An Overview of the Section 8 Housing Program

An Overview of the Section 8
Housing Programs
Updated January 29, 2008
Maggie McCarty
Analyst in Housing
Domestic Social Policy Division

An Overview of the Section 8 Housing Programs
Summary
The Section 8 low-income housing program is really two programs: the voucher
program and the project-based Section 8 program. Vouchers are portable subsidies
that low-income families can use to lower their rents in the private market. Vouchers
are administered at the local level by quasi-governmental public housing authorities
(PHAs). Project-based Section 8 is a form of rental subsidy that is attached to a unit
of privately owned housing. Low-income families who move into the housing pay
a reduced rent, on the basis of their incomes.
The Section 8 program began in 1974, primarily as a project-based rental
assistance program. However, by the mid-1980s, project-based assistance came
under criticism for seeming too costly and concentrating poor families in high-
poverty areas. Congress stopped providing new project-based Section 8 contracts in

1983. In their place, Congress created vouchers as a new form of assistance. Today,

vouchers — numbering more than 2 million — are the primary form of assistance
provided under Section 8, although over 1 million units still receive project-based
assistance under their original contracts or renewals of those contracts.
Congressional interest in the Section 8 program has increased in recent years,
particularly as the program costs have rapidly grown, led by cost increases in the
voucher program. In order to understand why costs are rising so quickly, it is
important to first understand how the program works and its history. This report
presents a brief overview of that history and introduces the reader to the program.
For more information, see CRS Report RL33929, Recent Changes to the Section 8
Voucher Renewal Funding Formula; CRS Report RL34002, Section 8 Housing
Choice Voucher Program: Issues and Reform Proposals in the 110th Congress; and
CRS Congressional Distribution Memorandum, Factors Behind Cost Increases in the
Section 8 Housing Choice Voucher Program, FY2000-FY2004, all by Maggie
McCarty.
This report will be updated as warranted.

Contents
In troduction ......................................................1
Background Information........................................1
Early Section 8....................................................3
New Construction and Substantial Rehabilitation.....................3
Moderate Rehabilitation.....................................4
Existing Housing Certificates....................................4
The Voucher Program......................................5
Today’s Section 8 Program..........................................6
Section 8 Project-Based Rental Assistance ..........................6
Section 8 Tenant-Based Housing Choice Vouchers...................7
Project-Based Vouchers.....................................9
Tenant Protection or Enhanced Vouchers.......................9
Special Purpose Vouchers..................................10
Family Self-Sufficiency Coordinators.........................10
Demonstrations ..........................................11
Conclusion ......................................................12
List of Tables
Table 1. The Experimental Housing Allowance Program..................2
Table 2. What Do Long Term Contracts Mean for Congress?...............4
Table 3. What is Fair Market Rent (FMR)?.............................5
Table 4. Income Thresholds for a Three-Person Family in
Selected Areas in 2007..........................................7
Table 5. How is a Voucher Subsidy Calculated?.........................8

An Overview of the Section 8
Housing Programs
Introduction
The rental assistance programs authorized under Section 8 of the United States
Housing Act of 1937 (42 U.S.C. § 1437f) — Section 8 project-based rental assistance
and tenant-based vouchers — have become the largest component of the Department
of Housing and Urban Development’s (HUD) budget, with appropriations of more
than $22 billion in FY2008. The rising cost of providing rental assistance is due, in
varying degrees, to expansions in the program, the cost of renewing expiring long-
term contracts, and rising costs in housing markets across the country. The most
rapid cost increases have been seen in the voucher program.
Partly out of concern about cost increases, and partly in response to the
administrative complexity of the current program, the Administration has called for
reform of the voucher program and its funding each year since 2002. In response,
Congress has enacted changes to the way that it funds the voucher program and the
way that PHAs receive their funding. Congress has not enacted the program reforms
advocated by the Administration, although it has considered its own reform
proposals.
In order to understand why the program has become so expensive and why
reforms are being considered, it is first important to understand the mechanics of the
program and its history. This paper will provide an overview of the Section 8
program and its history. For more information, see CRS Report RL33929, Recent
Changes to the Section 8 Voucher Renewal Funding Formula; CRS Report
RL34002, Section 8 Housing Choice Voucher Program: Issues and Reform
Proposals in the 110th Congress; and CRS Congressional Distribution
Memorandum, Factors Behind Cost Increases in the Section 8 Housing Choice
Voucher Program, FY2000-FY2004, all by Maggie McCarty.
Background Information
From 1937 until 1965, public housing and the subsidized mortgage insurance
programs of the Federal Housing Administration (FHA) were the country’s main
forms of federal housing assistance. As problems with the public housing and other
bricks and mortar federal housing construction programs (such as Section 235 and
Section 236 of the National Housing Act) arose — particularly their high cost —
interest grew in alternative forms of housing assistance. In 1965, a new approach
was adopted (P.L. 89-117). The Section 23 program assisted low-income families

residing in leased housing by permitting a public housing authority (PHA)¹ to lease
existing housing units in the private market and sublease them to low-income and
very low-income families² at below-market rents. However, the Section 23 program
did not ameliorate the growing problems with HUD’s housing construction programs
and interest remained in developing and testing new approaches. The Experimental
Housing Allowance Program is one example of such an alternative approach.
Table 1. The Experimental Housing Allowance Program
^T^h^e^E^x^p^e^rⁱ^m^e^nt^a^l^H^o^usi^{ng A}^l^l^o^w^a^nc^e^P^r^o^g^r^a^m⁽^E^H^A^P⁾^b^e^ga^{n w}ⁱ^t^h^a^m^a^nd^a^t^e^t^o^H^U^D^f^r^o^m
^C^oⁿ^g^r^e^s^sⁱⁿ¹⁹⁷⁰^t^o^t^e^s^t^t^h^eⁱ^m^p^a^c^t^s^aⁿ^d^f^e^a^sⁱ^b^ility^o^f^p^r^o^v^idⁱⁿ^g^lo^w^-ⁱⁿ^co^m^e^f^a^m^{ilies w}^ith
^allow^aⁿ^ces^{to as}^sⁱ^s^t^th^emⁱⁿ^obtainⁱⁿ^g^ex^is^tin^g^,^decen^{t ren}^t^{al h}^o^u^sⁱⁿ^g^of^th^{eir ch}^{oice (P}^.L^{. 91-}^152).
^Coⁿ^g^r^{ess w}^a^{s in}^ter^e^sted^sp^ecifⁱ^callyⁱⁿ^fⁱⁿ^dⁱⁿ^g^th^{e an}^sw^er^{s to}^sev^e^r^a^{l k}^e^y^q^u^estioⁿ^s^:
^!^Ho^w^m^aⁿ^y^f^a^m^{ilies w}^o^u^l^d^m^a^k^e^u^s^{e o}^f^allo^w^aⁿ^{ce p}^a^y^m^en^ts?
^!^Wh^at^kⁱⁿ^d^of^h^o^u^sⁱⁿ^g^w^o^u^l^{d t}^h^ey^ch^oos^{e an}^{d i}ⁿ^w^h^atⁿ^eⁱ^g^h^borh^oods^?
^!^H^o^w^w^o^ul^d^ho^usi^{ng m}^a^r^k^e^t^{s r}^e^sp^oⁿ^d^t^o^t^h^eⁱⁿ^c^r^e^a^s^e^d^d^e^m^a^nd^fo^r^ho^usi^ng?
^!^A^t^w^h^{at cos}^t^cou^l^{d a h}^o^u^sⁱⁿ^g^allow^aⁿ^{ce prog}^ram^{be adm}ⁱⁿⁱ^s^t^ered?
^In^o^r^d^e^{r to}^an^sw^{er th}^{ese q}^u^estioⁿ^s^{, HUD co}ⁿ^t^ract^e^d^fo^r^t^h^{e co}ⁿ^d^u^c^{t o}^f^th^{ree ex}^p^e^rim^eⁿ^t^{s: th}^e
^D^e^m^{and Exper}ⁱ^m^e^nt^to^{test h}^o^w^f^a^m^{ilies w}^o^u^l^d^r^e^sp^oⁿ^d^to^{a h}^o^u^sⁱⁿ^g^allo^w^aⁿ^{ce, th}^e^Suppl^y
^Experⁱ^m^e^nt^{, to}^{test h}^o^w^m^a^r^k^{ets w}^o^u^l^d^r^e^s^p^oⁿ^d^to^su^b^s^id^{ies an}^d^th^e^Adminis^t^r^a^{tive Agency}
^Experⁱ^m^e^nt^{, to}^{test th}^{e ad}^mⁱⁿⁱ^str^a^tiv^{e cap}^a^cⁱ^ty^an^d^fund^{s r}^e^q^uⁱ^r^e^d^t^o^a^d^mⁱⁿⁱ^st^e^r^a^ho^usiⁿ^g
^al^l^o^w^aⁿ^{ce prog}^ram^.^T^h^{e f}ⁱ^rs^t^report^s^cam^{e ou}^tⁱⁿ^{1973, an}^{d a f}ⁱⁿ^a^l^report^w^a^sⁱ^s^s^u^edⁱⁿ^1980.^T^h^e
^EHA^P^’^s^k^e^y^fⁱⁿ^dⁱⁿ^g^s^ar^{e listed}^b^e^lo^w^:
^!^Iⁿ^o^r^d^e^r^to^en^su^r^e^h^o^u^sⁱⁿ^g^q^u^ality^{, su}^b^s^id^{ies h}^a^v^e^to^b^e^tied^to^h^o^u^sⁱⁿ^g
^stan^d^a^r^d^{s; h}^o^w^e^v^e^r^,^strⁱ^cter^h^o^u^sⁱⁿ^g^stan^d^a^r^d^{s lim}^{it p}^a^r^ticip^atioⁿ^.^P^a^r^ticip^atioⁿ
^is^also^lin^k^e^d^to^su^b^s^id^y^am^o^uⁿ^{t; as th}^{e su}^b^s^id^yⁱⁿ^cr^{eases, so}^d^o^e^{s p}^a^r^ticip^atioⁿ^.
^!^Mo^b^ility^an^d^lo^catioⁿ^o^f^r^e^sid^eⁿ^{ce ar}^{e m}^aⁱⁿ^ly^g^o^v^e^rⁿ^ed^b^y^tie^s^t^o^r^e^l^a^tiv^es,
ⁿ^e^ig^h^bors^,^an^{d f}^r^ien^d^s^an^{d are n}^o^{t af}^f^{ected by}^h^o^u^sⁱⁿ^g^allow^aⁿ^{ce pay}^m^en^ts^.
^!^A^h^o^usi^{ng al}^l^o^w^aⁿ^{ce prog}^ram^h^a^s^vⁱ^rt^u^a^l^l^yⁿ^o^ef^f^ect^on^t^h^{e pri}^{ce of}^h^o^u^sⁱⁿ^g
^an^d^d^o^e^{s n}^o^{t stim}^u^l^{ate n}^e^w^coⁿ^s^tr^u^c^tioⁿ^o^r^m^a^j^o^r^r^e^h^a^b^ilitatioⁿ^.^Ho^w^e^v^e^r^,^it
^d^o^e^{s he}^l^p^p^r^e^s^e^r^ve^t^h^e^e^xⁱ^s^tⁱ^{ng ho}^usi^{ng st}^o^c^{k b}^y^stⁱ^m^ul^a^tⁱ^{ng r}^e^p^aⁱ^r^s.
^!^A^h^o^u^sⁱⁿ^g^allow^aⁿ^ce^prog^ram^can^{be ef}^f^ec^tiv^ely^admⁱⁿⁱ^s^t^{ered at th}^{e local lev}^e^l.
^T^h^{e ear}^ly^fⁱⁿ^dⁱⁿ^g^s^o^f^E^H^AP^h^e^lp^ed^to^{set th}^e^ton^e^f^o^{r th}^{e debate th}^{at created th}^{e Section}⁸
^prog^ram^.

^(R^ay^m^oⁿ^d^Stru^y^k^{, “}^P^olicy^Qu^es^tion^s^an^{d Ex}^perim^eⁿ^t^{al R}^e^s^pon^s^e^s^,^{” in}^H^ousⁱ^{ng Voucher}^s^f^o^r^t^h^e
^Poor^:^Les^s^ons^f^r^om^{a N}^a^tⁱ^onal^Experⁱ^m^e^nt^{, edi}^t^e^{d by}^R^a^y^m^on^{d S}^t^ru^y^k^an^{d Marc Ben}^dⁱ^c^k^Jr.
^[W^as^hⁱⁿ^g^t^on^{: Urban}^In^s^titu^{te P}^r^es^s^,^1981].)

¹ PHAs are state-chartered, quasi-governmental bodies that administer public housing and
Section 8 vouchers.
² HUD uses a relative measure of income for determining benefits and eligibility for Section
8. “Low-income families” have adjusted gross incomes at or below 80% of the local area
median income; “very low-income” families have adjusted gross incomes at or below 50%
of the local area median income; and “extremely low-income” families have adjusted gross
incomes at or below 30% of the local area median income

Due to criticisms about cost, profiteering, and slumlord practices in federal
housing programs, President Nixon declared a moratorium on all existing federal
housing programs, including Section 23, in 1973. During the moratorium, HUD
revised the Section 23 program and sought to make it the main assisted housing
program of the federal government. However, at the same time, Congress was
considering several options for restructuring subsidized housing programs. After all
the debates and discussions that typically precede the passage of authorizing
legislation were completed, Congress voted in favor of a new leased housing
approach, and the Section 8 program was created.
Early Section 8
The Section 8 program is named for Section 8 of the United States Housing Act
of 1937. The original program, established by the Housing and Community
Development Act of 1974 (P.L. 93-383), consisted of three parts: new construction,
substantial rehabilitation, and existing housing certificates. The 1974 Act and the
creation of Section 8 effectively ended the Nixon moratorium. In 1978, the moderate
rehabilitation component of the program was added, but it has not been funded since
1989. In 1983, the new construction and substantial rehabilitation portions of the
program were repealed, and a new component — Section 8 vouchers — was added.
In 1998, existing housing certificates were merged with and converted to vouchers.
New Construction and Substantial Rehabilitation
Under the new construction and substantial rehabilitation components of the
early Section 8 program, HUD entered into long-term (20- or 40-year) contracts with
private for-profit, non-profit, or public organizations that were willing to construct
new units or rehabilitate older ones to house low- and very low-income tenants.
Under those contracts, HUD agreed to make assistance payments toward each unit
for the duration of the contract. Those assistance payments were subsidies that
allowed tenants residing in the units to pay 25% (later raised to 30%) of their
adjusted income as rent. The program was responsible for the construction and
rehabilitation of a large number of units. Over 1.2 million units of housing with
Section 8 contracts that originated under the new construction and substantial
rehabilitation program still receive payments today.
By the early 1980s, because of the rising costs of rent and construction, the
amount of budget authority needed for the Section 8 rental assistance program had
been steadily increasing while the number of units produced in a year had been
decreasing. At the same time, studies emerged showing that providing subsidies for
use in newly constructed or substantially rehabilitated housing was more expensive
than the cost of providing subsidies in existing units of housing. Also, because
contracts were written for such long terms, appropriators had to provide large
amounts of budget authority each time they funded a new contract (see below for an
illustration of the implication of long-term contracts). As the budget deficit grew,
Members of Congress became concerned with the high costs associated with Section

8 new construction and substantial rehabilitation, and these segments of the Section

8 program were repealed in the Housing and Urban-Rural Recovery Act of 1983
(P.L. 98-181).
Table 2. What Do Long Term Contracts Mean for Congress?
^T^h^{e f}^o^llo^wⁱⁿ^g^ex^am^p^l^{e illu}^str^a^{tes h}^o^w^Coⁿ^g^r^{ess ap}^p^r^o^p^r^{iates f}^uⁿ^d^{s f}^o^r^loⁿ^g^-^ter^m^coⁿ^t^r^acts,
^com^p^{ared to on}^e-^y^{ear con}^t^racts^.

^In^2003,^a^h^o^u^sⁱⁿ^g^s^u^bsⁱ^d^y^cos^t^an^av^erag^{e of}^{$6,000 per y}^{ear. If}^C^oⁿ^g^r^es^s^w^aⁿ^t^ed^t^o^f^uⁿ^d¹⁰ⁿ^e^w
^S^ectⁱ^oⁿ^{8 s}^u^bsⁱ^dⁱ^e^sⁱⁿ^{2003, t}^h^{e cos}^t^of^doiⁿ^g^s^o^w^o^u^l^{d depen}^d^on^t^h^{e l}^eⁿ^g^t^h^of^t^h^{e con}^t^ract
^Co^ngr^e^{ss d}^e^cⁱ^d^e^d^t^o^fund^:

^If^th^{e con}^t^{ract w}^a^s^a^40-year^con^t^{ract, as}^w^a^s^th^e^cas^eⁱⁿ^th^e^begⁱⁿⁿⁱⁿ^g^of^th^{e Section}^{8 prog}^ram^,
^t^h^en^C^oⁿ^g^r^es^s^m^u^s^t^appropri^a^t^e^:

^{10 v}^o^u^c^h^e^rs^x^{$6,000 x}^{40 y}^ears⁼^$²^.⁴^m^illioⁿ^.*

^If^th^{e con}^t^ract^w^a^s^a^on^e-year^con^t^{ract, as}^is^th^{e cas}^{e w}^ith^Section^{8 con}^t^racts^today^,^th^en^C^oⁿ^g^r^es^s
^m^u^s^t^appropri^a^t^e^:

^{10 v}^o^u^c^h^e^rs^x^{$6,000 x}^{1 y}^{ear =}^$60,000^.

^T^h^u^s^{, i}^t^w^o^u^l^{d h}^a^v^e^cos^t^C^oⁿ^g^r^es^s^l^e^s^sⁱⁿ^{2003 t}^o^provⁱ^d^{e on}^{e y}^{ear con}^t^ract^s^t^h^anⁱ^t^w^o^u^l^{d h}^a^v^e
^to^p^r^o^v^id^e^m^u^ltiy^ear^coⁿ^t^r^acts.^T^h^{e tr}^ad^e-^o^f^f^{is th}^{e co}^{st in}^su^b^s^eq^u^eⁿ^t^y^ear^s.^Fo^r^ex^am^p^l^e,^assu^m^e
^t^h^at^C^oⁿ^g^r^es^sⁱⁿ^t^eⁿ^d^s^t^o^m^aⁱⁿ^t^aⁱⁿ^t^h^os^{e 10 s}^u^bsⁱ^dⁱ^e^sⁱⁿ^{2004. If}^C^oⁿ^g^r^es^s^f^uⁿ^d^ed^t^h^os^e^s^u^bsⁱ^dⁱ^e^s
^uⁿ^d^er^40-^y^ear^con^t^ractsⁱⁿ^{2003, th}^en^th^{e s}^u^bs^idies^w^o^u^l^{d n}^o^{t requ}^{ire n}^e^w^f^uⁿ^dⁱⁿ^g^ag^ain^uⁿ^til^2043,
^m^eanⁱⁿ^g^C^oⁿ^g^r^es^s^w^o^u^l^{d n}^o^t^h^a^v^e^t^o^provⁱ^d^{e appropri}^a^tⁱ^oⁿ^sⁱⁿ^2004;^h^o^w^e^v^e^r,ⁱ^f^C^oⁿ^g^r^es^s^f^uⁿ^d^ed
^t^h^os^{e s}^u^bsⁱ^dⁱ^e^s^uⁿ^d^{er on}^e-^y^{ear con}^t^ract^sⁱⁿ^2003,^t^h^en^t^h^{e s}^u^bsⁱ^dⁱ^e^s^w^o^u^l^{d requ}ⁱ^r^{e an}^ot^h^e^{r y}^ear’^s
^w^o^rt^h^of^f^uⁿ^d^sⁱⁿ^2004.

^*^No^te,^th^is^ex^am^p^l^{e d}^o^e^{s n}^o^{t in}^clu^d^{e an}^estim^{ate f}^o^rⁱⁿ^f^l^atioⁿ^.^W^h^en^f^uⁿ^dⁱⁿ^g^m^u^lti-^y^ear^coⁿ^t^r^acts,
^Coⁿ^g^r^{ess g}^eⁿ^e^r^a^llyⁱⁿ^clu^d^{es an}^estim^{ate o}^fⁱⁿ^f^l^atioⁿ^an^d^ad^d^s^{it to}^th^{e to}^{tal co}^st.
Moderate Rehabilitation. The Housing and Community Development
Amendments of 1978 (P.L. 95-557) added the moderate rehabilitation component to
the Section 8 program, which expanded Section 8 rental assistance to projects that
were in need of repairs costing at least $1,000 per unit to make the housing decent,
safe, and sanitary. Over the next 10 years, however, this component of the program
was fraught with allegations of abuse; the process of awarding contracts was
considered unfair and politicized. Calls for reform of the moderate rehabilitation
program led to its suspension. It has not been funded since 1989.
Existing Housing Certificates
The existing housing certificate component of the Section 8 program was
created in the beginning of the Section 8 program and continued until 1998. Under
the existing housing certificate program, PHAs and HUD would enter into an Annual
Contributions Contract (ACC) for the number of units that would be available to
receive assistance. Contracts were originally written for five years and were
renewable, at HUD’s discretion, for up to 15 years. In the contract, HUD agreed to
pay the difference between the tenant’s rental payment and the contract rent of a unit.
The contract rent was generally limited to the HUD-set Fair Market Rent (FMR) for
the area.

Table 3. What is Fair Market Rent (FMR)?
^{FMRs ar}^{e g}^r^o^{ss r}^eⁿ^t^estim^{ates th}^{at in}^clu^d^{e b}^o^t^h^sh^elter^r^eⁿ^t^p^a^id^b^y^th^e^ten^aⁿ^t^to^th^{e lan}^d^lo^r^d^an^d^th
^th^{e co}^{st o}^f^ten^aⁿ^t^-^p^aid^u^tilities,^ex^cep^t^telep^h^oⁿ^es^{. Each}^y^{ear, HUD sets FMRs eith}^{er at th}^e⁴⁰^th
^p^e^r^cen^{tile r}^eⁿ^t^o^r^{at th}^{e 5}⁰^percen^{tile ren}^t^f^o^{r each}^m^e^tropolitan^{or n}^oⁿ^-^m^e^tropolitan^s^t^atis^tical^th
^{area in}^th^{e n}^a^tion^,^as^w^e^{ll as}^f^o^{r each}^s^t^{ate. For m}^o^s^t^areas^{, th}^{e FMR}^is^s^e^{t at th}^{e 40}^p^e^r^cen^tile
^ren^t^pai^d^by^recen^t^m^o^v^e^rs^{, w}^hⁱ^c^h^m^ean^s^t^h^at^40%^of^al^l^s^t^an^dar^d^q^u^a^lity^r^eⁿ^t^al^h^o^u^sⁱⁿ^g^uⁿⁱ^t^s
^r^e^nt^e^d^wⁱ^t^hⁱⁿ^t^h^e^p^a^st¹⁸^m^o^nt^{hs ha}^ve^r^e^nt^{s a}^t^o^r^b^e^l^o^w^t^h^e^FM^R.^Fo^r^so^m^e^hi^{gh c}^o^st^a^r^e^a^s^,^t^h^e^th
^FMR^is^{set a}^t^t^h^e⁵⁰^p^e^r^cen^{tile r}^eⁿ^t^o^r^th^{e m}^e^dⁱ^an^r^eⁿ^t^{, so}^th^{at 5}⁰^%^o^f^stan^d^a^r^d^uⁿ^{its f}^a^{ll at o}^r
^b^e^lo^w^th^{e FMR. I}ⁿ^so^m^e^lo^w^-^co^{st co}^m^m^uⁿ^{ities, th}^{e FMR is r}^a^ised^to^th^e^statew^id^e^FMR,^if^{it is}
^hi^ghe^r^.
After entering into a contract with HUD, PHAs would advertise the availability
of certificates for low-income tenants. The existing housing certificate program was
primarily tenant-based, meaning that the assistance was attached to the tenant.
Families selected to receive assistance were given certificates as proof of eligibility
for the program; with their certificates, families could look for suitable housing in the
private market. Housing was considered suitable if it rented for the FMR or less and
met Housing Quality Standards (HQS).³ Once the household found a unit, they
signed a lease and agreed to pay 30% of their adjusted income for rent. The
remainder of the rent was paid by HUD to the landlord on behalf of the tenant. If a
family vacated a unit in violation of the lease, HUD had to make rental payments to
the landlord for the remainder of the month in which the family vacated, and pay
80% of the contract rent for an additional month. If the family left the unit at the end
of their lease, they could take their certificate with them and use it for their next
home. HUD also paid the PHA an administrative fee for managing the program. The
amount of this administrative fee was set by Congress in appropriations legislation
each year.
PHAs were permitted to use up to 15% of their Section 8 certificates for
project-based housing. In project-based Section 8 existing housing, the subsidy was
attached to the unit, which was selected by the PHA, and not to the tenant. This
meant that when a tenant vacated a unit, another eligible tenant would be able to
occupy it, and HUD would subsidize the rent as long as a contract was in effect
between the PHA and the owner.
In 1998, the Quality Housing and Work Opportunity Reconciliation Act
(QHWRA) (P.L. 105-276) merged the Section 8 existing housing certificate program
with the voucher program (see below) and converted all certificates to vouchers,
effectively ending the Section 8 existing housing certificate program.
The Voucher Program. The largest component of today’s Section 8
program, the voucher program, was first authorized by the Housing and Urban-Rural
Recovery Act of 1983 (P.L. 98-181). It was originally a demonstration program, but
was made permanent in 1988. Like the Section 8 existing housing certificate
program, the voucher program is administered by PHAs and is tenant-based, with a

³ Housing Quality Standards (HQS) are minimum standards set by HUD that set acceptable
conditions for interior living space, building exterior, heating and plumbing systems, and
general health and safety.

project-based component. However, under the voucher program, families can pay
more of their incomes toward rent and lease apartments with rents higher than FMR.
Today’s Section 8 Program
Today’s Section 8 program is really two programs, which, combined, serve
almost 3.5 million households.
Section 8 Project-Based Rental Assistance
The first program under Section 8 can be characterized as Section 8 project-
based rental assistance. This program includes units created under the new
construction, substantial rehabilitation, and moderate rehabilitation components of
the earlier Section 8 program that are still under contract with HUD. Although no
new construction, substantial rehabilitation, or moderate rehabilitation contracts have
been created for a number of years, about 1.3 million of these units are still funded
under multiyear contracts that have not yet expired and do not require any new
appropriations, or multiyear contracts that had expired and are renewed annually,
requiring new appropriations.
Families that live in Section 8 project-based units pay 30% of their incomes
toward rent. In order to be eligible, families must be low-income; however, at least
40% of all units must be available for very low-income families. If a family leaves
the unit, the owner will continue to receive payments as long as he or she can move
another eligible family into the unit.
Owners of properties with project-based Section 8 rental assistance receive a
subsidy from HUD, called a Housing Assistance Payment (HAP). HAP payments
are equal to the difference between the tenant’s payments (30% of income) and a
contract rent, which is agreed to between HUD and the landlord. Contract rents are
meant to be comparable to rents in the local market, and are typically adjusted
annually by an inflation factor established by HUD or on the basis of the project’s
operating costs. Project-based Section 8 contracts are managed by contract
administrators. While some HUD regional offices still serve as contract
administrators, the Department’s goal is to contract the function out entirely to
outside entities, including state housing finance agencies, PHAs, or private entities.
When project-based HAP contracts expire, the landlord can choose to either
renew the contract with HUD for up to five years at a time (subject to annual
appropriations) or convert the units to market rate. In some cases, landlords can
choose to “opt-out” of Section 8 contracts early. When an owners terminates an HAP
contract with HUD, either through opt-out or expiration — the tenants in the building
are provided with enhanced vouchers designed to allow them to stay in their unit (see
discussion of enhanced vouchers below). In 2008, about 4,000 Section 8 project-
based rental assistance contracts were expected to expire; it is unclear how many will
choose to renew.

In 2000, about 60% of the households that lived in project-based Section 8 units
were elderly households, about 15% were disabled households, and about 21% were
non-elderly, non-disabled households with children. Of the non-elderly, non-disabled
households (including the approximately 5% who did not have children), about half
received income solely from work, about 16% received income solely from welfare,
about 10% combined work and welfare, and about 20% reported no income or
income from other sources (such as child support). The average earnings of the non-
elderly, non-disabled households were a little more than $11,000 per year.⁴
Section 8 Tenant-Based Housing Choice Vouchers
When QHWRA merged the voucher and certificate programs in 1998, it
renamed the voucher component of the Section 8 program the Housing Choice
Voucher program. The voucher program is funded in HUD’s budget through the
tenant-based rental assistance account. The federal government currently funds more
than 2 million Section 8 Housing Choice Vouchers. PHAs administer the program
and receive an annual budget from HUD. Each has a fixed number of vouchers that
they are permitted to administered and they are paid administrative fees.
Vouchers are tenant-based in nature, meaning that the subsidy is tied to the
family, rather than to a unit of housing. In order to be eligible, a family must be very
low-income (50% or below area median income (AMI)),⁵ although 75% of all
vouchers must be given to extremely low-income families (30% or below AMI). To
illustrate the regional variation in these definitions of low-income and their
relationship to federal definitions of poverty, Table 1 compares HUD’s income
definitions to the Department of Health and Human Service’s (HHS) poverty
guidelines for several geographic areas. Note that HHS poverty guidelines are
uniform in all parts of the country (except for Alaska and Hawaii, not shown in the
following table).
Table 4. Income Thresholds
for a Three-Person Family in Selected Areas in 2007
^{HUD Very}^L^o^w^-^{Hud E}^x^trem^ely^HHS^Poverty
^Iⁿ^c^o^me^Lⁱ^mi^t^s^Lo^w^-^Inc^o^m^e^Limⁱ^t^s^G^u^idelines
^Jef^f^e^rs^on^C^o^uⁿ^t^y^,^MS^$17,450^$10,500^$17,170
^Mi^s^s^o^u^l^{a, MT}^24,550^14,700^17,170
^N^e^w^Y^o^rk^{, N}^Y^31,900^19,150^17,170
^S^aⁿ^F^r^an^ci^s^c^{o, C}^A^50,900^30,550^17,170
^S^o^urce:^D^e^part^m^eⁿ^t^of^H^o^u^sⁱⁿ^g^an^{d U}^r^ban^D^e^v^e^l^opm^en^t^{2007 In}^com^e^Lⁱ^mⁱ^t^s^an^{d D}^e^part^m^eⁿ^t^o^f
^H^eal^t^h^an^{d H}^u^m^aⁿ^S^e^rvⁱ^ces^{2007 Pov}^e^rt^y^G^uⁱ^d^elⁱⁿ^es^.

⁴ CRS calculation of data in Jeffrey M. Lubell, Mark Shroder, Barry Steffen, “Work
Participation and Length of Stay in HUD-Assisted Housing,” Cityscape, vol. 6, no. 2 (2003).
⁵ In some limited circumstances, families can earn up to 80% of AMI and still be eligible.

Families who receive vouchers use them to subsidize their rents in private
market apartments. Once an eligible family receives an available voucher, the family
must find an eligible unit. In order to be eligible, a unit must meet minimum housing
quality standards (HQS) and cost less than 40% of the family’s income⁶ plus the HAP
paid by the PHA. The HAP paid by the PHA for tenant-based vouchers, like the
HAP paid for Section 8 project-based rental assistance, is capped; however, with
tenant-based vouchers, PHAs have the flexibility to set their caps anywhere between
90% and 110% of FMR (up to 120% FMR with prior HUD approval). The cap set
by the PHA is called the payment standard. Once a family finds an eligible unit, the
family signs a contract with HUD, and both HUD and the family sign contracts with
the landlord. The PHA will pay the HAP (the payment standard minus 30% of the
family’s income), and the family will pay the difference between the HAP and the
rent (which must total between 30% and 40% of the family’s income). After the first
year, a family can choose to pay more than 40% of their income towards rent. PHAs
may also choose to adopt minimum rents, which cannot exceed $50. (See box below
for an example.)
Table 5. How is a Voucher Subsidy Calculated?
^Fir^s^{t, a P}^H^A^{sets a p}^a^y^m^en^{t stan}^d^a^r^d^{. A}^p^a^y^m^en^{t stan}^d^a^r^d^is^a^m^a^xⁱ^m^u^m^su^b^s^id^y^lev^e^l^th^at^{is eq}^u^a^l
^t^o^an^y^w^h^e^re^b^e^t^w^e^eⁿ⁹⁰^%^a^{nd 110%}^of^F^aⁱ^r^Mark^et^R^eⁿ^t^(F^MR^{). T}^h^en^{, a PH}^A^cal^cu^l^a^t^e^s^a
^m^a^xⁱ^m^u^m^Ho^u^sⁱⁿ^g^A^ssistan^{ce P}^a^y^m^en^{t (}^H^A^P⁾^.^A^HA^P^is^th^e^am^o^uⁿ^t^th^{at th}^{e P}^H^A^w^{ill p}^a^y^th^e
^lan^d^lo^r^d^an^d^{it is eq}^u^a^{l to}^th^e^g^r^eater^o^f^th^{e r}^eⁿ^t^f^o^{r an}^apartm^en^{t or th}^{e pay}^m^en^{t s}^t^an^{dard, m}ⁱⁿ^u^s
^{30% of}^a^f^a^m^ily^’^sⁱⁿ^com^e^.^T^h^e^f^a^m^ily^can^th^en^g^o^ou^{t to th}^{e ren}^t^{al m}^a^rk^{et an}^{d f}ⁱⁿ^d^an^apartm^en^t.
^In^{order t}^o^be^approv^ed^t^h^at^apart^m^en^t^canⁿ^o^t^ren^t^f^o^{r m}^o^{re t}^h^an^t^h^{e m}^a^xⁱ^m^u^m^H^A^{P pl}^u^s^40%^of
^{a f}^a^m^ily^’^sⁱⁿ^co^m^e^{. I}^f^th^{e r}^eⁿ^t^f^o^r^th^{e u}ⁿ^{it is less}^th^an^th^e^HA^P^p^l^u^s³⁰^%^o^f^{a h}^o^u^s^eh^o^l^d^’^{s in}^co^m^e^,
^th^{e h}^o^u^s^eh^o^l^d^m^u^{st still p}^a^y³⁰^%^o^f^th^eirⁱⁿ^co^m^e^to^w^a^r^d^r^eⁿ^t^{, b}^u^{t th}^{e HA}^P^w^{ill b}^e^r^e^d^u^ced^.

^F^o^{r ex}^am^pl^{e, con}^sⁱ^d^{er a}^f^a^mⁱ^l^y^w^h^o^earn^s^{$900 per m}^oⁿ^t^h^an^{d l}ⁱ^v^esⁱⁿ^{a com}^m^uⁿⁱ^t^y^wⁱ^t^h^an^F^M^R
^of^{$800 per m}^oⁿ^t^h^fo^r^t^h^e^appropri^a^t^e^sⁱ^{ze apart}^m^en^t^.^If^t^h^ei^{r PH}^A^h^a^s^{a pay}^m^en^t^s^t^an^{dard of}
^110%^of^F^M^R^,^th^en^th^{e m}^a^xⁱ^m^u^m^HA^P^{a f}^a^m^ily^can^receiv^e^is^{$610 per m}^oⁿ^t^h^{[($800 *}^110%^{) -}
^{($900 *}^30%^{)]. T}^h^{e f}^a^mⁱ^l^y^can^t^h^eref^{ore s}^h^{op f}^o^{r an}^apart^m^en^t^wⁱ^t^h^{a ren}^t^of^u^p^t^o^{$970 per m}^oⁿ^t^h
^{[$610 + ($900 *}^40%^)].

^If^th^{e f}^a^m^ily^fⁱⁿ^d^s^an^apartm^en^{t f}^o^{r $970 per m}^oⁿ^t^h^,^th^{e P}^H^A^w^{ill pay}^th^e^m^a^xⁱ^m^u^m^HA^P^($610)
^an^{d th}^{e f}^a^m^ily^w^{ill pay}^{40% of}^th^{eir in}^com^e^{per m}^oⁿ^t^h^($360).

^If^t^h^e^f^a^mⁱ^l^y^fⁱⁿ^d^s^an^apart^m^en^t^f^o^{r l}^e^s^s^t^h^an^t^h^{e pay}^m^en^t^s^t^an^{dard, s}^a^y^$750^per^m^oⁿ^t^h^,^t^h^e^f^a^mⁱ^l^y
^w^ill^p^a^y³⁰^%^o^f^th^eirⁱⁿ^co^m^e^to^w^a^r^d^r^eⁿ^t^{, an}^d^th^{e P}^H^A^w^ill^p^a^y^th^e^dⁱ^f^f^e^r^eⁿ^ce^b^e^tw^een^th^e^r^eⁿ^t^an^d
^30%^of^th^e^f^a^m^ily^’^sⁱⁿ^com^e^{. In}^th^is^cas^{e, th}^{e f}^a^m^ily^w^{ill pay}^$270^[$900^*^30%]^an^d^th^e^P^H^A^w^ill
^pay^{$480 [$750 -}^{(900 *}^30%^)].
Once a family is using a voucher, the family can retain the voucher as long as
the PHA has adequate funding for it and the family complies with PHA and program
requirements. If a family wants to move, the tenant-based voucher can move with
the family. Once the family moves to a new area, the two PHAs (the PHA that

⁶ This 40% cap on a tenant’s contribution is in effect only for the first year. After the first
year, if rent increases and the family wishes to continue to live in the unit, then the family
can choose to contribute more than 40% of its income toward rent.

originally issued the voucher and the PHA that administers vouchers in the new area)
negotiate regarding who will continue to administer the voucher.⁷
The voucher program does not contain any mandatory time limits. Families exit
the program in one of three ways: their own choice, non-compliance with program
rules (including non-payment of rent), or if they no longer qualify for a subsidy.
Families no longer qualify for a subsidy when their incomes, which must be
recertified annually, have risen to the point that 30% of that income is equal to rent.
At that point the HAP payment will be zero and the family will no longer receive any
subsidy.
In 2000, about 17% of households with vouchers were elderly households, about
22% were disabled households, and about 53% were non-elderly, non-disabled
households with children. Of the non-elderly, non-disabled households (including
the approximately 8% that did not have children), about half received their income
solely from work, about 20% received their income solely from welfare, about 6%
combined work and welfare, and about 22% reported no income or income from
other sources (such as child support). The average earnings of the non-elderly, non-
disabled households were a little more than $12,000 per year.⁸
Project-Based Vouchers. Vouchers, like Section 8 existing housing
certificates, can be project-based. In order to project-base vouchers, a landlord must
sign a contract with a PHA agreeing to set-aside up to 25% of the units in a
development for low-income families. Each of those set-aside units will receive
voucher assistance as long as a family that is eligible for a voucher lives there.
Families that live in a project-based voucher unit pay 30% of their adjusted
household income toward rent, and HUD pays the difference between 30% of
household income and a reasonable rent agreed to by both the landlord and HUD.
PHAs can choose to project-base up to 20% of their vouchers. Project-based
vouchers a portable; after one year, a family with a project-based voucher can
convert to a tenant-based voucher and then move, as long as a tenant-based voucher
is available.
Tenant Protection or Enhanced Vouchers. Another type of voucher,
called a tenant protection voucher, is given to families that were already receiving
assistance through another HUD housing program, before being displaced. Examples
of instances when families receive tenant-protection vouchers include when public
housing is demolished or when a landlord has terminated a Section 8 project-based
rental assistance contract. Families that risk being displaced from project-based

⁷ The feature of a voucher that permits a family to move from one jurisdiction to another
while retaining their assistance is referred to as portability. The administration of portability
has proven to be complicated for PHAs. In some cases, the originating PHA is billed for the
cost of the family’s voucher by the receiving PHA; in other cases, the receiving PHA
transitions the new family onto one if its vouchers and the original voucher reverts to the
originating PHA. PHA advocacy groups have called for HUD to make regulatory reforms
to ease the administration of portability.
⁸ CRS calculation of data in Jeffrey M. Lubell, Mark Shroder, Barry Steffen, “Work
Participation and Length of Stay in HUD-Assisted Housing,” Cityscape, vol. 6, no. 2 (2003).

Section 8 units are eligible to receive a special form of tenant-protection voucher,
called an enhanced voucher. The “enhanced” feature of the voucher allows the
maximum value of the voucher to grow to be equal to the new rent charged in the
property, as long as it is reasonable in the market, even if it is higher than the PHA’s
payment standard. They are designed to allow families to stay in their homes. If the
family chooses to move, then the enhanced feature is lost and the voucher becomes
subject to the PHA’s normal payment standard.
Special Purpose Vouchers. The voucher program also has several special
programs or uses. These include family unification vouchers and vouchers used for
homeownership. Family unification vouchers are given to families for whom the
lack of adequate housing is a primary factor in the separation, or threat of imminent
separation, of children from their families or in preventing the reunification of the
children with their families. According to the Child Welfare League of America,
HUD has awarded 33,497 family unification vouchers to PHAs since the inception
of the program.⁹
While there are no specifically authorized “homeownership vouchers,” since
2000 certain families have been eligible to use their vouchers to help pay for the
monthly costs associated with homeownership. Eligible families must work full-time
or be elderly or disabled, be first-time homebuyers, and agree to complete first-time
homebuyer counseling. PHAs can decide whether to run a homeownership program
and an increasing number of PHAs are choosing to do so. According to HUD’s
website, more than 5,700 families have closed on homes using vouchers.¹⁰
Family Self-Sufficiency Coordinators. The Family Self Sufficiency (FSS)
program was established by Congress as a part of the National Affordable Housing
Act of 1990 (P.L. 101-625). The purpose of the program is to promote coordination
between the voucher program and other private and public resources to enable
families on public assistance to achieve economic self-sufficiency. Families who
participate in the program sign five-year contracts in which they agree to work
toward leaving public assistance. While in the program, families can increase their
incomes without increasing the amount they contribute toward rent. The difference
between what the family paid in rent before joining the program and what they would
owe as their income increases is deposited into an escrow account that the family can
access upon completion of the contract. For example:

⁹ HUD awarded 33,497 FUP vouchers from 1992 to 2001. Each award included five years
of funding per voucher and the voucher’s use was restricted to FUP-eligible families for
those five years. At the end of those five years, PHAs were eligible to convert those FUP
vouchers to regular vouchers. While the five-year use restrictions have expired for all FUP
vouchers, according to surveys conducted by the Child Welfare League of America, the vast
majority of PHAs have continued to use their original FUP vouchers for FUP-eligible
families and some have even chosen to use some regular-purpose vouchers for FUP families.
As a result of these two factors, it is unclear how many families are receiving FUP vouchers
at this time.
¹⁰ [http://www.hud.gov/offices/pih/programs/hcv/homeownership/publiclist_vhosites.xls],
accessed January 4, 2007.

If a family with a welfare benefit of $450 per month begins working, earning
$800 per month, the family’s contribution towards rent increases from $135 per
month to $240 per month. Of that $240 the family is now paying towards rent,
$105 is deposited into an escrow account. After five years, the family will have
$6,300 plus interest in an escrow account to use for whatever purpose the family
sees fit.
PHAs receive funding for FSS coordinators, who help families with vouchers
connect with services, including job training, child care, transportation and education.
Demonstrations. Two large-scale demonstrations are currently under way
in the Section 8 voucher program. The Moving to Opportunity Fair Housing
Demonstration (MTO) was authorized in 1992 (P.L. 102-550, P.L. 102-139). MTO
combines housing counseling and services with tenant-based vouchers to help very
low-income families with children move to areas with low concentrations of poverty.
The experimental demonstration was designed to test the premise that changes in an
individual’s neighborhood environment can change his or her life chances. Since
participating families were selected between 1994 and 1998, the full results of the 10-
year demonstration are not yet available. However, HUD has published several
interim evaluations of the short- and mid-term impacts of MTO. They have found
some improvements in housing quality, neighborhood conditions, safety and child
and adult health for families that moved to lower-poverty areas. Mixed effects were
found on youth delinquency and risky behavior. Small positive impacts were found
on child education, but no impacts have yet been seen on employment, earnings, or
receipt of public assistance.¹¹
The Moving to Work Demonstration, authorized in 1996 (P.L. 104-134), was
created to give HUD and PHAs the flexibility to design and test various approaches
for providing and administering housing assistance. The demonstration directed
HUD to select up to 30 PHAs to participate. The goals were to reduce federal costs,
provide work incentives to families, and expand housing choice. MTW allows
participating PHAs greater flexibility in determining how to use federal Section 8
voucher and Public Housing funds by allowing them to blend funding sources and
experiment with rent rules, with the constraint that they had to continue to serve
approximately the same number of households. It also permits them to seek
exemption from most Public Housing and Housing Choice Voucher program rules.
An evaluation for MTW published in January 2004 reported:
The local flexibility and independence permitted under MTW appears to allow
strong, creative [P]HAs to experiment with innovative solutions to local
challenges, and to be more responsive to local conditions and priorities than is
often possible where federal program requirements limit the opportunity for
variation. But allowing local variation poses risks as well as provides potential
benefits. Under MTW, some [P]HAs, for instance, made mistakes that reduced
the resources available to address low-income housing needs, and some
implemented changes that disadvantaged particular groups of needy households
currently served under federal program rules. Moreover, some may object to the

¹¹ Moving to Opportunity Fair Housing Demonstration Program Interim Impacts
Evaluation, US Department of Housing and Urban Development, Prepared by Larry Orr,
et al., Abt Associates; and Lisa Sanbonmatsu, et al., National Bureau of Economic
Research, September 2003.

likelihood that allowing significant variation across [P]HAs inevitably results in¹²
some loss of consistency across communities.
Conclusion
The combined Section 8 programs are the largest direct housing assistance
program for low-income families. With a combined FY2008 budget of more than
$22 billion, they reflect a major commitment of federal resources. That commitment
has led to some successes. More than 3 million families are able to obtain safe and
decent housing through the program, at a cost to the family that is considered
affordable. However, these successes come at a high cost to the federal government.
Given current budget deficit levels, Congress has begun to reevaluate whether the
cost of the Section 8 programs, particularly the voucher program, are worth their
benefits. Proposals to reform the program abound, and whether the current Section
8 programs are maintained largely in their current form, changed substantially, or
eliminated altogether are questions currently facing Congress.

¹² Housing Agency Responses to Federal Deregulation: An Assessment of HUD’s “Moving
to Work” Demonstration, U.S. Department of Housing and Urban Development, Prepared
by Martin D. Abravanel et al., Urban Institute, January 2004.