Markov Chain Model of Rent Burden in the Housing Choice Voucher Program by Brent D. Mast.

Since 1937, the United States has made access to affordable housing a national priority. For a variety of reasons, assistance has been provided through housing subsidies rather than general income transfers.

Affordable housing assistance was initially provided through public housing projects run by local Public Housing Agencies (PHAs). In 1965, PHAs began experimenting with providing opportunities in privately owned rental units.1 Private opportunities have been provided through a variety of programs.

There are numerous arguments for providing assistance in privately owned buildings instead of public housing. The primary motivation for increasing private sector housing choices has been expanding social and economic opportunities for low-income households receiving housing assistance. Another argument is that private owners might have better incentives for operational efficiency, thus lowering program costs.

Exhibit 1 reports trends in rental assistance for 1999-2008 through public housing and the two largest private options – Certificates and the Housing Choice Voucher Program (HCVP). In 1995 there were .74 million households in public housing, compared to .56 million certificates and .19 million vouchers.

Certificates have been phased out over time, while Housing Choice Vouchers have increased dramatically. Today, HUD’s Section 8 program provides assistance to about .9 million households in public housing projects, and 1.7 million through the Housing Choice Voucher Program. HCVP is the now largest U.S. rental assistance program, with an annual budget of over $16 billion.

Voucher recipients choose their own rental units, and rent is paid for partially by the household and partially through HUD payments to landlords. The voucher program is administered by approximately 2600 local Public Housing Agencies (PHAs). Among the PHAs’ responsibilities are selecting applicants to receive vouchers, annual verification of household income, and determination of each household’s rent responsibility.

Program Monitoring and Research Division Working Papers