HCV Program Seeks to Provide Stability in Turbulent Economy

As HUD's largest rental assistance program, the Section 8 Housing Choice Voucher (HCV) program plays a key role in preventing homelessness and supporting local rental markets—particularly in a bad economy. Over the past three years, the country has struggled with persistently high unemployment and a severe shortage of affordable housing. Funding cuts and future budget uncertainties only make managing an area's HCV program that much more difficult.

As HUD's largest rental assistance program, the Section 8 Housing Choice Voucher (HCV) program plays a key role in preventing homelessness and supporting local rental markets—particularly in a bad economy. Over the past three years, the country has struggled with persistently high unemployment and a severe shortage of affordable housing. Funding cuts and future budget uncertainties only make managing an area's HCV program that much more difficult.

To get a sense of the challenges facing the HCV program in the current economy, the Insider spoke with Peter Lynn, Director of Section 8 for the Housing Authority of the City of Los Angeles (HACLA). With an allocation of over 45,000 vouchers serving over 100,000 L.A. residents, HACLA administers the second largest Section 8 program in the country. For the past two years, HACLA has received a “High Performer” rank from HUD's Section Eight Management Assessment Program (SEMAP), a turnaround from its “Troubled” SEMAP designation in 2005, when it was on the brink of federal receivership. Prior to joining HACLA four years ago, Lynn worked for the HCV program for the New York City Department of Housing Preservation & Development.

Managing the Funding Cycle

Insider: Since the economic crisis of 2008, how has the struggling economy affected the Section 8 program that you manage?

Lynn: There have been changes to the funding process and funding cycle. We have one budget for subsidies and a separate budget for administration of the program. This year, we took a significant cut to administrative funding. On the subsidy side, we have full funding, enough to cover everyone who's in the program, though I know other programs haven't been as fortunate. Subsidy cuts entail more hardship for assisted families.

The challenge is that funding is often implemented mid-year and retroactive to the beginning of the year. So we learn about what our funding is for the year midway through it. Sometimes, programs will receive a retroactive cut mid-year. It's challenging to administer a program with a funding process that doesn't let you know what your budget is till halfway through the year, especially since we're administering long-term contracts.

Insider: How long does it typically take between issuing a new voucher and signing an assistance contract for the household?

Lynn: Many steps in the process can take a long time. When we issue a new voucher, we do a draw off the waiting list, conduct eligibility interviews, and verify all the income information and other documentation the applicants provided. Then we let them know all the program rules and their obligations under them, as well as how best to present themselves during the housing search. That takes several weeks.

Then the families go out and look for a unit—and that can take several months, particularly in the case of elderly or disabled households. Often, households may need extensions of their vouchers.

When the household has found a place, there's the inspecting, leasing, and contracting process. So the amount of effort that goes into leasing a new household can take up to nine months and a lot of staff time. But we don't get paid until there's a unit under contract. So the cycle is long, and in the middle we might get funding cuts. In the case of administrative cuts, the process will only take longer with fewer staff members, so we want to devote resources to the front end of the process—for example, by making unit inspections for new households a higher priority than other inspections.

Insider: How have your per-unit subsidies changed recently?

Lynn: Typically, our outlays increase at roughly the rental market inflation rate. In an average year, we're asked to process rent increases of about 2 percent, so the subsidy we pay would increase by 2 percent.

But the program covers the share of the rent that the very low-income family can't afford. So during a sharp downturn in the economy, we see larger increases in household per-unit costs, because household income decreases rapidly. In this downturn, jobs got wiped out pretty fast. And instead of seeing an inflation rate of 2 percent due to rising rents, we've had a significant portion of families getting an increase in subsidy of 40 or 50 percent—or even 100 percent—due to a drop in income.

Insider: Has California's particular economic problems made the situation worse?

Lynn: Since the downturn hit the state budget, state programs have been cut, so families are receiving less income from public benefit programs, such as disability payments. And we have to increase the housing subsidy to make up for that loss.

These economic problems don't just mean large increases in subsidies, though. They also mean huge increases in administrative workload. Our staff has to do more interim recertifications so we can keep increasing the subsidies.

Insider: Have rental rates risen as well during this period?

Lynn: Actually, the rental market here has softened quite a lot. You tend to think that there's a fairly straight demand curve for rental housing. But in times like these, more people at higher income levels are willing to “double up” and share space. That makes more units available to people in our program. So our success rates for leasing have gone up, but at a higher per-household cost because incomes have dropped.

Insider: Any predictions about future funding?

Lynn: Everybody's sitting on the edge of their seats to find out what might happen to the budget in 2012!

Managing Greater Demand

Insider: How many applicants are on your waiting list?

Lynn: We have 10,000 households on the waiting list. It has been closed since 2004, so applicants are on the list an average of eight years. The public housing side, meanwhile, has open waiting lists of less than one year.

Insider: If you opened your waiting list, how many applicants would you expect to get?

Lynn: I wouldn't be surprised if we got a quarter of a million applicants. And at some point, we'll have to open it, but probably not for some time.

You hear horror stories about the way folks have opened their waiting list. You don't want to have people come to a particular site to apply—in those situations, there have been stampedes. We would probably do it by phone, Internet, and mail-in application, using machine-readable paper to automate the process as much as possible. Then we'd hold a lottery to reduce the applications to a workable number, and turn away the others. It just wouldn't make sense to maintain a waiting list that extends out 25 years.

Working with Property Owners and Households

Insider: Have you had any difficulties in working with property owners or managers?

Lynn: Some owners will try to use our program to fill substandard units. We have to work harder with them to get the units to meet Housing Quality Standards.

We also have to manage owners' expectations that they will always get rent increases. Since the downturn in the economy, the rental rates are down and our rent comparables are down. So owners aren't getting the rent increases they'd like; in fact, they've already been scaled down. But by and large, we have a strong relationship with owners.

Insider: Do owners report any common problems with their Section 8 tenants?

Lynn: Some of our participant families haven't been renters before, so they need some coaching on proper behavior, like not infringing on the peaceful enjoyment of other residents and maintaining good housekeeping.

Insider: Are you seeing more or fewer compliance problems among participants?

Lynn: Over all, compliance is up. That's another result of the downturn—people are very scrupulous about maintaining their compliance. They don't want to lose their assistance.

We used to have more people abandoning their assistance, and now we're not seeing much of that. The main reasons people leave the program is that they surrender their assistance, disappear, die, or earn their way out of the program. There's certainly less of the latter these days. But attrition is also down.

Insider: Has there been any increase in fraud, such as under-reporting income or having people move in who aren't on the lease?

Lynn: We're not finding more unauthorized occupants. The incentive to move extra people in may be higher, but the fear of losing assistance is also higher.

We have an internal fraud investigation unit that uses several methods of surveillance, including a hotline for tips—typically, ex-boyfriends or ex-girlfriends are the ones who are reporting tips. But fraud is not a major source of terminations.

Insider: Do you have trouble finding property owners willing to rent to voucher holders? Have more owners been dropping out of the program?

Lynn: Actually, more property owners are willing to rent to voucher holders in this soft market, because they know they're going to get paid from the program. If the household loses income, we will pick up the slack. That's a very valuable proposition in this kind of economy. Owners have to put up with a certain amount of administrative overhead from our inspections and contracting process, but as a landlord, you are pretty well guaranteed your rent once the household is in the unit. So we continue to attract property owners.

Insider: What advice would you give owners who are eager to attract more voucher holders?

Lynn: Since voucher holders have very low income, coming up with security deposits, which is not a program element I can fund, is very challenging for them. There are programs that can fund security deposits, but not everyone has access to them. So owners who are willing to accept security deposits over time are at a competitive advantage.

Responding to Demographic Trends

Insider: As the population ages, have you seen an increasing number of applicants with disabilities?

Lynn: Yes, and there's a huge need for retrofitting to accommodate elderly and disabled residents. The demand is huge, and property owners who invest in retrofitting and installing accessible features will be rewarded by the market.

Insider: Of the 50 states, California has the highest percentage of veterans. Are you seeing an increase in the number of homeless veterans or veterans in the program?

Lynn: Yes, in fact, we were just awarded another HUD-VASH grant that brings our total to 1,395 vouchers for homeless veterans.

Insider: What other trends are you seeing in Los Angeles, and what initiatives is your office working on in response?

Lynn: In Los Angeles, homelessness is a real crisis. It's far and away the worst in the nation. So in response to that, HACLA has set aside 4,000 vouchers for the homeless, which we administer in conjunction with homeless sponsor agencies that can provide direct outreach and other services that help the homeless get and stay housed. Not every community uses the voucher program to tackle homelessness, but we've found that this is a good use of resources to address a community-wide problem.

We've also worked with nonprofit developers to put project-based vouchers into new developments of supportive housing.

Finally, you may have heard HUD Secretary Donovan's recent announcement that ex-offenders (with the exception of sex offenders or those convicted for certain drug activity) will now be permitted to move in with family members who live in HUD-subsidized housing. This is important, because without access to affordable housing, people released from prison are less likely to be able to reunite with their families and more likely to join the homeless population—or end up back in prison. And ex-offenders are not an insignificant number of people. According to the OECD, the U.S. has the highest percentage of citizens behind bars in the entire developed world.

Still, it's tough to encourage family reunification when property owners are skeptical about letting ex-offenders into their communities. We have a stake in maintaining good neighborhoods and keeping public perception of the Section 8 program high. That increases the participation of owners on whom we're dependent. So we have to respect what the local priorities are—if it's not family reunification, then it may be reducing homelessness.