More than 40 percent of the properties now have assisted rents exceeding 120 percent of average market rents in their locations. The General Accounting Office has found Section 8 apartments renting for twice as much as nonsubsidized apartments across the street. Even worse, some tenants would like to leave the complex for more satisfactory housing at lower cost to the government but cannot because their rental assistance is tied to their current units. It makes no sense to pay owners more than they would get in a free and competitive market. The only reason the practice has continued is policymakers fear that many owners would have to default on their mortgages if their subsidies were capped at market-level rents.
Some observers argue that the current system needs only some fine-tuning to lower costs.
First, the interlocking subsidies of mortgage insurance and rental assistance insulate Section 8 properties from market forces. Proposals to control subsidy costs through better enforcement or tighter funding formulas will fail to eliminate all inefficiencies because they require a continued bureaucratic structure to administer the program. Market rent levels, which send the proper signals to owners and tenants, can be achieved only through competition, not by government fiat. Efforts at Reform Early in 1995 hud proposed replacing the expiring Section 8 contracts with portable housing vouchers and leaving landlords free to rent their units for whatever the market would bear. But hud s proposal was opposed by both property owners and tenant groups.