Earlier this month, the U.S. Department of Housing and Urban Development (HUD) proposed changes to how subsidies are calculated for low-income renters receiving housing assistance through the Housing Choice Voucher Program. These changes aim to expand opportunities for low-income families to move to more expensive neighborhoods, and are informed by academic research which demonstrates the long-term benefits of moving to a lower-poverty neighborhood.
The Housing Choice Voucher Program, funded by HUD and administered by local public housing authorities, provides rent subsidies to more than two million American households. The subsidy provided to a household is capped at an amount equal to the “Fair Market Rent” (FMR) minus 30 percent of the family’s monthly adjusted gross income. In other words, HUD will cover rent payments that exceed 30 percent of household income up to the level of FMR.
HUD currently calculates FMRs at the metropolitan area level, which results in one overall subsidy cap for any given metro area. As a consequence, families may be unable to afford living in more expensive neighborhoods within their metro areas, and may stay in high-poverty neighborhoods. In the words of HUD Secretary Julián Castro, “in some areas of the country, the Housing Choice Voucher Program currently offers little choice to families about where they can live, limiting opportunities for themselves and their children.”
In 2015, J-PAL affiliate Raj Chetty (Stanford), Nathaniel Hendren (Harvard), and J-PAL North America co-Scientific Director Lawrence Katz (Harvard) published a new, long-term analysis of the Moving to Opportunity experiment, finding that young children (under age 13) whose families were randomly provided vouchers to move from high-poverty housing projects to lower-poverty neighborhoods earned substantially more in adulthood, were likelier to attend college, attended high-quality colleges on average, and were less likely to become single parents. HUD’s announcement this month notes that “findings from this new study, along with HUD’s own research, support the Department’s current policy direction of fostering opportunities for economic mobility while also investing in place-based strategies that revitalize distressed neighborhoods.”
Under the newly proposed HUD rules, for metropolitan areas with wide variance in rents and where voucher holders are concentrated in a few high-poverty neighborhoods, FMRs would be calculated at the zip code level rather than at the metropolitan area level. Using these “Small Area FMRs” to calculate payment standards would increase subsidies in more expensive neighborhoods (and in some cases, decrease subsidies in less expensive neighborhoods). According to Katherine O’Regan, HUD’s Assistant Secretary for Policy Development and Research, the new rules “will offer real choice to voucher-assisted families.”