The rental assistance programs authorized under Section 8 of the United States Housing Act of 1937 (42 U.S.C. §1437f)—Section 8 project-based rental assistance and Section 8 tenant-based vouchers—have become the largest components of the Department of Housing and Urban Development's (HUD) budget, with combined appropriations of $27 billion in FY2013. The rising cost of providing rental assistance is due, in varying degrees, to expansions in the program, the cost of renewing expiring long-term contracts, and rising costs in housing markets across the country. The most rapid cost increases have been seen in the voucher program. Partly out of concern about cost increases, and partly in response to the administrative complexity of the current program, there have been calls for reform of the voucher program and its funding each year since 2002. In response, Congress has enacted changes to the way that it funds the voucher program and the way that PHAs receive their funding. Congress has considered program reforms, but has not enacted them. In order to understand why the program has become so expensive and why reforms are being considered, it is first important to understand the mechanics of the program and its history. This paper will provide an overview of the Section 8 programs and their history. For more information, see CRS Report RL33929, The Section 8 Voucher Renewal Funding Formula: Changes in Appropriations Acts ; CRS Report RL34002, Section 8 Housing Choice Voucher Program: Issues and Reform Proposals ; and CRS Report R41182, Preservation of HUD-Assisted Housing , by [author name scrubbed] and [author name scrubbed]. From 1937 until 1965, public housing and the subsidized mortgage insurance programs of the Federal Housing Administration (FHA) were the country's main forms of federal housing assistance. As problems with the public housing and other bricks and mortar federal housing construction programs (such as Section 235 and Section 236 of the National Housing Act) arose—particularly their high cost—interest grew in alternative forms of housing assistance. In 1965, a new approach was adopted (P.L. 89-117). The Section 23 program assisted low-income families residing in leased housing by permitting a public housing authority (PHA) to lease existing housing units in the private market and sublease them to low-income and very low-income families at below-market rents. However, the Section 23 program did not ameliorate the growing problems with HUD's housing construction programs and interest remained in developing and testing new approaches. The Experimental Housing Allowance Program is one example of such an alternative approach. Due to criticisms about cost, profiteering, and slumlord practices in federal housing programs, President Nixon declared a moratorium on all existing federal housing programs, including Section 23, in 1973. During the moratorium, HUD revised the Section 23 program and sought to make it the main assisted housing program of the federal government. However, at the same time, Congress was considering several options for restructuring subsidized housing programs. After all the debates and discussions that typically precede the passage of authorizing legislation were completed, Congress voted in favor of a new leased housing approach, and the Section 8 program was created. The Section 8 program is named for Section 8 of the United States Housing Act of 1937. The original program, established by the Housing and Community Development Act of 1974 ( P.L. 93-383 ), consisted of three parts: new construction, substantial rehabilitation, and existing housing certificates. The 1974 Act and the creation of Section 8 effectively ended the Nixon moratorium. In 1978, the moderate rehabilitation component of the program was added, but it has not been funded since 1989. In 1983, the new construction and substantial rehabilitation portions of the program were repealed, and a new component—Section 8 vouchers—was added. In 1998, existing housing certificates were merged with and converted to vouchers. Under the new construction and substantial rehabilitation components of the early Section 8 program, HUD entered into long-term (20- or 40-year) contracts with private for-profit, non-profit, or public organizations that were willing to construct new units or rehabilitate older ones to house low- and very low-income tenants. Under those contracts, HUD agreed to make assistance payments toward each unit for the duration of the contract. Those assistance payments were subsidies that allowed tenants residing in the units to pay 25% (later raised to 30%) of their adjusted income as rent. The program was responsible for the construction and rehabilitation of a large number of units. Over 1.2 million units of housing with Section 8 contracts that originated under the new construction and substantial rehabilitation program still receive payments today. By the early 1980s, because of the rising costs of rent and construction, the amount of budget authority needed for the Section 8 rental assistance program had been steadily increasing while the number of units produced in a year had been decreasing. At the same time, studies emerged showing that providing subsidies for use in newly constructed or substantially rehabilitated housing was more expensive than the cost of providing subsidies in existing units of housing. Also, because contracts were written for such long terms, appropriators had to provide large amounts of budget authority each time they funded a new contract (see below for an illustration of the implication of long-term contracts). As the budget deficit grew, Members of Congress became concerned with the high costs associated with Section 8 new construction and substantial rehabilitation, and these segments of the Section 8 program were repealed in the Housing and Urban-Rural Recovery Act of 1983 ( P.L. 98-181 ). The Housing and Community Development Amendments of 1978 ( P.L. 95-557 ) added the moderate rehabilitation component to the Section 8 program, which expanded Section 8 rental assistance to projects that were in need of repairs costing at least $1,000 per unit to make the housing decent, safe, and sanitary. Over the next 10 years, however, this component of the program was fraught with allegations of abuse; the process of awarding contracts was considered unfair and politicized. Calls for reform of the moderate rehabilitation program led to its suspension. It has not been funded since 1989. The existing housing certificate component of the Section 8 program was created in the beginning of the Section 8 program and continued until 1998. Under the existing housing certificate program, PHAs and HUD would enter into an Annual Contributions Contract (ACC) for the number of units that would be available to receive assistance. Contracts were originally written for five years and were renewable, at HUD's discretion, for up to 15 years. In the contract, HUD agreed to pay the difference between the tenant's rental payment and the contract rent of a unit. The contract rent was generally limited to the HUD-set Fair Market Rent (FMR) for the area. After entering into a contract with HUD, PHAs would advertise the availability of certificates for low-income tenants. The existing housing certificate program was primarily tenant-based, meaning that the assistance was attached to the tenant. Families selected to receive assistance were given certificates as proof of eligibility for the program; with their certificates, families could look for suitable housing in the private market. Housing was considered suitable if it rented for the FMR or less and met Housing Quality Standards (HQS). Once the household found a unit, they signed a lease and agreed to pay 30% of their adjusted income for rent. The remainder of the rent was paid by HUD to the landlord on behalf of the tenant. If a family vacated a unit in violation of the lease, HUD had to make rental payments to the landlord for the remainder of the month in which the family vacated, and pay 80% of the contract rent for an additional month. If the family left the unit at the end of their lease, they could take their certificate with them and use it for their next home. HUD also paid the PHA an administrative fee for managing the program. The amount of this administrative fee was set by Congress in appropriations legislation each year. PHAs were permitted to use up to 15% of their Section 8 certificates for project-based housing. In project-based Section 8 existing housing, the subsidy was attached to the unit, which was selected by the PHA, and not to the tenant. This meant that when a tenant vacated a unit, another eligible tenant would be able to occupy it, and HUD would subsidize the rent as long as a contract was in effect between the PHA and the owner. In 1998, the Quality Housing and Work Opportunity Reconciliation Act (QHWRA) ( P.L. 105-276 ) merged the Section 8 existing housing certificate program with the voucher program (see below) and converted all certificates to vouchers, effectively ending the Section 8 existing housing certificate program. The largest component of today's Section 8 program, the voucher program, was first authorized by the Housing and Urban-Rural Recovery Act of 1983 ( P.L. 98-181 ). It was originally a demonstration program, but was made permanent in 1988. Like the Section 8 existing housing certificate program, the voucher program is administered by PHAs and is tenant-based, with a project-based component. However, under the voucher program, families can pay more of their incomes toward rent and lease apartments with rents higher than FMR. Today's Section 8 program is really two programs, which, combined, serve almost 3.5 million households. The first program under Section 8 can be characterized as Section 8 project-based rental assistance. This program includes units created under the new construction, substantial rehabilitation, and moderate rehabilitation components of the earlier Section 8 program that are still under contract with HUD.