You asked us to summarize the history of the federal and state Section 8 rent subsidy program, explain how it works, and determine how many Connecticut households it assists and its cost. You also wanted to know if the law limits how long households could receive subsidies.

SUMMARY

Section 8 is the federal rent subsidy program, which is administered mostly by public housing authorities (PHAs) and, in Connecticut, by the Department of Social Services (DSS). DSS also administers the state's version of Section 8, the Rental Assistance Program. Attachment 1 discusses that program's history and funding level (2002-R-0007).

Congress created the Section 8 program in 1974 to subsidize rents in privately owned housing for low-income households. The program's four basic elements have remained unchanged:

1. households qualify for subsidies if their income, adjusted for family size, is at or below a specified percentage (currently 50%) of the median income of the area in which they live;

2. the federal government determines the reasonable rent level for a geographic area and physical standards for subsidized units based on regulatory criteria;

3. households contribute a portion of their income (usually 30%) for units that rent at or below that level; and

4. the subsidy pays the difference between the household's contribution and the rent.

Congress has not radically changed the program's procedures. Households apply to their local PHA for subsidies and find units on their own. The PHA pays the subsidies directly to landlords if the units meet the program's property maintenance standards. Households keep the subsidies when they move to another unit. Landlords can also apply for subsides for units they rehabilitate and subsequently rent to eligible households. But these subsidies stay with the units after the households move. In both cases, the PHA must annually certify the households' eligibility.

During the 1980s, Congress allowed households to rent units that exceeded the allowable federal level if they were willing to spend more than 30% of their income for rent. But the subsidy continued to pay the difference only between 30% of income and the allowable level. Congress also made it easier for households to keep the subsidies when they move between different PHA jurisdictions. During the 1990s, Congress authorized programs aimed at making households less dependent on public assistance, which presumably included rent subsidies.

HUD has currently budgeted $ 32 million for about 33,000 subsidies in Connecticut, according to its Hartford office. Its March 31, 2002 Resident Characteristics Report indicates that Section 8 participants occupy 23,619 units (http: //www. hud. gov/offices/pih/systems/pic/50058/rcr/index. cfm). It also indicates that Section 8 participants occupy 977 rehabilitated units.

Federal law neither imposes limits on how long households can receive subsidies nor allows PHAs to do so. But it puts a de facto limit on subsidies for households residing in rehabilitated units. In these cases, PHAs can provide the subsidies to the units' owners for no more than 10 years without HUD's approval. (State law imposes no limits on how long households can receive state funded rent subsidies. )

HUD does not have complete data on how long households have received subsidies. Of the 23,619 occupied units, it has longevity data on only 4,724 (20%). Of these, 13% are occupied by households that have been receiving subsidies for at least five years, 5% by those that have been receiving them for between five and 10 years, and 2% by those that have been receiving them for between 10 and 20 years. Of the 977 rehabilitated units, HUD has data on 440 units (45%). Of these, 31% are occupied by households that have received subsidies for at least five years, 10% by those that have received them between five and 10 years, and 4% by those that have received them for between 10 and 20 years.

PROGRAM HISTORY

The Section 8 program is one way government makes housing affordable to targeted groups. Some programs do this indirectly by subsiding the cost of constructing or rehabilitating a unit to the point where it can sell or rent at prices the groups can afford. Others, like Section 8, provide the subsidy directly to a group's members, contributing some or all of the funds needed to rent a unit.

The Housing and Community Development Act of 1974 created the Section 8 program, which pays the difference between the rent charged and 30% of a household's income, adjusted for family size. The act was one of several approaches to shift housing policy from constructing government owned housing toward making private housing affordable to low- and moderate-income people.

Earlier programs tried to keep rents down in newly constructed units by reducing the interest rate on the construction mortgage. But rents rose anyway due to increasing operating and maintenance costs. Other programs allowed PHAs to lease privately owned units, which they then subleased to low-income households. Both programs concentrated low-income people in poor areas.

Section 8 tried to give targeted households access to housing located over a wider geographic area. One of its components allowed households to pick units that rent at or below the federally determined fair market rent (FMR) for the area (i. e. , "tenant-based subsidies"). Households paid 30% of their incomes toward the rent and Section 8 paid landlords the difference between that amount and the rent. (The state's Rental Assistance Program was modeled after this component. )

Another component subsidized rents in newly constructed or substantially rehabilitated units for a specified term (usually 20 years) as long as the owners rented them to income-eligible households and kept the units in good condition (i. e. , "project-based" subsidies). Developers applied to HUD for these subsidies.

During the 1980s, Congress created a new version of the tenant-based program, one that subsidized units that rented above the FMR if a household was willing to pay more than 30% of its income toward the rent (i. e. , "voucher program"). It also began to phase out rent subsidies for newly constructed and substantially rehabilitated units.

In 1999, Congress combined the certificate and voucher programs and allowed PHAs to subsidized rents in units that were constructed or rehabilitated with nonfederal funds. It also created several new programs to help households obtain better paying jobs. Both programs are discussed below.

CURRENT PROGRAMS

Section 8 Housing Choice Voucher Program

Congress created this program in 1999 by fusing elements of the certificate and voucher programs. The new program requires PHAs and other administering agencies to target "extremely low-income" households (i. e. , 30% or less of the area's median income, instead of 50% as under the previous programs). Administering agencies must ensure that at least 75% of the households they approve for subsidies each year belong to this group (24 CFR Part 982. 201 (b) (2)).

The new program gives the administering agencies some latitude when determining the amount of the subsidy. Under the prior programs, the amount was based on the HUD-determined FMR, adjusted for unit size. The subsidy was the difference between the FMR and 30% of a household's income. Under the new program, PHAs use the FMR to calculate payment standards, which can range between 90% and 110% of the FMR.

The new program combines elements of the older programs with respect to households' rent contribution. The prior program paid the difference between the rent and 30% of the household's income. It also allowed households to spend more than 30% of their income for units that rented above the FMR. The new program pays the difference between the payment standard and 30% of the household income. But it allows households to spend up to 40% of their income for rents that exceeded the payment standard during the first year they receive subsides. They can spend more than this in subsequent years (24 CFR Part 982. 508).

PHAs and DSS administer the program in Connecticut. The latter does so through contracts with other organizations such as the Community Renewal Team, which serves the Hartford area.

Project-Based Vouchers

The "project-based" component grants subsidies to property owners for rehabilitated units, which they must rent under many of the same conditions that apply to landlords under the tenant-based program. The major difference is that the voucher stays with the unit when the household moves, as long as the new household meets the program's income criteria. HUD does not fund these vouchers under a separate budget line item, but allows PHAs to grant some of the tenant-based vouchers to landlords who apply for them.

In 1999, Congress changed some of the rules governing these vouchers. Apparently the old ones were too cumbersome and were available to only to owners who rehabilitated their property with nonfederal funds (Center on Budget and Policy Priorities, "Revisions to the Project-Based Voucher Statute," April 26, 2001).

The new rules allow PHAs to convert up to 20% of the tenant-based vouchers into project-based subsidies and landlords to qualify for them regardless of the funding source. PHAs can subsidize the units for up to 10 years and accept rents above the payment standard, with HUD's approval. The rules require PHAs to provide vouchers to households who move out of these units after one year.

SELF SUFFICIENCY PROGRAMS

The Section 8 program operates on the assumption that low-income households do not have enough money to rent privately owned, decent and safe housing. While the law imposes no limit on how long households can receive subsidies, Congress and HUD have taken steps to help them boost their incomes and reduce their need for subsidies.

Portability

As noted above, households must apply for tenant-based subsidies to the PHA in the town where they live. Historically, the program's rules made it difficult for households to obtain subsidies in other towns. Some researchers claimed this prevented inner city households without cars from moving to near job sites in other towns. In 1988, Congress made it easier for households to use their vouchers in other towns (24 CFR Section 982. 355).

Family Self-Sufficiency Program

Congress created this program in 1990 to help households access schooling, job training, case management, and support services. Participating households and the PHA must identify the steps each would take to help the household become financial independent. As an incentive, households whose income subsequently increase can deposit the extra income in an interest-bearing escrow account, which they can use after they leave the program.

Moving to Opportunity

Authorized in 1992, the Moving to Opportunity Demonstration Program uses tenant-based subsidies to help public housing project tenants moved into private housing in neighborhoods with relatively less poverty. Households can use the subsidies to rent units or purchase a home. HUD is evaluating the program to determine if the move helped the participants find better housing and jobs.

Welfare to Work Vouchers

This 1996 program funded 50,000 additional tenant-based vouchers to help households find housing needed to obtain or retain a job. PHAs must collaborate with welfare, job training, and social service agencies when selecting households. Attachment 2 discusses how these vouchers are being used in the Hartford area (2000-R-0064).

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