Section 8 housing: headed to state block grants?
BY BRAD ZIGLER
Special Correspondent

Originally published June 9, 2003 in the North Bay Business Journal

NORTH BAY -- President Bush’s budget giveth and taketh away. Among the takeaways in allocations to the Department of Housing and Urban Development's fiscal 2004 budget is one that would transform HUD's Section 8 housing assistance program, currently administered at the local level, into a multi-billion dollar state block grant.

The Section 8 program -- officially the Housing Choice Voucher program -- is HUD's single largest housing assistance scheme. Under the new budget, the program -- newly renamed as Housing Assistance for Needy Families -- would allocate $12.5 billion in voucher funding to states, rather than to the approximately 2,600 public housing authorities currently receiving Section 8 funds. States could then contract with housing authorities or other housing entities to administer the program.

And that has San Francisco architect Mike Hilliard worried. “Funding the Section 8 program through block grants,” he says, “adds another layer of administration and raises costs, which lowers the actual money available to help families.“ Mr. Hilliard’s firm, Hilliard Architects, Inc., is currently engaged in the renovation of Ponderosa Estates, a 56-unit Section 8-subsidized apartment and townhouse project in Marin City.

“Creating block grants could be just be the way for the federal government to exit the housing business altogether and that would be a tragedy. Helping to provide affordable housing is one of a few things that the federal government does well” adds Mr. Hilliard.

Recipients of Section 8 assistance receive a voucher covering a portion of the rent for homes in the private market. The tenant's share of the rent is an affordable percentage of their income, which is generally 30%-40% of his or her monthly income. Waiting lists for Section 8 housing assistance are long. The list at Sonoma County’s Housing Authority, for example, opens up only once every three to five years.

Section 8 block granting, while a revamp of the existing program, is not a new idea. HUD has considered block grants ever since Section 8 came under increasing congressional scrutiny due to the large number of vouchers that go unused each year, mostly attributed to increasingly tight rental markets. Last year, for example, public housing authorities, according to the Office of Management and Budget, couldn’t find use for more than $1.7 billion in federal aid. That money, says OMB, could have housed 200,000 families.

Unused vouchers translate into unused budget authority, and, says OMB, the vast budget authority that Section 8 consumes annually reduces funding that could potentially be applied to other HUD programs. HUD's fiscal 2004 budget request claims that the changes would “allow for more flexibility in efforts to address problems in the underutilization of vouchers that have occurred in certain local markets.”

According to the Washington-based Center for Budget and Policy Priorities, though, funding for many block grants that provide assistance to low-income families historically has failed to keep pace with inflation, let alone increases in the cost of rental housing which, between 1998 and 2003, grew at more than twice the rate of inflation nationwide. Under the block granting system, say housing advocates, regional rental inflation would no longer determine state or local funding allocations.

The administration pooh-poohs such notions, claiming that states will be free to tailor programs to the needs of their particular communities. A higher rent ceiling could be allowed in some areas, for example, but perhaps at the expense of funding for other areas.

Under the block grant program, states would be required to assist at least the same number of families as they currently serve, but would be given flexibility to set the terms of assistance.

Housing advocates are concerned the block granting scheme could ultimately lead to voucher recipients paying more than 30%-40% of their income for rent while also removing caps on monthly payments housing agencies require from families with little or no income.