New Data on True Cost of Voucher Administration
Posted by Eva Wingren on April 24, 2015
HUD is trying to get better data on the true cost of administering the Housing Choice Voucher program, but is a new formula enough to make up for the fact that voucher administration has been intentionally underfunded for years?
Officials from HUD’s departments of Policy Development and Research, and Public and Indian Housing, were recently on hand to answer questions from industry stakeholders about a new report they commissioned from Abt Associates on administrative fees for Housing Choice Vouchers. Also known as “Section 8,” vouchers could play a major role in cementing HUD’s identity as the “Department of Opportunity” because they assist people in renting units on the open market, meaning they can move to areas with better schools, less crime, and other amenities associated with leaving poverty.
However, housing authorities have struggled to stay program compliant in recent years, let alone do the extra outreach and counseling work required to place low income residents in areas of opportunity, because Congress has capped appropriations for administrative fees. In 2013, the year of the study, sequestration drove the administrative fee proration down to 69% of the formula-driven total. While this has driven some real cost savings via automation, housing authorities also laid off staff and let vouchers go un-leased to manage costs.
Housing Choice Vouchers have therefore been prevented from living up to their potential as change agents. According to a 2014 report by the MacArthur Foundation, 41% of Housing Choice Voucher residents live near low performing schools, compared to 25% of households living in apartments subsidized by the Low Income Housing Tax Credit. Rooflines has extensively covered the Baltimore Housing Authority’s pilot program to increase resident mobility using vouchers, which has produced strong initial results.
Readers looking for support for mobility policy changes will find only small changes in the report. The existing formula calculates fees based on the number of vouchers under lease and the local Fair Market Rent as a proxy for local wage rates. The newly proposed formula incorporates cost drivers that were discovered by actually tracking the time spent on various activities and costs of efficiently managing the program. The cost drivers, including several that are associated with economic mobility, are:
- Economics of scale from larger voucher programs
- Prevailing wages
- Health insurance costs
- Percentage of households with earned income (requiring yearly income recertification)
- New admissions rate (with a static number of vouchers, this means that people are making enough to afford rent on their own, and freeing up a voucher for a new family)
- Renting units in higher cost areas relative to the rest of a housing authority’s area
- Serving larger geographic areas
While Abt found that many housing authorities felt that it was important to provide services such as lease counseling to increase mobility to areas of opportunity, few felt that they could afford to. I do question whether merely providing a more accurate level of funding to account for the increased costs of placing voucher holders in areas of opportunity will be enough to drive better outcomes, or if other tactics and procedural changes need to be considered as well.
Like mobility concerns, cost savings were not part of Abt’s scope of work, but their findings did suggest some ideas to look into. The new formula is projected to save 5% over the old formula, if you believe that Abt was able to account for the fact that their study took place during some of the leanest months of the program’s history. However, it doesn’t recommend any procedural changes to bring costs down from an average of $70 per unit per month (one wonders what voucher residents could do with $70 a month instead). Instead, the authors chose to focus on the fact that most housing authorities would receive more administrative money under the new formula than they actually received under the pro-rated old formula. If this seems like comparing apples and oranges to you, you’re not alone, but far be it from me to suggest more cuts to people who have been operating at three quarters of full funding. At the very least, having better data about the true costs of administering housing choice vouchers should provide a policy defense against future pro-rations of funding.
HUD plans to provide housing authorities with the source data so that they can model their own fee structures and plan for the future of their voucher administration departments. In the longer term, HUD plans to issue proposed rules based on the study’s findings and open a comment period in fall 2015.
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Eva Wingren is a former coordinator of federal policy education and advocacy at Mercy Housing.