Section 8 housing, including a side-by-side
chart comparing the major provisions of H.R. 1851 with current law, see
[this CRS report](http://www.congress.gov/erp/rl/html/RL34002.html).

**[Summary]{.underline}**: H.R. 1851 would amend Section 8 of the United
States Housing Act of 1937 to alter certain aspects of HUD's rental
housing assistance programs. The bill would adjust calculations of
income, tenant rent, and PHA funding, alter requirements for the
inspection of housing units, and change some requirements for the
targeting of housing assistance. Highlights of the bill are as follows:

-   Allows unit occupancy and Section 8 assistance payments to be made
    for up to 30 days if a housing unit fails inspection only because of
    [non]{.underline}-life-threatening conditions (payments suspended
    after 30 days such conditions are not corrected).

-   Also allows a PHA to permit occupancy [prior]{.underline} to
    inspection, if another federal program inspection meeting federal
    Housing Quality Standards (HQS) has been made within the previous
    year, and to make payments to the owner [retroactive]{.underline} to
    the beginning of the lease term when an inspection is subsequently
    completed.

-   Extends the current annual re-inspection requirement to a biennial
    requirement. Allows the use of inspections under another federal,
    state, or local housing assistance program (instead of a PHA
    re-inspection), subject to PHA certification that such inspection
    provides comparable standards to federal HQS.

-   Requires PHAs to withhold assistance to any property assisting a
    voucher holder that fails an inspection and which is not corrected
    within 90 days. Such withheld assistance could be used to make
    repairs of such properties and could not be used to evict voucher
    holders.

-   Extends the annual PHA certification requirement for Section 8
    housing to three years for fixed income families (as defined in the
    bill). Interim recertifications could be triggered only if unearned
    annual income increases by \$1,500 or if a family requests a
    recertification if its income falls by \$1,500 or more (or a lesser
    amount that the PHA could establish).

-   Makes a variety of changes to how one calculates income for the
    purposes of qualifying for Section 8 housing. For example:

> \--raises the standard deduction for elderly and disabled families
> from \$400 to \$725 a year;
>
> \--raises the standard deduction for dependents from \$480 to \$500 a
> year (and indexes both above amounts for inflation;
>
> \--eliminates income deductions for child care expenses and child and
> spousal support;
>
> \--raises the threshold for calculating medical and handicapped
> assistance expense deductions from expenses over 3% of net income to
> expenses over 10% of net income;
>
> \--exempts 10% of the first \$10,000 of prior-year earned income;
>
> \--exempts income of minors (except for heads of households or their
> spouses) and of adult dependents that are full time students;
>
> \--exempts grant-in-aid or scholarship amounts used for tuition or
> books; and
>
> \--exempts income from Coverdell education accounts and Section 529
> qualified tuition programs.

-   Allows PHAs to rely on the income determinations made under other
    federal programs (like Medicaid, TANF, etc.).

-   Creates a new asset limit and residency ownership prohibition, for
    both initial eligibility and for ongoing annual recertification, for
    voucher, public housing, and Section 8 project-based assistance. The
    provision prohibits any family from having either more than
    \$100,000 in net assets or ownership of a residence suitable for
    occupancy (subject to certain exceptions).

-   Extends the 80% of local median income limitation that applies to
    initial occupancy to the recertification process (subject to certain
    exceptions). PHAs and owners could elect not to enforce this income
    limitation for residents of public housing or project-based Section
    8 units, and PHAs and owners could delay eviction or termination for
    up to six months.

-   Targets Section 8 assistance to the higher of 30% of the local area
    median income calculation or the national poverty level for the
    appropriate family size. (Current law is just the 30% requirement.)
    75% of new vouchers and 40% of new public housing and project-based
    residents must have adjusted incomes below this threshold. This
    change does not apply to Puerto Rico or any other U.S. territory or
    possession.

-   Authorizes such sums as may be necessary for FY2008-FY2012 for the
    renewal of expiring Section 8 vouchers, and for new tenant
    protection vouchers (for tenants displaced from project-based
    housing from no fault of their own), enhanced vouchers (special type
    of tenant protection voucher for certain families with rents above
    what they had been paying previously), and other special purpose
    vouchers (for such things as family reunification).

-   Requires HUD to issue tenant protection vouchers for all public and
    assisted housing units that are lost (not just those occupied at
    time of application for such tenant replacement vouchers).

-   Provides that the voucher funding allocation for PHAs is
    recalculated each year, based on a PHA's leasing and cost data from
    the prior calendar year.

-   Directs HUD to allocate all funds by the later of February 15^th^ or
    45 days after enactment of the appropriations bill funding the
    voucher renewals.

-   Authorizes PHAs to retain unobligated carryover voucher funds equal
    to 8.33% of their annual allocation at the end of 2007 and 5% in
    each succeeding year, to be maintained as voucher reserves. If a PHA
    has reserves of less than 2%, it could receive an advance of up to
    2% in the last three months of a year to cover overages. The advance
    would be offset by an equivalent funding reduction in the next
    year's funding allocation.

-   Requires HUD to recapture amounts in excess of each PHA's reserve
    limit at the end of each year and make available all such recaptured
    funds no later than May 1st, first for reimbursement for increased
    costs related to portability and family self-sufficiency escrow
    accounts, and next for reallocation to PHAs for increased voucher
    leasing.

-   Provides that voucher administrative fees are adjusted for inflation
    and include an amount for the cost of issuing new vouchers.

-   Alters the homeownership assistance program by allowing voucher
    funds to be used for a down payment for a first-time home purchase,
    as a one-time grant in an amount not exceeding \$10,000, for
    families who have been receiving voucher assistance for a period of
    at least one year. Allows voucher funds to be used for both the cost
    of leasing the land for manufactured housing, plus monthly home
    purchase costs, including property taxes, insurance, and tenant-paid
    utilities.

-   Authorizes a PHA to submit information regarding rental payment
    history for voucher tenants to credit reporting agencies, upon the
    consent of the family.

-   Directs HUD to assess the performance of PHAs in administering their
    local voucher programs in the following areas: quality of units
    assisted, extent of utilization of allocated funds and authorized
    vouchers, timeliness and accuracy of reporting to HUD, effectiveness
    in carrying out policies to achieve deconcentration of poverty,
    reasonableness of rent burdens (as defined in the bill), accurate
    rent calculations and subsidy payments, effectiveness in carrying
    out family self-sufficiency activities, timeliness of actions
    related to landlord participation, and such other areas as the HUD
    Secretary deems appropriate.

-   Increases the percentage of vouchers a PHA can use for projects from
    20% to 25%, with authority to go 5% higher to serve homeless
    persons.

-   Increases the percentage of vouchers that can be project-based in
    any project to the greater of 25 dwelling units or 25% of the units
    in a project (subject to certain exceptions), to provide for more
    income-mixing.

-   Increases the maximum project-based voucher contract term from 10 to
    15 years.

-   Allows owners using project-based vouchers to maintain site-based
    waiting lists, subject to PHA oversight.

-   Requires HUD to monitor voucher rent burdens and submit an annual
    report to Congress on the percentage of families nationwide paying
    more than 30% and 40%, respectively, of their adjusted incomes for
    rent. Requires HUD to submit an annual report to Congress on the
    degree to which voucher families are clustered in lower rent, higher
    poverty areas, and the extent to which greater geographic
    distribution of families could be achieved.

-   Requires PHAs to publicize information from the HUD reports above
    and, if the local percentage of voucher families paying more than
    30% or 40% of their incomes for rent exceeds the national average,
    the PHA must either raise the payment standard to eliminate
    "excessive rent burdens" or explain its reasons for not doing so (a
    payment standard is a maximum subsidy level that is equal to
    anywhere between 90% and 110% of Fair Market Rent). HUD would have
    to approve PHA requests to raise payment standards in such
    circumstances, up to 120% of the fair market rent (and higher for
    people with disabilities).

-   Requires HUD to set geographical areas for the purpose of
    establishing fair market rents (FMR) in as wide a range of
    communities as is feasible, including requiring separate areas for
    each urban county and metropolitan city with over 40,000 rental
    units. Areas would be shielded from FMR reductions resulting from a
    change in the percentile of distribution of rents used to establish
    the FMR, and tenants would be protected against reductions in
    payment standards resulting from these provisions.

-   Limits a PHA's elective screening of applicants to an applicant's
    ability to fulfill the obligations of the lease, including a
    consideration of any mitigating circumstances. Applicants and
    current participants are required to be notified of the basis of any
    determination of ineligibility and are allowed an informal hearing
    to seek to reverse the ruling.

-   Revises the Moving to Work Program (MTW) as the Housing Innovation
    Program (HIP) and extends it for ten more years. Up to 60 PHAs could
    participate generally (as designated by HUD using detailed selection
    criteria in the bill), plus an additional 20 PHAs under specific
    program requirements ([including one-for-one replacement
    requirements for demolished units and a prohibition on work
    requirements and on time limits on receiving
    assistance]{.underline}). The 25 existing MTW participating agencies
    would have to be approved as HIP participants, subject to certain
    exceptions.

-   Sets the purpose of HIP as providing PHAs and the HUD Secretary "the
    flexibility to design and evaluate innovative approaches to
    providing housing assistance that\--

> \--"increase housing opportunities for low-income families, including
> preventing homelessness, rehabilitate or replace housing at risk of
> physical deterioration or obsolescence, and develop additional
> affordable housing;
>
> \--"leverage other Federal, State, and local funding sources,
> including the low-income housing tax credit program, to expand and
> preserve affordable housing opportunities, including public housing;
>
> \--"provide financial incentives and other support mechanisms to
> families to obtain employment and increase earned income;
>
> \--"test alternative rent-setting policies to determine whether rent
> determinations can be simplified and administrative cost savings can
> be realized while protecting extremely low- and very low-income
> families from increased rent burdens;
>
> \--"are subject to rigorous evaluation to test the effectiveness of
> such innovative approaches; and
>
> \--"are developed with the support of the local community and with the
> substantial participation of affected residents."

-   HIP is designed to allow for PHAs to creatively provide and
    administer housing assistance (mainly by suspending many of the
    complex requirements for non-HIP PHAs).

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-   Clarifies that assistance distributed under HIP would have to be in
    accordance with numerous provisions applicable to non-HIP hosing
    assistance, including such things as judicial review, income
    targeting, consultations with resident advisory boards, compliance
    with housing quality standards, [the payment of prevailing
    wages]{.underline}, and the demolition of public housing.

-   HIP participation could not decrease the funds a PHA receives, and
    each participating PHA would have to report to HUD annually on the
    use of its HIP funds (in the format of an audit that complies with
    OMB Circular A-133).

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-   HUD would have to submit evaluation reports of HIP participants
    after three, five, and ten years and could contract out the
    assessment functions to an independent entity.

-   Authorizes \$10 million for each of FY2008-FY2012 for HIP capacity
    building and technical assistance to families, plus \$15 million for
    HUD to conduct the required evaluations.

-   Authorizes HUD to enter into agreements with the Social Security
    Administration (SSA) and the Secretary of Health and Human Services
    (HHS) to allow for participation in state demonstration programs
    designed to permit people with significant disabilities to be
    employed and continue to receive federal benefits administrated by
    SSA and HHS. [HUD could permit a partial or complete disregard of
    increases in earned income for demonstration program participants
    for the purpose of calculating rent contributions in Section 8
    housing]{.underline}.

-   Authorizes "the amount necessary" in each of FY2008-FY2012 to
    provide incremental tenant-based vouchers for 20,000 families each
    year.

-   Sets the effective date for the provisions in this Act, unless
    otherwise stipulated, as January 1, 2008.

**[RSC Bonus Fact]{.underline}**: Section 8 housing assistance has
become the largest component of the HUD budget, with appropriations of
more than \$20 billion in FY2006. ([*Congressional Research
Service*](http://www.congress.gov/erp/rl/html/RL32284.html))

**[Committee Action]{.underline}**: On March 29, 2007, H.R. 1851 was
referred to the Financial Services Committee, which, on May 23 and 25,
2007, marked up the bill and ordered it reported to the full House by
voice vote.

**[Possible Conservative Concerns]{.underline}**: Some conservatives may
be concerned about the net increased authorization levels in this bill
(\$2.5 billion over five years) and about the continued lack of time
limits and work requirements for the Section 8 voucher program.

**[Administration Position]{.underline}**: A Statement of Administration
Policy (SAP) was not available at press time. To read a statement on
Section 8 housing from the HUD Assistant Secretary for Public and Indian
Housing, please go to this webpage:
<http://www.house.gov/apps/list/hearing/financialsvcs_dem/htcabrera030907.pdf>.

**[Cost to Taxpayers]{.underline}**: CBO reports that H.R. 1851 would
authorize a net \$304.0 million in FY2008 and a total of \$2.48 billion
over the FY2008-FY2012 period.

**[Does the Bill Expand the Size and Scope of the Federal
Government?]{.underline}**: No.

**[Does the Bill Contain Any New State-Government, Local-Government, or
Private-Sector Mandates?]{.underline}**: No.

**[Does the Bill Comply with House Rules Regarding Earmarks/Limited Tax
Benefits/Limited Tariff Benefits?]{.underline}**: The Financial Services
Committee, in [House Report
110-216](http://thomas.loc.gov/cgi-bin/cpquery/R?cp110:FLD010:@1(hr216)),
states that, "H.R. 1851 does not contain any congressional earmarks,
limited tax benefits, or limited tariff benefits as defined in clause 9
of rule XXI."

**[Constitutional Authority]{.underline}**: The Financial Services
Committee, in [House Report
110-216](http://thomas.loc.gov/cgi-bin/cpquery/R?cp110:FLD010:@1(hr216)),
cites constitutional authority in Article 1, Section 8, Clause 1 (the
congressional power to provide for the common defense and
**[general]{.underline}** welfare of the United States) and Clause 3
(the congressional power to regulate **[interstate
commerce]{.underline}**). Some conservatives may find such citations
questionable.

**[RSC Staff Contact]{.underline}**: Paul S. Teller,
<paul.teller@mail.house.gov>, (202) 226-9718