Housing

Subsidizing Blight

Federal housing vouchers are supposed to break up concentrations of poverty. Often they just create new ones.
by | May 2002
 

The Patterson Park neighborhood, on the East Side of Baltimore, stands perched precariously between renewal and collapse. A mixed-income population, almost evenly divided between white and black, lives here in nearly identical blocks of rowhouses, clad in red brick and drab formstone. Some of the poorer blocks look ragged, and residents complain about drugs and crime. But unlike so many neighborhoods in Baltimore, Patterson Park has never tipped to the point of severe blight. There are encouraging signs. Every so often, a young professional couple moves in, encouraged by the cheap real estate, close proximity to downtown and the wide patch of green that gives the neighborhood its name.

A fragile balance holds Patterson Park together. Sometimes, it seems the poor residents might force the richer ones out; other times, a reverse pattern of gentrification seems likely. Yet in recent years, a government program has been throwing off this delicate balance and quietly creating an outcome. It is the federal government's Section 8 housing program, and it has been dragging Patterson Park down.

Section 8--known officially now as the "housing choice vouchers" program--subsidizes housing for some of Baltimore's most impoverished residents, mostly African-American women with children. In theory, these families can use their vouchers to rent apartments anywhere in the Baltimore metro area. In practice, their options are limited to a few low-income and transitional neighborhoods. Patterson Park is one of them. Hundreds of voucher-holders are finding their way to its rowhouses, including many refugees from the high-rise public housing projects that Baltimore began demolishing seven years ago.

Ed Rutkowski, who heads a community development corporation working to revitalize the neighborhood, bluntly calls Section 8 "a catalyst in neighborhood deterioration and ghetto expansion." Every day, Rutkowski says, he finds himself fighting the program's unintended consequences: neglected properties, persistent crime and a continual influx of dysfunctional families, some of whom have never lived outside of public housing.

Section 8 is supposed to deconcentrate poverty, but in Rutkowski's view, it actually reconcentrates it--in struggling neighborhoods such as his. At best, this has a destabilizing effect. At worst, it can drive middle-class residents out and turn the entire area into a slum. "Once a neighborhood has some problems," Rutkowski says, "Section 8 accelerates those problems."

Rutkowski's concerns are echoed in transitional neighborhoods of other cities as well, notably Chicago and Philadelphia. In Chicago, where more than a dozen public housing high-rises are coming down, residents with vouchers have clustered in working-class black neighborhoods such as South Shore, on the South Side, and Austin, on the border with affluent suburban Oak Park. Suburbs south of the city have taken in so many voucher families that local officials there have asked for a Section 8 moratorium. "Left to its own devices, Section 8 will always seek out the softest housing markets," says Christine Klepper, director of Housing Choice Partners in Cook County. "And it will often be in a transitional or poor neighborhood."

Grassroots concerns do not often make their way up to the higher policy-making levels, where the recent response to the clustering problem has been quite simple: Reduce the pressure by increasing the supply of vouchers. In fact, Congress and the U.S. Department of Housing and Urban Development have come increasingly to view vouchers as the answer to housing the nation's poor. With little fanfare, vouchers have become a bigger housing program than traditional public housing. And the pendulum swings a little further each time an old housing project gets the wrecking ball. To be sure, the most decrepit projects needed to be demolished, but critics of Section 8 say that the result of this shift to vouchers is little more than the replacement of vertical ghettos with horizontal ones.

HUD is working hard to challenge this idea. A report issued by the agency in March 2000 argued that voucher families typically end up in better neighborhoods than the ones they leave behind. Nationally, it said, Section 8 families live in far less impoverished neighborhoods than public-housing families, and, on average, the housing conditions of voucher-holders are comparable to those of renters generally. "Neighborhood problems directly related to the Section 8 program are extremely rare," the report said, "if they exist at all."

Indeed, from a bird's-eye view, Section 8 does work pretty well. With vouchers, thousands of families each year do exactly what the program expects: They migrate out of poor neighborhoods and into places with better schools and more job opportunities. But the results vary substantially from city to city, because the rental housing market is different in each one. In fact, the success of Section 8 can vary from neighborhood to neighborhood and even from block to block. And it is at these highly localized levels where patterns of concentration emerge.

Section 8 is commonly described, and endorsed by both Democrats and Republicans, as a "free-market" program. But there is no free market in rental housing the way there is for shoes or airline tickets. Local laws concentrate the supply of such housing in lower-income areas due to zoning restrictions, and in some cases to racial discrimination. Even where race is not a major issue, landlords in more prosperous areas often do not want to rent to single mothers with children, or simply don't like dealing with the Section 8 bureaucracy.

But the most important difference between Section 8 and any real free-market process is that the market doesn't set the prices--HUD does that. The agency decides what a voucher is worth by setting a "fair market rent" for each metro area. This sensibly takes into account the fact that housing costs more in New York City, for example, than it does in Lincoln, Nebraska. The formula is re-adjusted each year. But it is very hard for HUD to keep up with variations in rental prices from one neighborhood to the next in a given city. Lately, HUD has been offering local housing authorities more flexibility to adjust rents, but the market shifts faster than the economists can sharpen their pencils. If the voucher is worth too little for a "good" neighborhood, landlords won't take it and the poor get locked out. If the voucher is set too high in a marginal neighborhood, landlords milk it, and the door, perhaps, opens a bit too wide.

To conservatives such as Howard Husock, Section 8's problems are irreparable. Husock, a housing expert at Harvard University's John F. Kennedy School of Government, says that it's time to end the 30-year voucher experiment altogether. "We can't just end it tomorrow," Husock explains, "but we could really improve the character of the voucher program if there were time limits. Our housing policy is now completely out of sync with our welfare policy. If your rent is paid forever, then you don't have an incentive to improve your living situation."

Section 8's defenders, of course, draw a different conclusion. With good management and a few tweaks, they say, the program's disruption of transitional neighborhoods can be minimized. The underlying problem, housing activists argue, is that housing vouchers are being asked to take up too much of the housing burden. "Section 8 is not a bad program, but the federal, state and local governments want to see it as a panacea," says Barbara Samuels, a housing attorney with the ACLU of Maryland. "It's an important piece of our overall housing policy, but when you expect it to be the mainstay of that policy, it just collapses."

Driving around East Baltimore, Ed Rutkowski offers a tour of the dilemma facing his community. Patterson Park is wedged tightly between two neighborhoods, one a gleaming success and the other a glaring failure. To the south, down a slope toward the city's waterfront, is Canton. Young couples are buying two-story rowhouses here for as much as $250,000. Nearly every block has at least one house covered in scaffolding, with workmen busy making repairs. To the north, however, is a neighborhood called Middle East. Here, entire blocks of houses much like the ones in Canton have simply been abandoned. Instead of the scaffolding, plywood boards cover the windows and doors to keep out squatters and drug dealers. Patterson Park forms something of a buffer between these two areas. "We're trying to pull a little bit of Canton up here," Rutkowski says.

Patterson Park is in transition in all sorts of ways: racial, economic and generational. Historically, it was a modest bedroom community for blue-collar white families whose breadwinners worked in the nearby steel factories and canning companies. But many of those residents moved when the plants closed, and others from that generation who stayed have been passing away. As middle-class and then lower-class blacks moved in to take their place, more whites left. The neighborhood now is about as integrated as you'll find in Baltimore, where all-white and all-black neighborhoods are the norm.

During the past decade, speculators saw an opportunity in Patterson Park--and in the loopholes of the voucher program. They found they could snap up vacant rowhouses for as little as $10,000, give them a fresh coat of paint, pass Section 8 inspection, and start to rake in vouchers worth $700 a month, much more than the rentals would be worth on the private market. As groups of out-of-town investors got in on the deal, Section 8 families flooded into as many as 700 of Patterson Park's rowhouses. The neighborhood became visibly poorer and shabbier as the landlords ignored maintenance. "The people buying here were not experienced property managers," Rutkowski says. "They were accountants and lawyers in the suburbs."

Rutkowski has written a book about Patterson Park with Marcus Pollock, another Baltimorean active in community development. The book is called "The Urban Transition Zone," and it talks a lot about "tipping points" for declining neighborhoods. After a certain point, the theory goes, middle-class flight accelerates, intense poverty and blight follow and a neighborhood becomes unsalvageable. Lots of forces have been pushing Patterson Park toward its tipping point, including a spate of house "flipping" and predatory lending. But Rutkowski and Pollock believe Section 8 is the most serious. "We would hardly claim that the Section 8 program is single-handedly responsible for the problems of transitional neighborhoods," they write. "But it may well be the straw that breaks the camel's back."

It might not have to be. Properly managed, a Section 8 program could monitor where its voucher-holders have settled and avoid concentrating too many in any one neighborhood. This is a simple task for modern mapping software. Yet management of Baltimore's voucher program has been so abysmal that HUD threatened to take it over after a scathing audit in March 2001. (The computers at Baltimore's housing authority are among the only ones in the world that actually suffered Y2K problems.) It is a situation that Paul Graziano, the new housing commissioner, and Michael Kramer, the new Section 8 chief, are working hard to fix.

Throughout the authority, managers are being replaced, new computer systems are being set up, and there is an emphasis on such nuts-and- bolts tasks as getting rent checks out on time. Meanwhile, Graziano is stepping up oversight of landlords and trying to better synchronize Section 8 rents with the market. The last thing he wants is to continue luring droves of absentee investors to Patterson Park and similar transitional neighborhoods. "We were facilitating speculation," he says, "facilitating shoddy management practices and encouraging those who frankly should not be in the business of property management to come into our program. We paid them top dollar without regard to any kind of reasonable rent determination process and asked for little in return."

Still, Graziano is in a Section 8 squeeze. If he wants to avoid filling transitional neighborhoods with voucher families, he must find landlords in wealthier neighborhoods who will take them. And those landlords shun Section 8, not merely because of its bad reputation but also because they can get higher rents from the private market.

Graziano and Kramer have their fingers crossed that a recent change will help on the supply side. A few months ago, HUD gave Baltimore permission to increase its rental ceiling in tighter markets. Higher rents, it is hoped, will attract new landlords throughout the city. An independent market analysis is also underway to determine how much of the rental market--if any--remains untapped by Section 8. Kramer, however, doesn't expect it to turn up many units outside the usual voucher zones. It's a matter of geography, he says. "You really only find multi-family rental housing along three corridors out of the city. That's where the housing is. In neighborhoods where house prices far exceed the median, I wouldn't expect to see any renter moving there, Section 8 or not."

The forces working against Section 8 are so complex and interconnected that focusing on market rents and luring landlords may sound a bit simplistic. If housing authorities really want to deconcentrate poverty, some argue, perhaps it is time they try something radically different. Like investing in buses or light rail systems.

You might come to this conclusion if you talk with Dick Doran. Doran runs a nonprofit in suburban Baltimore County whose counselors go apartment hunting with voucher-holders throughout the metro area. The counselors try to open them to the idea of looking in so-called "opportunity areas," while trying to persuade landlords in those areas to take Section 8 tenants. As Baltimore defines it, an opportunity area is one that has a poverty level below 20 percent, is less than one-quarter minority, and has fewer than 5 percent of its households in subsidized housing. In the end, of course, it is the voucher- holder's choice where to move. Yet some 350 families who have gone through the counseling--65 percent--have moved to opportunity areas.

There are lots of available apartments in opportunity areas all over the Baltimore region, Doran says. The problem, for people who can't afford to own cars, is that there's no public transit to get there. "A lot of great opportunity areas are not on a public bus line," Doran says. "There's a lot of housing available out there that makes absolutely no sense for our families to live in."

It may be a stretch for municipal housing authorities to fund mass transit. But increasingly, they are turning to the sort of counseling that Doran's group does. The goal is to create Section 8 demand outside the inner city. Some voucher-holders, it seems, end up in impoverished neighborhoods not because they want to be there but because they never dreamed they could go anywhere else. "It's amazing," Doran says. "There were people in Baltimore who had never been beyond North Avenue"--one of the city's racial and economic dividing lines. "They didn't know what other parts of the city or the suburbs looked like, that there are nice neighborhoods with good rental units."

Information technology may also have a role to play in closing the gap between Section 8 supply and demand. In Minnesota's Twin Cities, HousingLink is a computerized housing referral service. The database includes listings of available Section 8 apartments in a seven-county area. This makes it easier for housing agencies to match voucher- holders, most of whom are from Minneapolis or St. Paul, with landlords, who tend to be in the suburbs. The regional approach is important, says HousingLink president Colleen O'Brien. "In the Twin Cities area, we have 13 different housing authorities managing Section 8. It had gotten so fragmented that they had a hard time finding any apartments outside their own jurisdictions."

Meanwhile, in Patterson Park, the Section 8 influx is slowing down. But not for very encouraging reasons. Some of the Section 8 investors, it seems, had also engaged in mortgage fraud. Several have gone bankrupt and had their properties foreclosed on. "Some of the Section 8 tenants are having to move out," says Rutkowski. "I feel badly for them because it is a hardship. Where are they going to go?"

Rutkowski hopes to add some of the newly foreclosed properties to his portfolio. In just six years of working to turn Patterson Park around, his grassroots group has fixed up 285 homes in the neighborhood and filled them with stable homeowners and renters. The strategy is paying off, if a recent Baltimore Sun headline is to be believed: "Improvement: Patterson Park Is Drawing the Attention of Young Couples, Families and Developers."

Most important, Rutkowski's complaints have made the housing authority aware of what's at stake with Section 8, and the very real prospect of sloppy voucher programs destroying fragile but viable neighborhoods. "This problem isn't about poor people," Rutkowski says. "It's not about whether or not we help the poor. It's not about poor people's behavior, and it's certainly not about race. It's really about management. If the housing authority manages the program well and the people who manage the properties do it properly, a ton of our problems disappear."

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