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Manhattan Institute

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Working Poor: Housing Hope


Working Poor: Housing Hope

March 2, 2004
Urban PolicyOtherInfrastructure & Transportation

HOUSING advocates are angry about the Bush proposal, included in the new federal budget, to reform one of the last no- strings-attached federal welfare programs: HUD's Section-8 housing vouchers.

Because New York City receives more of these vouchers than any other city in the country (in excess of 90,000), the advocates claim that it will be particularly hard-hit by reform. In fact, the city Housing Authority likes the Bush plan, because it will let the agency help more families - especially working families - without promoting dependency.

The voucher program began decades ago as an alternative to housing projects, after endemic squalor and crime showed the projects to be a failed experiment. Instead of putting someone in a project, the program gives them a voucher that subsidizes their rent in a regular apartment.

But vouchers have produced their own terrible side effects, even as the program passed traditional public housing in the number of people it supports - some 2 million today.

Unlike welfare, no time limit applies to Section-8s. So, just as welfare once did, they facilitate the creation of single-parent households - families most at risk of dependency and in which kids disproportionately fail to flourish.

Teen mothers clearly have been turning to Section-8s to start their own single-parent families. Out of the million or so non-elderly, non-disabled Section-8 households, single parents head 783,000.

Section-8s discourage work. Regulations require that three out of four vouchers go to households earning 30 percent or less of a region's median income. The tenant portion of rent is capped at 30 percent of their income, which in effect means that many of these low-income families pay miniscule rent. And since households must re-qualify for the program yearly, if voucher families want to keep receiving housing aid or avoid higher rent, they need to keep their income way below the regional median - that is, they need to avoid work, or at least reporting income.

Getting married to a wage earner also makes little economic sense, since a recipient risks losing their entitlement.

Ideally, the Bush administration would simply put a clear federal time limit on vouchers and work to phase the program out. But that likely couldn't clear Congress - Democrats would undoubtedly filibuster such a measure even if it could win a majority. So the administration has designed a "Flexible Voucher Plan" that gives the local housing authorities that administer Section-8s a powerful incentive to make the vouchers less of an entitlement.

Bush would stop giving housing authorities funds for a set number of assisted rentals. Instead, they'd get a yearly lump sum with the instruction to serve as many families as they can with it.

The authorities that serve more rather than fewer people with the grant, and do a good job generally in managing their funds, would be rewarded with extra administrative fees. Authorities that do a poor job? HUD says it would give their responsibilities to private leasing firms.

The plan frees local housing authorities to set flat rents, so that households won't be discouraged from boosting their incomes, and to make deals that provide declining amounts of assistance over the life of a lease - and even to impose overall time limits.

In effect, the Bush plan will transform housing authorities into real-estate leasing agencies, with a special responsibility to encourage upward mobility among tenants.

Let's hope that Congress gives its nod. If it does, the era of public housing as a permanent, and demoralizing, way of life may be at an end.