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Summer 2004
   
The Housing Reform That Backfired
Howard Husock
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How come liberal Democrats are flocking to the defense of the Section 8 housing voucher program, invented by Republicans as a “market-based” alternative to public housing projects? From the New York Times editorial page and Senator Hillary Clinton, to advocates like the National Low Income Housing Coalition, liberals have railed against Bush administration efforts to change the program’s rules and rein in its growing size and cost. A look at the program in New York City, where it has reached mammoth proportions, makes clear why it has attracted such defenders. Far from protecting “our most vulnerable residents,” as Senator Clinton puts it, housing vouchers are a last redoubt of the Democrat-sponsored entitlement culture that wreaked such harm on the poor and vulnerable over the last four decades by making them perpetually dependent.

Housing vouchers—in New York and across urban America—originated 30 years ago, with “Section 8” of the Nixon-era National Housing Act. The program’s rationale was straightforward: instead of placing an aid recipient in a housing project—viewed as a failed experiment because of the projects’ expense and disorder—the federal government would provide a voucher that subsidized the rent in a privately owned apartment. Conservatives have supported the voucher plan over the years chiefly because of its seeming free-market component, and because it does not impose on the government the considerable cost of building and maintaining public housing. But whatever Republican hopes, the voucher initiative operated from its inception just like any other no-strings-attached welfare program—and it continues to do so today, eight years after the nation ended the federal welfare entitlement and lifted hundreds of thousands of formerly dependent welfare mothers into lives of work and greater personal responsibility.

Almost alone among post–welfare reform social programs, Section 8 remains an open-ended benefit, with no time limit. And the benefit it provides is hefty. The median rent that voucher tenants pay in New York, for example, works out to just $220 a month, and many voucher recipients pay $100 or less. The New York City Housing Authority (NYCHA), at federal taxpayers’ expense, pays a landlord the remainder of the going rate of $1,180 for a two-bedroom unit and $1,476 for a three-bedroom (utilities included) that the Department of Housing and Urban Development (HUD) approves for the city. Since the law requires that 75 percent of housing vouchers must go to households earning less than 30 percent of an area’s median income, the entitlement overwhelmingly supports single-parent households, America’s poorest. In other words, housing vouchers abet, just as pre-reform welfare did, the formation and continuation of such households—those most at risk of remaining in long-term poverty and of raising children who end up in the underclass.

That Section 8 is today’s face of dependency is most apparent in New York, home to far more voucher holders than any other U.S. city. Even as Gotham’s welfare rolls shrank dramatically after welfare reform, the city’s housing voucher program ballooned. NYCHA’s allotment of vouchers has risen 21 percent, from 74,000 to 90,000, over the past four years alone. More than 98 percent of non-elderly, non-disabled NYCHA voucher tenants are single-parent households, and only a third of the parents work. The average time they spend in the program is over eight years, with more than a third of the recipients supported ten years or longer. The authority spends a staggering $700 million yearly in federal funds on the program and employs 740 people to administer it.

As large as NYCHA’s Section 8 voucher population is, however, it represents little more than half of the city’s total. New York’s Department of Housing Preservation and Development administers an additional 25,000 Section 8s, chiefly in apartments that Gotham has helped renovate, at the expense of city taxpayers, whose hefty federal taxes already help support HUD. State government and the regional HUD office manage another 57,000 Section 8s in the city, in complexes such as East New York’s Starrett City. In total, New York City, with 172,000 Section 8s of one kind or another, not only has more voucher tenants than any other city; it has more than any state, save California, with a population vastly greater than Gotham’s.

The Section 8 universe is expanding all over the country, not just in New York. Since 1998, the overall federal budget for housing vouchers has rocketed 167 percent, from $6 billion to $16 billion. Section 8s consume 51 percent of the entire HUD budget, up from 36 percent five years ago, and the 2.1 million households now holding vouchers nationally far outnumber the 1.3 million households in public housing proper. In some cities—Chicago most notably—housing vouchers have actually replaced much of the public housing system, as housing authorities have “vouchered out” tenants and bulldozed notoriously blighted high-rise projects.

In New York, however, there’s not much vouchering out going on. Even as NYCHA’s voucher population has exploded, the city’s existing publicly owned and operated public housing—with 181,000 units, the largest traditional system in the U.S.—has stayed stubbornly in place. The Section 8 program, in other words, has become a huge parallel public housing system, nearly doubling New York’s overall quantity of subsidized housing.

A major social benefit of a private rental market is its promotion of responsible behavior. Tenants must establish a good credit history, save money for their security deposits, come with good references from employers, pay the rent on time, maintain their apartments decently, and keep an eye on their children to avoid eviction. Part of the support for the Section 8 program has rested on the belief that it will have similarly beneficial effects, thanks to its market component. But the Section 8 vouchers in reality establish nothing like a true private rental market and so have none of those good effects. On the contrary: just like the old welfare system, housing vouchers promote dependency and subsidize irresponsibility.

To begin with, the route to a housing voucher in New York, perversely, begins in that great school of dependency, the homeless shelter.

NYCHA gives families in the shelters highest priority for receiving apartment vouchers, viewing them as the neediest of the needy. As an equally perverse result, no matter how many vouchers NYCHA hands out to shelter families, the number of families entering the shelters continues to rise, rocketing to 9,200 in 2003, up from 5,192 three years earlier. A NYCHA official characterizes the process as “feeding the monster”—an increased supply of subsidized housing boosts demand and spurs thousands of New York families, almost all of them headed by single mothers, to flood the shelters so that they can move to the head of the line to get vouchers. In other words, increased subsidized housing creates more homelessness.

Housing advocates charge that the influx simply reveals the full extent of New York City’s grave housing crisis. But it’s important to be clear about the situation of most of New York’s “homeless” families. Almost none had been sleeping on the streets or in the tunnels of Grand Central Terminal before showing up at one of the city’s emergency intake units, claiming homelessness. One former high-ranking official at the Department of Homeless Services (DHS) observes that, in her six years at the agency, she knew “maybe three or four families who were sleeping at bus stations and that sort of thing.”

In fact, thanks in part to a court order that requires New York to provide permanent housing to any homeless person—with the presumption that anyone declaring himself as such deserves the benefit of the doubt—“homeless” has become a slippery term in the city, its meaning based on the quality of a family’s living arrangements rather than whether or not it has a roof over it. The DHS’s Eligibility Investigation Unit will classify a household arriving at a shelter “homeless” simply because it finds their living arrangements “not appropriate,” says DHS spokesman Jim Anderson. He explains: “That could involve the number of people and the number of rooms for sleeping, the sleeping arrangements—such as the age and gender and relationship of those sharing common sleeping rooms.” Or, he adds, “it could involve fire safety or the possibility of domestic violence.”

What this amounts to in practice, say those familiar with DHS procedures, is that the department frequently declares inappropriate a relatively commonplace situation in which a new teen mother, still living at home with her mother or grandmother until her baby’s presence sparks a family fight, runs off to seek shelter as “homeless”—in order to get herself moved into a government-subsidized first home. It is common wisdom among NYCHA officials that many families moving from the shelter system into Section 8 apartments are headed by single mothers who are getting their own apartment for the first time, though there are no hard numbers to prove it. Nationally, HUD reports that more than 16,000 applicants under 21 receive housing vouchers every year.

The whole process—from shelter to Section 8 apartment—seems purposely designed to force into dependency those it claims to help. NYCHA, for example, runs semiweekly briefings for new voucher holders. Some of the young recipients show up with their mothers, who help them fill out the forms; the meetings remind one of a school orientation, except that here the “students” are being acculturated into dependency instead of getting ready to learn. There’s no need for the parental help, as it turns out. Efficient NYCHA officials (and NYCHA is one of the most efficiently run housing authorities in the nation) are there to hold the voucher recipient’s hand every step of the way: “Here’s your voucher number”; “Meet your ‘housing assistant’ ”; “These are the best days for appointments if you have problems with your landlord.”

Voucher holders barely have to lift a finger to find and move into their subsidized apartments. A shelter operator will give a recipient the names of a half-dozen or so brokers with Section 8 apartments available, arrange transportation for open-house visits, and even hire a mover, all paid for with city funds. The city also pays the security deposit and provides, through its “Lend a Hand” initiative, pots, pans, dishes, and furniture. (Most shelter residents, a former DHS official notes, “already have their own TVs.”)

Once a voucher holder is ensconced in a Section 8 apartment, the program then mires her even further in dependency, because all its incentives tell her not to improve her situation. Because Section 8 rent is pegged at 30 percent of income, any increase in a recipient’s wages leads to a dishearteningly steep rent increase. If she gets a job that boosts her income from $10,000 to $15,000, her rent zooms from $250 to $375 a month. In effect, she’s taxed as if she were well-off, at a marginal rate of 30 percent. (Conversely, Section 8 rents go down—potentially to next to nothing—if someone loses or quits a job or her welfare runs out.) Nor does getting married to a job holder necessarily make much economic sense. By pushing the household’s income too high, it could cause her to lose the voucher benefit entirely.

Voucher recipients are drawn almost exclusively from the ranks of the city’s most disorganized families and individuals, so it’s hardly surprising that many do not conduct themselves as model tenants. “Section 8 tenants are much more difficult to deal with,” says Mark Engel, president of Langsam Property Services Corporation, which rents out 1,700 Section 8 apartments in five- and six-story apartment buildings throughout the Bronx. “The families are fragmented. There are no husbands, and so there’s not as much control over the children. So there are more damages—graffiti, breaking appliances, leaving garbage out in the hallways, breaking the entranceway door.” Another Bronx landlord, who leases 700 apartments to Section 8 tenants, agrees. “A lot of those most eligible for the subsidy,” he says, “are the least appreciative and the least sensitive to their obligations as tenants—either to owners or their neighbors.” They can create truly bad environments. “I’m dealing right now with a tenant, a 29-year-old single mother with five kids and one on the way,” he offers by way of example. “There’s loud music, teenagers congregating in the hall. The apartment’s in chaotic shape—hygiene bad, housekeeping a disaster.”

Yet another Bronx property manager tells the story of a Section 8 tenant whose smoke detector went off, prompting her to knock it down with a broom, resulting in the apartment failing to pass NYCHA’s annual inspection. Such carelessly inflicted damage is common: NYCHA reports that 18.5 percent of apartments inspected when a new voucher tenant moves in fail reinspection just one year later. Landlords are then obligated to make the repairs and bill the tenants. “Good luck getting them to pay,” Engel says resignedly. And, he reports, almost a third of his voucher tenants neglect to chip in even their small share of the rent on time every month.

Faced with disruptive Section 8 neighbors—who sometimes include drug addicts or alcoholics from the city’s homeless shelters—normal rent-paying tenants can become demoralized. “Too many people are negatively affected by some of the recipients,” says a Section 8 landlord. “Tell me: where’s the fairness to other tenants when they’re forced to live with people who are not appropriately prepared for independent living?” NYCHA regularly receives letters from tenants complaining about voucher holders dealing drugs, causing excessive noise, or failing to supervise their children.

The misbehavior of many Section 8 tenants exposes the false assumption behind all subsidized housing: that providing the disorganized poor with low-cost but quality housing will uplift them. It’s not the better environment that encourages someone to advance; it’s the hard work and good life decisions that make for the better environment. For all the genial faith of Section 8’s market-oriented creators, voucher tenants appear more likely to degrade their environment than their environment to uplift them.

In light of the difficulties Section 8 tenants can cause, why do Gotham property owners participate in the program? The money is great. The Section 8 program comes with powerful financial incentives for landlords with property in poorer areas. “The fact is, you may be able to charge more rent on a Section 8 apartment than for another apartment in the same neighborhood,” admits Engel. One major outer-borough property owner estimates that Section 8’s “fair market rents,” set by HUD, are 15 percent higher than what his units in poor neighborhoods could command on the open market. That the government pays 70 percent of the rent every month like clockwork also appeals to landlords in poor communities, who may otherwise have difficulty collecting the rent on time, or at all.

The regularly deposited sums add up to real money. One New York landlord who rents 1,700 two-bedroom Section 8 units takes in $1.4 million a month in federal funds. Further, landlords get a one time $1,000 bonus from the city for every “homeless” voucher holder (and an additional $1,000 per dependent family member) they house. The city paid out more than $15 million in these bonuses last year. Drawn by these enticements, some 29,000 landlords now lease Section 8 apartments in New York City.

Overwhelmingly, these apartments are concentrated in New York’s poor and borderline neighborhoods, since property owners in parts of the city with strong housing demand have no incentive to participate. Community District 105 in the Bronx, for instance, has the highest concentration of Section 8 units in the city (17.8 percent of the neighborhood’s housing units); it also has the city’s third-highest household poverty rate (35.9 percent). Out of the city’s 59 community districts, just 11—in the Bronx, central Brooklyn, and Washington Heights, low-income areas all—account for nearly 50 percent of the city’s voucher apartments. Many densely packed Section 8 areas border neighborhoods dominated by public housing projects. For instance, 39 percent of all housing in the Bronx’s Mott Haven neighborhood (12,000 apartments) is in public housing projects; the five adjoining community districts have 20,000 Section 8 units. This geographical reality has led NYCHA to invent the term “split household” to refer to families in which one generation lives in a public housing project and the next moves into Section 8 apartments nearby.

This pernicious pattern—in which entire New York neighborhoods become dependent on government rents and are inexorably transformed into poorhouses without walls—poses great risks for the city. Not only does the outsize presence of Section 8 apartments and other subsidized housing in a particular neighborhood bring with it the social problems that often radiate from such housing, but it exacerbates a problem I’ve called “the frozen city.” Just as subsidized households remain stuck, seemingly forever, in the public housing system—the average length of stay in the city’s housing projects is an astonishing 18 years, a decade longer than the already lengthy average Section 8 tenancy—so too do the physical buildings those households inhabit remain tied to one particular, low-value use, preventing neighborhoods from upgrading. As a result, cities can’t renew themselves through higher-value new uses for property. (One hopeful note: in mid-June, the Bloomberg administration circulated a housing plan that would no longer give residents of homeless shelters absolute priority for Section 8 vouchers. Expect fierce opposition from homeless-shelter operators, who rely on lucrative contracts from the city.)

The Bush administration, to its credit, wants to reform this costly and counterproductive subsidy. New Yorkers should hope that reform succeeds. For starters, the administration’s proposed 2005 budget slashes the rate of growth in Section 8 spending: expenditures would go from $16.4 billion to $16.9 billion—only a 3 percent boost, after the mind-boggling 25.5 percent average yearly increase of the last six years. Rate increases in “fair market rents” would henceforth rise no faster than inflation.

Even more important, though, is the administration’s innovative “Flexible Voucher Plan.” It pushes NYCHA and the other 2,000-plus local housing authorities to make vouchers less of an open-ended benefit—bringing U.S. housing policy more in line with the nation’s post-1996 approach to welfare.

Here’s how the plan would work. Under current rules, a housing authority’s voucher funding depends on how many Section 8 apartments it maintains. There’s no incentive at all to move people out of subsidized housing and into self-sufficiency. The proposed new rules change all that. Each authority would now get an annual lump sum, or “block grant,” and it would win extra administrative fees if it spread that sum around to as many families as possible by giving short-term housing aid to lots of households instead of supporting the same families for years and years, as is now the case. As a result, officials could give temporary aid to working, two-parent families—something that almost never happens today. The new rules also permit authorities to set flat rents, so that households won’t face any disincentive to bettering their financial situation. Best of all, the Bush plan allows the authorities to put time limits on program participation.

In an ideal world, the administration would simply slap a federal time limit on Section 8 vouchers and phase the program out entirely. With smart zoning laws and building codes, the private market can provide enough housing for families at all income levels. That’s not to say that in a post–Section 8 world single parents with few job skills would be able to afford brand-new apartments—or even to move out of their mothers’ houses. But that’s all to the good: if the public stopped subsidizing single-parent families to live in their own apartments, it might discourage out-of-wedlock births.

Such a radical approach would be tough to implement at present, despite Republican control of Congress. In fact, it’s far from clear that Congress will even sign off on the less ambitious Bush reforms. Democratic opposition is only partly to blame. Congressional Republicans have been AWOL on the housing front—and on urban affairs generally—over the years. Few congressional Republicans even bothered to attend the hearings on the Section 8 reforms. The GOP has largely ceded the field to left-wing advocates, who want ever more “affordable”—that is, subsidized—housing.

This lack of interest partly stems from the shape of congressional districts. Republican voters don’t live in cities, where most subsidized housing exists, so GOP pols have little political incentive to focus on housing policy. If they speak out, they risk being branded uncompassionate or even racist. Many Republican legislators remain in thrall, too, to the allure of the free-market term “voucher.” They haven’t grasped that Section 8s establish no real private market but are instead a classic Great Society–style entitlement that helps perpetuate the underclass.

While Republicans acquiesce in the Section 8 program’s growth, urban liberal Democrats use the program’s growing funding stream to waft benefits to their constituents, who can rely on them—literally—to pay the rent. In New York, this arrangement helps reelect Democratic congressmen Jerrold Nadler, Major Owens, and Nydia Velazquez, all in districts thick with Section 8 apartments. The result: increased dependency and the undermining of many New York neighborhoods—and many other neighborhoods throughout urban America.

That’s why it is important for the Bush administration to get Congress to endorse Section 8 reforms. The end of dependency as a way of life will be that much closer.

 

 

 
“Section 8” vouchers were supposed to revolutionize subsidized housing—but only expanded it.
City Journal Summer 2004.
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America’s Trillion-Dollar Housing Mistake: The Failure of American Housing Policy
by Howard Husock
America's Trillion-Dollar Housing Mistake.


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