A

GAO

United States Government Accountability Office

Report to Congressional Requesters

March 2012 HOUSING CHOICE 

VOUCHERS

Options Exist to 

Increase Program 

Efficiencies

GAO-12-300
United States Government Accountability Office

Highlights of GAO-12-300, a report to 

congressional requesters 

March 2012 

HOUSING CHOICE VOUCHERS

Options Exist to Increase Program Efficiencies

Why GAO Did This Study

The Department of Housing and Urban 

Development’s (HUD) Housing Choice 

Voucher (voucher) program subsidizes 

private-market rents for approximately

2 million low-income households. HUD 

pays a subsidy that generally is equal 

to the difference between the unit’s 

rent and 30 percent of the household’s 

income. HUD also pays an 

administrative fee, based on a formula, 

to more than 2,400 local housing 

agencies to manage the program. Over 

time, program expenditures steadily 

have risen, causing some to question 

how well HUD managed costs and 

used program resources. This report 

(1) discusses the key drivers of cost 

growth in the voucher program and the 

actions taken to control this growth and 

(2) analyzes various options to cut 

costs or create efficiencies. For this 

report, GAO analyzed HUD data; 

reviewed budget documents, program 

laws and regulations, guidance, 

academic and industry studies, and 

GAO reports; and interviewed officials 

from HUD, industry groups, and 93 

housing agencies.

What GAO Recommends 

GAO identifies options for increasing 

efficiencies and recommends that HUD

(1) determine what level of reserve 

funding housing agencies should

maintain and reduce future budget 

requests by the amount of excess 

reserves and (2) consider proposing 

options for simplifying program 

administration and changes to the 

administrative fee formula. HUD did 

not agree or disagree with the 

recommendations. While it noted that 

the draft provided an accurate 

assessment, it offered some 

clarifications and responses.

What GAO Found

Several factors—including rising rents, declining household incomes, and 

decisions to expand the number of assisted households—were key drivers of the 

approximately 29 percent increase (before inflation) in housing agencies’ 

expenditures for the voucher program between 2003 and 2010. Congress and 

HUD have taken steps to limit cost increases while maintaining assistance for 

existing program participants. For example, Congress moved away from 

providing funding to housing agencies based on the number of voucher-assisted 

households they were authorized to subsidize and instead provided funding 

based on the generally lower number of voucher-assisted households housing 

agencies actually subsidized in the prior year. Further, HUD has proposed 

administrative relief and program flexibility for housing agencies, including 

streamlining program requirements and reducing subsidies paid.

GAO identified several additional options that, if implemented effectively, could 

substantially reduce the need for new appropriations, cut costs (expenditures), or 

increase the number of households assisted. 

• Reduce housing agencies subsidy reserves. Housing agencies have 

accumulated approximately $1.8 billion in subsidy reserves (unspent funds). 

They can hold the funds in reserve or spend them on authorized program 

expenses in future years. Over time, large sums can accumulate. Although 

HUD has sought the authority to offset (reduce) its future budget requests by 

the amount of “ excess” subsidy reserves, it has not provided Congress with 

complete or consistent information on how much of these reserve funds 

housing agencies should retain for contingencies. GAO has highlighted the 

importance of providing clear and consistent information on housing 

agencies’ reserves to Congress so it can make informed funding decisions. 

• Implement administrative reform. HUD officials have noted that certain 

requirements for administering the voucher program are burdensome and 

costly and could be streamlined. In addition, the formula HUD uses to pay 

administrative fees to housing agencies is not tied to current administrative 

costs or requirements. HUD has an administrative fee study underway, which 

intends to identify specific reforms to ease administrative burden, increase 

efficiencies, and suggest ways to align the administrative fee formula with the 

functions housing agencies perform. Without this information, Congress may 

not have the information necessary to make fully informed policy and funding 

decisions related to the voucher program.

• Implement rent reform and consolidate voucher administration. Rent 

reform (for example, reducing subsidies by requiring households to pay more

toward rent) and consolidation of program administration under fewer 

housing agencies could yield substantial cost savings—approaching $2 

billion—or allow housing agencies to serve additional households, provided 

annual savings were reinvested in the program. However, while these 

options may have some advantages over the current program structure, they 

would require policymakers to consider some potential trade-offs, including 

increased rent burdens for low-income households, increased concentration 

of assisted households in high poverty areas, and more limited local control 

over voucher programs.

View GAO-12-300. For more information, 

contact Mathew J. Scirè at (202) 512-8678 or 

sciremj@gao.gov. 
Page i GAO-12-300 Voucher Cost and Administration Issues

Letter 1 

Background 3

Several Factors Contributed to Cost Increases in the Voucher 

Program from 2003 through 2010, and Congress and HUD Made 

Efforts to Limit Them 8

Options Exist to Reduce Program Costs or Increase Efficiencies 20

Conclusions 43

Recommendations for Executive Action 45

Agency Comments and Our Evaluation 45

Appendix I Objectives, Scope, and Methodology 49

Appendix II Comment from U.S. Department of Housing and Urban Development 53

Appendix III GAO Contact and Staff Acknowledgment 56

Tables

Table 1: Primary Examples of Special-Purpose Vouchers 6

Table 2: Annual Appropriations and HUD Outlays for the Voucher 

Program, from Fiscal Years 2005 through 2011 8

Table 3: Percentage of Expenditure Increases Resulting from 

Changes in Subsidy Costs for Existing Vouchers, Subsidy 

Costs for New Vouchers, and Administrative Fees, 2003 to 

2010 10

Table 4: Summary of Fiscal Year 2008 and 2009 Subsidy Reserve 

Rescissions and Offsets 18

Table 5: HUD’s Proposed Voucher Program Reforms 19

Table 6: Summary of Subsidy Reserve Rescissions and Offsets and 

the Allocation of Supplemental Funding, Fiscal Years 2008 

and 2009 24

Table 7: Administrative Streamlining Efforts Implemented or 

Proposed at MTW Agencies 27

Table 8: Estimated Annual Effect of Selected Rent Reform Options 

on Program Costs and Number of Voucher-Assisted 

Households Served 30

Contents
Page ii GAO-12-300 Voucher Cost and Administration Issues

Table 9: Estimated Number and Percentage of Voucher-Assisted 

Households for Which Rents Would Increase and the 

Average Monthly Increase, by Rent Reform Option 32

Table 10: Comparison of Two- and Three-Bedroom Monthly Rents 

under a 35 Percent of Fair Market Rent Structure, for 

Three Areas 36

Figures

Figure 1: Annual Expenditures of Disbursed Funds by Housing 

Agencies for the Voucher Program, from 2003 through 

2010 9

Figure 2: Median Gross Rents (2011 Constant Dollars) for Units 

Leased by Voucher-Assisted Households, from 2003 

through 2010 11

Figure 3: Median Annual Household Income (2011 Constant 

Dollars) of Voucher-Assisted Households, from 2003 

through 2010 12

Figure 4: Estimated Effect of Rent Reform Options on Monthly 

Rents of All Voucher-Assisted Households, by Household 

Type 34

Figure 5: Estimated Effect of Rent Reform Options on Monthly 

Rents of Affected Voucher-Assisted Households, by 

Household Type 35
Page iii GAO-12-300 Voucher Cost and Administration Issues

Abbreviations

GPRA Government Performance and Results Act of 1993

GPRAMA Government Performance and Results Modernization Act 

 of 2010

HUD Department of Housing and Urban Development

HUDCAPS HUD Central Accounting and Program System

MTW Moving to Work

NRA Net Restricted Assets

PIC Public and Indian Housing Information System

VASH Veteran Affairs Supportive Housing

VMS Voucher Management System

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Page 1 GAO-12-300 Voucher Cost and Administration Issues 

United States Government Accountability Office 

Washington, DC 20548

March 19, 2012

Congressional Requesters

Annually from fiscal years 2003 through 2010, the Department of Housing 

and Urban Development’s (HUD) Housing Choice Voucher (voucher) 

program helped provide affordable rental housing to approximately 2 

million households with very or extremely low incomes.1

In response to your request, this report discusses the factors that have 

affected costs in the voucher program from 2003 through 2011 and the 

actions Congress and HUD took to manage these costs. The report also 

identifies additional steps that could be taken to limit cost growth in the 

voucher program or more efficiently provide decent, safe, and affordable 

housing.

In the same 

period, program expenditures grew at an average annual rate of about 4 

percent from $11.7 billion to $15.1 billion. The voucher program is unique 

among HUD’s rental assistance programs in paying subsidies to landlords 

to help households rent units (apartments or houses) on the private 

market. The amount of subsidy HUD pays generally is equal to the 

difference between the unit’s rent and 30 percent of the household’s 

income. While Congress and HUD have supported and enacted changes 

to the voucher program designed to limit growth in appropriations without 

reducing the number of households that received assistance, they also 

added new vouchers targeted at homeless veterans, nonelderly disabled 

households, and others. In the current constrained economic and budget 

environment, policymakers have questioned the consistent growth in 

voucher program costs and whether HUD and public housing agencies 

that administer the program adequately managed costs.

To determine the factors that have affected costs in the voucher program 

from 2003 to 2011 and the actions Congress and HUD took to manage 

these costs, we reviewed and analyzed appropriations legislation, budget 

documents, and HUD’s annual guidance on the allocation of the 

program’s appropriation to housing agencies. The start year for our 

 

1

The voucher program is authorized under Section 8 of the United States Housing Act of 

1937, as amended. Very low-income households are those with incomes at or below 50 

percent of the area median income; extremely low-income households are those with 

incomes at or below 30 percent of the area median income. 

 
Page 2 GAO-12-300 Voucher Cost and Administration Issues 

analysis reflects the year when Congress began changing the voucher 

program’s funding formula.2 We analyzed program data that HUD 

prepared using information derived from multiple HUD systems including 

the Central Accounting and Program System (HUDCAPS) and Voucher 

Management System (VMS) to determine how much housing agencies’ 

expenditures changed from 2003 through 2010.3

 

2

Funding for 2003 and 2004 was provided through the Housing Certificate Fund, which 

accounted for both the project-based Section 8 and the voucher programs. As a result, we 

were unable to determine the appropriated and outlay amounts for the programs for these 

years. 

We also reviewed prior 

work by GAO and others to describe what is known about the costeffectiveness and characteristics of vouchers relative to other forms of 

rental housing assistance. To identify additional steps that could be taken 

to limit cost growth in the voucher program and more effectively provide 

decent, safe, and affordable housing, we identified and reviewed relevant 

legislation, draft legislation, and studies. We analyzed HUD’s VMS data 

on the balances of Net Restricted Assets (NRA or subsidy reserves) for 

housing agencies as of September 30, 2011, to determine the extent of 

such reserves for housing agencies. In addition, using data from HUD’s 

Public and Indian Housing Information System (PIC) on household 

characteristics, income, and rents, we evaluated the cost and policy 

implications of three types of programmatic reform options for the voucher 

program: increasing minimum rents, changing the percent of income 

tenants pay toward rent, and requiring tenants to pay a percentage of fair 

market rent. In identifying and assessing these programmatic reform 

options, we reviewed proposals included in draft legislation and in HUD, 

Congressional Budget Office, and housing industry group reports. We 

also considered reforms certain agencies have implemented. In 

conducting our work, we assessed the reliability of datasets that HUD 

provided, including data files derived from HUDCAPS, VMS, and PIC and 

determined that the data were sufficiently reliable for the purposes of this 

report. Finally, for all of our objectives, we interviewed HUD officials and 

consulted with an academic and officials from various housing groups. 

We also contacted or visited 62 housing agencies that administer the 

voucher program and 31 of the 35 housing agencies participating in the 

Moving to Work (MTW) demonstration program. See appendix I for a 

more detailed discussion of our scope and methodology.

3

Expenditure data for 2011 were not available at the time we conducted our analysis. 
Page 3 GAO-12-300 Voucher Cost and Administration Issues 

We conducted this performance audit from February 2011 through March 

2012 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.

The voucher program is not an entitlement program. As a result, the 

amount of budget authority HUD requests and Congress provides through 

the annual appropriations process limits the number of households that 

the program can assist.4 Historically, appropriations for the voucher 

program (or for other federal housing programs) have not been sufficient 

to assist all households that HUD has identified as having worst-case 

housing needs—that is, unassisted households with very low incomes 

that pay more than 50 percent of their incomes in rent, live in substandard 

housing, or both.5 In 2009, 41 percent of the more than 17 million very 

low-income renters had worst-case housing needs, according to HUD. 

The primary problem affecting these renters was rent burden—

approximately 97 percent paid more than 50 percent of their incomes in 

rent.6

To be eligible for assistance, in general, households must have very-low 

incomes—not exceeding 50 percent of the area median income, as 

determined by HUD. Under the Quality Housing and Work Responsibility 

Act of 1998 (P.L. 105-276), at least 75 percent of new voucher program 

 

4

Budget authority is the authority federal law provides to enter into financial obligations 

that will result in immediate or future outlays involving federal government funds. 

5

HUD has standards for housing quality. For example, the voucher program regulations 

set basic housing quality standards that all units must meet (1) before assistance can be 

paid on behalf of a household, and (2) at least annually during the assisted tenancy. HUD 

housing quality standards include requirements for all unit types, including those in singlefamily and multifamily dwellings. See 24 C.F.R. § 982.401. 

6

See HUD, Office of Policy Development and Research, Worst Case Housing Needs 

2009: Report to Congress (Washington, D.C.: February 2011). In 2009, more than 7 

million renters had worst case housing needs, up 20 percent from 2007 levels and almost 

42 percent from 2001 levels.

Background
Page 4 GAO-12-300 Voucher Cost and Administration Issues 

participants must have extremely low incomes—not exceeding 30 percent 

of the area median income.7

Under the voucher program, an assisted household pays 30 percent of its 

monthly adjusted income in rent; the remainder of the rent is paid through 

a HUD-subsidized “voucher,” which generally is equal to the difference 

between (1) the lesser of the unit’s gross rent (generally, rent plus 

utilities) or a local “payment standard” and (2) the household’s payment. 

The payment standard is based on the HUD-determined fair market rent 

for the locality, which generally equals the 40th percentile of market rents 

(including utilities) recent movers paid for standard-quality units. HUD 

annually estimates fair market rents for metropolitan and nonmetropolitan 

areas.8 Housing agencies—the state and local agencies that administer 

the voucher program on HUD’s behalf—can set payment standards (that 

is, pay subsidies) between 90 percent and 110 percent of the fair market 

rent for their areas. By determining fair market rents and setting payment 

standards at a rate sufficient to provide acceptable choices for voucher 

program participants, HUD and housing agencies essentially set the 

upper and lower bounds on the cost of typical, standard-quality units that 

voucher holders rent. Participants in the voucher program can choose to 

live in units with gross rents that are higher than the payment standard, 

but they must pay the full difference between the unit’s gross rent and the 

payment standard, plus 30 percent of their income.9

In 2011, more than 2,400 housing agencies administered more than 2.2 

million vouchers—their programs ranged in size from more than 96,000 

vouchers to fewer than 5. Housing agencies are responsible for 

inspecting units, ensuring that rents are reasonable, determining 

households’ eligibility, calculating and periodically re-determining 

households’ incomes and rental payments, and making subsidy payments 

 

7

See 42 U.S.C. 1437n (b)(1).

8

Under 42 U.S.C. 1437f(c)(1), HUD annually must publish fair market rents for the voucher 

program. See related regulations at 24 C.F.R. Part 888. 

9

By law, whenever a household moves to a new unit where the gross rent exceeds the 

payment standard, the household may not pay more than 40 percent of its adjusted 

monthly income for rent. 
Page 5 GAO-12-300 Voucher Cost and Administration Issues 

to landlords.10

Each year, Congress appropriates funding for subsidies for renewal 

(existing) and incremental (new) vouchers and administrative expenses. 

As part of the appropriations process, Congress outlines a formula that 

determines the amount of renewal funding for which housing agencies 

are eligible (“eligible amount”). However, the amount Congress 

appropriates to the voucher program may not equal the total amount for 

which housing agencies are eligible under the formula. HUD is 

responsible for allocating program funding (“appropriated amount”) 

among housing agencies based on their eligible amounts. To the extent 

that the appropriated amount does not fully fund housing agencies at their 

eligible amounts, HUD reduces the funding housing agencies receive to 

fit within the appropriated amount. Housing agencies are expected to use 

all the subsidy funding HUD allocates for authorized program expenses 

(including subsidy and utility payments). However, if housing agencies’ 

allocated amounts exceed the total cost of their program expenses in a 

given year, they must maintain their unused subsidy funds in NRA 

(reserve) accounts. Housing agencies may use their NRA balances 

(subsidy reserves) to pay for authorized program activities in subsequent 

years.

In addition, housing agencies perform basic program 

functions, such as establishing and maintaining a waiting list, processing 

tenant moves, conducting landlord and tenant outreach, and reporting to 

HUD. HUD disburses appropriated funds to housing agencies for subsidy 

payments to landlords and administrative expenses.

11

 

10Laws and HUD regulations provide 44 different income exclusions and deductions: (1) 

HUD regulations cite 20 income sources to be excluded when determining households’ 

eligibility for assistance and calculating tenant rents. See 24 C.F.R. § 5.609. (2) Under 

various statutes, 19 other income sources qualify as exclusions. (3) In addition, program 

administrators (housing agencies) must apply 5 income deductions, which reduce the 

amount of income that can be considered in calculating tenant rents. See 24 C.F.R. § 

5.611. Once program administrators have collected information from households on 

income and applicable exclusions and deductions, HUD policy requires that they 

independently verify this information (“third-party” verification). After verifying households’ 

income information, program administrators must compute the amounts the households 

will pay in rent. See 24 C.F.R. § 5.628. 

11Housing agencies report NRA (or subsidy reserves) under Housing Assistance Payment 

(HAP) Equity on their income statements. NRA is the amount of HAP Equity (subsidy) for 

the voucher program through the end of the housing agency’s fiscal year and equals total 

HAP revenues minus total HAP expenses for eligible unit months (or vouchers) leased on 

a calendar-year basis. 
Page 6 GAO-12-300 Voucher Cost and Administration Issues 

Incremental vouchers include various special-purpose vouchers. 

Congress appropriates funding for these vouchers in separate line items 

in the budget, which distinguish them from renewal vouchers. Housing 

agencies must apply to HUD to receive allocations of and funding for the 

special-purpose vouchers, which, as described in table 1, include 

Enhanced, Tenant Protection, Family Unification Program, Mainstream, 

Nonelderly Disabled, and Veteran Affairs Supportive Housing vouchers. 

These vouchers may have different or additional eligibility and operational 

requirements than renewal vouchers. After the first year, special-purpose 

vouchers generally become renewal vouchers for purposes of 

determining funding eligibility in the next year, but HUD may require that 

housing agencies separately track them as special-purpose vouchers.

Table 1: Primary Examples of Special-Purpose Vouchers

Type of special-purpose voucher Description

Enhanced Enhanced vouchers are available to tenants facing a housing conversion action, including 

owner opt-outs of Section 8 project-based contracts, mortgage prepayments, or voluntary 

terminations of the mortgage insurance associated with the preservation-eligible property. 

By statute, HUD must offer enhanced vouchers to families affected by housing conversions.

Tenant Protection Tenant protection vouchers subsidize rents for tenants facing a housing conversion action 

or HUD enforcement actions against owners not covered by enhanced vouchers, including 

terminations or non-renewals of Section 8 project-based contracts, sales or foreclosures of 

HUD-subsidized mortgages, or demolitions/dispositions of public housing.

Family Unification Program These vouchers are available to families for whom the lack of adequate housing is a primary

factor in the separation, or threat of imminent separation of their children, or in the delay of 

the discharge of children to the family from out-of-home care. The vouchers also are 

available to youths aged 18 to 21 who left foster care at age 16 or older and who lack 

adequate housing.

Mainstream Mainstream vouchers assist families that include a person with disabilities who faces 

difficulties in locating suitable and accessible housing in the private market.

Nonelderly Disabled These vouchers are designed to provide choices to nonelderly disabled residents in their 

transition out of elderly-designated public housing or care-giving institutions or 

developments with preferences for elderly tenants.

Veteran Affairs Supportive Housing 

(VASH) 

The VASH program combines HUD voucher rental assistance for homeless veterans with 

case management and clinical services from the Department of Veterans Affairs. 

Source: HUD.

Congress appropriates funding for administrative fees, and the formula 

used to calculate the administrative fee generally is based on fair market 

rents, adjusted annually to reflect changes in wage rates. HUD pays fees 

to housing agencies based on the number of units leased (vouchers 

used) as of the first of each month. HUD pays one (higher) rate for the 

first 600 units under lease and a second (lower) rate for the remaining 

units. As with subsidy funding, if the appropriated amount does not fully 
Page 7 GAO-12-300 Voucher Cost and Administration Issues 

cover housing agencies’ fees as determined by the formula, HUD will 

reduce the amount of funding each housing agency receives to fit within 

the appropriated amount. Since fiscal year 2006, administrative fees have 

accounted for less than 10 percent of total voucher program funding.

Some housing agencies that administer vouchers can participate in and 

receive funding under MTW, a demonstration program authorized by 

Congress in 1996 and implemented by HUD in 1999.12 MTW allows 

participating housing agencies to test locally designed housing and selfsufficiency initiatives in the voucher and other federal housing programs. 

Housing agencies may waive certain statutes and HUD regulations to 

achieve three objectives: (1) reduce cost and achieve cost-effectiveness 

in federal expenditures; (2) give incentives to families with children whose 

heads of household are working, seeking work, or in job training, 

educational or other programs that assist in obtaining employment and 

becoming economically self-sufficient; and (3) increase housing choices 

for low-income families. MTW agencies also have “funding flexibility”—

they may use their program-related funding (including voucher subsidy 

funding) and administrative fees for any purpose (programmatic or 

administrative).13 Currently, 35 housing agencies participate in MTW—

according to HUD, they administer about 15 percent of all vouchers and 

account for approximately 16 percent of all subsidy and administrative fee 

funding on an annual basis. Congress and HUD fund MTW agencies 

pursuant to their MTW agreements; however, the agencies could have 

subsidies and administrative fees reduced if the amounts Congress 

appropriated were less than the housing agencies’ eligible amounts under 

the formulas.

 

12See Omnibus Consolidated Rescissions and Appropriations Act of 1996 (P.L. 104-134, 

110 Stat. 1321), April 26, 1996. In addition, GAO is reviewing the effectiveness of MTW, 

including assessing the steps HUD has taken to help ensure that participating agencies 

address statutory purposes and meet statutory requirements, and the potential benefits of 

and concerns about expanding the number of MTW agencies.

13This funding flexibility (“fungibility”) only applies to MTW agencies’ regular vouchers. 

Like regular housing agencies, MTW agencies separately must maintain allocated 

amounts that exceed the cost of their authorized special-purpose voucher program 

activities in reserve accounts and only may use those balances to pay for authorized 

program activities in subsequent years. 
Page 8 GAO-12-300 Voucher Cost and Administration Issues 

Several factors affected voucher program costs (as measured through 

congressional appropriations, HUD outlays, and housing agencies’ 

expenditures) and in some cases contributed to cost increases from 2003 

through 2010, including: (1) increases in subsidy costs for existing 

vouchers, (2) subsidy costs for new vouchers, and (3) administrative fees 

paid to housing agencies. In addition to these factors, the design and 

goals of the voucher program, such as requirements to target assistance 

to certain households, contributed to overall program costs. Despite 

increases in the cost of the program from 2003 through 2010, our work 

and other published studies have found that vouchers generally have 

been more cost-effective in providing housing assistance than federal 

housing production programs designed to add to or rehabilitate the lowincome housing stock. In addition, Congress and HUD have taken several 

steps to manage cost increases over the period.

Several factors affected increases in congressional appropriations, HUD 

outlays, and housing agencies’ expenditures in the voucher program from 

2003 through 2010. As shown in table 2, from fiscal years 2005 through 

2011, voucher program appropriations increased from approximately 

$14.8 billion to $18.4 billion (approximately 4 percent annually). Over the 

same period, outlays—funding HUD disburses to housing agencies for 

program expenses—increased from $10 billion to $18.6 billion 

(approximately 11 percent annually). Information on appropriations and 

outlays for the voucher program were not available for 2003 and 2004 

because HUD did not report this information separately from other rental 

assistance programs.

Table 2: Annual Appropriations and HUD Outlays for the Voucher Program, from 

Fiscal Years 2005 through 2011

Fiscal yeara Appropriationb HUD Outlay

2005 $14.8 billion $10.0 billion

2006 15.4 billion 13.0 billion

2007 15.9 billion 16.0 billion

2008 16.4 billion 15.7 billion

2009 16.8 billion 16.0 billion

2010 18.2 billion 18.0 billion

2011 18.4 billion 18.6 billion

Source: GAO analysis of budget data.

Several Factors 

Contributed to Cost 

Increases in the 

Voucher Program 

from 2003 through 

2010, and Congress 

and HUD Made 

Efforts to Limit Them

Subsidies for Existing and 

New Vouchers and 

Increases in 

Administrative Fees 

Contributed to Cost 

Increases in the Voucher 

Program from 2003 

through 2010
Page 9 GAO-12-300 Voucher Cost and Administration Issues 

a

In 2005 Congress created a specific budget account (Tenant-based Rental Assistance) for the 

voucher program. Prior to this, Congress provided a combined appropriation for both the voucher and 

Project-based Section 8 programs through the Housing Certificate Fund. As a result, it is not possible 

to distinguish the voucher program’s appropriations and outlays from those of the Project-based 

Section 8 programs prior to 2005. 

b

Appropriations include supplemental funding, carryovers, and rescissions. 

Once disbursed, housing agencies expend program funds on activities 

such as making subsidy payments to landlords and for administrative 

expenses. As shown in figure 1, from 2003 through 2010, housing 

agencies’ expenditures increased from approximately $11.7 billion to 

$15.1 billion (about 4 percent annually). Expenditure data for 2011 were 

not available at the time we were conducting our review. HUD’s outlays 

and housing agencies’ expenditures can differ somewhat in any given 

year because of differences in the timing of payments and fluctuations in 

the rate of funding utilization—that is, some housing agencies may not 

use all of their apportioned funds and may build reserves. Later in this 

report we discuss the extent to which housing agencies have 

accumulated subsidy reserves and steps Congress and HUD could take 

to reduce future budget requests or reallocate the reserve funds.

Figure 1: Annual Expenditures of Disbursed Funds by Housing Agencies for the 

Voucher Program, from 2003 through 2010

Note: Expenditure data were not available for 2011. 
Page 10 GAO-12-300 Voucher Cost and Administration Issues 

As shown in table 3, housing agencies’ expenditures increased by a total 

of about 28.9 percent in nominal dollars from 2003 through 2010. Once 

adjusted for inflation, housing agencies’ expenditures increased by a 

smaller rate, approximately 8.8 percent. (We evaluated expenditure after 

adjusting for the general effects of inflation using a broad base index of 

price changes for all goods and services. We expressed expenditures in 

2011 constant dollars, the latest year for which complete data on price 

changes are available.) In the sections below, we discuss how (1) 

increases in subsidy costs for existing vouchers, (2) subsidy costs for new 

vouchers, and (3) administrative fees paid each contributed to the 

nominal and constant dollar increases in voucher program costs from 

2003 through 2010.

Table 3: Percentage of Expenditure Increases Resulting from Changes in Subsidy 

Costs for Existing Vouchers, Subsidy Costs for New Vouchers, and Administrative 

Fees, 2003 to 2010

Percentage change in expenditures 

due to:

Nominal dollar 

change

Constant dollar 

change

Total 28.9% 8.8%

Increases in subsidy costs for existing 

vouchers

19.5 2.4

Subsidy costs for new vouchers 5.3 4.4

Administrative fees paid 4.1 2.0

Source: GAO analysis of HUD data.

Note: Nominal 2003 and 2010 dollars were converted to 2011 constant dollars using the Bureau of 

Labor Statistics’ Consumer Price Index—All Urban Consumers series. 

As shown in table 3 above, in nominal terms, subsidy costs for existing 

vouchers grew by of 19.5 percent, accounting for a majority of the 

increase in housing agencies’ expenditures from 2003 through 2010. 

After adjusting for inflation, subsidy costs for existing vouchers grew by a 

small amount (2.4 percent) and were a smaller contributor to the total 

increase in expenditures. Two factors generally explain the remaining 

increase in expenditures for existing vouchers after adjusting for 

inflation—changes in market rents and household incomes. As previously 

discussed, the subsidies HUD and housing agencies pay to landlords on 

behalf of assisted households are based on market rents and household 

incomes. As a result, changes in market rents and household incomes 

affect subsidy cost. As shown in figure 2, in 2011 constant dollars, 

median gross rents for voucher-assisted households increased from 

about $850 to $880 (or 4 percent) over the period. Growth in rents 

Increases in Subsidy Costs for 

Existing Vouchers
Page 11 GAO-12-300 Voucher Cost and Administration Issues 

outpaced the rate of general inflation. As rents increase, HUD and 

housing agencies must pay larger subsidies to cover the increases, 

assuming no changes to household incomes or contributions to rent.

Figure 2: Median Gross Rents (2011 Constant Dollars) for Units Leased by VoucherAssisted Households, from 2003 through 2010

Note: Nominal dollars were converted to 2011 constant dollars using the Bureau of Labor Statistics’ 

Consumer Price Index—All Urban Consumers series. 

Housing agencies we contacted reported that this increase in rental 

prices can be explained, in part, by increased demand and competition 

for affordable housing—for example, some noted that the number of 

renters has increased as a result of an increase in the number of 

foreclosures in recent years. National vacancy rates—an indicator of the 

relative tightness of the rental market—decreased from 2009 to 2010.

Further, as figure 3 shows, in 2011 constant dollars, the median annual 

income of voucher-assisted households contracted from about $11,000 to 

$10,700 (a decrease of about 3 percent) from 2003 through 2010. Over 

the period, incomes of assisted households did not keep pace with the 

rate of general inflation. As incomes decline, voucher-assisted 

households are paying less towards rent, requiring larger subsidies to 

cover the difference between the rents and tenant payments.
Page 12 GAO-12-300 Voucher Cost and Administration Issues 

Figure 3: Median Annual Household Income (2011 Constant Dollars) of VoucherAssisted Households, from 2003 through 2010

Note: Nominal dollars were converted to 2011 constant dollars using the Bureau of Labor Statistics’ 

Consumer Price Index—All Urban Consumers series. 

More than half of the housing agencies we contacted reported that job 

loss and wage reductions contributed to in their subsidy costs over the 

period of our analysis. One housing agency in California we contacted 

also reported that state cuts to social welfare programs, including those 

that provide direct cash assistance, lowered incomes for some 

households and therefore have increased subsidy costs. HUD estimated 

that reductions in federal welfare and disability income payments have 

resulted in monthly subsidy payment increases of $17 and $5, 

respectively, for households that receive those forms of assistance.

The increase in the number of households assisted with vouchers (that is, 

subsidy costs for new vouchers) from 2003 through 2010 was another 

important contributor to the program’s rising costs. As table 3 shows, in 

nominal dollars, subsidy costs for new vouchers grew by 5.3 percent over 

the period. After adjusting for inflation, the addition of new vouchers grew 

by 4.4 percent, accounting for half of the overall increase in housing 

agencies’ expenditures over the period. Congress increased the size of 

the program through the addition of special-purpose vouchers such as 

Enhanced, Tenant Protection, Family Unification Program, Mainstream,

Subsidy Costs for New 

Vouchers
Page 13 GAO-12-300 Voucher Cost and Administration Issues 

Nonelderly Disabled, and Veteran Affairs Supportive Housing (see table 1 

for a description of each of these types of vouchers). HUD was unable to 

provide the data necessary to determine the extent to which each type of 

voucher contributed to the growth in program expenditures during this 

period.

Finally, growth in the fees paid to housing agencies to administer the 

voucher program grew about 4.1 percent in nominal dollars from 2003 

through 2010 (see table 3). In constant dollar terms, administrative fees 

grew by 2 percent over the period. The formula HUD uses to pay 

administrative fees to housing agencies is not directly tied to the cost of 

performing the administrative tasks the program requires. Moreover, the 

fees HUD has paid housing agencies in recent years have been less than 

the amount for which they were eligible under the formula because of 

reductions in appropriations. Housing agencies we contacted noted that 

the cost of doing business increased over the period of our analysis. For 

example, several noted that inspection costs have increased with the 

growing cost of gasoline, especially for housing agencies that administer 

vouchers over large geographic areas. Others noted that policies such as 

portability—the ability of voucher holders to use their vouchers outside of 

the jurisdiction of the housing agency that issued the voucher—increased 

staff costs because they have been increasingly complex and difficult to 

implement and monitor. Representatives of housing agencies with whom 

we spoke said that they have frozen salaries and hiring and increased 

staff hours, among other things, to cope with reductions in administrative 

fees.

The design and goals of the voucher program contribute to the overall 

expense of the voucher program, although it is difficult to quantify how 

much of the cost increase from 2003 through 2010 was due to design 

issues. Specifically, the voucher program has various features that are 

intended to target or give priority to the poorest households, and serving 

these households requires greater subsidies. Long-standing federal policy 

generally has required household contributions to rent to be based on a 

fixed percentage of household income, which can be reduced through 

income exclusions and deductions for certain expenses, such as child 

Changes in Administrative Fees 

Paid to Housing Agencies

Program Design and Goals 

Also Influence Program 

Costs
Page 14 GAO-12-300 Voucher Cost and Administration Issues 

care and health services.14 Further, housing agencies are required to 

lease 75 percent of their new vouchers to extremely low-income 

households. In addition, housing agencies also may establish local 

preferences for selecting applicants from their waiting lists.15

Similarly, program goals, such as HUD’s deconcentration policy also can 

affect program costs. Specifically, this policy encourages assisted 

households to rent units in low-poverty neighborhoods, which typically are 

more expensive. According to HUD officials, the deconcentration goal 

increases subsidy costs for housing agencies and overall costs for the 

department because, as previously discussed, if rents increase, but 

household contributions to rent remain constant, HUD and housing 

agencies must make up for the increased rent burden in the form of 

higher subsidy payments.

Like the 

income standards and targeting requirements, these preferences have a 

direct impact on subsidy costs—for example, the Boston Housing 

Authority has established preferences designed to assist “hard-to-house” 

individuals and families, including those experiencing homelessness. 

According to housing agency officials, because these individuals and 

families have little to no income, the agency’s annual per-unit subsidy 

costs are higher than they would be absent the preferences. While these 

types of requirements help address Congress’s and HUD’s goal of 

serving the neediest households, HUD officials noted that such 

requirements make the program more expensive than it would otherwise 

be if housing agencies had more flexibility to serve households with a 

range of incomes.

 

14This “30-percent rule” has its origins in the “Brooke Amendment”—in 1969, then-Senator 

Edward Brooke of Massachusetts offered, and Congress passed, an amendment to the 

United States Housing Act of 1937, as amended, that mandated that no family would have 

to pay more than 25 percent of its income toward rent in federally assisted housing. In 

1981, Congress increased the maximum to 30 percent. 

15Housing agencies must establish an application and selection process that treats 

applicants for voucher assistance fairly and consistently and provides an effective method 

for determining eligibility. However, voucher program regulations provide flexibility for 

each housing agency to develop an application and selection process tailored to its 

particular circumstances, including the ability to establish local preferences for assistance. 

See 24 C.F.R. § 982.207.
Page 15 GAO-12-300 Voucher Cost and Administration Issues 

Despite increases in the cost of the voucher program from 2003 through 

2010, our work and other published studies consistently have found that 

vouchers generally have been more cost-effective in providing housing 

assistance than federal housing production programs designed to add to 

or rehabilitate the low-income housing stock.16 Our 2002 report provides 

the most recent original estimates of the cost differences between the 

voucher program and certain existing production programs.17 We 

estimated that, for units with the same number of bedrooms in the same 

general location, the production programs cost more than housing 

vouchers. In metropolitan areas, the average total 30-year costs of the

production programs ranged from 8 to 19 percent greater for onebedroom units. For two-bedroom units, the average total 30-year costs 

ranged from 6 percent to 14 percent greater.18

Much of the research over the past several decades reached similar 

conclusions. For example, in 2000, HUD found that average ongoing 

costs per occupied unit of public housing were 8 to 19 percent higher than 

voucher subsidy costs. In 1982, the President’s Commission on Housing 

found that subsidy costs for new construction were almost twice as much 

as subsidy costs for existing housing.

The cost advantage of the 

voucher over the production programs was likely understated because 

other subsidies—such as property tax abatements—and potential 

underfunding of reserves to cover expected capital improvements over 

the 30-year cost period were not reflected in the cost estimates for the 

production programs.

19

 

16For a detailed discussion of the relevant literature, see Edgar O. Olsen, “The CostEffectiveness of Alternative Methods of Delivering Housing Subsidies,” presentation at the 

thirty-first annual APPAM research conference (Charlottesville, Virginia: Oct. 30, 2009). 

The commission’s finding set the 

17See GAO, Federal Housing Assistance: Comparing the Costs and Characteristics of 

Housing Programs, GAO-02-76 (Washington, D.C.: Jan. 31. 2002). We analyzed the 

characteristics and costs of the housing under six federal housing programs that continue 

to increase the number of assisted households: the voucher program, Low-income 

Housing Tax Credits, HOPE VI, Section 202, Section 811, and Section 515. With the 

exception of the voucher program, each of these programs is a production program.

18Because of data limitations, we used a different methodology to present total costs for 

the HOPE VI program—a HUD program to revitalize distressed public housing. We found 

that the total 30-year cost of a HOPE VI unit with an average size of 2.4 bedrooms was 

about 27 percent more expensive than vouchers.

19See HUD, Office of Policy Development and Research, Economic Cost Analysis of 

Different Forms of Assisted Housing (Washington, D.C.: December 2000) and The 

President’s Commission on Housing, The Report of the President’s Commission on 

Housing (Washington, D.C.: April 1982). 

Although Costs Have 

Risen, the Voucher 

Program Generally Has 

Been More Cost-Effective 

Than Other Types of 

Housing Assistance
Page 16 GAO-12-300 Voucher Cost and Administration Issues 

stage for the eventual shift from production programs to vouchers as the 

primary means through which the federal government provides rental 

housing assistance.

Notwithstanding the cost-effectiveness of vouchers relative to other forms 

of rental housing assistance, many of these studies noted the benefits 

that production programs can and have conferred on low-income 

households and communities such as supportive services for the elderly 

and persons with disabilities. The voucher program typically does not 

confer such benefits. In addition, research has indicated that some 

markets may have structural issues. For example, regulatory restrictions 

that reduce the supply of housing (and thus, opportunities for households 

to use vouchers) make production programs more effective tools for 

providing affordable housing than vouchers in those locations.20 And our 

work found that voucher holders sometimes are unsuccessful in using 

their vouchers, either because they cannot find units that meet their 

needs or because landlords are unwilling to accept their vouchers. These 

households may benefit more from production programs, which can better 

guarantee access to affordable housing, than vouchers.

In light of increasing program costs, Congress and HUD have taken 

several steps to limit the extent of increases from fiscal years 2003 

through 2011, while maintaining assistance for existing program 

participants. These steps include legislative changes to the formula HUD 

uses to calculate and distribute subsidy funding to housing agencies, as 

well as continued efforts to reduce improper rental assistance payments.

Before fiscal year 2003, Congress and HUD funded housing agencies’ 

renewal needs based on their average per-voucher costs from the 

previous year, adjusted for inflation, and multiplied by the number of 

authorized vouchers.21

 

20See HUD, Office of Policy Development and Research, Targeting Housing Production 

Subsidies: Literature Review (Washington, D.C.: December 2003). 

Meaning, housing agencies received funding for 

all of their authorized vouchers, regardless of whether they leased all of 

those vouchers. In addition, prior to 2003, HUD provided each housing 

agency with reserve funding equal to one month of its subsidy funding—

21Authorized voucher leasing levels for housing agencies are outlined in their Annual 

Contributions Contracts with HUD. 

Congress and HUD Have 

Taken Steps to Limit Cost 

Increases in the Voucher 

Program

Congressional Actions
Page 17 GAO-12-300 Voucher Cost and Administration Issues 

housing agencies could use their reserves to fund new vouchers (a 

practiced called “maximized leasing”).22

Beginning in fiscal year 2003, Congress changed the voucher program’s 

funding formula so that it would provide housing agencies with renewal 

funding that was tied to housing agencies’ actual costs and leasing rates 

rather than the number of authorized vouchers (whether used or unused).

• Starting in fiscal year 2003, Congress stopped providing funding for 

vouchers that housing agencies issued in excess of their authorized 

levels, thus prohibiting over- (or maximized) leasing.23

• Congress generally based voucher program appropriations for fiscal 

year 2003 and thereafter on the number of leased vouchers (not to 

exceed authorized levels) and actual cost data that housing agencies 

reported to HUD.

• Congress discontinued the practice of providing reserve funding for 

housing agencies and instead started reserving a portion of renewal 

funding to make adjustments to housing agencies’ allocations for 

contingencies such as increased leasing rates or certain unforeseen 

costs.

• In more recent years, Congress has provided HUD appropriations that 

did not fully fund housing agencies at their eligible amounts under the 

funding formula.

• In every year since 2004, Congress has provided administrative fees 

that were at least 6 percent lower than the 2003 rate.

• Finally, as shown in table 4, in fiscal years 2008 and 2009, Congress 

rescinded a portion of housing agencies’ subsidy reserves and 

directed HUD, in total, to offset almost $1.5 billion from 1,605 housing 

agencies).24

 

22HUD provided this reserve funding separately to the funding reserves (NRA) housing 

agencies can accumulate and to which we refer throughout this report. 

23Beginning in 2003, housing agencies were prohibited from leasing more vouchers than 

were authorized in their contracts. 

24Later in this report, we discuss how continued monitoring and reduction of housing 

agencies subsidy reserves could reduce the need for new appropriations for or increase 

the number of households assisted under the voucher program. 
Page 18 GAO-12-300 Voucher Cost and Administration Issues 

Table 4: Summary of Fiscal Year 2008 and 2009 Subsidy Reserve Rescissions and 

Offsets 

Rescission and offset of 

excess subsidy reserves

Number of affected 

housing agencies Dollar total

2008 1197 $723,167,604

2009 975 $750,000,000

Total 1605a $1,473,167,604

Source: GAO analysis of HUD data.

a

Of these, 567 housing agencies faced rescissions and offsets in both 2008 and 2009. 

HUD has taken steps to reduce improper payments in the voucher 

program. According to HUD reports, the department has reduced gross 

improper payments (subsidy over- and underpayments) resulting from 

program administrator errors (that is, a housing agency’s failure to 

properly apply income exclusions and deductions and correctly determine 

income, rent, and subsidy levels) by almost 60 percent, from $1.1 billion 

in fiscal year 2000 to $440 million in fiscal year 2009.25

In addition, HUD has provided housing agencies with fraud detection 

tools—such as the Enterprise Income Verification system, which makes 

income and wage data available to housing agencies—and realized 

continued reductions in improper payments as a result of these tools. 

According to HUD, from fiscal year 2006 through 2009, the department 

reduced gross improper payments resulting from errors in reported tenant 

income—including the tenant’s failure to properly disclose all income 

sources—by approximately 37 percent, from $193 million to $121 million. 

These efforts do not necessarily reduce the cost of assisting households, 

but they help increase the program’s efficiency by helping ensure that an 

appropriate level of assistance is provided and potentially serving more 

households with appropriated funds.

HUD has requested the authority to implement program reforms that 

could have had the potential to decrease voucher program subsidy costs, 

administrative costs, or both. For example, as shown in table 5, in its 

 

25See GAO, HUD Rental Assistance: Progress and Challenges in Measuring and 

Reducing Improper Rent Subsidies, GAO-05-244 (Washington, D.C.: Feb. 18, 2005). 

HUD Actions on Improper 

Payments 

HUD-Proposed Reforms and 

Additional Actions to Manage 

Costs
Page 19 GAO-12-300 Voucher Cost and Administration Issues 

fiscal year 2012 budget request, HUD proposed implementing a rent 

demonstration to test alternatives to the current rent structure that could 

result in assisted households paying more in rent. As we discuss later in 

this report, changes to the way assisted household contributions to rent 

are calculated could result in cost savings to the program.

Table 5: HUD’s Proposed Voucher Program Reforms

Reform Budget year(s) Description

Rent demonstrationa 2012 HUD sought the authority to test alternatives to the current 

rent structure with non-MTW agencies.

Increased time between re-certifications of tenant 

income

2012 HUD proposed extending the time between re-certifications of 

tenants with fixed incomes from 1 to 3 years. 

Transforming Rental Assistanceb 2011 HUD proposed streamlining and improving the delivery and 

oversight of rental assistance across all relevant HUD 

programs through the introduction of more efficient forms of 

administration such as consortiums, consolidation, and other 

locally designed structures. For example, a consortium of 

housing agencies could centralize administrative functions for 

a large area or for a state.

Flexible Voucher Program 2005, 2006, 

2007

HUD proposed allowing state and local housing agencies to 

administer the voucher program and encouraging housing 

agencies with overlapping jurisdictions and those with small 

voucher programs to consolidate or enter cooperative 

agreements to promote administrative efficiencies and cut 

costs. 

Housing Assistance for Needy Families 2004 Under this block grant, HUD proposed making state housing 

agencies responsible for the financial management and 

administration of the voucher program and giving states the 

option to directly administer the program or contract with local 

housing agencies or other public, nonprofit, or private entities 

to administer voucher assistance at the local level.

Source: GAO analysis of HUD budget documents.

a

On December 6, 2011, HUD’s Policy Development and Research issued a request for proposal for a 

separate rent demonstration. According to the request, the demonstration will test alternatives to the 

current rent structure using a random assignment experimental model and most likely would be 

undertaken at select MTW agencies because these agencies already have the authority to request 

waivers of voucher program laws and regulations. HUD is funding the demonstration under its 

Transformation Initiative. 

b

Subsequent versions of the Transforming Rental Assistance proposal did not include the 

administrative efficiencies discussed in the table. 

Although Congress did not grant HUD the authority to implement these 

voucher-related initiatives, HUD recently initiated administrative changes 

to its housing agency consortium rule, a first step in the effort to 

encourage housing agencies to consolidate as envisioned by the 

department’s 2011 Transforming Rental Assistance proposal. The revised 
Page 20 GAO-12-300 Voucher Cost and Administration Issues 

rule would treat participating housing agencies in a consortium as one 

entity. HUD’s current regulation requires that consortium members be 

treated separately for oversight, reporting—as a result, few housing 

agencies have formed consortiums since 1998.

Finally, in 2010, HUD began reviewing the administrative fee structure for 

the voucher program.26

Finally, in 2009, HUD developed a tool designed to help HUD staff and 

housing agencies forecast voucher and budget utilization (that is, the 

percentage of budget allocation and percentage of authorized vouchers 

they are using) for up to 3 years. Department officials credit the tool with 

increasing voucher program efficiency; however, HUD and housing 

agencies’ use of the forecasting tool has not reduced overall costs in the 

voucher program.

The study aims to ascertain how much it costs a 

housing agency to run an efficient voucher program. HUD plans to use 

the results to help develop a new formula for allocating administrative 

fees. Although not enough time has passed to determine whether HUD’s 

findings will positively or negatively affect costs in the voucher program, 

this study represents a positive effort on HUD’s part to more clearly 

understand administrative costs in the voucher program and identify ways 

to improve efficiency. According to HUD officials, HUD intends to use this 

study as a basis for future legislative proposals, which could have 

implications for the cost of administering the program.

We identified several options that if implemented effectively, could reduce 

voucher program costs (by approximately of $2 billion annually, based on 

our estimates) or allow housing agencies to assist additional households 

if Congress chose to reinvest the costs savings in the program. First, 

improved information on the level of subsidy reserve funding housing 

agencies should maintain could aid budget decisions and reduce the 

need for new appropriations. ; Second, agency officials have noted that 

the voucher program’s requirements are complex and burdensome and 

streamlining these requirements could reduce costs. Finally, changes to 

the calculation of voucher-assisted households’ payments toward rent—

known as rent reform—and consolidating voucher administration under 

 

26Later in this report, we discuss how HUD’s administrative fee study could be used to 

streamline administrative requirements and reduce administrative costs. 

Options Exist to 

Reduce Program 

Costs or Increase 

Efficiencies
Page 21 GAO-12-300 Voucher Cost and Administration Issues 

fewer housing agencies’ could also reduce program costs Each of these 

options would require congressional action to implement, and we discuss 

below possible steps that HUD could take to facilitate the implementation 

of some of them. Rent reform and administrative consolidation also 

involve difficult policy decisions that will affect some of the most 

vulnerable members of the population and alter long-standing program 

priorities and practices.

Housing agencies have accumulated subsidy reserves (unspent funds) 

that Congress could use to (1) reduce program appropriations (through a 

rescission and offset) and potentially meet other federal needs or (2) 

direct HUD to assist additional households.27

In addition, beginning in 2012, HUD implemented changes to how it 

disburses subsidy funds to housing agencies. As a result of these 

changes, although housing agencies may continue to accumulate subsidy 

reserves, HUD, rather than the housing agencies, holds these reserves. 

As previously discussed, 

HUD allocates subsidy funding to housing agencies based on the formula 

Congress establishes in annual appropriations legislation. In recent years, 

the formula has specified that HUD allocate funds based on housing 

agencies’ leasing rates and subsidy costs from the prior year. In any 

given year, housing agencies may under-lease or receive more funding 

than they can spend. Unless these funds are rescinded and offset, 

housing agencies can keep their unused subsidy funding in reserve 

accounts and spend these funds on authorized program expenses 

(including rent subsidies and utility allowance payments) in future years. 

Over time, large sums of money can accumulate. As of September 30, 

2011, 2,200 housing agencies had more than $1.5 billion in subsidy 

reserves, which includes unspent subsidy funding from prior years and 

certain set-aside funding and funding for new vouchers where insufficient 

time has passed for expenditure.

 

27Because HUD has allocated subsidy reserve funds to housing agencies, congressional 

rescissions must be implemented through an offset, whereby Congress requires housing 

agencies to spend down their reserve funds in order to make up for reductions in the 

appropriated amount. 

Improved Information on 

Subsidy Reserves Could 

Aid Budget Decisions
Page 22 GAO-12-300 Voucher Cost and Administration Issues 

This change also will allow HUD to better determine the extent of the 

reserves housing agencies have accumulated.28

HUD officials told us that the department believes that it requires specific 

authority from Congress to reduce (offset) future voucher program budget 

requests by all or a portion of housing agencies’ subsidy reserves.

 

29

Furthermore, HUD’s definition for what constitutes excess reserves has 

varied. For example, HUD officials told us that housing agencies should 

retain one month (approximately 8.5 percent) of their annual funding 

allocations in reserves. However, in its fiscal year 2010 and 2011 budget 

proposals, HUD defined excess reserves as those in excess of 4 and 6 

Although HUD provides quarterly reports to the Congressional Budget 

Office on the extent of housing agencies’ reserves and has requested the 

authority to offset and in some cases, redistribute “excess” reserves (that 

is, reserves beyond what is needed to fund contingencies, such as cost 

increases from rising rental rates or falling tenant incomes, as defined by 

HUD), the department has not developed specific or consistent criteria 

defining what constitutes excess reserves or how it would redistribute 

funding among housing agencies. For example, in its fiscal year 2012 

voucher program budget proposal, HUD requested the authority to offset 

excess reserves. According to the proposal, if given this authority, the 

department first would reallocate the funds to housing agencies to make 

up any difference between the appropriated amount and the total funding 

for which housing agencies were eligible based on the renewal formula 

and then redistribute any remaining funds to housing agencies based on 

“need and performance.” However, the proposal did not specify how HUD 

would calculate excess subsidy reserves or a detailed methodology for 

redistributing the funds, and HUD officials acknowledged that 

redistributing excess funds among housing agencies will increase the size 

and the cost of the program over time because if housing agencies are 

able to lease more vouchers with these funds, Congress will have to 

appropriate more funding for renewal vouchers in subsequent years.

 

28See HUD, Notice PIH 2011-67, Implementation of New Cash Management 

Requirements for the Housing Choice Voucher Program (Dec. 9, 2011). 

29Because housing agencies’ reserves are resources that HUD has disbursed and 

expended, HUD effectively recaptures any excess reserves by reducing or offsetting the 

housing agencies’ funding allocation in another year.
Page 23 GAO-12-300 Voucher Cost and Administration Issues 

percent, respectively, of housing agencies’ allocated amounts.30

In past work, we highlighted the importance of HUD’s clearly identifying 

the existence and amount of unexpended subsidy funds (reserves) so 

that Congress could have confidence in the department’s capacity to 

effectively manage the funding appropriated for the voucher program. We 

concluded that HUD should take steps to ensure that reserves did not 

reach unreasonable levels—that is, in excess of what is prudently needed 

to address contingencies.

Further, 

HUD generally has excluded housing agencies with 250 and fewer 

vouchers from its proposed offsets. HUD officials told us that they have 

been considering lowering this threshold or developing a sliding scale 

methodology (generally based on size) to determine the amount of 

reserves housing agencies should maintain and the amount of excess 

reserves that HUD would propose offsetting and redistributing.

31 More recently, we stated that agency 

reporting about key areas such as financial management or program 

reforms should competently inform congressional decision making, and 

agencies should engage Congress about how to present this 

information.32

While a reserve for contingencies is prudent, without clear and consistent 

criteria for determining what constitutes an appropriate level for housing 

agency reserves, it is difficult to judge how well HUD managed the 

 

30As previously discussed, Congress rescinded $750 million from HUD’s 2009 

appropriation for the voucher program, and HUD offset this amount from housing 

agencies’ reserve accounts. Similarly, in 2008, Congress rescinded the amount in the 

housing agencies’ reserves accounts that exceeded 7 percent of the amount of the 

program’s 2007 renewal funding (about $723 million), and HUD offset this amount from 

housing agencies’ reserve accounts. In 2005, Congress directed HUD to reduce the 

housing agencies’ reserves account to no more than 1 week (approximately 2 percent) of 

subsidy funding. The Affordable Housing and Self-Sufficiency Improvement Act of 2012 

(January 31, 2012, draft) would permit housing agencies to retain subsidy reserves in an 

amount equal to no less than 6 percent of their current year’s annual budget authority. 

This amount would be exempt from any offsets imposed by HUD. 

31GAO, Section 8 Tenant-Based Housing Assistance: Opportunities to Improve HUD’s 

Financial Management, GAO/RCED-98-47 (Washington, D.C.: Feb. 20, 1998). In this 

report we highlighted that the Office of Management and Budget guidance on budget 

formation instructs agencies to consider available funding on hand before requesting new 

funding.

32GAO, Government Performance: GPRA Modernization Act Provides Opportunities to 

Help Address Fiscal, Performance, and Management Challenges, GAO-11-466T

(Washington D.C., Mar. 16, 2011).
Page 24 GAO-12-300 Voucher Cost and Administration Issues 

funding Congress has provided for the voucher program. For example, as 

previously discussed, in fiscal years 2008 and 2009 Congress rescinded 

and directed HUD to offset excess subsidy reserves. However, as shown 

in table 6, the 2009 rescission and offset were too large for 288 (about 18 

percent) of the 1,605 housing agencies that were subject to the 2008 and 

2009 rescissions and offsets to absorb. Congress had to provide these 

288 and an additional 152 housing agencies with supplemental funding to 

prevent the termination of voucher assistance. 

Table 6: Summary of Subsidy Reserve Rescissions and Offsets and the Allocation 

of Supplemental Funding, Fiscal Years 2008 and 2009 

Number of affected 

housing agencies Dollar total

Housing agencies that had reserves 

rescinded and offset in 2008, 2009, or 

both years

1,605 $1,473,167,604

Housing agencies that received 

supplemental funding in 2009

440 $122,280,516

Housing agencies that had reserves 

rescinded and offset in 2008, 2009, or 

both years

288 $96,684,883

Housing agencies that did not have 

reserves rescinded and offset in either 

2008 or 2009

152 $25,595,633

Source: GAO analysis of HUD data.

Note: Of the 1,605 housing agencies that had reserves rescinded and offset, 567 housing agencies 

were had reserves rescinded and offset in both 2008 and 2009. 

Similarly, in the fiscal year 2012 budget, Congress rescinded and directed 

HUD to offset housing agencies’ subsidy reserves by $650 million. Based 

on our analysis, as of September 30, 2011, housing agencies had 

approximately $606 million in excess reserves, approximately $44 million 

short of the $650 million rescission amount. Our analysis assumed that 

housing agencies retained in reserves the equivalent of one month or 

about 8.5 percent of their annual funding allocations—HUD’s current 

thinking on the appropriate level of reserves—and also excluded certain 

set-aside funding and funding for new vouchers.33

 

33Based on our analysis, MTW agencies had no excess (nonfungible) subsidy reserves. 

As a result, to meet the 
Page 25 GAO-12-300 Voucher Cost and Administration Issues 

$650 million rescission goal, HUD would have to offset more funds from 

housing agencies’ reserves than would be required under a one-month 

reserve criterion, potentially resulting in some housing agencies holding 

less than a one month reserve for contingencies.34 

HUD officials have noted that certain requirements for administering the 

voucher program have grown burdensome and costly and could be 

streamlined. In May 2010, the Secretary of HUD testified that the 

department’s rental assistance programs “desperately need 

simplification.” He further stated that HUD must streamline and simplify its 

programs so that they are easier for families to access, less costly to 

operate, and easier to administer at the local level.35 For example, under 

current rules, housing agencies must re-examine household income and 

composition at least annually and adopt policies describing when interim 

re-examinations will be conducted.36 HUD has expressed support for 

extending the time between re-examination of income for households on 

fixed incomes from 1 to 3 years and the time between unit inspections 

from 1 to 2 years37

 

34According to HUD, to fund the rescission, the department will offset reserve balances 

that exceed approximately one month of housing agencies’ 2012 eligible amounts. See 

HUD, Notice PIH 2012-9, Implementation of the Federal Fiscal Year 2012 Funding 

Provisions for the Housing Choice Voucher Program( Feb. 8, 2012). For housing agencies 

that administer 50 or fewer vouchers, the offset will equal that portion of the reserve 

balance that exceeds approximately 6 months of housing agencies’ 2012 eligible 

amounts. 

—according to one program administrator that 

manages voucher programs for five housing agencies, annual reexaminations and inspections account for more than 50 percent of 

administrative costs in the voucher programs the agency administers.

35House Financial Services Committee, Transforming Rental Assistance, Testimony of 

Shaun Donovan Secretary of the Department of Housing and Urban Development, 111th

Cong., 2nd sess., 2010.

36See 24 C.F.R. §982.516.

37Insurance, Housing, and Community Opportunity Subcommittee, House Financial 

Services Committee, Legislative Proposals to Reform the Housing Choice Voucher 

Program, Testimony of Sandra B. Henriquez, Assistant Secretary of the Department of 

Housing and Urban Development, 112th Cong., 1st sess., 2011. HUD’s fiscal year 2012 

budget request also proposed extending the time between re-certifications for households 

on fixed incomes. 

Administrative Reforms 

Could Streamline 

Burdensome Requirements 

and Reduce Costs
Page 26 GAO-12-300 Voucher Cost and Administration Issues 

However, overall data are not available on the actual costs of specific 

administrative activities, such as annual income re-examinations and 

inspections, and how they vary across housing agencies. To help address 

this lack of information, HUD has initiated a study to determine (1) what 

constitutes an efficient voucher program, (2) what a realistic expectation

would be for what a housing agency should be doing to run an efficient 

program, (3) how much it costs to run an efficient program, and (4) what 

an appropriate formula would be for allocating administrative fees to 

housing agencies operating voucher programs.38 According HUD, the 

study will allow the department to analyze all aspects of voucher program 

administration to reduce and simplify housing agencies’ administrative 

responsibilities.39

Although some of the changes needed to simplify and streamline the 

voucher program would require Congress to amend existing statutes, 

HUD’s administrative fee study and the experiences of housing agencies 

participating in MTW may provide insight into specific reforms to ease 

housing agencies’ reported administrative burden, as well as any 

potential cost savings resulting from these reforms. For example, 

according to a HUD report, while conclusive effects of many MTW 

reforms, particularly as they relate to assisted households, are not known, 

some of the demonstration’s most compelling results to date are those 

related to housing agency operations.

Such information will be important as congressional 

decision makers consider potential reforms of administrative 

requirements.

40 As shown in table 7, many of the 

housing agencies that participate in the demonstration have implemented 

reforms that Congress has been considering through draft legislation, 

HUD has proposed in its fiscal year 2012 budget request, or both.41

 

38HUD, Statement of Work: Housing Choice Voucher Program Administrative Fee Study, 

Solicitation Number RCHI00992, (Washington, D.C.: Feb. 8, 2010). 

According to the MTW agencies, many of these initiatives have resulted 

in both time and cost savings in their programs.

39Testimony of Sandra B. Henriquez, Assistant Secretary of the Department of Housing 

and Urban Development, 112th Cong., 1st sess., 2011.

40HUD, Office of Public and Indian Housing and Office of Policy Research and 

Development, Report to Congress Moving to Work: Interim Policy Applications and the 

Future of the Demonstration (Washington, D.C.: August 2010).

41See Affordable Housing and Self-Sufficiency Improvement Act of 2012, discussion draft 

dated Jan. 31, 2012. 
Page 27 GAO-12-300 Voucher Cost and Administration Issues 

Table 7: Administrative Streamlining Efforts Implemented or Proposed at MTW Agencies

Administrative efficiency

Number of MTW agencies that implemented 

the (or a similar) efficiency

Allow housing agencies to make subsidy payments to landlords as they correct 

non-life-threatening conditions identified as part of an inspection. 

5a

Conduct biennial inspections 18b

Allow inspections from alternate sources, including those conducted for other 

federal, state, and local housing assistance programs. 

2 

Conduct triennial re-examinations for households with fixed incomes. 26c

Allow fixed-income households’ incomes to be adjusted by applying an inflationary 

factor established by the Secretary in any year the housing agency does not 

conduct a review of income.

5 

Allow housing agencies to conduct interim re-examinations only when a 

household’s income or deductions change by an amount that is estimated to result 

in an increase of 10 percent or more in annual adjusted income.

6d

Allow housing agencies to use households’ prior-year income in determining 

income for annual reviews.

0 

Allow housing agencies to rely on income determinations made for other federal, 

means-tested, public assistance programs.

2 

Exclude from incomes imputed returns on net assets that do not exceed $50,000. 20e

Source: GAO analysis of draft legislation and interviews with MTW agencies.

a

All housing agencies allow either the tenant or owner, or both to self-certify correction of non-lifethreatening conditions. 

b

Most of these housing agencies set criteria that need to be meet before changing the inspection 

schedule of a unit. For example, some agencies specify that units must have passed one inspection 

before placing them on a biennial schedule. 

c

The majority of these housing agencies conduct biennial re-examinations of fixed-income 

households rather than triennial. In addition, 12 have an alternate re-examination schedule for other 

types of households. 

d

These housing agencies have made changes to their interim re-examination policies. For example, 

one of these agencies limits interim re-examinations based on a criteria that includes a decrease in 

adjusted income of 10 percent or more (elderly/disabled families are exempt). 

e

The amount of asset income excluded from income varies. For example, some set this amount at 

$5,000 and others exclude asset income. 

In addition, and as previously discussed, the existing administrative fee 

formula generally is linked to fair market rents that are adjusted annually 

to reflect changes in wage rates, and HUD pays fees to housing agencies 

based on the number of units leased (vouchers used) as of the first of 

each month. This formula is not tied to the program’s current 

administrative costs or requirements. Further, housing agencies we 

contacted reported that the cost of administering the voucher program 

has been on the rise, with contributing factors including higher postage, 

fuel, and employee health care costs, as well as increased reporting and 

other requirements.
Page 28 GAO-12-300 Voucher Cost and Administration Issues 

Without more specific information about potential reform options, 

policymakers will not be able to make an informed decision about how to 

reform the administrative fee formula and the activities required to 

administer an efficient voucher program. These efforts—using the 

administrative fee study to identify specific reforms and leveraging the 

experiences of MTW agencies—are in line with the goals of the 

Government Performance and Results Act of 1993 (GPRA), which 

Congress enacted, in part, to inform its decision making by helping to 

ensure that agencies provide objective information on the relative 

effectiveness and efficiency of their programs and spending.42 Whether 

HUD’s study will yield findings that eventually will result in measureable 

cost or time savings is not clear. While reforming administrative 

requirements for the voucher programs could lead to increased 

efficiencies and cost savings, the administrative fee paid to housing 

agencies is a relatively modest share of the program’s overall annual 

appropriations—approximately 9 percent in recent years. Nevertheless, 

such efforts will provide Congress with timely and meaningful information, 

which will enhance its ability to make decisions about funding for and 

requirements of the voucher program.

If implemented, rent reform (that is, changes to the calculation of 

households’ payment toward rent) and the consolidation of voucher 

administration under fewer housing agencies could yield substantial cost 

savings, allow housing agencies to serve additional households if 

Congress were to reinvest annual cost savings in the voucher program, or 

both.43 Further, these reform options are not mutually exclusive; that is, 

cost savings or additional households served could be greater if both 

options were implemented. Further, implementation of these options may 

involve some trade-offs, including increased rent burdens for assisted 

households.

 

42GPRA, §§ 2(a)(1), 2(b)(5). The GPRA Modernization Act of 2010 (GPRAMA) updated 

the federal government’s performance measurement framework established in GPRA.

43For a detailed discussion of how we selected which rent reform options to include in our 

analysis, see the detailed scope and methodology in appendix I. Academics have 

advanced other rent reform options that we did not include in this report. For example, see 

Amy Crews Cutts and Edgar O. Olsen, “Are Section 8 Housing Subsidies Too High?” 

Journal of Housing Economics, vol.11 (2002): 214-243. 

Rent Reform and 

Consolidation Could 

Result in Reduced Costs or 

More Households Served, 

but Both Involve Tradeoffs
Page 29 GAO-12-300 Voucher Cost and Administration Issues 

As previously discussed, under current program rules, an assisted 

household generally must contribute the greater of 30 percent of its 

monthly adjusted income or the housing-agency established minimum 

rent—up to $50—toward its monthly rent. HUD’s subsidy is the difference 

between (1) the lesser of the unit’s gross rent or the applicable payment 

standard and (2) the household’s rental payment. Therefore, as an 

assisted household’s income increases, HUD’s subsidy payment 

decreases, and vice versa. Under existing program rules, a household 

could pay no rent—if the household has no monthly income after 

adjustments, the housing agency from which the household receives 

assistance does not have a minimum rent, or the household obtained a 

hardship exemption.44 However, such households make up a small share 

of all voucher-assisted households, with more than 99 percent making 

some dollar contributions to their rent.45

Because about 90 percent of voucher program funds are used to pay 

subsidies, decreasing the level of subsidy for which households are 

eligible (or, alternatively stated, increasing the amount households must 

contribute toward rent) necessarily will yield the greatest costs savings for 

the program. We estimated the effect, both in terms of cost savings and 

additional households that could be served with those savings if 

Congress chose to reinvest the savings in the program, of several options 

including requiring assisted households to pay

• higher minimum rents;

• 35 percent of their adjusted income in rent;

• 30 percent of their gross income in rent (with no adjustments);46

• a percentage of the applicable fair market rent.

or

47

 

44If a housing agency adopts a minimum rent policy, the housing agency must grant 

exemptions from the requirement to any household that the housing agency determines is 

unable to pay the amount because of financial hardship, unless the hardship is temporary. 

See 24 CFR §5.630.

45Our analysis showed that 0.5 percent of all assisted households pay no rent and 1.3 

percent pay from $0 to $50. 

46A rent structure based on gross income would eliminate the deductions and exclusions 

to income that households currently may claim.

Rent Reform
Page 30 GAO-12-300 Voucher Cost and Administration Issues 

Using HUD data, we determined that each of these options could reduce 

the federal cost burden—in some cases, quite considerably—or if 

Congress chose to reinvest cost savings in the program, allow housing 

agencies to serve more households without additional funding. For 

example, as shown in table 8, increasing minimum rents to $300 would 

yield the greatest cost savings on an annual basis—an estimated $1.8 

billion—or allow housing agencies to serve the greatest number of 

additional households—an estimated 287,000. Requiring assisted 

households to pay 30 percent of their gross income in rent would yield the 

least savings for the voucher program and serve the fewest additional 

households. Further, HUD operates a number of other rental assistance 

programs where household subsidies are based on the same calculations 

as those for the voucher program. Implementation of these rent reform 

options in its other rental assistance programs has the potential to create 

additional cost savings.

Table 8: Estimated Annual Effect of Selected Rent Reform Options on Program 

Costs and Number of Voucher-Assisted Households Served

Reform option

Estimated annual 

cost savingsa

Estimated 

additional 

households 

served

Increase minimum rents to:b, c

$50d $11 million 1,400

75 67 million 8,600

100 124 million 16,000

150 318 million 43,000

200 602 million 85,000

250 1.1 billion 167,000

300 1.8 billion 287,000

Require households to pay:e

35 percent of adjusted income in rent $1.1 billion 164,000

30 percent of gross income in rent 513 million 76,000

35 percent of the fair market rentf 927 million 136,000

Source: GAO analysis of HUD data.

 

47In past work we highlighted some of the limitations of HUD’s process for estimating fair 

market rents and ways to improve the accuracy of these estimates. See GAO, Rental 

Housing: HUD Can Improve Its Process for Estimating Fair Market Rents, GAO-05-342

(Washington, D.C.: Mar. 31, 2005). 
Page 31 GAO-12-300 Voucher Cost and Administration Issues 

a

To estimate the effect of these options on program costs and households assisted, we analyzed 

household characteristic and rent data as of December 2010. These estimates illustrate the relative 

effects of the options if fully implemented in one year. Actual implementation of such options likely 

would be done gradually and not all of the savings or efficiencies would be realized in the first year. 

b

We assumed that all households paid the greater of the minimum rent or 30 percent of adjusted 

income. Our minimum rent calculations did not take into account any payment households received 

for utility assistance. 

c

On January 31, 2012, the House Subcommittee on Insurance, Housing, and Community Opportunity 

released a revised draft of the Section 8 Savings Act entitled the Affordable Housing and SelfSufficiency Improvement Act of 2012. The draft bill proposes implementing a minimum rent of at least 

$69.45 (adjusted annually). We estimated that this increase would save approximately $56 million 

annually or could be used to serve an additional 7,100 households if Congress chose to reinvest the 

savings. 

d

We assumed all applicable households paid $50 in rent. As previously discussed, although housing 

agencies are permitted to set a minimum rent of up to $50, not all do and many offer hardship 

exemptions from the requirement. 

e

For the adjusted and gross income options, we did not impose a minimum rent requirement. 

f

For this option, we evaluated the effect of requiring households to pay 12, 15, 20, 30, and 35 percent 

of the fair market rent and no minimum rent. Only the 35 percent option resulted in cost savings or 

additional households served on an annual basis—all other percentages resulted in cost increases 

and fewer households served. 

These reform options could be implemented individually and some could 

be implemented together, depending on the objective policymakers were 

trying to achieve—such as maximizing cost savings, minimizing the 

impact on assisted households, or promoting work and self sufficiency 

among families with children (that is, nonelderly, nondisabled 

households).48 To illustrate, one housing agency in the MTW program put 

in place a rent structure that gradually increases household rents—from 

27 percent of gross income in years 1 and 2, to the greater of $100 or 29 

percent of gross income in years 3 and 4, and to the greater or $200 or 

31 percent of gross income in all subsequent years—to promote selfsufficiency among all assisted households. Under this approach, our 

analysis showed that households receive more subsidy in the first 2 

years, but pay more rent over time than under the current rent structure.49

In addition to estimating the cost savings that could result from each of 

these rent reform options, we evaluated each option in terms of its effect 

 

48Our analysis of current household characteristics showed that 81 percent of nonelderly, 

nondisabled households are comprised of at least one parent and one child. As a result, 

we refer to these households as “families with children” throughout this report. 

49Our analysis of current household characteristics and incomes showed that this 

approach would save approximately $691 million annually.
Page 32 GAO-12-300 Voucher Cost and Administration Issues 

on (1) changes in the rent paid by assisted households, (2) household 

attrition rates, (3) HUD’s goals of encouraging households to move to the 

neighborhoods of their choice (mobility) and discouraging households 

from choosing communities that have higher levels of poverty

(deconcentration), (4) incentives to seek work, (5) program 

administration, and (6) housing agency and industry support. While each 

of these options has advantages over the current rent structure—they 

could reduce costs or create administrative efficiencies—each also 

involves trade-offs.

Under each rent reform option, some households would have to pay more 

in rent than they currently pay. For example, as shown in table 9, if all 

households were required to pay at least $50 in rent per month, an 

estimated 36,000 households (2 percent) would experience an average 

increase of $31 in their monthly rent. HUD’s fiscal year 2013 budget 

request proposes increasing the minimum rent to $75 per month for all 

assisted household. Under this option, 207,000 households (11 percent) 

would experience an average increase of $27. Table 9 also shows options 

that change the formula for calculating the households’ payment toward 

rent. For example, setting the households rental payment to 30 percent of 

gross income (that is, without any deductions) would affect about 1,662,000 

households (86 percent) and increase mean household rent by $27.

Table 9: Estimated Number and Percentage of Voucher-Assisted Households for Which Rents Would Increase and the 

Average Monthly Increase, by Rent Reform Option

Number of households 

experiencing an increase in 

their monthly paymenta

Percentage of households 

experiencing an increase in their 

monthly payment

Mean change in monthly 

payment of affected 

households

Minimum rentb

$50 36,000 2% $31

75c 207,000 11 27

100 256,000 13 45

150 358,000 19 75

200 698,000 36 71

250 1,012,000 52 92

300 1,225,000 63 122

Household Rent Formula

35% of adjusted income 1,751,000 92 $50

30% of gross income 1,662,000 86 27

35% of fair market rentd 1,172,000 61 155

Source: GAO analysis of HUD data.
Page 33 GAO-12-300 Voucher Cost and Administration Issues 

a

To estimate the effect of each rent reform options on the number of households affected and their 

monthly payments, we analyzed household characteristic and rent data as of December 2010. 

b

The Affordable Housing and Self-Sufficiency Improvement Act of 2012proposes implementing a 

minimum rent of at least $69.45 (adjusted annually). We estimated that, if implemented, 

approximately 198,000 households would experience an average increase of $23 in their monthly 

payment. 

c

HUD’s fiscal year 2013 proposed budget proposes increasing the minimum rent to $75 per month for 

all assisted households. 

d

Under this option, approximately 755,000 households would experience an average decrease of 

$139 in their monthly payment. 

Increasing minimum rents primarily would affect families with children that 

tend to report little or no income. Conversely, assisted elderly and 

disabled households almost always report income (most likely because 

they are on fixed incomes, like Social Security) and a large percentage of 

them already pay close to $200 in rent.50

 

50We considered a household disabled if any member of the household had a disability. 

On a programwide level, 

imposing minimum rents of $200 or less does not change the amount 

these households pay in rent, when considering all assisted households. 

Figure 4 shows the mean change in all households’ monthly rent resulting 

from each of these rent reform options. Increases in monthly rental 

payments for elderly and disabled households begin to increase more 

significantly with a $200 minimum rent and under each of the rent formula 

changes. As a result, higher minimum rents or increases to the 

percentage of their incomes paid in rent will yield the greatest cost 

savings. For the rent formula change to 35 percent of adjusted income, 

the mean change in monthly rent generally would be similar across each 

household type.
Page 34 GAO-12-300 Voucher Cost and Administration Issues 

Figure 4: Estimated Effect of Rent Reform Options on Monthly Rents of All Voucher-Assisted Households, by Household 

Type

Note: To estimate the effect each rent reform option on monthly household payments, we analyzed 

household characteristic and rent data as of December 2010. The Affordable Housing and SelfSufficiency Improvement Act of 2012 proposes implementing a minimum rent of at least $69.45 

(adjusted annually). Under this change, only families with children would experience a change in rent 

($5 on average). 

Figure 5 shows the mean change in monthly rent only for those 

households whose payments toward rent have changed as a result of 

each reform option. Among these affected households, changes in rental 

payments would be similar across household types for some of the rent 

structure options. For example, if households were required to pay a $75 

minimum rent, mean rental payments would increase by $30 for disabled 

households (on the high end) and $24 for elderly, disabled households 

(on the low end). However, if households were required to pay a $200 or 

higher minimum rent, families with children again would experience 

higher mean changes in rent than disabled and elderly households.
Page 35 GAO-12-300 Voucher Cost and Administration Issues 

Figure 5: Estimated Effect of Rent Reform Options on Monthly Rents of Affected Voucher-Assisted Households, by 

Household Type

Note: To estimate the effect each rent reform option on monthly household payments, we analyzed 

household characteristic and rent data as of December 2010. The Affordable Housing and SelfSufficiency Improvement Act of 2012proposes implementing a minimum rent of at least $69.45 

(adjusted annually). We estimated that, if implemented, mean rental payments would increase by $23 

for families with children; $26 for disabled households; and $21 for both elderly and elderly, disabled 

households. 

Also as shown in figure 5, under the option where the rental payments are 

based on 35 percent of the fair market rent, some households will have to 

pay more in monthly rent, while others will pay less. Further, a higher 

proportion of affected households will see an increase in their rental 

payments. Specifically, of the approximately 1.9 million total households 

whose monthly rental payments would change under this option, about 61 

percent (approximately 1.2 million households) would experience an 

increase in their monthly payments and about 39 percent (755,000 

households) would experience a decrease.

Requiring households’ rental payments to be based on a percentage of 

the applicable fair market rent rather than 30 percent of adjusted income 

primarily would affect households living in high-cost (mostly urban) areas 
Page 36 GAO-12-300 Voucher Cost and Administration Issues 

and large families, as well as those at the lower end of the income scale.

HUD’s fair market rents reflect market prices and unit sizes—thus, 

household rent shares will increase if they live in a more expensive fair 

market area or rent larger units in the same fair market rent area under a 

rent option based on percentage of fair market rents. Table 10 illustrates 

how fair market rents and household payments based on a percentage of 

the fair market rent can vary by location and unit size.

Table 10: Comparison of Two- and Three-Bedroom Monthly Rents under a 35 Percent of Fair Market Rent Structure, for Three 

Areas

Boston, Massachusetts Concord, New Hampshire Farmington, Maine

Fair market 

rent

Monthly tenant 

payment

Fair market 

rent

Monthly tenant 

payment

Fair market 

rent

Monthly tenant 

payment

2 bedroom unit $1,357 $475 $993 $348 $687 $240

3 bedroom unit 1,623 568 1,226 429 820 287

Source: GAO analysis of HUD data.

In addition, under an option where households’ rental payments are 

based on a percentage of the fair market rent, lower-income households 

would pay a larger percentage of their income toward rent than higherincome households. And while many of the lowest-income households 

would experience rent increases ($116 per month, on average for families 

with children), many of the highest-income households would experience 

rent decreases ($97 per month).

51

Under each of these rent reform options, a small number of households 

might lose their subsidies—that is, their subsidy payments would be 

reduced to zero because their new, higher rental payments would fully 

cover the gross rent. For example, under the option where households 

pay 35 percent of their adjusted income in rent, we estimated that 

approximately 1.8 percent of households would lose their subsidies. 52

 

51We segmented the incomes of assisted household into 10 equal groups. We considered 

assisted households in the lowest tenth as the lowest-income households and assisted 

households in the highest tenth as the highest-income households.

Further, other affected households might leave the program because they 

would have to pay more in rent and no longer choose to participate in the 

program. However, because the demand for rental assistance by low52In addition, under all other rent reform scenarios, less than 0.5 percent of households 

would lose their subsidies. 
Page 37 GAO-12-300 Voucher Cost and Administration Issues 

income households generally exceeds the number of available vouchers, 

eligible household likely would replace the one that left because similar 

unassisted households have much higher rent burdens than assisted 

households. Consequently, these rent reform options likely would not 

result in a sharp decline in program participation rates.

Rent structures that decrease the amount of subsidy households receive 

may discourage HUD’s deconcentration efforts, as well as household 

mobility. With less subsidy, households (especially those with lower 

incomes) may not have the means to move from neighborhoods of 

concentrated poverty to those with a diversity of people and opportunities. 

But HUD’s deconcentration goal presents its own trade-offs—chief among 

them that fewer households ultimately would be served, albeit with more 

generous subsidies. Among the rent reform structures we evaluated, all 

but one would decrease household subsidies. A rent structure under 

which households would pay 30 percent or less of the applicable fair 

market rent would increase subsidies for almost all households and thus 

could further HUD’s deconcentration and mobility goals.53

Two of the rent structures we evaluated—higher minimum rents and rents 

based on a percentage of the fair market rent—could create work 

incentives for households with little to no income. Under the current rent 

structure, and as previously discussed, a household with no income 

generally does not pay rent—HUD’s subsidy covers the gross rent. 

Consequently, some have argued that these households have little 

incentive to seek employment because, for every $1 they earn, their 

subsidies are reduced by 30 cents (for every $100 they earn on a monthly 

basis, they will pay $30 in rent). Rent structures that do not take into 

account household income may do more to encourage assisted 

 

53We evaluated the effect (in terms of costs and households served) of requiring assisted 

households to pay 12, 15, 20, 30, and 35 percent of the fair market rent. (The October 5, 

2011, draft Section 8 Savings Act includes a provision that would require certain 

households to pay the greater of $75 or 12 percent of the fair market rent.) Our analysis 

showed that requiring households to pay 12, 15, 20, or 30 percent of the fair market rent 

would increase program costs and reduce the number of households served. For 

example, requiring households to pay 12 percent of the fair market rent would increase 

program costs by approximately $4.1 billion and reduce the number of households served 

by approximately 451,000; requiring households to pay 30 percent of the fair market rent 

would increase program costs by approximately $165 million and reduce the number of 

households served by approximately 27,000. 
Page 38 GAO-12-300 Voucher Cost and Administration Issues 

households to find and retain employment.54

Moving toward a rent structure either based on fair market rents or gross 

income would introduce significant administrative efficiencies into the 

program and could allow housing agencies to further reduce improper 

payments from administrator (housing agency) error or tenants’ 

underreporting of income. Some housing agencies we contacted noted 

the complexity of the current income and rent determination process and 

their frustrations with tracking the existence of and changes to tenant 

incomes. HUD noted that requiring assisted households to pay higher 

minimum rents or 35 percent of their adjust income in rent would not 

create administrative efficiencies in the voucher program. Our 2005 report 

on improper subsidy payments in HUD’s rental assistance programs 

made similar observations, finding that the complexity of HUD’s income 

and rent determination policies were of major concern to HUD field 

offices, program administrators, and industry groups.

Housing agencies in the 

MTW program that have implemented these types of rent structures 

simultaneously have offered self-sufficiency training and services to 

assisted households. Additionally, rent structures that eliminate 

household income from the rent equation may allow Congress and HUD 

to more accurately forecast funding needs. As we previously discussed, 

market rents and tenant incomes are two of the primary drivers of 

program costs, and predicting changes in market rents and incomes 

when developing budget proposals for future years is difficult. These 

types of rent structures also would encourage assisted households to 

make choices about housing consumption similar to unassisted 

households. For example, households would not have an incentive to 

over-consume housing because their share of the rent would increases 

with the size of the unit they rented.

55

 

54In the early stages of the MTW demonstration, several housing agencies experimented 

with time limits on assistance as a means of encouraging self sufficiency among assisted 

households. All of these housing agencies largely abandoned time limits. However, some 

were in favor of mandatory minimum rents or subsidies that decreased over time, 

regardless of a household’s income. Applied Real Estate Analysis, Inc. and The Urban 

Institute, The Experiences of Public Housing Agencies That Established Time Limits 

Policies under the MTW Demonstration (Washington, D.C.: May 2007). 

HUD officials 

noted at the time that the department was considering various 

55See GAO, HUD Rental Assistance: Progress and Challenges in Measuring and 

Reducing Improper Rent Subsidies, GAO-05-224 (Washington, D.C.: Feb. 18, 2005). 
Page 39 GAO-12-300 Voucher Cost and Administration Issues 

approaches for statutory, regulatory, and administrative streamlining and 

simplification of its policies for determining subsidies.

Finally, nearly all of the housing agencies we contacted said that they 

supported some type of rent reform—among the most popular options 

were increasing minimum rents and increasing tenant rental payments to 

35 percent of adjusted income. Some housing agencies have suggested 

that they have been successful in implementing rent reform under the 

MTW program with community support.56 Despite this, some industry 

groups have voiced concern about rent reform. For example, in 

commenting on a provision included in the draft Section 8 Savings Act of 

2011 that would permit HUD to pursue a rent demonstration, the National 

Low Income Housing Coalition stated that the demonstration would put 

HUD-assisted households at risk of having significant rent burdens.57 The 

Coalition also said that any demonstration should include parameters that 

require HUD to monitor these burdens and stop or change the 

demonstration if it were found to harm assisted households.58

Based on our literature review and interviews with HUD and housing 

industry officials, consolidation of voucher program administration under 

fewer housing agencies (administrative consolidation) could yield a more 

efficient oversight and administrative structure for the voucher program 

and cost savings for HUD and housing agencies; however, current 

information on the magnitude of these savings was not available.

HUD spends considerable resources in overseeing housing agencies. 

More than 2,400 local housing agencies administer the voucher program 

on HUD’s behalf. According to a 2008 HUD study, the department 

 

56The MTW statute requires that “an application to participate in the demonstration shall 

include a plan that... includes criteria for establishing a reasonable rent policy, which shall 

be designed to encourage employment and self-sufficiency by participating families, 

consistent with the purpose of this demonstration, such as by excluding some or all of a 

family’s earned income for purposes of determining rent.” See HUD, Policy Development 

and Research, Report to Congress, Moving to Work: Interim Policy Applications and the 

Future of the Demonstration (Washington, D.C.: August 2010). 

57The National Low Income Housing Coalition advocates for the affordable housing needs 

of low-income people. 

58Subcommittee on Insurance, Housing, and Community Opportunity, House Committee 

on Financial Services, testimony of Linda Couch, Senior Vice President for Policy, 

National Low Income Housing Coalition,112th Cong., 1st sess., 2011. 

Consolidation of Voucher 

Administration
Page 40 GAO-12-300 Voucher Cost and Administration Issues 

dedicated from more than half to two-thirds of its level of oversight to 10 

percent of its units (generally those housing agencies that administer 400 

or fewer vouchers), and an even lower level of risk in relation to the 

amount of subsidy funds they administered (about 5 percent of total 

program funds).59

According officials from HUD and some housing agencies with whom we 

spoke, administering the voucher program through small local housing 

agencies may be less cost effective, in part because of the differences in 

the economies of scale. For example, larger housing agencies can realize 

cost efficiencies in conducting large numbers of voucher unit inspections 

that smaller agencies cannot. Also, larger housing authorities collect 

sufficient fees to support fraud detection units to ensure that households 

report all of their income sources. Although there are no current data on 

the comparative costs of administering the voucher program though small 

and large housing agencies, the current administrative fee structure 

recognizes that economies of scale exist in larger housing agencies. As 

previously discussed, HUD pays housing agencies a higher rate for the 

first 600 vouchers a housing agency has under lease and a lower rate for 

the remaining units under lease. Congress passed this two-tiered fee 

structure based in part on a 1994 HUD study that found that flat fee rates 

were leading to administrative fee deficits in small housing agencies and 

large administrative fee reserves at larger housing agencies.

According to agency officials, consolidating the 

administration of vouchers under fewer agencies would decrease HUD’s 

oversight responsibilities.

60

HUD has acknowledged that oversight and administrative efficiencies 

could be realized. As previously discussed, in recent years, the 

department has advanced several proposals aimed at streamlining and 

simplifying administration of the voucher program. Several of these 

proposals have advocated administrative consolidation as a means of 

creating administrative efficiencies. For example, HUD’s 2011 version of 

the Transforming Rental Assistance initiative was intended to streamline 

and improve the delivery and oversight of rental assistance across all of 

 

59See HUD, Office of Policy, Program, and Legislative Initiatives, Rebalancing HUD’s 

Oversight and Small PHAs’ Regulatory Burdens (Washington, D.C.: 2008). About 58

percent of housing agencies administer 400 or fewer vouchers.

60See HUD, Office of Policy Development and Research, Section 8 Administrative Fees: A 

Report to Congress (Washington, D.C.: June 1994). 
Page 41 GAO-12-300 Voucher Cost and Administration Issues 

the department’s rental assistance programs by means such as 

promoting consortiums, consolidation, and other locally designed 

structures for administrative functions.

In addition, HUD recently initiated changes to its housing agency 

consortium rule. The revised rule would treat all housing agencies in a 

consortium as one entity—HUD’s current regulation requires that 

consortium members be treated separately for oversight, reporting, and 

other purposes. Some have argued that the current rule does not allow 

HUD or housing agencies to realize the full benefits of consolidation—

less oversight (one versus multiple agencies) and shared and thus 

reduced administrative responsibilities—and therefore discourages the 

formation of consortiums. Since 1998, nine housing agencies that 

administer vouchers have formed four consortiums.

We evaluated the administrative consolidation in terms of its effect on 

assisted households and selected voucher program goals. More 

specifically, we looked at implications for, or likelihood of achieving (1) 

HUD’s mobility and deconcentration goals, (2) program administration, 

and (3) housing agency and industry support. Like the rent reform options 

we evaluated using similar criteria, consolidation has advantages over the 

current administrative structure, but also involves some trade-offs.

Consolidation might help HUD more readily achieve deconcentration 

goals. Although vouchers theoretically allow recipients to use them 

anywhere in the United States, the current system of program 

administration creates numerous hurdles for households to move out of 

high-poverty, central city jurisdictions in which they typically live. Most 

housing agencies originally were established to construct and manage 

public housing developments.61 As a result, program administration does 

not always align with housing markets. In urban areas within the same 

market, several housing agencies may operate voucher programs with 

different admissions criteria and subsidy levels. A paper by researchers at 

the Brookings Institution argued that this “fragmentation of local program 

administration undermines the potential of the [voucher] program as a 

mechanism for deconcentrating urban poverty.”62

 

61Approximately 850 housing agencies only administer vouchers. 

Extending the 

62See Bruce Katz and Margery Austin Turner, Who Should Run the Housing Voucher 

Program? A Reform Proposal. Working paper prepared for the Brookings Institution, 

Center on Urban and Metropolitan Policy (Washington, D.C.: November 2000).
Page 42 GAO-12-300 Voucher Cost and Administration Issues 

jurisdiction of housing agencies (through consolidation, for example) likely 

would give assisted households access to more housing options,

particularly in surrounding suburbs. On the other hand, regionalized 

administration of the voucher program may make it harder for households 

to make or maintain contact with program administrators when 

necessary—for example, assisted households may not have access to 

transportation or may have to travel long distances to meet with housing 

agency officials.

Several states offer examples of regional or statewide administration. 

Thirty-one states have programs in which one housing agency 

administers a voucher program throughout a state. These housing 

agencies administer from less than one percent to all of their respective 

state’s total voucher allocation. In addition, as part of our work, we visited 

a number of housing agencies in the Boston, Massachusetts, 

metropolitan area. As a result of litigation in the mid-1990s, local housing 

agencies in the state are permitted to lease vouchers throughout the state 

(that is, outside their original jurisdictions, which typically align with city 

limits).63

Although consolidation will not alleviate housing agencies’ current 

administrative burden, it may begin to address some of the issues 

housing agencies and industry groups have raised about a particular 

policy—portability. Although portability is one of the hallmark objectives of 

the voucher program, almost all the housing agencies we contacted said 

that HUD’s portability polices should be revised or eliminated, noting that 

they are complicated and costly to administer. Under HUD’s portability 

rules, an assisted household may move to the jurisdiction of a different 

housing agency—the receiving agency either may bill the sending agency 

for assistance for the transferring household or absorb the household into 

its own program. According to the 2000 Brookings Institution report, 

because of the complexity of the portability process—for example, 

Although all of the housing agencies with which we spoke 

suggested that it was important that housing agencies maintain local 

control of their programs, each leased at least one voucher outside their 

original jurisdiction. In Brookline—a city with relatively high housing costs 

compared with the surrounding area and the nation—more than half of 

voucher holders rent apartments outside the city limits.

 

63Williams v. Hanover Housing Authority, 871 F. Supp. 527 (D. Mass. 1994); see also 

Williams v. Hanover Housing Authority, 926 F. Supp. 10 (D. Mass. 1996), rev’d and 

remanded on other grounds, 113 F.3d 1294 (1st. Cir. 1997). 
Page 43 GAO-12-300 Voucher Cost and Administration Issues 

receiving agencies may calculate subsidy levels differently than sending 

agencies, or apply more rigorous screening criteria—many housing 

agencies do not fully explain portability to households and do not 

encourage them to consider moving.64

In addition, consolidated waiting lists and single points of contact for 

housing assistance within a single housing market, region, or state may 

make the process of applying for and obtaining rental assistance less 

confusing and more transparent for households seeking assistance. For 

example, a large number of housing agencies in Massachusetts 

participate in a consolidated waiting list—households seeking assistance 

in the state need only put their name on one list and receive 

communications from one agency. HUD officials said that the department 

has been considering taking steps to maintain the waiting lists of each 

housing agency in a centralized system.

Finally, housing agencies we contacted were split on the idea of 

consolidation—about one quarter supported it as a way to cut costs and 

introduce administrative efficiencies in the voucher program, while almost 

half were against it. Some housing industry groups and an academic with 

which we spoke argued that consolidation would not save money—one 

noted that the administrative fees that small housing agencies receive are 

relatively insignificant in terms of total program dollars—and would 

sacrifice local discretion and control of voucher programs. Others noted 

that administrative costs savings could result from the consolidation and 

single-source management of waiting lists and elimination or substantial 

reformation of the portability process; however, no data currently are 

available to assess this point.

Over the past decade, Congress has responded to the increasing cost of 

vouchers by changing the way the program is funded. Specifically, rather 

than providing funding based on the number of vouchers housing 

agencies are permitted to lease, Congress currently provides funding 

based on housing agencies’ prior-year subsidy expenses. Congress also 

has capped appropriations so that housing agencies do not always 

receive the amount of subsidy or administrative funding for which they are 

 

64See Who Should Run the Housing Voucher Program? A Reform Proposal.

Conclusions
Page 44 GAO-12-300 Voucher Cost and Administration Issues 

eligible based on the funding formulas Congress annually establishes. 

While this approach gives Congress some control over cost increases, it 

does not directly address the market and policy factors we identified as 

contributing to increases in program costs.

Although policy makers can do little to alter or control market changes 

such as changes in rents and tenant incomes, our analysis suggests that 

savings could continue to be realized (or, in some cases, more 

households could be served without additional program funding if 

Congress chooses to reinvest the funds in the program) if HUD provided 

Congress better information on housing agencies’ subsidy reserves. 

Enhanced information would include the extent of housing agencies’ 

subsidy reserves, clear and consistent criteria for determining how much 

housing agencies would need to retain to help ensure effective program 

management, and how much could be rescinded in future appropriations.

Without such information, HUD faces difficulties in effectively manage the 

funding Congress provides for the voucher program, including ensuring 

that funds disbursed to housing agencies are used to assist households 

rather than remaining unused in reserve accounts.

In tandem with providing information about the use of program funds, 

HUD also has an opportunity to advance proposals that would help 

increase the efficiency of program administration. In particular, HUD now 

has or will have richer, relevant experience and data from which to draw. 

In addition to previous reforms HUD has proposed, examples from the 

MTW program and HUD’s study on administrative fees can offer options 

to Congress for streamlining and simplifying administrative activities and 

aligning the administrative fee structure with actual administrative 

expenses. For example, information and analyses from these sources 

could help identify all current administrative requirements, determine 

which of those actions are necessary and which could be eliminated or 

streamlined, and determine the cost of performing these activities—which 

could help reduce program costs in the future.

Although Congress and HUD have taken several steps to control rising 

costs in the voucher program, we have identified a range of options that 

offer the additional promise of managing program costs or increasing 

efficiency in the long term. These options would also be applicable to 

HUD’s other rental assistance programs and would have the potential to 

generate even greater savings. Implementing rent reform and 

administrative consolidation would require policymakers to consider some 

potential trade-offs—in the balance are issues such as the rent burden of 

assisted households, concentration of poverty, and the extent of local 
Page 45 GAO-12-300 Voucher Cost and Administration Issues 

control over voucher programs. Nevertheless, these options have certain 

advantages over the current program structure. For example, these 

options could save money or streamline program administration—both of 

which are important objectives in a time of fiscal constraint. Currently 

Congress is considering a variety of measures to address some of these 

issues.

To help reduce voucher program costs or better ensure the efficient use 

of voucher program funds, we recommend that the HUD Secretary 

provide information to Congress on (1) housing agencies’ estimated 

amount of excess subsidy reserves and (2) its criteria for how it will 

redistribute excess reserves among housing agencies so that they can 

serve more households. In taking these steps, the Secretary should 

determine a level of subsidy reserves housing agencies should retain on 

an ongoing basis to effectively manage their voucher programs.

Further, the Secretary should consider proposing to Congress options for 

streamlining and simplifying the administration of the voucher program 

and making corresponding changes to the administrative fee formula to 

reflect any new or revised administrative requirements. Such proposals 

should be informed by results of HUD’s ongoing administrative fee study 

and the experience of the MTW program.

We provided a draft of this report to HUD for comment. In its written 

response, reproduced in appendix II, HUD neither agreed nor disagreed 

with our recommendations, but provided technical comments that we 

have incorporated where appropriate. While the response noted that the 

draft report provided an accurate assessment of the program and its 

current outcomes, HUD identified several points for clarification and 

emphasis, including: 

• HUD commented that the stated purpose of our report of 

identifying options for increasing efficiencies and simplifying 

program administration was inconsistent with our 

recommendations for agency action because some of the options 

do not result in both efficiencies and simplification. We clarified, 

where appropriate, that the focus of our report was to identify 

reform options that could reduce costs or create efficiencies. 

• HUD also commented that the draft report’s discussion of growth 

in HUD’s outlays could be misleading because this growth reflects 

Recommendations for 

Executive Action

Agency Comments 

and Our Evaluation
Page 46 GAO-12-300 Voucher Cost and Administration Issues 

only a change in HUD’s disbursement policy and does not relate 

at all to changes in program costs. Specifically, HUD stated that 

starting in 2006, the program was required to disburse all eligible 

funds, instead of the department’s maintaining those reserves. 

HUD did not provide any support that outlays reflect only a change 

in HUD’s disbursement policy and do not relate at all to changes 

in program costs. While we recognize that disbursement policies 

may affect outlays, changes in program size and other factors 

would also affect outlays. Further, although the draft provides 

information on the trends in actual HUD outlays, it focuses on 

housing agencies’ expenditures because they are a better 

measure of what housing agencies are paying in subsidies to 

assisted households with vouchers. Therefore, we made no 

changes in response to this comment. 

• HUD also commented that the draft report did not address HUD’s 

ongoing efforts to limit the accumulation of subsidy reserves. We 

added additional language to the report on these efforts, such as 

the assistance HUD provides to housing agencies in ensuring that 

all available voucher funds are utilized. 

• HUD noted that it currently provides quarterly reports to the 

Congressional Budget Office on subsidy reserve levels. However, 

these quarterly reports do not include information on the estimated 

amount of housing agencies’ subsidy reserves that exceed 

prudent levels, as we are recommending. By providing the 

estimated amount of excess subsidy reserves, Congress will be 

better positioned to make informed funding decisions, as we 

illustrated in our draft report. 
Page 47 GAO-12-300 Voucher Cost and Administration Issues 

As agreed with your offices, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies to the Secretary of Housing 

and Urban Development and other interested committees. In addition, the 

report will be available at no charge on the GAO Web site at 

http://www.gao.gov. 

If you or your staff have any questions concerning this report, please 

contact me at (202) 512-8678 or sciremj@gao.gov. Contact points for our 

Office of Congressional Relations and Public Affairs may be found on the 

last page of this report. Key contributors to this report are listed in 

appendix III. 

Mathew J. Scirè

Director, Financial Markets

 and Community Investment
Page 48 GAO-12-300 Voucher Cost and Administration Issues 

List of Congressional Requesters

The Honorable Charles E. Grassley

Ranking Member

Committee on the Judiciary

United States Senate

The Honorable Shelley Moore Capito

Chairwoman

Subcommittee on Financial Institutions 

 and Consumer Credit 

Committee on Financial Services

United States House of Representatives

The Honorable Judy Biggert

Chairman

Subcommittee on Insurance, 

Housing and Community Opportunity

Committee on Financial Services

United States House of Representatives
Appendix I: Objectives, Scope, and 

Methodology

Page 49 GAO-12-300 Voucher Cost and Administration Issues 

The objectives of our review were to (1) determine the factors that have 

affected costs in the Housing Choice Voucher (voucher) program from 

2003 through 2011 and the actions Congress and the Housing and Urban 

Department (HUD) took to manage these costs and (2) identify additional 

steps HUD, housing agencies, or policy makers can take to limit cost 

growth in the voucher program and more effectively provide decent, safe, 

and affordable housing.

To determine the factors that have affected costs in the voucher program 

from 2003 through 2011 and the actions Congress and HUD took to 

manage these costs, we reviewed and analyzed appropriations 

legislation, budget documents—including HUD budget proposals, 

Congressional Research Service reports, monthly statements from the 

Department of the Treasury, and the Office of Management and Budget 

SF-133 reports on budget execution and budget resources. We also 

reviewed HUD’s annual guidance on the allocation of the program’s 

appropriation to housing agencies. We used these sources to determine 

the annual appropriations and outlays over the period. The starting year 

for our analysis reflects the year when Congress began changing the 

voucher program’s funding formula.1

We analyzed program data that HUD prepared using information derived 

from multiple HUD systems including the Central Accounting and 

Program System (HUDCAPS) and Voucher Management System (VMS) 

to determine how much housing agencies’ expenditures changed from 

2003 through 2010. Specifically, we assessed the extent to which certain 

factors, such as subsidy paid to a landlord, program size (that is, the 

number of assisted households), and administrative expenses, 

contributed to the change in program expenditures over this period. We 

identified these factors by reviewing GAO, HUD, and stakeholder studies.

We also reviewed prior work by GAO and others to describe what is 

 

1

Funding for 2003 and 2004 was provided through the Housing Certificate Fund, which 

accounted for both Section 8 programs—the project-based and tenant-based programs. 

As a result, we were unable to determine the appropriated and outlay amounts for the 

programs for these years. In addition, in 2005 the Housing Certificate Fund was split into 

two accounts, one of which was the tenant-based rental assistance account. Because of

the split, about $4.2 billion from the advance appropriation enacted in fiscal year 2004 and 

available in 2005 does not appear in this account. Instead, it appears in the Housing 

Certificate Fund where it was appropriated. Total available resources for tenant-based 

rental assistance in fiscal year 2005 were $14.8 billion. 

Appendix I: Objectives, Scope, and 

Methodology 
Appendix I: Objectives, Scope, and 

Methodology

Page 50 GAO-12-300 Voucher Cost and Administration Issues 

known about the cost-effectiveness and characteristics of vouchers 

relative to other forms of rental housing assistance.

To identify additional steps HUD, housing agencies, or policy makers can 

take to limit cost growth in the voucher program and more effectively 

provide decent, safe, and affordable housing, we identified and reviewed 

relevant legislation, draft legislation, and studies. We analyzed HUD’s 

VMS data on the Net Restricted Assets (NRA) balances (or subsidy 

reserves) of housing agencies as of September 30, 2011, to determine 

the extent of housing agencies’ “excess” subsidy reserves. To derive our 

estimates of the potential “excess” balances, we used HUD’s 8.5 percent 

(about a month) threshold to estimate the excess NRA balance. Also, we 

analyzed HUD data to determine the number of housing agencies and 

amount of funding that Congress offset in fiscal years 2008 and 2009 and 

the additional funding Congress appropriated for and HUD provided to 

certain housing agencies in 2009. Further, we visited nine housing 

agencies in Massachusetts. We selected these housing agencies based 

on Massachusetts’ use of both local and regional housing agencies to 

provide voucher assistance and the housing agencies’ proximity to one 

another. In addition, we interviewed 31 of the 35 housing agencies 

participating in the Moving to Work (MTW) demonstration program to 

identify the activities the agencies had implemented in their voucher 

programs to reduce program costs and introduce efficiencies in the 

program.2

We also evaluated the cost and policy implications of three types of 

programmatic reforms to the voucher program: increasing minimum rents, 

changing the percent of income tenants pay toward rent, and requiring 

tenants to pay a percentage of fair market rent. In identifying and 

assessing these programmatic reforms, we reviewed proposals included 

in draft legislation and HUD, Congressional Budget Office, and housing 

industry group reports. We also considered reforms certain agencies 

have implemented. To estimate the effects of these alternative 

For example, as part of these interviews, we identified alternate 

rent structures these agencies had implemented or proposed.

 

2

We did not contact the Philadelphia Housing Authority because the agency currently is 

under administrative receivership. We did not contact the Boulder Housing Partners, and 

Lexington-Fayette Urban County Housing Authority because they had not yet entered into 

MTW agreements with HUD at the time of our analysis. In addition, the Housing Authority 

of the County of Santa Clara administers its own MTW program as well as the Housing 

Authority of the City of San Jose’s MTW program.
Appendix I: Objectives, Scope, and 

Methodology

Page 51 GAO-12-300 Voucher Cost and Administration Issues 

approaches to calculating tenant payments on the subsidy levels that 

result, we analyzed a December 2010 extract of tenant records from 

HUD’s Public and Indian Housing Information Center (PIC). These 

records contain information about participating households, as of 

December 2010, including information on gross and adjusted income 

levels, housing unit size and rent, tenant contributions and housing 

assistance payments, as well as information on age, sex, and disability 

status of each household member. To focus on the core of the assisted 

household population, we examined only those households with five or 

fewer members, and living in units with one, two or three bedrooms. We 

determined the elderly and disability status of each household. 

Specifically, we defined a household as an elderly household if either of 

the first two household members (the head of household and possibly a 

spouse or co-head) were age 62 or over, and we placed a household in 

disability status if any of the five members were identified as having a 

disability. For the identified subsidy alternatives, we calculated an 

alternative tenant contribution using information on income and applicable 

fair market rent in the PIC file as appropriate, and calculated the resulting 

assistance payment. (The assistance payment is the difference between 

the lesser of the payment standard and gross rent, and the tenant 

payment, subject to any existing minimum tenant payments.) We did not 

consider the possible effects of any change in household behavior, either 

in terms of continued participation in the voucher program or in choice of 

housing unit or rent level that could be induced by changes in tenant 

contributions.

In conducting our work, we assessed the reliability of datasets provided 

by HUD, including data files derived from HUDCAPS, VMS, and PIC.

Specifically, we performed basic electronic testing of relevant data 

elements, such as housing assistance payment amounts, total tenant 

payment, and unit months leased. We reviewed HUD’s data dictionaries, 

instructions, and other relevant documentations. We also interviewed 

HUD officials knowledgeable about the data to obtain clarifications about 

key variables and calculation rules. Where possible, we compared our 

results with other sources to ensure the reasonableness of the 

information. We determined that the data were sufficiently reliable for the 

purpose of this report.

Finally, for all of our objectives, we interviewed HUD officials and 

consulted with one academic and officials from various housing groups 

including the Center on Budget and Policy Priorities, Council of Large 

Public Housing Authorities, National Low-Income Housing Coalition, 

National Association of Housing Redevelopment Officials, Public Housing 
Appendix I: Objectives, Scope, and 

Methodology

Page 52 GAO-12-300 Voucher Cost and Administration Issues 

Authorities Directors Association, Quadel Consulting, and the Urban 

Institute. Further, we contacted 53 housing agencies that administer the 

voucher program. In selecting these housing agencies, we considered the 

number of authorized vouchers, location (that is, HUD-defined regions), 

and leasing and spending rates for the voucher program as of March 

2011.

We conducted this performance audit from February 2011 through March 

2012 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.
Appendix II: Comment from U.S. Department of 

Housing and Urban Development

Page 53 GAO-12-300 Voucher Cost and Administration Issues

Appendix II: Comment from U.S. Department 

of Housing and Urban Development
Appendix II: Comment from U.S. Department of 

Housing and Urban Development

Page 54 GAO-12-300 Voucher Cost and Administration Issues
Appendix II: Comment from U.S. Department of 

Housing and Urban Development

Page 55 GAO-12-300 Voucher Cost and Administration Issues
Appendix III: GAO Contact and Staff 

Acknowledgment

Page 56 GAO-12-300 Voucher Cost and Administration Issues

Mathew J. Scirè, (202) 512-8678, sciremj@gao.gov

In addition to the contact named above, Daniel Garcia-Diaz, Acting 

Director; Stephen Brown, William Chatlos, Karen Jarzynka-Hernandez, 

Cory Marzullo, John McGrail, Josephine Perez, and Barbara Roesmann 

made key contributions to this report.

Appendix III: GAO Contact and Staff 

Acknowledgment 

GAO Contact

Staff 

Acknowledgments

(250587)
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