Perspectives on Direct Rental Assistance: Summary of Public Comments

Perspectives on Direct Rental Assistance: Summary of Public Comments

By Paul Joice, Social Science Analyst, Office of Policy Development and Research

Direct Rental Assistance could benefit both tenants and landlords by delivering rental assistance faster and with less administrative burden.

In recent years, various innovative programs have emerged that provide simple, flexible assistance to low-income individuals, including the expanded Child Tax Credit and cash assistance (or guaranteed income) pilots. In the housing arena, the Emergency Rental Assistance program authorized payments directly to tenants, and in Philadelphia, the PHLHousing+ pilot is distributing cash assistance to low-income renters on the housing choice voucher (HCV) waitlist. Direct rental assistance (DRA) is not a new idea; the concept is essentially the same as the Experimental Housing Allowance Program that HUD tested in the 1970s. Over the past 50 years, however, the prevailing mode of providing rental assistance has been tenant-based vouchers, which are paid to a landlord on behalf of an eligible renter. Various stakeholders, including researchers, philanthropies, public housing agencies (PHAs), other housing providers, and antipoverty advocates, are exploring the development of DRA pilots. Many open questions about DRA remain, however, including the potential benefits and risks of the model and how DRA policies should be designed.  

Request for Information and Summary of Responses

On July 22, 2024, HUD published a Request for Information (RFI) to solicit public comment on the DRA concept, and the agency received 226 responses by the August 30 deadline. More than 600 pages of comments are publicly available, but this article distills the key takeaways for stakeholders exploring DRA.

The RFI noted that HUD's interest in DRA stems from its nature as a rental assistance program rather than an unrestricted cash transfer. The RFI also suggested that DRA would best inform HUD's policy development and program improvement goals if HUD aligned it with the HCV program in certain ways, such as offering a deep subsidy for low-income renters and requiring that the funds be used for housing costs.

Most responses to the RFI indicated general support for DRA. HUD staff coded responses based on whether they indicated positive or negative sentiment; of the 170 responses that indicated sentiment, 79 percent were positive, including 30 percent that were enthusiastically positive, and 21 percent were negative, including 7 percent that were strongly negative.

The RFI respondents anticipated a wide range of potential benefits from DRA, including the potential to empower tenants; create less administrative burden than other forms of housing assistance, which could appeal to landlords; and make obtaining assistance and stable housing easier and faster for tenants. Some responses noted the potential for DRA to inform improvements and reforms to the HCV program, such as by increasing landlord participation and voucher success rates. Others envisioned DRA as complementing and coexisting with the HCV program, perhaps providing a framework to scale rental assistance into an entitlement program.

Responses that expressed opposition to or concern about DRA focused on the risk that DRA recipients might not use the funds for the intended purpose — paying their rent. In the HCV program, the PHA pays the voucher subsidy directly to the landlord, and this guaranteed payment is one of the program's main benefits to landlords. If DRA recipients are less likely to pay their rent on time and in full, then landlords could, in turn, increase evictions and become reluctant to accept tenants with DRA. 

Program Design and Research Priorities

The potential benefits and risks associated with DRA highlight the importance of careful pilot program design and rigorous research. For example, the extent to which DRA recipients reliably pay their rent would be a key issue for researchers to study. Some RFI respondents expressed optimism that DRA recipients would pay their rent and argued that burdensome monitoring would be unnecessary. They noted that DRA recipients would have strong incentives to pay their rent, such as avoiding eviction and the loss of the DRA subsidy. Some respondents also cited evidence from guaranteed income pilots showing that renters who receive flexible cash assistance tend to use these funds to pay rent. Other respondents proposed strategies DRA pilots could adopt to prevent, monitor, and correct cases in which DRA recipients do not pay rent. One suggested approach is for landlords with nonpaying DRA tenants to contact the PHA before pursuing eviction. This approach could balance administrative burden and nonpayment risk. When the DRA recipient does pay reliably, no additional reporting or monitoring burden exists. But when the DRA recipient is delinquent, the PHA would be able to intervene to correct the situation and avoid more serious consequences for both the landlord and the tenant. This approach would require the landlord to be aware of the DRA subsidy and PHA involvement. Although some respondents imagined that DRA would be essentially invisible to the landlord, thus preventing landlords from discriminating against DRA recipients based on source of income (a substantial challenge in the HCV program), others noted that this expectation is unrealistic, because landlords typically vet prospective tenants, including verifying their income, to determine whether they will be able to afford the rent. If DRA recipients do not disclose the subsidy, landlords may incorrectly conclude that they cannot afford the rent.

If landlords are aware that a tenant (or prospective tenant) has a DRA subsidy, then the feasibility of the DRA model rests on the extent to which DRA can reduce landlords' administrative burden. One such burden — a commonly cited complaint of landlords participating in the HCV program — is HUD's process for housing quality inspections, and RFI respondents considered how DRA could reduce that burden. Many respondents suggested allowing DRA recipients themselves more discretion and responsibility for assessing housing quality and choosing an acceptable unit. This approach would align DRA with the standard procedures for renters and landlords in the unsubsidized rental market. Respondents often suggested augmenting the tenant-led inspection approach with efforts to teach tenants how to assess housing conditions and requirements that tenants submit a checklist to the PHA certifying that the unit meets certain specifications. Some respondents expressed concern about the possibility of DRA recipients choosing units of unacceptably low quality, which would not only put themselves at risk but also invite controversy around DRA funds paying for substandard housing. This concern could be mitigated through various approaches, such as having PHA staff conduct followup inspections (at a time that does not interfere with leasing or program admission), allowing tenants to request interim inspections (as they can in the HCV program) if issues arise, and requiring annual or biennial PHA inspections after admission. 

The RFI also asked how DRA subsidies should be calculated; although HUD indicated that DRA should be a deep subsidy like the HCV program, some deviations might be appropriate. Some RFI respondents suggested that DRA could be a flat subsidy rather than based on a household's income. Most respondents addressing this topic suggested consistency with the HCV approach: having tenants pay a portion of their income toward rent and having the DRA subsidy supply the remainder. Several respondents made a compelling argument for calculating DRA subsidies using the payment standard rather than the rent of the specific unit occupied. This approach would offer DRA recipients an incentive to comparison shop for units, because choosing a unit below the payment standard would reduce the tenant's out-of-pocket rent contribution. Other respondents noted the importance of using payment standards based on Small Area Fair Market Rents to ensure that the shopping incentive does not lead DRA recipients to choose units in high-poverty neighborhoods.

Next Steps for DRA Research

PHAs with Moving to Work (MTW) flexibility currently are designing DRA pilots, and non-MTW PHAs and other stakeholders are exploring DRA pilots with non-HUD funds. The RFI responses highlight the importance of rigorous research accompanying DRA pilots. The respondents brought up many plausible hypotheses about the effects of DRA. Some commenters expressed enthusiasm for DRA's transformative potential, whereas others anticipated various potential pitfalls. Careful research is needed to test these hypotheses and quantify the costs and benefits of DRA. Notably, DRA pilots should provide fertile ground for research that meets the gold standard for program evaluation: randomized controlled trials. PHAs nationwide have long waitlists of people needing housing assistance. DRA pilots can enroll households and then randomly assign them to receive DRA, remain on the waitlist, or receive traditional housing assistance such as a voucher. Researchers could compare the groups' progress toward particular outcomes, including the likelihood of receiving assistance, housing stability, housing and neighborhood quality, and measures of economic security.