Section 8 Subsidized Housing--Some Observations on Its High Rents, Costs, and Inequities

The Department of Housing and Urban Development's (HUD) Lower Income Rental Assistance Program, also known as the Section 8 Program, is the major federal program for providing the poor with funds or other means to compete for existing housing in the neighborhoods of their choice. Under the Program, HUD makes assistance payments for annual contribution contracts to public housing agencies authorized to engage or assist in developing or operating housing for lower income families. The agencies then pay the owners of units on behalf of the eligible families and in accordance with executed housing assistance payment contracts. Eligibility for assistance is generally limited to families with incomes which do not exceed 80 percent of the median income for the particular area of residence. A federal subsidy is paid equal to the difference between the contract rent, which is based on the market rent of comparable standard units in the area, and the amount of rent paid by the eligible family. Fair market rents are used to determine the amount of total rent paid, and they are supposed to reflect the rentals that prospective tenants who are not assisted would be willing and able to pay.

GAO found that the Program is costing more than it should and is serving only a fraction of those in need. However, the projects visited were having a positive impact on the neighborhoods in which they were located and were providing adequate housing to the families living in them. At the end of fiscal year 1979, expenditures were about $2 billion annually and the budget authority for the units occupied and those expected to be occupied in 1980 has been set at about $128 billion. Factors contributing to the high costs of rental housing have been many and varied, and often the result of economic, social, and political considerations for which HUD cannot be held accountable. However, the review disclosed instances where rents and costs were greater than they should have been and could have been controlled by HUD. One contributing factor to the high program costs has been the manner in which HUD has determined fair market and gross rents. They are often higher than they should be. Other problems included: little concern for the high rental and subsidy levels on the part of some HUD officials; the use of sometimes unrefined and unreliable methods for establishing rents; too much emphasis on meeting production goals and not enough on costs; HUD generosity regarding features and amenities not normally expected in subsidized housing; and the failure of owners and public housing agencies to properly verify tenant income and allowances.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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