The Bush administration’s new budget takes a crucial step toward reforming one of the federal government’s last unreconstructed, no-strings-attached welfare programs: HUD’s Section-8 housing vouchers. The voucher program began two decades ago as a conservative-supported alternative to public housing projects, already deemed a failed experiment for their endemic squalor and crime. Instead of placing a recipient of housing assistance in a project, the program gives her a voucher that subsidizes her rent in a regular apartment. Unfortunately, the Section-8 program has produced its own terrible side effects, even as it has surpassed traditional public housing in the number of people it supports—some 2 million today.

Unlike welfare, Section-8 vouchers have remained an open-ended entitlement: no time limit applies to them. For this reason, they facilitate, just as welfare once did, the creation of single-parent households—families most at risk of long-term poverty and dependency and in which children disproportionately fail to flourish. Teen mothers clearly have been turning to Section 8s to start their own single-parent families. Between April 2002 and April 2003, 16,206 new voucher families were headed by people 21 or younger. Overall, out of the 1 million or so non-elderly, non-disabled Section-8 households, single parents head 783,000.

The vouchers also discourage recipients from going out and getting jobs. Section-8 regulations require that three out of four vouchers go to households earning 30 percent or less of a region’s median income. The tenant portion of rent is capped at 30 percent of their income, which in effect means that many of these low-income Section-8 families pay miniscule amounts of rent. Since households must re-qualify for the program every year, if dirt-poor voucher families want to keep receiving housing aid or avoid paying more in rent, they need to keep their income way below the regional median—that is, they need to avoid work, or at least avoid reporting income. Getting married to a wage earner also makes little economic sense, since a recipient risks losing her entitlement—it’s a classic perverse incentive. Says one HUD official: “Housing authorities tell us all the time about voucher holders who quit their job the day before they have to re-qualify for eligibility.”

Not only do the Section-8 vouchers hurt their intended beneficiaries by trapping them in dependency, they also damage neighborhoods and cities. Voucher holders have concentrated in working-class and lower-middle-class urban or inner-ring suburban neighborhoods, often home to minority families that have worked hard to escape the inner city and its attendant pathologies. (Eleven out of 25 cities that HUD surveyed had neighborhoods in which voucher holders made up 25 percent or more of the population.) As the poor, disorganized households move into these borderline neighborhoods, they bring with them the social problems of the ghetto, including crime and poverty, which the hard working families thought they had left behind. Small wonder established residents of new, Section-8-created ghettoes in south suburban Chicago and Prince George’s County, Maryland have protested vehemently the Section-8 vouchers that are destabilizing their neighborhoods and lowering their property values.

Given what we know about Section 8s, it would be best if the Bush administration simply put an unambiguous federal time limit on vouchers and worked to phase the program out entirely. But a term limit plan would not likely clear Congress in its current make up—Democrats would undoubtedly filibuster such a measure even if it could win a majority. Consequently, the administration has cleverly designed a reform, the “Flexible Voucher Plan,” that gives the local housing authorities that administer Section 8s a powerful incentive to make the vouchers less of an entitlement and bring housing policy more in line with our post-welfare-reform social policy.

Under the Bush proposal, housing authorities will no longer get funds for a set number of assisted rentals, as they do today. Instead, they will receive a bloc grant—an annual lump sum—with the instruction to serve as many families as they can with it. The authorities that serve more rather than fewer people with the grant, and do a good job generally in managing their voucher funds, will be rewarded with extra administrative fees. As for those authorities that do a poor job, HUD says it will give their responsibilities to private leasing firms.

It will make sense, under the terms of the plan, for authorities to spread small dollops of assistance to large numbers of people for limited periods of time, rather than to give large payments to the same families forever. The new plan frees local housing authorities to set flat rents, so that households won’t be discouraged from boosting their incomes, and to make deals that provide declining amounts of assistance over the life of a lease—and even to impose overall time limits. In effect, the Bush plan will transform housing authorities into real-estate leasing agencies, with a special responsibility to encourage upward mobility among tenants.

Let’s hope that Congress gives its nod. If it does, the era of public housing as a permanent, and demoralizing, way of life may be coming to an end.


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