Tenant-Based Rental Assistance

Tenant-Based Rental Assistance

A breakdown of costs for the Experimental Housing Allowance Program (EHAP), which ran from 1970 to 1981 and tested a model of housing assistance that provided cash directly to tenants to pay their rent.

Author: Todd Richardson (PD&R: 1991 to 1997; 2000 to present)

Note: The appendix of this article features a brief timeline and definitions to illustrate the evolution of tenant-based housing assistance programs.

Sometime during the early 2000s, I attended a fundraiser for my children’s school. During the event, my wife, an employee of the school, introduced me to Malcolm “Mike” Peabody, a board member of an area nonprofit. When I mentioned that I worked for HUD, Mike lit up and said, “I was the first Deputy Assistant Secretary for Fair Housing under Secretary George Romney, and I helped launch the housing allowance experiment.” I had inherited a collection of reports on the Experimental Housing Allowance Program (EHAP) from former Office of Policy Development and Research (PD&R) staff members Jill Khadduri and Garland Allen, so I was familiar with the program, but I had not been aware of Mike’s role. Mike invited me to breakfast, where he shared with me an article he had written in 1972 for HUD Challenge, a publication I had not been aware of before our meeting.

That article, “Housing Allowances, A New Way to House the Poor,” is now available on HUD User because the meeting prompted me to ask our staff to search for and scan any existing issues of HUD Challenge. The publication, produced by HUD’s Office of Public Affairs, ran from 1969 to 1978 and features many illuminating articles about HUD’s early days.

Mike’s HUD Challenge article recalls one of HUD’s early, pre-EHAP efforts to test the effectiveness of tenant-based rental assistance, which provides a housing subsidy directly to tenants rather than tying subsidies to individual units as traditional public housing does. Mike’s interest in this model stemmed from his observation that the military provided a similar subsidy for soldiers living off base.

A test of the model in Kansas City, Missouri, took advantage of a flexible funding program from HUD called Model Cities. Through this program, 102 low-income renters living in substandard housing received cash assistance to move to privately owned standard housing units that had been inspected to ensure that they met the city’s housing code. This proof-of-concept test showed that “standard rentals were set higher than proved necessary,” that “most lower income families will opt for paying less rent even if they can afford to pay for something better,” and that “an overwhelming number [of participants] moved out of the Model Cities Area and most of them into areas considered middle and lower middle income. Most minority families remained within the minority community….”

The article blew me away. The story of these 102 families was very similar to that of the more than 2.3 million families that use housing choice vouchers today. The 1972 article concludes, “[A] number of questions have yet to be answered before housing allowances can be instituted on a nationwide basis…. To answer some of these questions, a much larger experiment is planned this year in a number of cities around the United States.” This was the beginning of how PD&R research has played a critical role informing changes to the voucher program throughout its evolution.

That “larger experiment” was EHAP, which was born out of the same statutory language that PD&R operates under today. The program ran from 1970 to 1981 and is considered one of the largest social experiments of its time. Pictured here is a typewritten estimate of the original cost of the program in 1981 dollars that was tucked into a book given to me by PD&R alumnus Garland Allen; unadjusted for inflation, the experiment cost more than $150 million and involved 30,000 households at 12 sites. In their article in the Brookings Institution 1980 publication ”Do Housing Allowances Work?”, former PD&R staff Garland Allen, Jerry Fitts, and Evelyn Glatt provide descriptions of EHAP’s three major components.

• The Demand Experiment “focused on how families respond to housing allowances” and was run in two metropolitan areas, Pittsburgh and Phoenix, randomly assigning 950 families into a control group and 2,500 families into seventeen treatment groups receiving up to three years of assistance. The experiment evaluated different tenant contribution amounts – percent of income models ranging from 15% to 35% as well as percent of rent models ranging from 20 to 60%; in combination with different requirements related to housing quality (no requirement, minimum rent standard, or an inspection requirement).

• The Supply Experiment’s purpose “was to determine the effects of housing allowances on housing markets”. This experiment examined housing allowances as an entitlement by making the allowances available to all qualifying renters and homeowners in Green Bay, Wisconsin, and South Bend, Indiana metropolitan areas. This experiment involved 16,000 households receiving up to 10 years of assistance.

• The Administrative Agency Experiment (AAE) was designed “to gather information about the administration and costs of delivering housing allowances.” This experiment explored which local government entities – Public Housing Authorities, state community development agencies, county agencies, or welfare agencies - would be ideally positioned to implement the program and what challenges they would face in doing so. Between 400 and 900 households were served at each of the eight sites scattered across the United States.

EHAP produced dozens of reports that PD&R has been uploading to HUD User. Whenever a policy question concerning housing choice vouchers arises, I review these reports to discover that, in many cases, EHAP explored the idea first.

EHAP tested a housing assistance model that issued cash disbursements directly to tenants to pay their rent. This is different than the Section 8 Existing Housing Program, which was codified in the Housing and Community Development Act of 1974, and calls for the subsidy payment to go directly to landlords instead of the tenants.

The Section 8 Existing Housing Program – which over time evolved from the Section 8 Certificate program into today’s Housing Choice Voucher program - was a compromise between the Section 23 Leased Housing program created in 1965, in which the PHA found and leased the unit and subleased it to the tenant, and early implementation lessons from EHAP, in which the tenant found the unit, received the subsidy, and paid all the funds directly to their landlord.

In general, because EHAP and the Section 8 Certificate program were operating simultaneously throughout the 1970s, staff in PD&R worked very closely with staff in the Office of Public and Indian Housing, using the data from EHAP to address questions that arose during implementation of the Section 8 Certificate program. That close working relationship continues to this day.

As tenant-based rental assistance has evolved to become the nation’s largest form of housing assistance, PD&R has tested numerous ideas that have led to innovative new programs. The following represents a small sample of that research:

• Freestanding Housing Voucher Demonstration (1983). This research tested moving the Section 8 Certificate program closer to the EHAP model by allowing PHAs to set payment standards above (or below) area FMRs and allowing tenants to pay more than 30 percent of their income if the unit was above the PHA’s rent limit, and also keep the difference if they rented for less than the rent limit; it also allowed tenants to  take their voucher to another PHA (portability). Portability and allowing tenants to spend more than 30 percent of their income became part of the 1987 authorized voucher program.

• Moving-To-Opportunity Demonstration (1992). The Moving to Opportunity (MTO) Demonstration explored the potential benefits of mobility for renter households. MTO provided families living in high-poverty public housing developments with vouchers that could be used only in low-poverty neighborhoods. Researchers found that families signed up for the demonstration to move to safer neighborhoods. Participants experienced reduced rates of anxiety and depression; in addition, the adult heads of household experienced reduced rates of diabetes and preteen children experienced long-term economic benefits when they became adults; however, some negative impacts of the move were observed for older children, particularly boys. MTO shows the importance of housing and place, particularly the impact of living in low-crime areas, on health; and if definitively demonstrated the impact neighborhood has on young children’s long-term future. 

• Study on Section 8 Voucher Success Rates (1998). This study estimated voucher success rates – the rate at which the tenants offered a voucher successfully lease a unit - at 69 percent in 2000, with tenants needing an average of 83 days to find a unit. The study confirmed that voucher success rates are lower in tight markets, 61 percent, and higher in jurisdictions with source of income protections, 76 percent. 

• Effects of Housing Choice Vouchers on Welfare Families (1999). This study tested the potential benefits of receiving a housing voucher versus not having housing assistance, finding that families receiving welfare who successfully leased housing with a voucher avoided homelessness. Among families in a control group who did not receive a voucher, roughly 45 percent became homeless in any given year relative to 9 percent of the families that had received a voucher. 

• Study of Household Transition From the Disaster Housing Assistance Program (2007). This research demonstrated how vouchers could be used to serve families whose homes were destroyed because of disasters. It showed the importance of having a combination of housing assistance and case management to serve very poor families displaced by a disaster.

• Family Options Study (2008). This study evaluated multiple interventions for homeless families, finding that vouchers were the most effective intervention. This research confirmed the findings from the Effects of Housing Choice Vouchers on Welfare Families, that for solving family homelessness the solution is long-term housing assistance like housing vouchers, with only a modestly higher cost than shorter-term and less effective programs like Rapid Rehousing and Transitional Housing. It was important for showing how critical it is that Continuum of Care homeless providers and PHAs work together to solve homelessness among families. 

• Housing Choice Voucher Program Administrative Fee Study (2012). This study used time and motion research to recommend a better way to fund the PHAs that administer the Housing Choice Voucher program. An effort to change the formula based on this research was not successful to date, but the research remains relevant.

• Small Area Fair Market Rent (SAFMR) Demonstration (2012). This study tested the effectiveness of setting area FMRs at the ZIP Code level rather than at the metropolitan area level. The study found that doing so encourages more families to move to higher-cost neighborhoods. This research supported a new rule requiring use of SAFMRs in areas with high concentrations of voucher tenants and loose housing markets. Currently 24 MSAs are required to implement SAFMRs.

• Rent Reform (Triennial Recertification) Demonstration (2013). This study found that conducting recertifications less frequently leads to families keeping their housing assistance for longer periods. 

• A Pilot Study of Landlord Acceptance of Housing Choice Vouchers (2016). This paired testing research found that most landlords, unless they specifically solicit voucher tenants in their advertising, deny applicants with vouchers unless their community offers source of income protections.

Tenant-based rental assistance has evolved. Its earliest iterations incorporated three legs: fair housing, tapping the private sector, and improving housing quality. Over time, as housing quality has improved nationally since the 1970s, housing affordability and preventing and addressing homelessness have risen to be the core goals of HUD’s rental assistance programs. Although mobility for fair housing remains an important goal, so does mobility to improve opportunities and outcomes for children. Recent research has focused on increasing landlord participation in the voucher program and expanding housing options for tenants.

Going forward, research that has just begun, is exploring additional possible program changes:

• Is there an alternative to charging rents at 30% of adjusted income? The MTW Expansion Rent Reform Demonstration is currently testing two methods of setting rents: tiered rents, in which all families within a specific income tier pay the same rent, and stepped rents, in which tenants’ rent contributions increase over time regardless of income. 

• Are there incentives for landlords we could be offering to improve voucher leasing? The MTW Expansion Landlord Incentive Demonstration is testing incentives to encourage more landlords to accept housing vouchers.

• MTO showed the benefits of moving to a low-poverty neighborhood for pre-teen children. What program changes could help more families succeed at leasing low poverty neighborhoods?  The Community Choice Demonstration is evaluating which supports and incentives are most successful at helping families with housing vouchers move to higher-opportunity neighborhoods. 

PD&R will also be working with the Office of Public and Indian Housing to celebrate the 50^th anniversary of the Section 8 Existing Housing program in 2024, including a special edition of Cityscape dedicated to the anniversary.

Appendix

Over the years, PD&R has maintained close working relationships with both the Office of Housing and the Office of Public Indian and Housing during our joint efforts to test and evaluate housing assistance programs:

• 1937: Housing Act of 1937. The public housing program began, although some economists at the time argued that tenant-based assistance would be preferable. (Tenant-based assistance participants: 0)

• 1965: Housing and Urban Development Act of 1965. Section 23 of the act allowed PHAs to lease private units from landlords and then sublease these units to tenants at a rent the tenant could afford. (Tenant-based assistance participants: 0)

• 1970: Housing and Urban Development Act of 1970. The act created EHAP. (Tenant-based assistance participants: 0)

• 1974: Housing and Community Development Act of 1974. This act created housing certificates. (Tenant-based assistance participants: approximately 30,000 from EHAP)

• 1983: Housing and Urban-Rural Recovery Act of 1983. This act created the Freestanding Housing Voucher Demonstration. (Tenant-based assistance participants: 768,938)

• 1987: Housing and Community Development Act of 1987. This act made the Housing Choice Voucher program permanent. (Tenant-based assistance participants: 1,038,598)

• 1998: The Quality Housing and Work Responsibility Act of 1998. This act completed the merger of the Section 8 Certificate and voucher programs and mandated other reforms. (Tenant-based assistance participants: 1,390,005)

• 2008: Housing and Economic Recovery Act of 2008. This act supported the Homelessness Prevention and Rapid Re-housing Program, a short-term, tenant-based assistance program to address homelessness. (Tenant-based assistance participants: 2,071,195)

• 2022: (Tenant-based assistance participants: 2,355,389)

As the accompanying chart shows, participation in tenant-based programs has grown to match the combined unit counts of the project-based programs. One reason for this growth is that tenant-based assistance is replacing project-based assistance. Since 2000, most new incremental vouchers have come in the form of tenant protection vouchers for demolished public housing developments or properties exiting the Project-Based Rental Assistance program; special purpose vouchers such as those serving homeless veterans or people with disabilities; or disaster recovery. The first new “fair share vouchers” since fiscal year 2000 were funded in fiscal year 2022.

Households Receiving Annual Federal Housing Subsidy, 1940–2021

Source: Author’s compilation of budget and data records