Apartment Groups Urge Reform of HUD's Section 8 Voucher Program to Address Affordable Housing Shortage

WASHINGTON, DC – In testimony today before the Senate Banking, Housing and Urban Affairs Committee, the apartment industry told Congress it must reform the Section 8 Housing Choice Voucher Program if it hopes to adequately address the nation’s worsening affordable housing crisis.

Testifying on behalf of the Joint Legislative Program of the National Multi Housing Council (NMHC) and the National Apartment Association (NAA), Scott Gardner, NAA’s 2002 President, told the legislators that the Section 8 Housing Choice Voucher Program is one of the most effective ways the country can meet the growing housing needs of America’s low- and moderate-income families. Unfortunately, the program is plagued with regulatory requirements and administrative problems that discourage private owners from participating in it. As a result, despite the unprecedented need for housing assistance, a significant number of vouchers are returned each year because aid recipients cannot find housing that accepts vouchers.

(Note: The Section 8 program, administered by the U.S. Department of Housing and Urban Development (HUD) and public housing authorities (PHA), subsidizes the difference between 30 percent of the resident family’s income and an apartment’s fair market rent (FMR). The program is praised because it offers low-income families more control in deciding where they would like to live.)

Gardner’s testimony identified four key reforms needed to make the program more transparent so Section 8 voucher holders are indistinguishable from non-subsidized residents from both the resident’s and owner’s perspective.

1. Improve the Housing Quality Standards Unit Inspection Process
The program currently requires each apartment unit to be individually inspected and certified for program eligibility. Unit-by-unit inspections are duplicative since properties are already inspected on a regular basis by many other qualified firms, including lenders, and even by HUD and the Federal Housing Administration. The added inspections required by Section 8 delay turnover. Owners report having to wait 30 days or longer to have an apartment approved. Leaving an apartment vacant for a month or more causes a significant financial burden on participating owners.

2. Improve the Payment System
Under the current program, rent subsidy payments are often late, causing further financial problems for participating owners. Unfortunately, the sanctions for untimely payments are nominal so they do not serve as an incentive for prompt payment. Just as owners would not accept regularly late payments from unsubsidized residents, they should not be forced to accept them from voucher holders. The program should require automated electronic fund transfers for all payments and allow for market-based compensation when payment is delayed.

3. Increase the Payment Standard
The current payment standard, typically between 90 percent and 110 percent of FMR, is far too low to support owner participation. FMRs are currently set at the 40^th percentile rent, or the dollar amount below which 40 percent of the standard-quality rental housing units are rented. These rents are simply too low to provide owners with sufficient income to operate and maintain their properties. FMRs should be based on at least the 50^th percentile, and PHAs should have the flexibility to increase them to 120 percent of FMR in high cost areas and 150 percent in tight markets with 95 percent or higher occupancy rates. Even with these increases, Section 8 would still be well below market rents.

4. Amend HUD’s Lease Addendum
HUD requires every lease to a Section 8 voucher holder to include a HUD standard lease addendum. Unfortunately, HUD’s addendum is incompatible with state and local landlord-tenant laws and is inconsistent with industry practices. This causes difficulties and additional staff training expenses for owners who must comply with one set of lease requirements for voucher holders and another for non-voucher holders. It also puts owners in the untenable position of having to decide which laws to enforce when there is conflict between HUD’s lease and state/local law.

Gardner concluded that the apartment industry stands ready to engage more fully in the Section 8 program, however, such participation is not economically feasible without reforming the program to reduce the significant costs and burdens it imposes on apartment owners.

The full testimony and additional information are available at www.nmhc.org/Content/BrowseContent.cfm?IssueID=284.

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NMHC and NAA represent the nation’s leading firms participating in the multifamily rental housing industry. NMHC/NAA’s combined memberships are engaged in all aspects of the development and operation of apartment communities, including ownership, construction, finance and management. Together, the organizations jointly operate a federal legislative program and provide a unified voice for the private apartment industry. For more information, contact NMHC at 202/974-2300, e-mail the Council at info@nmhc.org, or visit NMHC’s web site at www.nmhc.org.

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