Biden's Budget Includes 'Once In A Generation' Investment In Vouchers, Public Housing. Now Landlords Need To Get On Board

President Joe Biden’s American Jobs Plan, one of the backbones of his fiscal year 2022 budget, promises over $2 trillion to the U.S. infrastructure and economy.

Amid the myriad programs, a relatively small line item in Biden’s budget could do more to house the country’s most vulnerable citizens than any government policy since before Ronald Reagan was president. The $30B allocated to the Housing Choice Vouchers program and $40B allocated to public housing would be a godsend to housing authorities across the country — if it survives Congress, where the budget’s price tag and the funding necessary to meet it have been hotly debated.

“To propose this level of investment in one fell swoop, it’s extraordinary,” Council of Large Public Housing Authorities Executive Director Sunia Zaterman told Bisnow.

In order for the expansion of the voucher program to have its intended effect, more landlords will need to get on board with renting to its recipients and be given the support to do so. A majority of units rented to voucher recipients are owned by landlords who control six units or fewer in some cities — exactly the group hit hardest by the pandemic-driven combination of unpaid rent and eviction moratoriums.

“The equation has become more challenging because of the pandemic, with people starting out in a tougher position and with more work to be done,” SoLa Impact founder and Managing Partner Martin Muoto said.

The Biden administration estimates that its proposed investment in vouchers, previously known as Section 8, would extend the program to 200,000 more households. The public housing investment would meet about half of what all U.S. public housing authorities need to repair and renovate the country’s entire housing stock to meet modern standards, as well as fill the gaps in their operational budgets, according to CLPHA’s estimate.

“It’s once in a generation,” said Susan Popkin, director of the Urban Institute’s Housing Opportunities and Services Together Initiative. 

Housing Choice Vouchers are distributed by local housing authorities to households making less than 50% of area median income, the value of which is calculated based on what the U.S. Department of Housing Development considers the threshold for being rent-burdened — anything more than 30% of a household's income. Housing authorities are legally obligated to reserve 75% of a city's voucher allocation to households making 30% AMI or less. Those vouchers are then used to pay rent at privately owned housing.

The total amount dedicated to the preservation, retrofitting and creation of affordable housing in Biden’s budget is $213B, including a $20B injection into tax credit programs. While such programs, like the Low Income Housing Tax Credit, form the backbone of privately developed and owned affordable housing, they often go to units affordable to individuals and families making as much as 80% of a metropolitan area’s median income, which includes a city's wealthy suburbs. In San Francisco, a four-person household with income of up to $102,500 would qualify for housing at an 80% AMI restriction.

Those in deeper poverty depend on vouchers and public housing to avoid homelessness, and the rise in the American homeless population in recent years underscores the degree to which those programs have been underfunded. The last time public housing received a budget increase was in 2009 as part of President Barack Obama’s recovery efforts in the wake of the Great Financial Crisis, and that only provided a $4B boost, Zaterman said.

“There’s now a strong consensus that more could have and should have been done in 2008 and 2009 for reinvestment,” Zaterman said. “This $40B [proposal] does not meet the overall need, but it is extraordinary in the level that it raises the funding from our current baseline.”

Issuing 200,000 additional vouchers in the coming years would just be step one — more will need to be done in order to ensure that all of the new recipients can actually put those vouchers to use, Popkin said.

“It’s going to take a lot of effort to get that many vouchers leased up, and some of it is working on landlords and some of it is building new housing,” Popkin said. “We’re short of all forms of housing units, from affordable housing to the very top; we have not been building enough housing for any income. That’s why the infrastructure bill places such a heavy emphasis on housing in general.” 

The biggest issue facing the voucher program is unmet need, with only 1 in 4 eligible households receiving any sort of federal assistance, according to a 2018 study by New York University’s Furman Center. But the program is also subverted by the difficulty voucher recipients have in finding housing in higher-opportunity neighborhoods.

In theory, vouchers allow for residents to move out of disadvantaged neighborhoods into safer, cleaner areas with better schools, but the value of vouchers is capped at the difference between 30% of a household’s income and a number close to a city’s AMI. In neighborhoods where the median income is considerably higher than the metropolitan area overall, there is a wide gap between the value of a voucher and the asking rent in most apartments.

Bisnow asked dozens of landlords whether they accept tenants with vouchers, and only three — SoLa Impact, Acumen Cos. and AMLI Residential Properties Trust — responded in the affirmative. Five said they do not lease to any voucher recipients, and the ones that gave a reason uniformly cited the monetary gap between the rents they charge and the value of vouchers. The rest did not respond.

“A lot of landlords don’t want to take vouchers, because increasingly, they’re not competitive with market rents,” Muoto said, adding that his company leases the most units to voucher recipients of any landlord in Los Angeles. “They may not be explicit about it, but they’re implicitly finding ways to avoid it.”

Only a dozen or so states have laws banning landlords from discriminating based on source of income, but even in those states, landlords with desirable buildings can choose between applicants for any number of reasons, making discrimination difficult to prove. 

Though some landlords’ decisions not to accept vouchers could come from a place of prejudice, perhaps more likely the cause is the amount of paperwork and compliance work required by the federal government as protection against abuse of tenants, including in-person inspections before a voucher recipient moves in and periodically afterward. Landlords also are often concerned about being left on the hook if a tenant damages a unit, though that concern is disproportionate to the frequency of units being damaged, Bloomberg CityLab reports.

“Being a landlord, people want passive income,” Muoto said. “A lot of [small landlords] are retirees, and we’ve got an 11-person social impact team that literally works day and night with tenants. But most landlords are not set up to do that.” 

The U.S. Department of Housing and Urban Development eased some of the protocols for landlords renting to voucher recipients, such as allowing inspections to be done virtually. It also allowed more housing authorities to accept online applications, significantly reducing the burden many potential applicants face in getting on waiting lists. CLPHA and the Urban Institute are among several trade and advocacy groups lobbying the federal government to make those temporary measures permanent.

A bill separate from the American Jobs Plan was introduced by Democratic Sen. Chris Coons of Delaware and Republican Sen. Kevin Cramer of North Dakota in late May. It would allocate $500M to add a swath of further incentives to get more landlords to accept vouchers, Bloomberg CityLab reports. Among those incentives would be a signing bonus for any landlord who owns property in a census tract with a poverty rate below 20%. The bill would also greatly expand the usage of “small area fair market rents” to calculate the value of vouchers, making them more competitive with market-rate renters.

The efficacy of the voucher program in promoting social mobility is dependent on people using those vouchers to move to better neighborhoods, but they face barriers to doing so beyond a lack of landlords to accept their vouchers. Though a popular theory is that households sometimes prefer to remain in such areas to be closer to their family and social networks, the results of a 2019 experiment by nonpartisan think tank Opportunity Insights contradict that notion.

The experiment, run by economics professors Peter Bergman of Columbia University and Raj Chetty of Harvard University, gave assistance to voucher recipients in the Seattle area in short-term financing, apartment searching and engagement with landlords. It found that 54% of families given such assistance moved to areas the study labeled “high-upward-mobility neighborhoods,” compared to 14% of families in the control group.

The coronavirus pandemic threw into stark relief the dangers and health hazards of housing insecurity, prompting unprecedented action by all levels of government to ban evictions of nonpaying tenants last year. It also has given the Biden administration the impetus to propose a historic level of investment in the social safety net, and even if those investments are shrunk or scuttled during negotiations with Congress, advocates are encouraged by the stance Biden has taken.

“I think it’s very high-priority for this administration, both the money for the vouchers and for public housing,” Popkin said. “It’s very clear that [HUD] Secretary [Marcia] Fudge has been given a leading role in negotiating the infrastructure bill and pushing it.”

Though the issues plaguing the Housing Choice Vouchers and public housing projects will take more than money to solve, money makes it much easier for housing authorities to address all sorts of problems, Zaterman and Popkin agreed.

“We’ve needed a sense of urgency for so long, and we have been willing to tolerate people living in the streets and not doing anything about it for a long time, and it should be shocking,” Popkin said. “This wasn’t always normal, and we know we can do something about it.”