HUD Seeks Feedback for Direct Rental Assistance Pilot Project

Subsidies would be given directly to the renter, rather than to the site.

HUD is seeking to test whether rental assistance is more effective if it’s provided directly to families, with no requirement that a site owner enter a contract with a housing agency or meet other administrative requirements of the Housing Choice Voucher (HCV) program, the most common form of federal rental assistance. HUD says some researchers, advocates, policymakers, and public housing agencies have expressed interest in testing a ‘‘direct rental assistance’’ model. The model would provide a rental housing subsidy directly to the renter, rather than providing it to the site.

The approach is similar to what HUD did with its Experimental Housing Allowance Program (EHAP) in the 1970s. The EHAP program ultimately helped to inform the design of the HCV programs. One notable feature of EHAP, which was not adopted by the HCV program, was that the subsidy was paid directly to the assisted household, rather than being paid to the owner. One reason that HUD is now interested in direct rental assistance is to better understand the implications of that policy design choice.

HUD’s Office of Policy Development and Research (PD&R) and Office of Public and Indian Housing (PIH) have released a Request for Information (RFI) to seek public input on the concept to inform future policy development. HUD strongly recommends that interested persons submit comments electronically through the Federal eRulemaking Portal at www.regulations.gov.

Potential Effects

Housing Choice Vouchers are highly effective at reducing homelessness, overcrowding, and housing instability. However, too many families aren’t able to use their vouchers before they expire, in part because many owners don’t accept vouchers and most states and localities lack laws against discrimination based on source of legal income. Currently, the tax credit law bars owners and managers from turning away applicants because they hold housing choice vouchers.

Even though vouchers theoretically offer a pathway for those who wish to move to lower-poverty neighborhoods with high-performing schools and other resources, voucher holders don’t locate in low-poverty areas at significantly higher rates than other families with low incomes. This is because of the difficulty of finding owners in lower-poverty neighborhoods who will participate in the voucher program.

Direct rental assistance could be one of the ways to overcome this challenge. The direct assistance approach could potentially make it easier for families to find a place to live, including in a wide range of neighborhoods, and may also reduce administrative costs for HUD. But it may have spillover effects to the LIHTC program.

The LIHTC program is an effective tool for creating affordable housing. It incentivizes private developers to build or rehabilitate affordable rental units by offering tax credits in exchange for setting aside a portion of the units for low-income households. If direct rental assistance enables a significant portion of low-income households to move away from LIHTC properties, the demand for these units could decrease and could make it more challenging for developers to justify or finance new LIHTC projects, leading to a potential reduction in the supply of new affordable housing units, particularly in areas where market incentives alone are insufficient.

Seeking Input

HUD’s RFI states that HUD isn’t currently developing a direct rental assistance demonstration or pilot but may do so in the future under the Moving to Work (MTW) Demonstration program or under other new legislative authority if provided by Congress. HUD says its interest in research on direct rental assistance is tied to it being a rental assistance program, not an unrestricted cash transfer. For direct rental assistance to support HUD’s evidence-based policy development and program improvement goals, HUD believes it should align with the HCV program in the following ways:

• The subsidy should be provided to the renter, and the renter would be required to use the subsidy for housing. The rental subsidy should not exceed the recipient’s total gross rent;
• The subsidy should be provided to low-income households eligible for the HCV program, and the amount of the subsidy should be roughly equivalent to the HCV subsidy;
• Any test of direct rental assistance should be administered in partnership with public housing agencies (PHAs) to ensure that the program draws HCV-eligible households from the PHA waitlists, but the PHAs would have no direct contractual relationships with apartment owners renting to direct rental assistance recipients; and
• A housing quality requirement of some type should ensure that direct rental assistance recipients occupy decent, safe, and sanitary housing.

Targeted Feedback

HUD’s RFI asks six questions to the public. HUD is interested in learning about the effect of direct rental assistance on the following outcomes:

• How likely are households offered direct rental assistance to complete all necessary steps to receive the assistance? What is the length of time from an offer of assistance to receipt of assistance?
• What types of burdens—for tenants, landlords, and PHAs—are associated with the administration of direct rental assistance?
• How willing are landlords to rent to tenants receiving direct rental assistance?
• Do renters have access to a broad range of units and neighborhoods using direct rental assistance?
• What is the quality of housing when tenants are using direct rental assistance?
• Do tenants make timely rent payments using direct rental assistance?