New HUD Data Show Families Will Likely Lose Housing Vouchers If Congress Approves President's Budget Request, Revised 7/21/03

NEW HUD DATA SHOW FAMILIES WilL LIKELY LOSE HOUSING VOUCHERS
IF CONGRESS Approves president’s budget requesT
Reduction of 184,000 in Number of Households Assisted Would
Primarily Affect Low-Income Working Families and Elderly and Disabled People
By Barbara Sard and Will Fischer

Data collected by the Department of Housing and Urban Development (HUD) in April 2003 from state and local housing agencies that administer nearly all federal housing vouchers show that the Administration’s budget request for fiscal year 2004 is inadequate to fund all housing vouchers likely to be in use when the fiscal year starts in October 2003. Analysis of these data, which were not available at the time the President’s budget was prepared, shows that if the necessary funding above the President’s current request is not included in the appropriations bills this year and additional funds do not become available from other sources, approximately 184,000 vouchers in use serving low-income families at the beginning of the fiscal year likely will not be funded. Such a reduction would be unprecedented in the history of the voucher program. Efforts to avoid this problem would be greatly facilitated if the Administration, using this more recent data, submitted a budget amendment to Congress requesting the necessary funds.

If the projected funding shortfall occurs, it is likely that some families that now rely on vouchers to help pay their rent will lose assistance, placing these families at a high risk of eviction and, in some cases, homelessness. These cuts would fall primarily on low-income working families, the elderly, and the disabled, since these groups make up 70 percent of the population that the voucher program serves.

Many housing agencies will not impose their share of the 184,000 voucher reduction immediately. Agencies that do not impose the full reduction at the beginning of the year will have to reduce the number of families served by an even greater number later in the year to achieve the required cut in the average number of families served over the full year that is required by the level of funding requested by the Administration. If the overall reduction is imposed evenly over the course of the fiscal year the number of families with vouchers would be 368,000 lower by the end of the fiscal year than when the fiscal year begins. (The 184,000 figure represents the amount by which the average number of families assisted over the course of the fiscal year will be below the number assisted at the start of the year.)

The housing voucher program (sometimes referred to as the “Section 8” voucher program) is the largest federal low-income housing assistance program. Families use vouchers to rent modestly-priced apartments in the private market. Typically, a family pays 30 percent of its income for rent and utilities, and the voucher covers the rest.

Voucher Utilization and Costs in Fiscal Year 2003 Exceed Expectations

During the six months from August 2002 to January 2003, the number of families receiving housing voucher assistance rose by 60,000. In January 2003, local and state housing agencies were using 94.9 percent of authorized vouchers. If the rate of increase in voucher utilization evidenced in this six-month period (the latest period for which data are now available) continues for the remainder of fiscal year 2003, some 95.9 percent of authorized vouchers will be used by families for the fiscal year as a whole. This 95.9 percent average fiscal year 2003 utilization rate is more than two percentage points higher than the 93.5 percent rate that Congress had assumed would be the rate achieved this fiscal year.

The average cost per voucher also has exceeded Congressional estimates. The average reported cost per voucher in January 2003 was $549 per month, or $6,588 on an annual basis (including administrative fees). We estimate, based on the trend in costs during the six-month period, that the average cost per voucher for fiscal year 2003 as a whole will be $6,692. In finalizing the appropriations for fiscal year 2003, Congress had assumed that the average voucher cost this year would be $6,372. (The Congressional Budget Office had estimated the average cost at $6,608, close to what our analysis now estimates it will be.)

Based on the available data concerning the number of vouchers in use and their average cost, we estimate that $13.1 billion will be needed in fiscal year 2003, about $700 million more than Congress appropriated. This $700 million in funds will be drawn from unspent funds from prior years (including funds previously allocated to state and local administering agencies in addition to the carryover funds discussed in endnote 1) so there will be no shortfall in fiscal year 2003. But because the Administration’s budget relied on the availability of these carryover funds to cover a portion of the voucher program’s cost in fiscal year 2004, the use of some of these funds in 2003 will increase the size of the 2004 shortfall.

The shortfall in the Administration’s 2004 budget request for the voucher program is unrelated to the Administration’s proposal to convert the voucher program to a block grant to the states in fiscal year 2005. If the final funding level for fiscal year 2004 is similar to what the Administration requested in February, the level of assistance that the voucher program provides will have to be cut in 2004 regardless of whether the block grant proposal is approved.

Budget Request Falls Approximately $1.26 Billion Short of Amount Needed to Avoid Cutting Assistance

The President’s budget for fiscal year 2004 requested $13.05 billion to fund existing housing vouchers.[1] At the time that the Administration’s budget was released, no complete, up-to-date data on per-voucher costs or utilization rates were available. Evidence that was available at the time suggested that the Administration might have underestimated the average cost per-voucher and the utilization rate nationally in calculating its request for voucher funding, and that there was significant risk the funding level would be inadequate. But without more current data, it was difficult to estimate reliably the program’s funding needs or the size of a shortfall, if one existed.

In April 2003, HUD required state and local housing agencies that administer the voucher program to report data on both voucher costs and utilization for the six-month period from August 2002 to January 2003. HUD recently released these data to Congressional staff. These data are critical to estimating funding needs for fiscal year 2004.[2] An analysis of these data shows that:

In addition, without more funding than this, Congress will not be able to continue an integral component of the new method for funding vouchers that Congress adopted this year: a central fund to cover unanticipated program costs and to enable state and local agencies to make fuller use of the number of vouchers that they have been authorized to administer. In recent years, Congress has repeatedly urged HUD and state and local housing agencies to increase the proportion of vouchers that are in use, so that vouchers do not sit unused while families remain on waiting lists for assistance. The newly released HUD data show that the voucher utilization rate rose during the period the data cover. This increase appears to be caused in substantial part by the success of new policies put in place at the national, state, and local level in recent years designed to raise the proportion of vouchers in use and by a loosening of housing markets in some sections of the country that has made it easier for families to find housing where they can use their voucher. It is likely that the trend toward higher utilization will continue in fiscal year 2004 if adequate funding is available. Moreover, HUD has the authority to put to use more of the vouchers that Congress has authorized by “reallocating” vouchers from agencies that have consistently failed to use them to agencies whose track record demonstrates they would be able to put the vouchers to use promptly.

If the President’s funding request is not increased, however, no further progress could be made in putting authorized vouchers to use. As a result, an additional approximately 95,000 authorized vouchers that are not likely to be in use at the start of fiscal year 2004 — but that potentially could be used to serve families if utilization continues to rise — would be defunded. These 95,000 vouchers are in addition to the 184,000 vouchers in use at the start of the fiscal year that, as mentioned earlier, also would have to be defunded.

Table 1
Comparison of Voucher Funding Needed in Fiscal Year 2004
	Cost per voucher in FY 2004	Funding available for voucher renewals	Number of renewal vouchers funded	Number of renewal vouchers not funded[5]	Number of vouchers in use in October 2003 not funded	Percent of authorized vouchers that would be funded	Shortfall if FY 2004 utilization is at its expected level in October 2003[6]
Administration request	$6,468	$13.05 billion	2,017,000	89,000	0	95.8%
CBPP estimate based on new HUD data	$6,871	$12.55 billion[7]	1,826,000	280,000	184,000	86.7%	$1.26 billion

Inadequate Funding May Force State and Local Agencies to Take Vouchers Away from Families that Rely on Them to Pay Rent

A shortfall of this magnitude will result in a substantial cut in voucher assistance to low-income families. The number of families assisted through the voucher program would drop from approximately 2.02 million in October 2003 to an average of approximately 1.84 million during fiscal year 2004. Moreover, if the reduction in families served were imposed evenly over the course of the year rather than all at once at the beginning of the year, the number of families served would need to be reduced to 1.65 million by September 2004 to achieve an average of 1.84 million during fiscal year 2004. (Some families leave the program each year as their incomes rise or for other reasons, and agencies may try to meet a portion of the required cut by gradually reducing the number of families served through such turnover.) In other words, the number of families assisted at the end of fiscal year 2004 would be 368,000 fewer than the number being assisted when the fiscal year began.

The great majority of the households with vouchers — seven out of ten according to the most recent available HUD data — are either working families with children or elderly or disabled households. As a result, the impact of such cuts in the voucher program would fall most heavily on these groups. If cuts were applied proportionately across all groups, the average number of households assisted during fiscal year 2004 would fall below the number assisted in October 2003 by the following amounts.[8]

For a list of the cuts that would be required in each state under the Administration’s budget, see table 2.

This reduction in the number of low-income households receiving housing assistance would come at a time when the need for such assistance is great. The economy remains weak, and in most locations, there are long and growing waiting lists for the voucher program. In the event of a funding shortfall of the size described here, it is likely that state and local housing agencies would not be able to serve any families from their waiting list. Under normal circumstances, some families leave the voucher program each month and are replaced with families on the waiting list. If families leave the program but are not replaced by new families from waiting lists, the number of families receiving assistance will steadily dwindle.

In addition, to accomplish a reduction of this magnitude it is likely that many state and local agencies would have no choice but to terminate the voucher subsidies for some families currently using vouchers to help pay their rent. Few of these households are likely to be able to retain their housing without voucher assistance, and few will be able to find other decent housing that they can afford. The small landlords who own the bulk of the apartments rented to voucher holders and depend on the income from these apartments also will be harmed economically.

**Table 2**
Projected State Level Reductions in Voucher Assistance
If Funding Equals Administration’s Request
State	Number of Vouchers Projected to Be in Use in October 2003	Projected Reduction in Average Number of Households Assisted During Fiscal Year 2004 if President’s Request is Approved
State	Number of Vouchers Projected to Be in Use in October 2003	Total	Working Families	Elderly Households	Disabled Households	Other Households
Alabama	26,481	2,413	734	407	538	734
Alaska	3,785	345	105	58	77	105
Arizona	19,814	1,806	550	304	402	550
Arkansas	21,304	1,941	591	327	433	591
California	286,609	26,117	7,949	4,400	5,820	7,949
Colorado	26,512	2,416	735	407	538	735
Connecticut	28,497	2,597	790	438	579	790
Delaware	4,144	378	115	64	84	115
District of Columbia	8,935	814	248	137	181	248
Florida	83,987	7,653	2,329	1,289	1,705	2,329
Georgia	45,557	4,151	1,263	699	925	1,263
Hawaii	10,797	984	299	166	219	299
Idaho	6,438	587	179	99	131	179
Illinois	77,829	7,092	2,158	1,195	1,580	2,158
Indiana	34,608	3,154	960	531	703	960
Iowa	20,590	1,876	571	316	418	571
Kansas	10,567	963	293	162	215	293
Kentucky	29,807	2,716	827	458	605	827
Louisiana	34,088	3,106	945	523	692	945
Maine	11,777	1,073	327	181	239	327
Maryland	37,663	3,432	1,045	578	765	1,045
Massachusetts	68,626	6,253	1,903	1,054	1,393	1,903
Michigan	43,181	3,935	1,198	663	877	1,198