Section 8 Program faces imminent housing crisis


A sign of things to come: an owner of three apartment complexes in Greater Minnesota, notified his low-income and mostly elderly tenants that he will be exiting the U.S. Housing and Urban Development’s (HUD) Section 8 rent-subsidy program in one year. His decision stems from HUD’s failure to pay tenant subsidies for several months last summer. The experience of this building owner marks the beginning of an emerging crisis in the Section 8 program. It could lead to massive displacement of low-income families and the loss of hundreds of thousands of units of affordable housing if nothing is done.

The project-based Section 8 program houses 1.3 million low-income households in the US. The program presents a partnership between private building owners and the government where families pay 30% of their income on rent while the government pays the difference to the building owners. Over 1.1 million of these contracts rely on annual funding by Congress. Since the program’s inception, Congress has provided sufficient funds to ensure funding of each contract for one year. However, in 2007, as a result of HUD’s understating its funding needs and Congress under-funding the program, HUD made late payments to dozens of Minnesota building owners. To avert a further crisis, HUD forced owners to take three and four-month contracts, in effect undermining owner confidence in the reliability of Section 8.

The budgetary strain in 2008 will be even greater. Congress passed the 2008 HUD budget last December. Unfortunately, this budget falls $1.9 billion short of the funding needed to fund all Section 8 contracts in the country. Initial estimates by the National Low-Income Housing Coalition suggest that nearly 7,000 units of affordable housing in Minnesota and 500,000 nationwide are placed at risk by the shortfall. Estimates based on the number of Section 8 contracts renewing in 2008, state upwards of 18,000 housing units at-risk in Minnesota. This means that late payments and imposition of short-term contracts will hit a wave of building owners in coming months.

Budget shortfalls pose new dangers to tenants. According to HUD, if HUD fails to pay subsidies to owners, the owners can argue the government broke their contracts and raise tenants’ rent to market rate without notice. Section 8 tenants have no legal protections and receive no vouchers in cases of broken contracts. If nothing is done, many low-income renters may suddenly face a rent increase to market rate and lose their housing.

If the owner in Greater Minnesota opts out as he intends, tenants will receive Section 8 vouchers to stay or move to other rental housing. However, the transition to vouchers is more difficult than it seems. First, some tenants must move in a year because their apartments will be developed into non-rental units, such as ownership or non-subsidized assisted living units. Next, voucher holders face low housing vacancy rates due to the decreasing value of the vouchers and widespread discrimination against voucher holders by landlords. According to a survey conducted by HOME Line in August 2007, the vacancy rate for buildings eligible for Section 8 and whose landlords accepted vouchers stood at a low 3.9%. Finally, when tenants leave, their apartments will no longer be affordable for future residents. In Minnesota small towns, such as Lake City, Monticello, and Cannon Falls, affordable housing is a scarce resource that is lost forever when building owners exit their Section 8 contracts.

Since project-based Section 8 budget shortfalls have never happened before, no one knows exactly what the impact will be. Whatever the impact, the budget is drastically short for project-based section 8 funding, which can have serious effects for anyone living in a project-based section 8 building. Section 8 tenants and housing advocates are currently working on a response effort. They will be waging a campaign throughout 2008 to publicize the effects of the budget shortfall as they start to trickle down to individual buildings and tenants in order to pressure elected officials to fix the disaster that they have created.

Lindsey Twin works as a tenant organizer with HOME
Line, an affordable housing advocacy organization, and
writes about housing issues.