Federal Cuts Hit Home

Rent-subsidy changes could affect thousands with low income.

Three years ago, Myrtis Nichol Jones put her name on the waiting list for federally subsidized housing in Tacoma, where she used to live. In February, her name finally came up. "At first I felt it was like a blessing," says Jones, a 32-year-old now living in a Columbia City apartment. Paying rent takes a huge bite out of the Social Security income she receives for mental and physical disabilities, including nerve damage from a car accident. But the elation did not last. Eligibility questions, in part, she says, related to a 10-year-old drug charge, delayed immediate assignment of what is known as a Section 8 voucher. And while she was trying to clear that up, the Tacoma Housing Authority suddenly recalled 180 vouchers it had just given out and stopped issuing any more.

The reason, as Tacoma Housing Authority Executive Director Peter Ansara explains, is that the agency woke up one day and found itself with a "$2.6 million problem." That day was April 22, when the federal Department of Housing and Urban Development announced new funding rules for the fiscal year that was about to end in June—rules that were retroactive to January. Rather than reimbursing local housing authorities for whatever they were paying on Section 8 units, HUD asserted that it would only pay, per unit, what it was paying last year, plus an adjustment for inflation. Like a number of other housing authorities across the country, Tacoma found that the new formula didn't meet their current costs. "We were running a deficit without even knowing it," Ansara told reporters last week in a conference call organized by the D.C.–based nonprofit Center on Budget and Policy Priorities.

While housing authorities in Tacoma and elsewhere have been taking unprecedented measures to deal with the crisis, they are bracing for more cuts. In a first attack on escalating Section 8 costs, which in five years have grown from 36 percent to 50 percent of HUD's budget, the Bush administration has submitted a proposal to Congress that would cut $1.6 billion from the program in the 2005 fiscal year, which began July 1. And the White House has indicated that it wants to restructure Section 8, which is the backbone of governmental housing assistance for low-income people. (It allows clients to use vouchers in the private rental market.) Along the lines of funding changes brought about by welfare reform, the White House proposes to run the housing program through block grants to states, asserting that states will be able to cut costs while serving the same number of people under more flexible rules.

In anticipation, housing authorities across Washington are discussing ways to cut costs. Ideas include increasing the payments required by clients (who currently pay 30 percent of their income on rent), allowing more higher-income people into the program, and giving vouchers expiration dates. Some say they might still need to reduce the number of families they serve. Housing authorities in Seattle and in King and Snohomish counties have already closed their waiting lists. The Seattle Housing Authority has more than 4,000 people on the list.

Tacoma has quickly become the Section 8 "meltdown story" of the state, as one housing authority director put it. Ansara, of the city's housing authority, says the feds' new formula for 2004 provides $62 per unit less than what the agency is paying. Costs have gone up from last year because of increasing utility rates and decreasing income among the Section 8 population, which Ansara thinks is linked to high unemployment in the city. (The less money clients are able to pay in rent, the more the housing authority doles out.) In addition, the housing authority used Section 8 vouchers last year to relocate people from a public housing project undergoing redevelopment, and those people tended to have bigger families and require more expensive apartments.

Ansara's agency filed an appeal last week with HUD requesting more money. As a stopgap, though, the housing authority spent its $1.7 million reserve fund and borrowed $250,000 from the city. It also decided to lower its commitment to the neediest people—those making less than 30 percent of the median income. "It's a fracture in our values, but that's what we're going to do," Ansara says. As a last resort, he says, the agency might have to terminate up to 400 families from the program.

Seattle, in contrast, is well positioned. All but 1,000 of Seattle Housing Authority's 7,500 Section 8 vouchers come through a special demonstration contract with HUD, called "Move to Work," which is exempt from the new funding rules. Agency spokesperson Virginia Felton says that "chances are" the other 1,000 vouchers will remain intact. But she notes that the Move to Work contract expires in 2006, leaving the Seattle Housing Authority vulnerable to future federal cuts. "We're still going to be in the situation of having lost money," she says. "One option we might have is to say, 'OK, you have to pay 40 percent'" of income on rent. She says other options on the table include time limits and serving higher-income people.

Current federal rules allow vouchers to go to people making up to 80 percent of the median income, and the administration is encouraging housing authorities to incorporate more people at the upper end of the spectrum—the rationale in part being that tenants today have a disincentive to find work. King County Housing Authority Executive Director Stephen Norman, however, draws a line. Serving higher-income folks "takes away from our core mission," he says. "We ain't going to do that."

But Norman acknowledges that the agency, which serves every municipality in the county except Seattle, will have to do something. Although it survived the 2004 funding changes unscathed, it anticipates a $300,000 to $500,000 shortfall should the 2005 cuts go through. If further cuts continue as expected, he says, the agency might have to cut 800 families out of Section 8 rent subsidies over the next five years.

Still, HUD might be right that housing authorities can trim at least some costs without hurting clients. The Everett Housing Authority took a look at falling rents in its market and realized that its payment standards were out of whack. It reduced the amount it will pay, for instance, on a two-bedroom unit (including utilities) from a maximum $929 to $890. Back in Seattle, Jones' one-bedroom apartment in Columbia City rents for $565—$216 less than the maximum cost set by the Seattle Housing Authority for rent and utilities on a one-bedroom unit. Karyn Kuever, who owns the apartment building where Jones lives, as well as a number of others in SeaTac, says she doesn't often get tenants using Section 8 vouchers. Her apartments are too cheap.


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