Hud Creates a Housing Crisis

Cuts to Section 8 funding leave local housing authorities in the lurch.
by | August 2004

A sudden cash crisis in the Section 8 housing voucher program is forcing many local housing authorities around the country to take emergency cost-cutting steps.

The root of the problem is a decision made in April by the U.S. Department of Housing and Urban Development in response to congressional concerns over Section 8's ballooning costs. To bring them down, HUD, which had been paying housing authorities for the full cost of the vouchers they issued to low-income renters, limited the amount it will pay local agencies--and it made the change retroactive to January, forcing dozens of housing authority directors to take emergency stop-gap measures.

Tacoma, Washington, for example, found itself short $2.6 million on an annual basis, just five weeks before its fiscal year ended. To make that up, the housing authority exhausted its budget reserves and borrowed $250,000 from the city. Tacoma hasn't had to kick any tenants off Section 8--yet--but it is reducing its commitment to helping the poorest families find housing. And in a drastic move, the city snatched 180 vouchers away from people who had waited over a year to get one but who hadn't found an apartment yet. "Some of the measures we're taking go against our own values," says housing director Peter Ansara.

Several local agencies say they are having to undo many recent improvements they've made to the program--many of which came at the behest of HUD and the U.S. Congress.

One such directive was to use vouchers to deconcentrate poverty. Local agencies responded by raising the amount of rent they would pay, giving tenants a shot at living in more affluent neighborhoods. Now, they're lowering their "payment standards"--by 7 percent in the case of St. Paul, Minnesota. "The things Congress had put in place were working," says St. Paul housing director Jon Gutzmann. "People were able to find apartments in more expensive areas, and yes, it had an added cost. It should be no surprise that the program was getting more expensive."

In Boston, tenants were spared pain in making up a $1.2 million Section 8 deficit, but landlords weren't. Arguing that rents in the expensive Boston housing market had softened some, Boston cut its payments to all landlords by 7 percent. That's not as easy a call to make as it sounds: Landlords are crucial to Section 8's success, and housing authorities don't want to scare them away. "This has had a real chilling effect on the program," says Sandra Henriquez, head of the Boston Housing Authority. "Some landlords are now saying they won't touch this program because of the ups and downs."

This summer's housing crisis may be a prelude to a larger one to come. The Bush administration's proposed budget for 2005 includes a $1.6 billion cut to Section 8. HUD says it would give local authorities more flexibility over how they run their programs. Most housing directors say they'd take the flexibility, but not at the loss of so much federal funding. Under the Bush plan, Henriquez estimates that Boston would have to terminate 2,000 of its 11,000 voucher holders, putting many of them out on the street. "It's hard for me to understand how greater flexibility translates into a $1.6 billion cut," she says.


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