PAYING THE RENT:

An evaluation of the Section 8 Existing
Housing Program in New York City

A CHPC Research Report

October, 1997

Chapter II: The Tenants

Determination of eligibility is perhaps the most critical aspect of any housing assistance program. For many years federal law promoted access to housing assistance for a mixed-income population. During the 1980s, budget considerations encouraged a contraction of eligibility almost exclusively to very low-income and other disadvantaged households. In the 1990s, there has been a reaction against that trend, with federal housing legislation gravitating back to a mixed-income approach.

Federal Targets and Preferences

Like the public housing and Section 8 new construction and substantial rehabilitation programs, federal law specifies, to a large degree, the tenant profile of the Section 8 Existing Housing program. Unlike the public housing and Section 8 project-based programs, however, the tenant profile of the Section 8 Existing Housing program in New York City is driven more by the housing needs of low-income families--and by the budgetary constraints of the city--than by federal law. Whereas the managers of public or privately owned assisted housing developments must be mindful of maintaining a tenant mix that promotes the financial and social health of their projects, the Section 8 Existing program faces no such consideration. Since the recipients of tenant-based certificates and vouchers are by the nature of the program dispersed within the existing housing stock, the "concentration effects" of the program are at worst neutral. This allows the program to serve a needier population than project-based housing programs, and without adverse consequences.

When Congress established the Section 8 Existing Housing program, it targeted benefits to the same population as was served by public and project-based Section 8 housing. The Housing and Community Development Act of 1974 limited eligibility to those households at or below 80 percent of the median income for each area, adjusted for family size, and further required that HUD administer the program in such a way that at least 30 percent of the assisted families be very low-income families. [1] HUD's implementing regulations required that each PHA operating a Section 8 Existing program observe the 30 percent very low-income target. HUD regulations also required PHAs to establish waiting lists for Section 8 certificates, from which eligible families would be drawn on a first-come, first-serve basis.

In 1981 Congress amended the law, limiting low-income families other than very low-income families to 5 percent of new admissions to the program (and to public housing and project-based Section 8 as well). This income targeting requirement remained in place until 1990. [2] Moreover, in 1979 Congress established two significant "federal preferences" for public and Section 8 housing: for families who are occupying substandard housing and for those who are involuntary displaced. The first preference has been interpreted to include homeless families. A third important preference, families whose rent/income burden exceeds 50 percent, was added in 1983. Since the number of families in New York City meeting those preference criteria far exceeded the supply of certificates and vouchers, families in those categories became the almost exclusive recipients of Section 8 rent subsidies.

Demographic Characteristics of Section 8 Tenants

Even before Congress legislated the tightened income targets and preference criteria, New York's Section 8 recipients were predominately those of very low-income. As early as 1983, 87 percent of families receiving NYCHA- distributed certificates had incomes below 50 percent of the median, a percentage far exceeding that legally required during the early years of the program.

Although the incomes of families participating in the certificate program were lower than those in public housing, the ethnic characteristics were more representative of those prevailing in the city at large. Almost 45 percent of the recipients as of 1983 were white families, a higher percentage than prevailing in public housing at that time, and a much higher percentage than were applying for public housing during the six preceding years. There may be two reasons for the higher percentage of white families entering the Section 8 program, even though the eligibility criteria were identical to those for public housing. First, white certificate holders may have found it easier to find eligible apartments, because of the absence of discrimination or because they were more likely to be living in apartments that met the Housing Quality Standards and hence could qualify in place. Another explanation may be that low-income white families were more apt to apply for Section 8 than for public housing because it does not involve living "in the projects" or necessitate relocating from white enclave neighborhoods of the city, where there was often little public housing.

Source: New York City Housing Authority

After federal law was changed to give preference to homeless families and those with excessive rent burdens, the proportion of families receiving Section 8 certificates and vouchers who were non-Hispanic white decreased rapidly. By 1994 white households comprised only 15 percent of the new families receiving NYCHA Section 8 rent subsidies.

The higher proportion of white participants during the early years of the program was related to the correspondingly higher proportion of elderly households served. In recent years that proportion has declined as the focus of the program has shifted to housing the homeless. As of 1996, 29 percent of all households receiving subsidy through NYCHA's Section 8 program were classified as elderly, comparable to the percentage of NYCHA's public housing tenant households who are elderly. For certificates and vouchers exercised between 1993 and 1995, however, the proportion was under 10 percent. [3] Nevertheless, elderly households are apparently well represented on the waiting list. Although NYCHA does not tabulate the elderly component of its waiting list specifically, the proportion of applicant households whose primary source of income is social security or supplemental security income (SSI) has been fairly constant at around 28 percent. Public housing officials report that many elderly households are clustered in the 50 to 80 percent of median income range, and hence do not receive preference for Section 8 certificates. [4]

While the proportion of applicants who are elderly or disabled and consequently derive most of their income from social security has remained virtually constant over the life of the program, the proportion of whom are among working poor has declined steadily. In the early years of the program slightly more than one-third of rental assistance applicants were employed. The percentage began to slip during the mid-1980s, and by 1994 only 22 percent of those on NYCHA's Section 8 waiting list were employed. Conversely, the percentage who were public assistance recipients rose from about 38 percent during the early 1980s to 50 percent during the 1990s. Since more than 98 percent of certificates and vouchers issued in recent years have gone to families with federal preferences, there is little chance that an employed applicant will actually be issued one. In December 1996, after the waiting list had swelled to over 200,000 eligible applicants, the Housing Authority stopped accepting applications from families who were not homeless, victims of domestic violence or intimidated witnesses.

One of the original criticisms of the rent subsidy program was that large families would not be able to find housing through it, either because a sufficient number of large apartments does not exist in the private market or because the Fair Market Rent level (FMR) schedules are not favorable to large families. The record of the Section 8 program in New York City does not support this contention. The percentage of applicants requiring four or more bedrooms has historically hovered below 2 percent, while the proportion of NYCHA Section 8 tenants with certificates or vouchers for four or more bedrooms is 2.2 percent. As of 1983, however, the average Section 8 tenant household contained 2.09 people, significantly less than those in public housing. Tenant household sizes have risen since, reaching 2.79 for families entering the program in 1995, but when adjusted for the small proportion who are elderly, the figure is still below that of public housing.

Section 8 and the Homeless

While federal law sets parameters on the tenant profile of a public housing authority's Section 8 Existing Housing program, these limitations have been largely superfluous in New York City. The housing problems of the city's poor have generally forced NYCHA and HPD to exceed even the strict federal income targets and preference criteria. The preference criteria have, in effect, allowed the city to select from the Section 8 waiting list those families it had the greatest budgetary and political need to house.

Each year since the early 1980s between 10,000 and 15,000 homeless families have sought emergency housing from the city. In order to accommodate that influx, the city has established a network of transitional homeless facilities run primarily by non-profit groups. With about 5,200 apartment-style housing units in total, these "Tier II" facilities attempt to stabilize the circumstances of the families, provide or link them to a variety of social services, and ultimately to assist them in procuring permanent housing. More than half of these families eventually leave the transitional housing of their own accord, returning to their original housing or finding new housing affordable to them on their earnings, welfare grants or Section 8 assistance. As many as 7,000 annually, however, require direct placement assistance provided by the staffs of the non-profits working in conjunction with city agencies.

During the late 1980s and early 1990s homeless families were placed primarily into three types of housing: public housing, private or non-profit housing newly renovated with city assistance, or city-owned in rem housing. With these placement resources available, the city's Human Resources Administration (HRA) was able to balance entries and exits from the transitional housing network and stabilize the shelter population at about 5,500 families.

This system has gradually begun to erode. NYCHA, which for a time had been placing several thousand homeless families referred to it by HRA into its public housing developments each year, grew increasingly concerned that its carefully managed tenant mix was being undermined. Existing residents in public housing also became increasingly vocal about the influx of formerly homeless families, many of whom other tenants felt were disruptive or insufficiently prepared for independent living. In 1992 the Authority negotiated an agreement with the Dinkins administration that substantially cut the number of HRA referrals it was asked to accept, increased its authority to screen referrals, and provided follow-up social services to those who were placed.

Another source of permanent housing for homeless families was non-profit housing rehabilitated as part of the city's massive Ten Year Housing Plan. Funded with a mix of low-income housing tax credits and city capital dollars, some 15,000 new housing units were created in formerly abandoned buildings utilizing the Local Initiatives Support Corporation (LISC) and the Enterprise Foundation as intermediaries to neighborhood-based non-profits,

Source: Mayor's Office of Operations

or large non-profits like Phipps Houses and Settlement Housing Fund as direct developers/owners. Those programs generally required the nonprofits to rent 30 percent of the apartments to homeless families, who were usually provided with Section 8 certificates or vouchers so that their rents would not have to be cross-subsidized by other tenants. [5]

As the city's budget crisis deepened, however, and the supply of vacant buildings that could be efficiently rehabilitated dwindled, those programs wound down and are now effectively over.

The largest source of homeless housing was city-owned in rem buildings, into which the city placed over 13,000 homeless families between 1987 and 1995. That placement resource, too, is gradually evaporating. As the city became more aggressive in disposing of in rem properties and eventually stopped vesting new buildings, the in rem inventory declined from a peak of 53,000 units in 1986 to about 25,000 today. Moreover, the city recognized that, in order to facilitate disposition, it had to limit the number of homeless families placed in them and ceased such placements in 1996.

With the loss of public and publicly assisted placement opportunities, the need to find permanent housing for homeless families within the private, unassisted housing stock gained urgency. For years the city had been notably unsuccessful in doing so, primarily because the shelter grant for public assistance recipients has remained far below the market rate for apartment rentals, even in the poorest areas of the city. It wasn't until the city linked its Emergency Assistance Rehousing Program to the Section 8 certificate and voucher program that permanent apartments for homeless families in the private housing sector opened up in substantial numbers.

The city established EARP in 1983 as an inducement to private landlords to rent apartments to homeless families. The principal incentive was a bonus payment of $2,300 per family member that, when coupled with the maximum shelter grant of $286 for a family of three, would raise the effective rent payments to $500 per month during the 32-month term of the agreement. [6] The incentive proved insufficient to attract private landlord interest in renting to families many perceived to be troubled and potentially disruptive: during the first six years of the program less than 300 private placements per year were made. In fact, HPD became the major beneficiary of the bonuses as most placements were made into in rem housing. In fiscal 1988, for example, 2,111 EARP placements were made, but only 265 were in private rental buildings.

In 1989 the program was restructured; in addition to bonuses the families were provided Section 8 certificates to permit a more attractive, ongoing rental price. [7] The combination of EARP bonuses and Section 8 certificates proved much more effective in placing homeless families than either had separately. In 1994 a peak of 3,072 homeless families were placed in private housing. In March of that year the city, in an economy move, cut the EARP bonus payments to $1,000 for a family of two (increasing to a maximum of $5,000 for a family of eight or more), effective with leases signed on July 1. Landlords seeking to get into the program before the new schedules took effect facilitated the record number of EARP rentals. In 1995 the number of EARP/Section 8 rentals fell back to 2,330.

Despite the drop in 1995, homeless placements into private housing through the EARP/Section 8 program have become an increasingly critical part of the city's homeless housing efforts, growing from less than 5 percent of all placements in 1989 to over 40 percent. Indeed, with the demise of the city's vacant building rehabilitation effort and the dwindling of in rem and public housing placement options, accessing private sector housing through EARP/Section 8 has become the city's principal option for moving families out of the Tier II shelters. This virtually ensures that the dramatically reduced number of certificates and vouchers now available will go only to the homeless, regardless of any loosening of federal income targeting and preference criteria.

To Next Chapter

Chapter 1: The Program | Chapter 2: The Tenants | Chapter 3: The Housing | Epilogue

Disclaimer: The New York City Rent Guidelines Board has converted this CHPC report to an electronic format and posted it on its web site. We do so to inform the public and the housing community, and further the debate on rent-subsidized housing. The Rent Guidelines Board did not participate in this study and does not necessarily agree with the findings of this report. The report is solely a production of the Citizen's Housing and Planning Council.

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Notes:

1. Very low-income families were defined as those having incomes not exceeding 50 percent of the area median.

2. Congress increased the percentage to 10 percent in 1990 and suspended all federal preferences in 1996.

3. Nationally, about 23 percent of Section 8 Existing Housing tenants are 65 years of age or older, compared to 38 percent of public housing tenants.

4. See testimony before the House Subcommittee on Housing and Community Development, November 3, 1993.

5. These certificates and vouchers typically came from HPD's allocation. Consistent with federal preferences, homeless families were given certificates or vouchers and referred to this newly renovated housing. Since this was among the most desirable housing available, the 30 percent quotas have been easily met.

6. Tenants are entitled to renew the leases at the end of the term, but the landlord is not entitled to any additional bonus.

7. Up to the Fair Market Rent.