Section 8 Housing Choice Voucher Program: Issues and Reform Proposals
Released: 2014-02-07T00:00:00

Introduction

The Section 8 Housing Choice Voucher program provides monthly rental assistance to around 2 million low-income households each year. It is administered at the local level by quasi-governmental public housing agencies (PHAs). While some form of Section 8 rental assistance has been in place since the mid-1970s, the modern program was shaped largely by the 1998 assisted housing reform act ( P.L. 105-276 ). More than a decade later, the Section 8 Housing Choice Voucher program has come under new scrutiny, with PHA industry leaders, low-income housing advocates, both the Bush and Obama Administrations, and some Members of Congress calling for reforms. Further, recent efforts to reduce domestic discretionary spending have resulted in constraints in funding for the program, which has intensified PHAs' calls for cost-saving administrative reforms. This report introduces the primary features of the Section 8 Housing Choice Voucher program, issues that have arisen, and recent reform proposals.

Current Program Features and Issues

Administration

The current Section 8 Housing Choice Voucher program and its approximately 2 million vouchers are administered by more than 2,500 local PHAs across the country. PHAs vary greatly in their size, jurisdiction, and capacity. Some administer as few as 10 vouchers, while one PHA, the New York City Housing Authority, administers almost 90,000. Roughly half of all PHAs administer 250 or fewer vouchers. Some PHAs have jurisdiction over all rural areas of a state or an entire county or city, while others have jurisdiction over only part of a city or county. Some PHAs have a full-time director and a large staff; others have one person serving part-time as both the director and sole staff.

This heterogeneity has been criticized at times by some researchers and housing advocates. They have argued that housing markets are regional, and thus housing programs should be administered on a regional level. Most other social service programs serving low-income families—such as Temporary Assistance for Needy Families, child care assistance, and the Supplemental Nutrition Assistance Program (SNAP, formerly Food Stamps)—are administered at the state level. If the voucher program were administered at the state level, it is argued, it might be easier to coordinate it with other social services. A recent Government Accountability Office (GAO) report suggested that consolidated administration of the voucher program could increase efficiency; however, it could also result in reduced local control over the program.

The organizations representing PHAs have generally argued in favor of the current locally driven and focused system. Local PHAs have important local connections with entities ranging from landlords to zoning boards, connections that states, they contend, would not have. Furthermore, PHAs have the most experience in administering federal housing assistance for the poor, both through the voucher program and the federal public housing program.

HUD has taken some steps to encourage consolidation of PHAs. For example, the department has provided guidance to PHAs on how to voluntarily transfer their voucher programs to another PHA.

Local Discretion

Many of the features of the program (described throughout this report) are set by federal statutes and regulations, such as the general eligibility requirements, maximum subsidy levels, minimum tenant contributions towards rent, and basic housing quality standards. However, PHAs are given discretion in some areas, such as managing and prioritizing their waiting lists for assistance and screening tenants for suitability. PHAs must describe their programs and how they are using their local discretion in five-year and annual PHA plans, as well as in administrative plans. All of these plans must be developed with public input and made available for public review. (For more information about PHAs' discretionary authority, see CRS Report R42481, The Use of Discretionary Authority in the Housing Choice Voucher Program: A CRS Study , by [author name scrubbed].)

Eligible Uses of Funds

Today's voucher program provides a federally defined subsidy, called a voucher, which a family can use to help pay its housing costs in the private market. That voucher pays roughly the difference between a unit's rent and the tenant's contribution towards the rent. The bulk of voucher funds provided by HUD to PHAs is used to renew existing, previously funded and authorized vouchers. New vouchers are called incremental vouchers. No funds had been provided for new, general purpose incremental vouchers since 2002; however, the appropriations acts since FY2008 have all provided funding for incremental vouchers for targeted populations, including homeless veterans and families in the child welfare system.

In addition to receiving funding for the rent subsidies themselves, PHAs receive funding for the cost of administering the program. PHAs earn administrative fees on a per-voucher basis. They can use their administrative fee funding to cover the cost of administering the voucher program, and for other purposes, such as providing supportive services, downpayment or security deposit assistance, or housing search assistance.

The voucher program is governed by hundreds of pages of regulations and guidance that make it, some argue, costly, overly prescriptive, and difficult to administer. Past reform initiatives have proposed to convert the current program into something more akin to a block grant, redefining the concept of a voucher by instead providing funds that PHAs could use for rental assistance, homeownership assistance, and/or supportive services, as defined by the grantee. A "voucher" would no longer have uniform meaning, and PHAs could provide more or less generous assistance to families at their discretion, outside of some, if not all, current federal rules. Such a reform would be consistent with the 1996 welfare reform law that abolished the Aid to Families with Dependent Children (AFDC) program and replaced it with the broader-purpose Temporary Assistance for Needy Families (TANF) block grant.

The concept of block-granting the voucher program raises concerns among low-income housing advocates, who argue that block granting could lead to funding cuts, that block grants can lead to less federal oversight and less transparency about how funds are being spent, and that existing rules and regulations are necessary to protect tenants.

To some degree, the Moving to Work (MTW) Demonstration (discussed later in this report) has allowed some PHAs to receive their federal housing assistance funding (Section 8 and public housing) in block grant form. MTW has been popular with participating PHAs, who feel that the added flexibility allows them to innovate and run more efficient programs. Low-income housing advocates have criticized MTW for lacking transparency and clear program objectives and for allowing PHAs to adopt proposals—such as time limits and work requirements for recipients—that they argue are detrimental for assisted families. (For more information about MTW, see CRS Report R42562, Moving to Work (MTW): Housing Assistance Demonstration Program , by [author name scrubbed].)

Homeownership Vouchers

In some cases, families can use their vouchers to help pay the monthly costs of a mortgage, but only if their local PHA chooses to run a homeownership voucher program. There has been debate about how much of the voucher program should, and can realistically, be focused on promoting homeownership. The George W. Bush Administration made a priority of increasing the number of first-time homebuyers making purchases with homeownership vouchers. Successful homeownership can help lower-income families build assets and wealth, which can help their long-term financial security. However, the voucher homeownership program has minimum requirements that many families currently served by the rental voucher program may be unable to meet (minimum income standards, employment requirements). Furthermore, some voucher families, particularly those in low-wage and/or volatile employment markets may not have the financial stability necessary to successfully maintain homeownership. Given the recent turmoil in the housing market, the immediate future growth of the voucher homeownership option is uncertain. After a peak of nearly 2,800 closings in FY2004, the number of closings has averaged around 1,700 per year through the end of FY2010, and around 1,100 closings in FY2011 and FY2012.

Rent Structure14

Under the current rules of the voucher program, families pay an income-based rent. Specifically, families are required to pay 30% of their adjusted incomes toward rent, although they may choose to pay more. Given this income-based rent structure, as tenants' incomes increase, the amount they are required to pay in rent increases, and as their incomes decrease, the amount they are required to pay in rent decreases.

The current income-based rent structure used in the voucher program—and most other HUD rent-assistance programs—is based on the concept of affordability. It is generally accepted that housing is affordable for low-income families if it costs no more than 30% of their adjusted gross income, on the assumption that low-income families need the full remaining 70% to meet other needs. However, this figure may be considered somewhat arbitrary. For some families with few costs for work, transportation, medical, child care, or other needs, 40% or even 50% of income might be a reasonable contribution toward housing costs. In fact, the current voucher program allows families to choose to pay up to 40% of their incomes toward housing costs initially, and even greater amounts upon renewal of a lease. For other families, with high expenses for work, transportation, medical, child care, or other outside costs, some percentage lower than 30% might be the most reasonable, or "affordable," contribution. In fact, in the early years of the rent assistance program, the standard was set lower, at 25% of family income.

Critics of the current rent calculation, including the former George W. Bush Administration and some PHA industry groups, have argued that PHAs should have the flexibility to modify the existing income-based rent system or adopt new systems partially or fully decoupled from income, such as flat or tiered rents. Under flat rents, families would pay a PHA-determined, fixed, below-market rent, based on unit size, regardless of their incomes. As income changed, rent would stay the same. Current law permits PHAs to set voluntary flat rents for public housing. Families are permitted to choose to pay flat rents, but must be permitted to switch back to income-based rents.

Under tiered rents, PHAs could set different flat rents for broad tiers of income. Families would pay the rent charged for their income tier, and only fluctuations in income that move them from one tier to another would change their rent. If PHAs set rent tiers very low, then fewer tenants would face an increase in rent, but PHAs could face higher voucher costs. If the tiers were set higher, then more tenants would face rent increases, but PHAs would see reduced voucher costs.

Shallower subsidies under flat or tiered rents would allow PHAs either to save money or serve more people with the same amount of money, depending on the authority provided by HUD and Congress. However, shallower subsidies would also result in greater cost-burdens for the lowest-income families.

Many PHAs that have been given the choice to adopt alternative rent structures—those participating in the Moving to Work demonstration—have made that choice. According to data from HUD, nearly half of MTW PHAs have adopted flat or tiered rents.

Another argument in favor of moving away from an income-based rent structure concerns administrative ease. The current complicated rent calculation, paired with the difficulty of verifying the incomes of tenants, has led to high levels of error in the subsidy calculation. According to a HUD 2001 Quality Control study looking at data from 2000, over 60% of all rent and subsidy calculations contained some type of error. The report estimated the errors resulted in $1 billion in subsidy over- and under-payments. These errors led the Government Accountability Office (GAO) to designate the Section 8 program as a "high risk" program, meaning that it was particularly susceptible to waste, fraud, and abuse.

HUD has undertaken a number of initiatives to try to reduce errors. Beginning with the FY2003 Consolidated Appropriations Act ( P.L. 108-7 ), HUD was given access to the National Directory of New Hires, a database that may allow PHAs to better verify income data. HUD has also implemented the Enterprise Income Verification system, a fraud-detection tool that makes income and wage data available to PHAs. It appears these efforts have resulted in some improvement. The FY2009 Quality Control study found a 60% reduction in erroneous payments from 2000, down to $440 million, but up from $400 million the prior year. About 42% of subsidies were erroneously calculated, down from 60% in 2000, but up from 39% in FY2008. In 2007, GAO removed the rental assistance program from its high risk series.

Adopting flat or tiered rents could substantially reduce—if not eliminate—errors in rent calculations.

A flat rent structure may also help reduce the work disincentives inherent in the current calculation. Since rent goes up as income goes up, families face an effective 30% tax on any increase in earnings and therefore they may have a disincentive to increase earnings and/or an incentive to under-report income. To help address this problem in the public housing program, Congress has instituted a mandatory earned income disregard that applies to new earnings for some families; however, no such mandatory disregard exists in the voucher program, except in the case of certain recipients who have disabilities. If PHAs administering the voucher program choose to voluntarily disregard increased earnings, they will not receive funding to cover the increased subsidy costs, or they may face sanctions from HUD for not accurately calculating subsidies. Under flat or tiered rents, families can generally increase their earnings without facing changes in their rents.

Low-income housing advocates generally agree that the current rent-setting system is overly complicated, but still support income-based rents over flat rents. Flat rents are not as responsive to changes in family income as income-based rents, and their adoption could result in some families paying more toward rent than is generally considered affordable (30% of income). They argue that changes to the method of calculating income could do much to simplify the rent-setting process.

Calculation of Income25

Eligibility for a voucher is based on a family's annual gross income, and the amount of rent a family must pay is based on a family's annual adjusted income. The current system for calculating income, as noted earlier in relation to rents, has been criticized as cumbersome and prone to errors.

Annual income, which is used for determining eligibility and is the basis for determining adjusted income for rent-setting purposes, is defined as all amounts that are anticipated to be received by all members of a household during the subsequent 12-month period, with some exclusions (such as foster care payments). Anticipating low-income families' future incomes can be difficult, as their employment is often variable. The composition of a family may also be variable, with members joining or leaving the household over the course of a year. Further, PHAs are expected to verify families' incomes using third-party sources. While this process helps to ensure accuracy, it can be time-consuming for PHAs.

Once the total amount of a family's income has been determined, adjusted income is calculated for rent-setting purposes by applying various deductions. From total annual income, the family may qualify to have certain amounts deducted, such as $480 per dependent; $400 for elderly and disabled households; and reasonable child care expenses, disability expenses, and certain medical expenses of the elderly or disabled.

The complexity of the income determination system is a factor driving errors in rent determination. Many of the requirements are statutory, so changes would require congressional action. Some of the current requirements are regulatory, rather than statutory, and PHA groups have called on HUD to simplify the process. In the past, HUD has stated that it is looking at ways to improve the income calculation process, although no major administrative changes have been made.

Eligibility30

The current voucher program sets initial eligibility for assistance at the very low-income level (50% or below of local area median income (AMI)), with a requirement that 75% of all vouchers be targeted to extremely low-income families (30% or below local AMI). The targeting requirement was enacted as a part of the 1998 assisted housing reform law ( P.L. 105-276 ) and was designed to ensure that the neediest families received assistance.

Serving lower income families results in higher costs per voucher. In a limited funding environment, the higher the per voucher cost, the fewer the number of families that can be served. The difficult tradeoff between serving more families with less generous subsidies or serving fewer families with more generous subsidies can be found in most social programs and lies at the center of many of the voucher reform debates.

The George W. Bush Administration advocated loosening current targeting standards in an attempt to either serve more families or reduce the cost of the program. Low-income housing advocates have generally supported retaining current income eligibility and targeting requirements, arguing that the lowest-income households face the heaviest rent burdens and are the most in need of assistance.

Work Requirements and Time Limits

The voucher program does not currently have time limits or work requirements for applicants or recipients. Families that receive voucher assistance can retain that assistance until they choose to leave the program; they are forced to leave the program (due to non-compliance with program rules or insufficient funding); or their incomes rise to the point that 30% of their incomes equal their housing costs, at which point their subsidy is zero. The public housing program does have a mandatory eight-hour per month work or community service requirement for non-elderly, non-disabled tenants; however, many public housing residents are exempted.

Some have advocated setting time limits for receipt of voucher assistance and making work a requirement for ongoing eligibility. They argue that under the current system, families have no incentive to increase their incomes or work efforts and leave the program. Adopting a work requirement in the voucher program may help encourage non-elderly, non-disabled households that are not currently working to go to work. Time limits and, particularly work requirements, have been at least partly credited with decreasing the size of the cash assistance caseload in the Temporary Assistance for Needy Families (TANF) program.

Another reason to consider time limits relates to the fact that many communities have long waiting lists for assistance. Since few new vouchers have been funded in recent years, turnover in the current program is the primary way to serve those families on the waiting lists.

There is some evidence that families with children, those most likely to be affected by work requirements and time limits, already leave the program relatively quickly. According to HUD research from 2003, the median length of stay for families with children is two and a half years. Further, while time limits and work requirements may help move families out of the voucher program, it is unclear whether such changes would increase families' incomes or lead to self-sufficiency. Research based on the 1996 welfare reform changes ( P.L. 104-193 ) indicates that for many poor families, increases in work do not necessarily translate into greater total income, and most households need work supports (such as child care and transportation assistance) in order to make them successful in becoming financially self-sufficient. Such supportive services are not currently a part of the voucher program, and would likely require additional funding. In fact, it is unclear how low-income families that are leaving the program now are meeting their housing costs. HUD conducted preliminary research looking at families with children who left the voucher program over a five-year period, and found that less than 1% of them had incomes sufficient to afford an apartment at the fair market rent in their community.

Low-income housing advocates promote providing incentives for families to increase their work efforts and their incomes, rather than time limits and work requirements. For example, non-elderly, non-disabled families could be encouraged to find and increase work through expansions in the Family Self-Sufficiency program (FSS), which provides work supports for some tenants with vouchers and deposits participating tenants' increased rent payments (that result from increased earnings from work) into escrow accounts on their behalves. However, not every PHA runs an FSS program; as of 2008, 28,469 voucher program participants were enrolled in FSS programs. The full effects of FSS are unclear, as it has not been implemented using as a demonstration or in such a way as to test its impact. HUD has produced a couple of descriptive profiles of FSS participants, which found higher income increases experienced by FSS program participants compared to non-FSS participants.

Inspections

Before a PHA can make subsidy payments for a unit selected by a tenant, the unit must first be inspected to ensure that it complies with the HUD-adopted Housing Quality Standards (HQS). If the unit is approved, it must be reinspected at least annually. If the unit fails inspection, the PHA cannot make payments to the landlord until the unit is in compliance. These inspections are designed to protect tenants from living in substandard housing. However, the inspections themselves (or finding inspectors to conduct them) can add delays to the leasing process, which may result in landlords' reluctance to participate in the voucher program and families losing out on units in tight markets. Further, some HQS failures may be found for violations that a tenant might consider a "minor" violation (such as missing light-switch plates or a tear in the carpet that could be considered a tripping hazard), yet PHAs are still required to withhold payment. This may also contribute to landlords' reluctance to participate in the program.

The prevalence of substandard housing varies widely; for example, areas with a relatively new housing stock (particularly in the Southwest) may only need inspections every couple of years to ensure quality, whereas areas with a relatively old housing stock (such as the Northeast) may require more frequent inspections, perhaps even more than once a year, in order to ensure quality. Although there have been calls to change the inspection requirements, it has proven difficult to balance providing flexibility to PHAs to address the needs of specific communities with ensuring protection for tenants from substandard conditions.

Portability

Section 8 vouchers are nationally portable, which means that families can take their vouchers and move from the jurisdiction of one PHA to the jurisdiction of another PHA. Once a family moves, the two PHAs come to an agreement on how to administer the voucher. The receiving PHA can "absorb" it, meaning the receiving PHA agrees to serve the family with one of its vouchers, freeing up the voucher for the originating PHA. Alternatively, the receiving PHA can also choose to "bill" the originating PHA for the voucher, meaning the receiving PHA will administer the voucher on behalf of the originating PHA, and will seek reimbursement from the originating PHA for any costs associated with the voucher. In a billing situation, the originating PHA will retain the voucher as a part of its stock, and if and when the family leaves the program, the originating PHA can reissue it.

There are advantages and disadvantages to both billing and absorbing. Receiving PHAs that bill only receive a partial (80%) administrative fee from the originating PHA, yet the administration can be complicated. Receiving PHAs that absorb vouchers have to serve the porting family before the next person on their own waiting list, a person who may have been on the waiting list for a long time already. Recognizing these problems, PHAs have the ability to limit portability. A PHA can require a family to live in its jurisdiction for up to one year upon initial receipt of a voucher and a PHA can deny a portability move if it will increase PHAs costs above what can be supported by federal appropriations.

Proposals have been offered to alter portability to make it administratively easier. They have ranged from limiting portability except between jurisdictions with preexisting agreements to having a national pool of vouchers that could be used to smooth out the absorption process. Proposals that limit portability result in limits to families' choices; proposals that involve national pools generally require additional funding.

Mobility

Portability offers the possibility for families with vouchers to move from areas of high concentrations of poverty, poor schools, and little employment opportunity to areas with low concentrations of poverty, good schools, and more employment opportunity. Research looking into the effects of mobility on families has found generally positive effects, but not in all cases or to the extent that researchers and proponents had expected. Advocates for low-income families have argued that the mobility potential of portability has not been fully reached. They argue for more funding for mobility counseling and performance standards that encourage mobility efforts. Advocates for state or regional administration of the voucher program argue that moving away from PHA-level administration could help improve mobility. (For more information, see CRS Report R42832, Choice and Mobility in the Housing Choice Voucher Program: Review of Research Findings and Considerations for Policymakers , by [author name scrubbed] and [author name scrubbed].)

Funding Allocation

The cost of a voucher is equal to roughly the difference between the rent for a unit (capped by a maximum set by the PHA and called the payment standard) and the tenant's contribution toward the rent (generally, 30% of the tenant's income). The cost of a voucher fluctuates as a family's income and market rents increase or decrease. Prior to FY2003, HUD reimbursed PHAs for the actual cost of their vouchers, and each year, HUD would ask Congress for funding sufficient to cover what HUD anticipated it would take to fund PHAs' costs.

Due partly to changes in the rental market and partly to changes in the rules of the voucher program (such as increases in the payment standard), PHAs' actual costs began rising rapidly in 2002 and 2003. This raised concerns for both the George W. Bush Administration and Congress about the cost of the program. Partly in response to these cost increases, the Bush Administration proposed potentially cost-saving changes in both the way that PHAs received funds and in the underlying factors that led to the cost growth, including the amount tenants were asked to contribute toward rent and the maximum payment standard.

Congress reacted by changing only the way that PHAs received their renewal funding, without enacting other program reforms. In FY2005, Congress directed HUD to fund PHAs based on the amount of funding they received in the previous year, rather than their costs. This new funding formula, which was continued in FY2006, was more predictable for PHAs, similar to formulas used for other discretionary social programs, and easier for HUD to administer. However, it also led to funding problems for some PHAs, whose actual costs were still driven by the difference between rents and incomes in their communities, while their funding was capped. As a result, some PHA groups called for either a change back to an actual cost funding formula or changes to the structure of the voucher program that would allow them to better control their costs. In the FY2007 funding law ( P.L. 110-5 ), Congress reverted back to a funding formula based on actual costs and utilization. A similar formula has been adopted each year since. (For more information, see CRS Report RL33929, The Section 8 Voucher Renewal Funding Formula: Changes in Appropriations Acts , by [author name scrubbed].)

In recent years, as per voucher costs and the number of vouchers in use have risen, some Members of Congress have expressed concern about the rising cost of the Section 8 voucher program. These concerns have led to continued calls for program reforms to constrain future cost growth. A 2012 GAO report examined recent cost growth in the voucher program and found that it was largely driven by market factors; during the recent economic recession, tenant incomes have declined significantly and rents have increased significantly.

Recent Reform Proposals

Moving to Work Expansion

In recent years there have been calls to expand the Moving to Work (MTW) Demonstration. MTW was authorized by Section 204 of the Omnibus Consolidated Rescissions and Appropriations Act of 1996 ( P.L. 104-134 ) in order to design and test ways to

promote self-sufficiency among assisted families; achieve programmatic efficiency and reduce costs; and increase housing choice for low-income households.

Under Moving To Work, HUD can select up to 30 PHAs to participate in the demonstration and receive waivers of most rules that govern public housing and the Section 8 voucher program (those under the U.S. Housing Act of 1937 (P.L. 75-412, as amended)). With HUD approval, MTW agencies can merge their Section 8 voucher, public housing capital and public housing operating funds, alter eligibility and rent policies, modify their funding agreements and reporting requirements with HUD, and make other changes. Rules outside of the U.S. Housing Act cannot be waived under MTW, such as labor requirements and fair housing rules, nor can rules governing the demolition and disposition of public housing. Participating agencies must also agree to serve substantially the same number of people they were serving before the demonstration and they must agree to continue to serve low-income families.

Agencies participating in MTW have used the flexibility it provides differently. Some have made minor changes to their existing Section 8 voucher and public housing programs, such as limiting reporting requirements; others have implemented full funding fungibility between their public housing and voucher programs and significantly altered their eligibility and rent policies. Some have adopted time limit and work requirement policies, similar to those enacted in the 1996 welfare reform law.

Several of the national PHA industry groups support an expansion of MTW. They argue that the flexibility provided under MTW would permit PHAs to more efficiently and effectively manage their limited federal funding and make programmatic changes tailored to their local communities. Low income housing advocates, particularly the National Low Income Housing Coalition, have expressed opposition to an MTW expansion. Specifically, they are concerned that MTW agencies will choose to serve higher income families than they are permitted under the rules of the U.S. Housing Act and that the agencies will disconnect rent-setting policies from income with the result that tenants will pay increased rents. While the initial intent of PHAs may not be to charge higher rent or serve higher-income families, there is concern that in a restricted funding environment, such policy changes will have to be made in order to balance budgets.

The existing MTW program, while called a demonstration, was not implemented in a way that would allow it to be rigorously evaluated. Therefore, there is not sufficient information about different reforms adopted by MTW agencies to evaluate their effectiveness. There is some information available about how PHAs have implemented the program (as noted earlier); however, it is unclear whether PHAs implementing a modified MTW program in an environment where funding is limited would make the same choices that earlier MTW agencies made. (For more information, see CRS Report R42562, Moving to Work (MTW): Housing Assistance Demonstration Program , by [author name scrubbed].)

Several bills were considered in the 110 th and 111 th Congresses to expand the MTW program, although none were enacted before the end of those Congresses. The Moving to Work Charter Program Act has been introduced in each of the past several Congresses, and was introduced again in the 112 th Congress ( S. 117 ). It proposed to expand and modify the MTW program, permitting the Secretary of HUD to enter into a new form of charter contract with up to 250 PHAs.

The Section 8 Voucher Reform Act, ordered reported by the House Financial Services Committee in the 111 th Congress and introduced in the 112 th Congress, included a provision that would have replaced the existing Moving to Work program with a new Housing Innovation Program (HIP). The HIP would have maintained several aspects of MTW, including the ability to blend public housing and voucher funding, but would make several major changes. HUD would have been required to designate up to 60 agencies to participate in HIP, with the option of adding another 20 under a modified version of the program. HUD would have been required to develop a selection process, based on priorities established under the bill, and select a diverse group of agencies (including a limited number of lower-performing agencies, but not troubled agencies). HUD would also have been required to establish performance standards and evaluate, or contract for the evaluation of, HIP participating agencies with the goal of developing successful models that can be adopted by other agencies. Unlike MTW, HIP would have included limits to some policies pursued by participating agencies, including guidelines for time limit and employment condition policies and limits on rent policies that result in higher rent burdens for tenants.

Also in the 112 th Congress, the House Financial Services Committee circulated a discussion draft of the Moving to Work Improvement, Expansion, and Permanency Act of 2011 . The discussion draft bill proposed to make the MTW program permanent and lift the cap on the number of participating agencies. It also proposed to modify the purposes of MTW to include promoting economic independence, flexibility and cost effectiveness, and housing choice. The draft bill included modifications to reporting requirements both for PHAs to HUD, and for HUD to Congress. It also included a mechanism to transition existing MTW agencies to the new model. The language from this draft bill was included in the draft Affordable Housing and Self Sufficiency Improvement Act (AHSSIA), discussed in the next section of this report.

Voucher Reform Legislation

Since the early 2000s, Congress has considered reforms to the Housing Choice Voucher program each year.

From 2003 through the end of its second term, the George W. Bush Administration proposed either eliminating the Section 8 voucher program and replacing it with a new initiative, or substantially reforming the program. Bills to enact President Bush's reforms were introduced in Congress, although no further action was taken. Legislative proposals in the 107 th and 108 th Congresses envisioned fundamentally reworking the voucher program, with initiatives including transferring administrative responsibilities from PHAs to the states, implementing time limits and work requirements, and allowing PHAs to experiment with various rent-setting policies.

Bipartisan reform bills from the past couple of years have been narrower in scope than the earlier reform proposals. They have proposed changes to the rules governing the existing program, rather than fundamentally altering it. In 2006, a bipartisan voucher reform bill, the Section 8 Voucher Reform Act of 2006 (SEVRA) ( H.R. 5443 , 109 th Congress) was approved by the House Financial Services Committee, but no further action was taken before the close of the 109 th Congress. Similar, bipartisan reform legislation was proposed in the 110 th Congress. The Section 8 Voucher Reform Act of 2007 ( H.R. 1851 , 110 th Congress) passed the House and the Section 8 Voucher Reform Act of 2008 ( S. 2684 , 110 th ) was introduced in the Senate. The bills were similar but had several key differences. Reform legislation was not enacted before the end of the 110 th Congress. A new version of SEVRA—the Section Eight Voucher Reform Act of 2009 ( H.R. 3045 )—was introduced in the 111 th Congress and reported out of the House Financial Services Committee, but not enacted before the 111 th Congress adjourned. Several Section 8 reform bills were again circulated, introduced, or considered in the 112 th Congress. No reform legislation has been introduced in the 113 th Congress.

The following section of the report summarizes reform efforts from the 112 th Congresses.

112th Congress

SEVRA

A version of SEVRA very similar to the one approved by the House Financial Services Committee in the 111 th Congress was introduced by Representative Waters in the 112 th Congress. The bill proposed to simplify the income calculation process by streamlining deductions, permitting families on fixed incomes to self-certify their income for up to three years, and permitting PHAs to use tenants' prior-year income to calculate current year income. It would have modified the inspection process to permit PHAs to inspect units every other year, rather than every year. It proposed other changes, including requiring PHAs to absorb portability vouchers, allowing PHAs to establish alternative rent structures for non-elderly, non-disabled tenants (with limits on how much families could be required to pay), and making it possible for PHAs to use their voucher funding to provide downpayment assistance for first time homebuyers (without requiring direct appropriations). The bill would have established a new renewal funding allocation formula for PHAs, similar to the formula enacted in appropriations laws since FY2007, but including provisions for reallocating unused funds and permitting PHAs to borrow against future appropriations. It would have directed the Secretary to develop a new administrative fee formula as well as a new performance rating system (both within guidelines set in the bill). The major difference between the Section 8 Voucher Reform Act of 2011 ( H.R. 1209 ) and the version from the prior Congress is that the most recent version did not contain a controversial firearms provisions that had been added during committee consideration. SEVRA was not considered before the end of the 112 th Congress.

SESA and AHSSIA

On June 23, 2011, the Insurance, Housing and Community Opportunity Subcommittee of the House Financial Services Committee held a hearing entitled "Legislative Proposals to Reform the Housing Choice Voucher Program." At that hearing, witnesses discussed a draft bill that has been circulated by the subcommittee, the Section Eight Savings Act of 2011 (SESA). On October 13, 2011, the subcommittee held another hearing entitled " The Section 8 Savings Act of 2011: Proposals to Promote Economic Independence for Assisted Families," where a revised draft version of SESA was circulated. The two draft versions of SESA both included many provisions from SEVRA, but also made changes; most notably, neither version of SESA included an expansion of MTW.

With the start of the second session of the 112 th Congress, the House Financial Services Committee circulated a new draft reform bill. It contained many provisions from SEVRA and SESA, but with several changes, including a new name, which reflected the fact that all of these bills included provisions beyond the Section 8 voucher program: the Affordable Housing and Self Sufficiency Improvement Act of 2012 (AHSSIA).

Like SEVRA, AHSSIA contained provisions that address inspection of units under the Section 8 voucher program. The primary difference is that SEVRA would have permitted PHAs to use rent payments withheld from property owners whose units had failed inspections to make repairs to the unit; AHSSIA would not permit the use of withheld rent to make repairs.

Both AHISSA and SEVRA proposed to change the way income eligibility and tenant rent are defined and calculated for families participating in assisted housing programs. AHISSA, unlike SEVRA, would have increased the minimum rent threshold, subjected it to future inflation increases, and required PHAs to use the new minimum rents.

Like SEVRA, AHSSIA proposed an expansion of MTW. AHSSIA would have changed MTW from a demonstration to a HUD program, lifted the existing cap on the number of participants, required HUD to evaluate participating PHAs' progress in achieving the purposes of the program, and required HUD to evaluate the program to identify replicable program models.

AHSSIA also contained several new provisions that were not included in SEVRA, including a title to modify the Family Self Sufficiency (FSS) program. Among other changes to FSS, the draft legislation proposed to combine the public housing and Section 8 voucher versions of the FSS program into one program and allow for it to be available to Section 8 assisted multifamily housing properties. It would have made participation in FSS mandatory for large PHAs (subject to the availability of funding), created a new formula for distributing funding, and prohibited PHAs from terminating tenancy for families because they fail to successfully complete the program. Under the same title of the draft legislation, AHSSIA would have required HUD to conduct a new rigorous demonstration to identify the most effective methods for promoting economic security among non-elderly, non-disabled assisted tenants.

Further, AHSSIA included an authorization for the Rental Assistance Demonstration (RAD) to convert certain assisted housing properties to a new form of Section 8 rental assistance. RAD was initially authorized in the FY2012 appropriations legislation. AHSSIA also contained a new provision to allow PHAs to have additional funding flexibility in their public housing programs.

The subcommittee on Insurance, Housing, and Community Opportunity marked up and approved a draft version of AHSSIA in early February 2012, but the bill was not formally introduced, nor was it considered by the full committee, before the end of the 112 th Congress.

Appropriations Proposals

The President's FY2014 budget request to Congress, like his FY2012 and FY2013 requests, included proposals for several statutory changes that would affect HUD's rental assistance programs, including the Section 8 Housing Choice Voucher program. Specifically, HUD asked for language that would

broaden the definition of "extremely low-income" to reflect the higher of 30% of area median income or the poverty thresholds published by the Department of Health and Human Services (HHS); revise the deductions from income used to calculate rent for elderly or disabled families by increasing the standard deduction and increasing the threshold for deducting medical or related costs; cap the amount of utility allowance a family can receive based on the size of the family, rather than the size of the unit leased by the family; alter inspection requirements; and permit HUD to run a demonstration to test different models for setting rent in rental assistance programs.

Similar provisions were included in Section 8 voucher reform legislation considered in the 111 th Congress and included in SEVRA, SESA and, most recently, AHSSIA. HUD's FY2014 budget estimated that these changes would result in an overall reduction in the cost of HUD rental assistance programs.