A Fair Look at Possible Changes to Rental Assistance

Last week Secretary Carson’s Department of Housing and Urban Development (HUD) proposed changes to federal rental assistance programs. There were a variety of changes in the HUD proposal, but so far reactions have focused mainly on tenant rents. This narrow focus on a single element of the proposal doesn’t do the full proposal justice.

The three major changes are the ability to institute work requirements, the changes to tenant rents, and reductions in paperwork and monitoring. A few words on each, below.

1) Work Requirements

The proposal allows housing authorities to institute work requirements. Despite concerns from activist groups like the National Low-Income Housing Coalition (NLIHC), the proposal does not allow housing authorities to apply work requirements to the elderly, disabled, or minors.

According to the Center for Budget and Policy Priorities, 60 percent of households on public assistance are elderly or disabled. These households would be exempt. Of the remaining households, some are already working and so ostensibly they would not need to change their behavior.

In short, if all housing authorities adopted strong work requirements a minority of HUD households would be impacted, perhaps 13 - 18 percent. Work requirements are likely more of a symbolic change that expands the universe of what’s possible under government rental assistance than a provision that would dramatically change rental assistance.

2) Rent Changes

This change has drawn a lot of attention. The increase from 30 to 35% of income for rent is not ideal from a policy standpoint, because it reduces tenant incentives to earn additional dollars (or to report additional dollars if they are earned).

If rents need to be raised, the change from $50 to $150 for minimum rent is superior to the increase from 30 to 35% of income for rent. In fact, HUD would likely be better off moving all of their units to flat rate rents, similar to how minimum rents are structured.

HUD’s view is that rent changes must be made as a result of budgetary constraints. Indeed, changes in rent due to budget constraints are not unprecedented in HUD housing. In 1981, Congress increased rent from 25 to 30% of income for HUD rental assistance programs for this reason.

One important point: where the rent changes result in a financial hardship, tenants are exempt under the proposal. Examples of financial hardship include A) risk of being evicted, B) financial issues (like lose their job, a death in the family, a change in circumstances) C) tenants have lost eligibility for other welfare benefits, or are waiting to find out if they’re eligible for them, etc. Despite activists’ concerns the proposed reform would put people out on the street, it looks as though it’s designed not to.

3) Less Paperwork, Less Monitoring

There are a couple of changes related to reducing paperwork and bureaucracy in the program. The first is changing the rent calculation from adjusted income to gross income. Determining what counts as income for tenants is a very complicated process which leads tenants of similar economic circumstances to be treated differently. That’s a fairness issue, one among many in the provision of housing benefits. It’s nice to see an attempt to simplify and treat tenants similarly.

Finally, HUD rental assistance recipients currently have to recertify their income annually. The proposal changes the certification to be less frequent, from annually to once every three years. The idea is to give low-income tenants greater ability to grow their income while eliminating paperwork. Both libertarians and liberals should find this element of the proposal at least somewhat appealing.

In short, a fair analysis of the proposal requires greater nuance than what’s being offered.