Strengthening Public Housing Agencies: Why It Matters

Susan M. Hoffmann

University of Pennsylvania
Partnership for Effective Public Administration and Leadership (PEPAL)
PEPAL Brief 2018-01
September 2018
About the Author

Susan M. Hoffmann is Professor of Political Science at Western Michigan University. Her

published work includes Mission Expansion in the Federal Home Loan Bank System with Mark
K. Cassell (SUNY Press, 2010); Politics and Banking (Johns Hopkins University Press, 2001);
and journal articles on financial services regulation and capital budgeting. As a former
practicing city planner, Susan worked in neighborhood planning, economic development, and
capital budgeting for the City of Cleveland. In the world of volunteers, she has served on the
board of Kalamazoo Neighborhood Housing Services, the plan commission of the City of
Monona, Wisconsin, and is an incorporating member of the Metropolitan Milwaukee Fair
Housing Council. Susan is currently Chair of the St. Joseph Housing Commission in St. Joseph,
Michigan.

About PEPAL
The mission of Penn's Partnership for Effective Public Administration and Leadership (PEPAL)
is to seed, support, and spotlight significant ideas about how to improve government
performance and solve public problems, local, national, and global. Established in 2018,
PEPAL is affiliated with two Penn School of Arts and Sciences programs, the Fels Policy
Research Initiative (FPRI) and Fox Leadership International (FLI). PEPAL's institutional
partners include the Brookings Institution's Center for Effective Public Management, the Volcker
Alliance, and the Innovations in American Government Program of Harvard University's John F.
Kennedy School of Government. PEPAL disseminates ideas through Briefs, Reports, and Public
Symposiums. The views expressed by authors, panelists, or others in conjunction with PEPAL
Briefs, Reports, and Public Symposiums do not represent the views of the University of
Pennsylvania and do not represent the views of any other PEPAL-affiliated individuals or
institutions.
Table of Contents

Introduction .............................................................................................................. 1

Public Housing Agencies ......................................................................................... 1

Programs ................................................................................................................... 4
Public Housing ............................................................................................... 4
Housing Choice Voucher Program .............................................................. 9
Rental Assistance Demonstration .............................................................. 13

Concluding Remarks ............................................................................................. 15

References ............................................................................................................... 16
 Introduction

In the United States in the twenty-first century increasing numbers of low-income

families and individuals – across racial and ethnic groups, household types, and regions – are
unable to afford decent rental housing. The ongoing affordability challenge for moderate- and
even middle-income households in some markets only intensifies the problem for the lower-
income households with whom the better-off compete. HUD’s Worst Case Housing Needs 2017
Report to Congress offers numbers to sketch the problem: 19.3 million very low-income renter
households, over eight million of them with worst case housing needs. Matthew Desmond’s
Evicted (2016) describes the problem through the ethnographic lens, with stories of individuals
and families who cannot pay the rent and find themselves in a cycle in which eviction is not only
an effect, but indeed a cause of their deepening poverty.

HUD points to a shrinking supply of rental housing affordable by very low-income

households as a central driver of the problem, while Desmond calls for major expansion of the
federal voucher program as its solution. In either case – whether we view the problem as one of
inadequate supply or lack of effective demand – local Public Housing Agencies (PHAs) are on
the front line in implementing the alternative solutions. These approximately 3,800 agencies
across the U.S. own and operate public housing, administer tenant-based vouchers, and
increasingly, function as developers to preserve existing subsidized apartments and build new
ones. But PHAs are not well-understood by state and federal policy makers, the general-purpose
governments of the localities in which they operate, the communities and citizens they serve, or
scholars of public administration. While any of these audiences may have a sense of public
housing as a (failed) program, few among them have an understanding of PHAs as public
administrative agencies and special-purpose local governments for which managing publicly-
owned housing estates is just one program.

This report attempts to direct the attention of scholars of public administration to PHAs,
and to brief public policy makers and local public managers on PHAs so they can partner with
these agencies more effectively to address the problem of rental housing affordability. The first
section defines a PHA and offers a snapshot of the agencies’ collective scope. The second and
third sections look at PHAs’ two main programs: public housing and housing choice vouchers,
sketching the history of the programs, how they work, and some of the challenges PHA
managers face. The fourth section describes the current Rental Assistance Demonstration
program, in which PHAs are asked to be developers to preserve affordable housing by bringing
together their public housing and voucher programs. This report relies on the scholarly
literature; documents available on the websites of U.S. government agencies, think tanks,
industry groups, and PHAs; and interviews and conversations with PHA managers. Data for all
tables is from HUD’s “Picture of Subsidized Households” dataset, using 2017 data for Public
Housing Agencies (HUD 2018a).

Public Housing Agencies

Public Housing Agencies (PHAs) are, for the most part, special-purpose local
governments like school districts or transit authorities. They are established according to
enabling laws in their respective states to develop and operate, or assist in developing or
operating, housing for low-income families. They have boards of directors whose members are
elected or appointed, capital assets to manage in the public’s interest and the interest of program
1
beneficiaries, and revenue from operations and other public and private sources. Two quirks in
this characterization of PHAs should be noted. First, the term “public housing authority” is often
used interchangeably with “public housing agency” in the day-to-day language of people who
work in the field as well as in the scholarly literature, and “PHA” is used as the acronym for
both. This is because many state laws enable PHAs as special-purpose local governments under
the term “housing authority,” while the U.S. Housing Act of 1937 defines the platform for
assisted housing as a “public housing agency.” Second, the federal law does allow for PHAs
that are not local governments. Though they account for a small percentage of PHAs, states or
their agencies may function as PHAs under the federal law, and social service organizations may
be PHAs for purposes of administering vouchers (HUD 2017b, 101-102).

Public housing agencies originated in tandem with the federal government’s low-rent
housing program, commonly spoken of as “public housing.” In the early 1930s, through the
Public Works Administration (PWA), Washington experimented with three approaches for
reaching into localities to help provide low-rent housing: the PWA made low-interest loans to
private limited dividend corporations to develop and operate estates (Carl Mackley Houses in
Philadelphia, for example), built and owned estates directly, and provided development financing
to the earliest public housing authorities (for example, Cleveland). The first approach did not
take hold because the subsidies were too shallow to make projects feasible at low rents. The
second approach foundered in the shifting federalism relationship of the New Deal era:
Louisville and Detroit, among other cities, resisted the PWA’s attempts to use eminent domain to
acquire slum property on which to build low-rent housing, and federal courts sided with the
localities in U.S. v. Certain Lands in City of Louisville (1935) and U.S. v. Certain Lands in City
of Detroit (1935).

Thus in 1937, as it put the low-rent housing program on a more permanent footing, the
United States Housing Act adopted the third approach: assisting local authorities that would own
the housing estates, or “projects,” as they were termed in the statute. By that time, 29 states had
passed enabling legislation and 46 local housing agencies had been created (Keith 1973, 29).
The original statute defined “public housing agency” as
any State, county, municipality, or other governmental or public body (excluding the
Authority), which is authorized to engage in the development or administration of low-
rent housing or slum clearance. (P.L. No. 412)
The law went on to define “States” to include the District of Columbia and the territories,
dependencies and possessions of the United States. The “Authority” was the U.S. Housing
Authority in the Department of Interior, created by the statute to administer the program and to
inherit the assets and liabilities of previously responsible federal agencies. Reference to the
Authority, whose functions have been absorbed by HUD, has been deleted from the statute
(HUD 2017b, 101-102).

Currently 3,824 public housing agencies assist low-income renter households in the
United States.1 The vast majority of these are local PHAs established under the laws of the
respective states to operate at the municipal, county or regional level.2 These PHAs provide
housing assistance in communities across the country, in all 50 states and all territories,
possessions and dependencies except American Samoa. Table 1 illustrates this broad geographic
scope, showing the number and percentage of PHAs in each of the U.S. Census Bureau’s census
divisions.

2
 Table 1: Geographic distribution of PHAs

Census division Number %

East North Central 482 13%
West North Central 602 16%
Mid-Atlantic 352 9%
New England 261 7%
East South Central 396 10%
South Atlantic 533 14%
West South Central 789 21%
Mountain 168 4%
Pacific 159 4%
Territories, possessions, and dependencies 82 2%
Total 3824 100%

Source: All tables based on “Picture of Subsidized Households” dataset available at

https://www.huduser.gov/portal/datasets/assthsg.html#2009-2017_data

Table 2 shows PHAs by size, measured as total available subsidized units in all programs.
Note the large number of very small and small PHAs: 1,313 PHAs, 34% of the total, have fewer
than 100 total assisted units.

Table 2: PHAs by size

Size Number % Cum%

Very small (1-49) 706 18.5 18.5
Small (50-99) 607 15.9 34.3
Medium low (100-299) 1009 26.4 60.7
Medium high (300-999) 862 22.5 83.3
Large (1,000-4,999) 518 13.5 96.8
Extra large (5,000+) 122 3.2 100.0
Total 3824 100.0 100.0

PHAs provide about 3.5 million subsidized units for low-income renter households,
accounting for 70% of the total 5 million HUD-assisted units. HUD classifies its programs in
three categories shown in Table 3: privately owned project-based, public housing, and tenant-
based. The first category encompasses 1.47 million available units in privately-owned
subsidized projects. PHAs’ public housing and tenant-based assistance programs account for the
rest of the available HUD-assisted units.

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 Table 3: HUD-assisted rental units

Category and program Subsidized units available

Privately owned, project-based
Project Based Section 8 1,280,446
RentSup/RAP 3,983
S236/BMIR 26,110
202/PRAC 125,149
811/PRAC 34,361
Total private subsidized 1,470,049

Public Housing 1,040,888

Tenant-based
Housing Choice Vouchers 2,489,182
Mod Rehab 18,820
Total PHA units 3,548,890
Total HUD-assisted units 5,018,939

Programs

Public Housing

Public housing is widely viewed as a disaster of social welfare policy. Edward Goetz
(2013) describes two versions of the narrative of failure. In the conservative view, the program
was an overreach of public authority and capacity, predestined to fail. For liberals, the program
was crippled from the outset by design features in the authorizing legislation crafted to appease
political opponents.

In either version, no project is more iconic of the narrative of failure than Pruitt-Igoe in
St. Louis. Its 33 towers with almost 3,000 apartments opened from 1954 through 1956.
Demolition began less than twenty years later, in 1972, as implosion of the first tower was
broadcast on national television (Marshall 2015). The buildings had fallen victim to a dynamic
set in motion as St. Louis’s white working class, whose needs Pruitt-Igoe’s planners thought they
were anticipating, moved to the suburbs with the help of the FHA. Concentrated poverty and its
related social problems developed in the estate as the Great Migration continued and poor black
families without housing options took up the apartments. Poor residents could not afford rent
adequate to keep up the buildings, so maintenance declined and physical deterioration took hold
(Freidrichs 2011).

This trajectory occurred in other cities, though it usually took longer. Chicago comes to
mind. Stateway Gardens, constructed from 1955-1958, and adjacent Robert Taylor Homes, built
in 1961 and 1962, had a combined total of over 6,000 apartments. Demolition began at Stateway
Gardens in 1996 and at Robert Taylor Homes in 1998; both were entirely down by 2007.

Nevertheless, argues Goetz, many public housing authorities have quietly succeeded in
providing decent housing in publicly-owned estates since the 1930s despite difficult constraints.
4
It was noted above that PHAs and the public housing program were born together. The next
section returns to that joint genesis, and includes the program as well as PHAs in a brief policy
history.

Origins and evolution of public housing

The low-rent housing program began in the 1930s, but advocates for public intervention
to address the housing problem had highlighted the very poor condition of housing available to
low-income workers in the industrializing cities since the late nineteenth century. Jacob Riis’s
prose in How the Other Half Lives evoked the squalid conditions of New York City’s tenement
houses as effectively as his famous photographs:
…The hall is dark and you might stumble…. Here where the hall turns and dives into
utter darkness is a step, and another, another. A flight of steps. You can feel your way, if
you cannot see it…. All the fresh air that ever enters these stairs comes from the hall door
that is forever slamming, and from the windows of dark bedrooms that in turn receive
from the stairs their sole supply of the elements God meant to be free.… The sinks are in
the hallway, that all the tenants may have access—and all be poisoned alike by their
summer stenches…. Here a door. Listen! That short hacking cough, that tiny helpless
wail—what do they mean?.... The child is dying with measles. With half a chance it
might have lived; but it had none. That dark bedroom killed it. (1890, cited in Gelfand
1975, 106)

Drawing on Richard Wright (1941), Ben Austen (2018, 7) describes the Chicago
“kitchenette” available to black families arriving in Chicago in the 1920s. Landlords divided
existing apartments into multiple units, so that
With too many families crammed into airless wood-frame dwellings, forced to use
alternative heating and cooking methods, with exposed wires and extension cords snaking
in every direction from improvised walls and transoms to plug into the one or two
overloaded circuits, fires were rampant. And because the kitchenettes were divided by
nailed-up doorways and partitions that were themselves flammable, and because they
lacked windows and safe exits, the fires too often proved deadly.

The condition of housing available to low-income working families remained at the

forefront of the understanding of the problem in the 1930s. Advocates for federal intervention
formed peak associations. Labor leaders organized the Labor Housing Conference in 1934, with
an expansive vision of a non-commercial housing sector providing affordable housing for
working people. Social welfare reformers viewed housing conditions as part of their social
service brief; they organized the National Public Housing Conference in 1931. Advocacy came
also from organized professional public administration. The National Association of Housing
Officials (NAHO), sponsored by the Public Administration Clearing House then headed by
Louis Brownlow, was formed in 1933 to provide technical assistance to the housing movement.
This organization has been renamed National Association of Housing and Redevelopment
Officials (NAHRO) and remains an advocate for public housing and PHAs, and the chief source
of professional development for PHA managers.

Opponents objected to public housing as unfair government competition with private

enterprise, charging socialism. They included urban land owners and developers, represented by
the National Association of Real Estate Boards (NAREB); downtown business interests, led by

5
the U.S. Chamber of Commerce; the U.S. League of Building and Loans; and the Lumber
Dealers Association.

The Housing Act of 1937 emerged from this debate, authorizing the low-rent housing
program and defining public housing agencies as the federal government’s local implementation
partners. PHAs would issue bonds to finance development, which the federal government would
pay off; the cost of operations would come from rent. As noted above, compromises with
opponents were adopted; these were intended to make it clear that the program was not designed
to compete with the private market, but rather to supplement where private industry was not
meeting the need. Compromises included limits on per-unit construction cost, limits on the rent,
limits on the incomes of eligible residents, and a linkage to clearing “slum” housing. When the
Housing Act was reauthorized in 1949, these constraints were tightened (Keith 1973; Gelfand
1975).

The public housing program is eighty years old. Vale and Freemark (2012) offer a
periodization of subsidized housing’s history based on intended program beneficiaries. Though
they apply this analysis to federal housing subsidies more broadly, it serves well to capture
change in the low-rent public housing program that is the focus here. In the first phase, public
housing was focused on assisting the “worthy poor.” In the second, Congress directed that
priority for public housing go to the very poorest, leading to concentration of poverty. In the
third phase, again congressionally directed, PHAs have been asked to return to an effort to serve
less poor families with their public housing programs.

From the program’s origin in the1930s through the 1950s, the working poor were the
intended beneficiaries. They were viewed as temporarily poor and upwardly mobile, worthy of
the public’s assistance. 3 PHAs were selective about the families admitted to the new estates that
replaced cleared-out slums. The Chicago Housing Authority, for example, screened 28,000
families to choose 2,424 for its first three projects. War workers got preference during WWII,
and veterans went to the head of the line afterwards. In the big cities, race was an issue in
selection from the beginning. Black families who met the stringent criteria were admitted to
public housing, but usually segregated into particular developments—as in Detroit. In Chicago,
alternatively, the number of units available to black families was limited in terms of a quota
based on pre-project neighborhood composition.

In the second broad period, roughly the 1960s through the1990s, public housing became
home to many of the poorest families in the U.S., resulting in a concentration of poverty that
came to be viewed as a tragic mistake. How did this transformation occur? On one hand, home
ownership opportunities expanded for the white working class, who left public housing; other
white families did not apply to replace them. At the same time, pressure brought by the Civil
Rights Movement and the second surge of the Great Migration opened public housing to black
families. Big city public housing became increasingly segregated in the face of these twin
dynamics, as well as increasingly poor as manufacturing jobs left the core cities along with the
white working class. In 1969, recognizing and endorsing the increasingly poor occupancy of
public housing, Congress tightened limits on the rent that could be charged. The Brooke
Amendment capped tenant contributions toward rent at 25%. Thus poorer families paid lower
rents. Some PHAs – St. Louis for example – could not collect enough rent to keep the properties
well-managed and in good repair. The statute also provided for introduction of an operating
subsidy, but there was a lag in implementation and the formula was inadequate. In 1981 the
6
Omnibus Budget Reconciliation Act made changes to public housing that sealed the deal on
concentrated poverty. In an effort to serve the poorest, eligibility was largely restricted to
families with income below 50% of area medians (very-low income). Rent was increased to
30% of adjusted income, but this increase was paired with reduction to the operating subsidy.
Ceiling rents were removed, driving out any working families still present.

In 1998, federal policymakers tried to walk back concentrated poverty in public housing
and return to the less poor. The Quality Housing and Work Responsibility Act (QHWRA)
loosened income-eligibility requirements for admission such that in any year, forty percent of
new entrants must be extremely low-income, that is with incomes below 30% of area medians,
but the rest could have incomes up to 80% of area median (low-income). PHAs were permitted
to re-establish ceiling rents (also termed flat rents, or market rents), which would make it feasible
for less-poor residents to remain as their incomes rose.

Where are we now?

Nudged upward in fits and starts as the debate about who warrants assistance continued,
the number of public housing units peaked in 1991 at 1.4 million, and started to decline. Today
there are just over 1 million “hard units” of public housing left. These are owned and managed
by 2,922 PHAs, 76% of all PHAs. Table 4 shows the distribution of the size of individual
PHAs’ public housing programs. (Some of these PHAs also have voucher programs; Table 4
includes only their public housing.)

Table 4: Size of PHAs public housing programs for all PHAs with public housing

Number % Cum %
Very small (1-49) 748 25.6 25.6
Small (50-99) 668 22.9 48.5
Medium low (100-299) 937 32.1 80.5
Medium high (300-999) 430 14.7 95.2
Large (1,000-4,999) 122 4.2 99.4
Extra large (5,000+) 17 0.6 100.0
Total 2922 100.0 100.0

Notice that most public housing programs do not reach a size likely to bring to mind the
narrative of failure. About one quarter of PHAs with public housing have very small programs,
1-49 units. Programs like this might represent a single apartment complex for low-income
seniors in a rural community; a handful of townhouse-style units for young low-income families;
or a building with accessible apartments for people with disabilities, perhaps with social services
on-site. In these scenarios, people in the localities served – who may have a dad, a sister with
disabilities, or a cousin with two kids living in the assisted housing – may not even recognize
these low-cost housing options as public housing. Another quarter of public housing programs
fall in the small range, with 50-99 units. One high-rise for seniors and residents with disabilities
may account for a PHA’s entire program of 80 or 100 units. Cumulatively, public housing
programs with less than 100 units account for almost half of all public housing programs.

7
 A medium-size program, more than 100 but fewer than 1,000 units, might have four or
five developments serving different needs, or different neighborhoods in the community. The
Lansing Housing Commission in Michigan, for example, offers 800 units in four developments
that feature mixes of townhouses, duplexes and single-family units in different parts of the city
(Lansing Housing Commission 2018). The Stevens Point Housing Authority in Wisconsin has
246 units of senior and family housing in three developments and at scattered sites (Stevens
Point Wisconsin 2018).

Only four percent (122) of public housing programs are large, with 1,000 to 4,999 units.
Just 17 PHAs have more than 5,000 public housing units. Among these are some that have been
notorious for poor management at some points in the past, Chicago Housing Authority, for
example, but others that have been quietly managed well, such as the Cuyahoga Metropolitan
Housing Authority. To be sure, the larger programs account for more total units and are critical
for meeting needs in big cities. But the many small, often unrecognized, public housing
programs also address otherwise unmet needs in their communities.

Challenges for PHA managers

What are some of the challenges that PHA managers face running their public housing
programs? I want to highlight three: operating revenue, capital funds, and pressure from the
federal government to wind down public housing.

Consider first the challenge of revenue for operations. Rent is one source. For a resident,
rent plus utilities is restricted to 30% of income, adjusted for factors including family size and
medical expenses. Congress eased income eligibility restrictions in 1998 in an effort
deconcentrate poverty—and bring people who could pay more rent into public housing.
Currently 40% of new residents each year must be extremely low-income (less than 30% of area
median income) and the rest may have incomes rising to 80% of area medians. But the income
profile of public housing residents remains far lower than these rules permit. In 2017, 71% of
households in public housing had extremely-low incomes, and fully 90% fell below the very-low
income cutoff of 50% of area median (HUD 2018a).

There is a formula-based operating subsidy meant to make up the difference between

tenant rent and other PHA income, and the cost of day-to-day operations. Introduced in 1970,
the formula was long viewed as inadequate, and it was revised in 2005. But Congress does not
appropriate the full amount of PHAs’ formula-based eligibility for subsidy, and HUD prorates
the actual Operating Fund appropriation each year. From 2005 to 2009, PHAs received 83-89%
of what the formula indicated they needed. The proration briefly exceeded those levels in 2010-
2011, but fell again to average 84% from 2012-2016 (PHADA nd; CRS 2014). 2017 and 2018
were better, at 93% and 94% (NAHRO 2017; NAHRO 2018), but the Administration request for
FY 2019 would barely cover half of the formula-based subsidy (HUD 2018b, 7-1). The bottom
line is that Congress limits the rent in public housing to less than it costs to operate, and does not
fully fund the subsidy needed to fill the gap.

Further complicating a PHA’s financial challenge, the formula for the operating subsidy
does not include a factor for building up reserves to repair or replace major systems, like roofs
and boilers, or to remodel apartments periodically. A separate Capital Fund is distributed among
PHAs to address these needs, according to a formula that includes such factors as the age of the
buildings and relative construction costs. But appropriations for the Capital Fund fall even
8
further short of need than appropriations for the Operating Fund. The most recent study of
capital needs in public housing was conducted in 2010; it found a backlog of about $26 billion,
with needs accumulating at approximately $3.4 billion per year (Abt Associates 2010). Funding
appropriated each year since this study has not addressed annual accumulation, let alone the
backlog.

Congress and HUD know that this situation is not sustainable. Their current response is
the Rental Assistance Demonstration program (RAD). RAD challenges PHA managers to be
creative and move their public housing off of the low-rent housing program platform. PHA
directors in the field recognize this. They must put together packages that make the most of their
supply-side assets, that is, the public housing they have, and demand-side tools, that is, any
tenant-based subsidy they have or can get in order to attract private and public investment.
Before discussing RAD further, the tenant-based subsidy program that PHAs implement –
Housing Choice Vouchers – is described.

Housing Choice Voucher Program

As the number of hard units of public housing has declined from the peak of 1.4 million
to about 1 million today, the number of vouchers that PHAs administer has increased. PHAs now
have about 2.5 million subsidized units available in their housing choice voucher programs,
accounting for 70 percent of PHAs’ available subsidized units, and half of all HUD-assisted
units. 2,210 PHAs (58% of PHAs) administer voucher programs. Table 5 shows the distribution
of these programs by size. The medium-low and medium-high categories together account for
more than half (59%) of PHAs’ voucher programs; the median program falls into the medium-
high range with 326 available vouchers. 148 PHAs have very small programs; these often
represent situations in which a community’s public housing has been demolished and vouchers
provided to replace it, or owners of a private subsidized project have opted out of the subsidy
contract and vouchers have been provided to protect the tenants. Some of the large and extra-
large programs are administered by statewide agencies, but local housing authorities also have
programs in these ranges.

Table 5: Size of voucher programs for all PHAs with vouchers

Size Number Percent Cum %

Very small (1-49) 148 6.7 6.7
Small (50-99) 265 12.0 18.7
Medium low (100-299) 649 29.4 48.1
Medium high (300-999) 654 29.6 77.6
Large (1,000-4,999) 407 18.4 96.1
Extra large (5,000+) 87 3.9 100.0
TOTAL 2210 100.0 100.0
Minimum program: 4
Median program: 326

9
Origins and evolution of vouchers
The idea of providing allowances to households so they can pay the rent was present in
the policy debate as long ago as the 1930s. But the condition of housing available to low-income
and working people dominated problem definition in the early decades of federal assistance, and
the macroeconomic benefits of new construction figured in. By the late 1960s, however, the
condition of housing had improved dramatically as revealed in census reports, and the
affordability dimension of the problem came to the forefront. Moreover, production approaches
were tarnished. The narrative of public housing’s failure took hold as racial segregation and
concentrated poverty became apparent in some big city public housing. Privately-developed and
managed subsidized housing was not looking good either, as the government lost billions of
dollars on foreclosed subsidized mortgages – whether due to poor management by inexperienced
nonprofits, or corruption, both private and public – and real costs to produce and operate multi-
family housing rose, hitting federal outlays hard (Winnick 1995).

Changing market conditions were thus real. So was the influence of ideology.
Conservatives and liberals alike saw reasons to view assistance attached to renters favorably
(Hays 1995). With at least some support in both political parties, both ideological camps,
Congress and the Nixon Administration, federal demand-side housing assistance began with
HUD’s Experimental Housing Allowance Program (EHAP). The demonstration was authorized
in the 1970 Housing and Community Development Act and began in 1973. It was well-funded,
providing resources for 30,000 vouchers at 12 test sites, and carefully designed with components
to assess program effects on eligible households’ behavior, local housing markets, and local
administrative agencies (Winnick 1995).

EHAP’s findings were only beginning to come in when Congress embraced tenant-based
assistance as an alternative to public housing. The Housing and Community Development Act
of 1974 (P.L. 93-383) revised the U.S. Housing Act of 1937 fundamentally. In 1937, Section 8
in the statute was two and a half lines long, authorizing the U.S. Housing Authority to make rules
“as may be necessary to carry out the provisions of this Act.” In 1974, Section 8 extended to 26
pages and authorized three new programs for lower-income housing assistance. Section 8 New
Construction and Section 8 Substantial Rehabilitation both authorized payment to private owners
of new or substantially rehabilitated housing for some or all of the units involved; contracts for
these project-based subsidy payments are administered directly by HUD, not by local PHAs.
The Section 8 Existing program authorized payment to private landlords, by PHAs, on behalf of
assisted households.4

The Section 8 Existing program offered “certificates” to cover part of the rent.
Experience with the original program design suggested that more flexibility was warranted.
Consequently, in 1983 Congress authorized a “voucher” demonstration that permitted assisted
households to 1) choose apartments with rents a little higher than HUD’s payment standard, if
the household paid the difference between their voucher and the rent, and 2) carry their vouchers
outside of the jurisdiction of the PHA that provided the voucher. This latter is called
“portability.” In 1987 the voucher demonstration was made permanent. In 1999, pursuant to the
Quality Housing and Work Responsibility Act of 1998 (QHWRA), the Section 8 certificate and
voucher programs were merged in the “Housing Choice Voucher” program (HUD 2000).

When the certificate and voucher programs were merged, 1.4 million households were
assisted. That number had been reached as Congress renewed existing certificates and vouchers,
10
and provided additional assistance annually from 1975 through 1994. Growth stalled from 1995
through 1998, but with the merger, Congress resumed increasing tenant-based assistance (HUD
2000). Today, new vouchers are either “tenant-protection vouchers” or “incremental vouchers.”
Tenant-protection vouchers are issued to families living in public housing units that are
demolished or sold, or in private subsidized units whose owners opt out of federal subsidy; they
replace the previously available subsidized units. Incremental vouchers comprise net new
available assistance. They have mostly been provided for special categories of households,
including homeless veterans, non-elderly disabled persons, families in danger of losing their
children, and disaster victims. Tenant-protection vouchers and all types of incremental vouchers
are included under the umbrella of the Housing Choice Voucher program, currently with about
2.5 million subsidized units available.

How does the program work on the ground?

The size of each PHA’s voucher program is essentially the sum of vouchers it has been
awarded over time. A PHA keeps what it had (assuming effective administration) and in any
particular year, may be able to add new incremental vouchers by competing successfully for
them, or new tenant-protection vouchers if hard units of public housing or privately-owned
subsidized housing are lost in its jurisdiction.

The basic statutory parameters of the program include features related to household
eligibility, rent reasonableness, the condition of units, and voucher portability. PHAs are
responsible for implementation activities around each of these basic parameters, as well
additional tenant services, landlord outreach, and HUD reporting requirements (CLPHA 2013).

With regard to eligibility, the current statutory requirement is that 75 percent of new
participants in any PHA’s program each year must have extremely-low incomes, defined as
income below 30% of area median income (AMI) or the federal poverty level, whichever is
greater. The policy goal here is to deconcentrate poverty. The remaining 25% of new voucher
holders may have incomes up to 80% of area median income. PHAs are responsible for
determining program participants’ income. But income eligibility does not mean a voucher is
available, so PHAs are also responsible for establishing and maintaining wait lists. Wait list
procedures can be complicated, and perhaps heartbreaking, for applicants and agencies trying to
help them alike. The Cuyahoga Metropolitan Housing Authority in the Cleveland area, for
example, opened its wait list for five days in 2018 and received almost 40,000 pre-applications,
from which 10,000 were selected for the wait list by lottery (CMHA 2018). Once a household is
on a wait list, PHAs determine and certify income eligibility. For fortunate families, PHAs issue
vouchers, provide briefing on program rules, enforce the rules, and periodically re-evaluate
income. CMHA may be able to serve about 1400-1700 of the 10,000 families on its current wait
list in a year, as some of its vouchers come available.

To ensure rent reasonableness PHAs set a “payment standard,” which functions as a cap
on the amount of the voucher, between 90 and 110% of the HUD-established area Fair Market
Rent (FMR) for the jurisdiction. The challenge for the PHA is to serve as many eligible
households as possible within the PHA’s authorized number of vouchers. In some markets, a
payment standard at 90 or 92% of the FMR may be enough to attract landlords. In a tight
market, a PHA may have to go to 110% of the FMR, and run the risk that it cannot cover all of
its authorized vouchers within its available funding allocation. That is, the number of vouchers
authorized and the funding allocation are two different variables that the PHA juggles.
11
 Once an eligible participant finds a unit and the landlord agrees to participate, the PHA
inspects the unit to ensure that it meets housing quality standards. Given adequate condition, the
PHA negotiates the housing assistance payment (HAP) contract with the landlord, and pays the
landlord through the payment system it has established. The unit must be re-inspected
periodically, and the payment changes periodically if the income of the assisted household
changes.

PHAs must also provide for voucher holders to carry vouchers outside of the issuing
PHAs jurisdiction, an extraordinarily staff intensive process (CLPHA 2013).

Challenges for PHA managers

Beyond the inherent administrative complexity of this program, PHA managers face the
challenge of unreliable federal funding. There are two funding streams: voucher renewal and
administrative fees. Consider first the funding for renewal of tenant vouchers, the money that is
paid to landlords on behalf of program participants. According to the Council of Large Public
Housing Authorities, funding that PHAs receive for their authorized vouchers has been unstable
since 2003. One problem was that the measure of “vouchers in use” was unclear: Was a PHA
supposed to be using all of its authorized number of vouchers, or all of the funds it was
allocated? The formula has been stabilized and it is now clear that using the funds is the
objective. A challenge that remains is that agencies are not permitted to build up reserves for
dealing with “fluctuations in landlord participation, rising rents, declining tenant incomes, or
other market factors beyond their control.” There was a sweep of reserves in 2005, and
rescissions in 2008 and 2009 (CLPHA 2018). Nevertheless, according to PHA directors in the
field, annual renewal funding has been in the 97-99% range and they are able to cope.

The challenge of funding for administration is more serious. According to a study

conducted for HUD by Abt Associates (2015), since tenant-based subsidies began in the 1970s,
the administrative fee formula has relied on differences in Fair Market Rents (FMRs), “with
agencies in areas with high FMRs getting higher fees per voucher than agencies with lower
FMRs….based on the weak theory that FMRs correlate with wage rates and other costs of
operation (viii).” The Abt study was designed to measure what it actually costs to administer a
high-performing, efficient program. The researchers found that PHAs had been significantly
underfunded to run the voucher program, and proposed a new formula that would result in higher
administrative fees for most PHAs. HUD has endorsed the study methodology, findings, and
new formula (HUD 2015), but has not implemented it.

Even in terms of this flawed formula, congressional appropriations have not allowed for
full funding of administrative fees since 2008, resulting in proration. From 2008 through 2010,
PHAs got at least 90% of their formula allocations, but from 2011 to 2014, proration did not rise
above 80% (Abt, xiii). For 2018, based on the 2018 omnibus funding bill, HUD estimates that
proration will be 76% (HUD 2018c). Different PHAs cope with fluctuations in administrative
fees more and less successfully; it is especially difficult for smaller agencies. Some PHAs have
achieved efficiencies by contracting out inspections or moving to direct deposit of payments to
landlords (rather than issuing checks). Others have reduced staffing, sometimes eroding service
to families and landlords. According to CLPHA, more than 100 PHAs had given up their
vouchers by 2013 due to inadequate funds to administer the program.

12
 Despite the challenges, the Housing Choice Voucher program as a whole is now far
larger than Low-Rent Housing as a whole. And Congress and HUD are asking PHAs,
essentially, to make the rest of their public housing go away.

Rental Assistance Demonstration

The Rental Assistance Demonstration (RAD) began in 2012. Requested by the Obama
Administration and first authorized in the FY2012 HUD appropriations law (P.L. 112-55), RAD
asks public housing agencies to step up as developers, to be creative, and put together financing
packages and partnerships to preserve deeply subsidized rental housing in their communities.
This paper has framed PHAs as implementation platforms for housing assistance programs, but
we need to recognize their history as developers of affordable housing as well. That’s how they
started. In the early decades of public housing, PHAs developed the estates in a partnership with
general purpose local governments, which constrained site selection, and the federal government,
which provided capital financing.

The HOPE VI initiative constituted a second highly visible wave of development activity
for PHAs. From 1993 through 2010, PHAs coordinated 260 redevelopment projects in 130
communities. HOPE VI began as an effort to address the most seriously distressed public
housing through demolition, but it evolved quickly into a far more ambitious redevelopment
program aimed at improving neighborhoods and deconcentrating poverty, as well as upgrading
housing. PHAs competed for federal HOPE VI dollars by designing projects that included
participation by their local governments and other community partners, and financing packages
that used federal grants to leverage significant funding from other sources. In addition to mixed
financing, a second significant departure from traditional public housing was that redesigned
sites usually provided housing for a mix of resident income levels. Most HOPE VI projects
included some units with shallow subsidy, aimed at serving households with incomes at 40 to
60% of area medians, and some market rate housing, along with public housing units intended to
serve extremely low-income households (Vale and Shamsuddin 2017). To the extent that public
housing units were lost at the redeveloped sites, PHAs’ voucher programs expanded to help
displaced residents rent apartments in other neighborhoods.

HOPE VI is over. There remains a serious backlog of capital needs in public housing,
and losing this supply is deeply problematic as the need for rental assistance only increases. The
Rental Assistance Demonstration is the current federal invitation to PHAs to devise a way to
preserve and redevelop their public housing units. RAD also has a component for owners of
privately-owned HUD assisted housing, but the focus here is on how the program works for
public housing authorities.

RAD permits PHAs to “convert” public housing to Section 8 rental assistance contracts.
This means that the public housing units move off of the public housing program platform –
there will be no more operating subsidy or capital grants. Instead, the PHA enters into a project-
based Section 8 housing assistance payment (HAP) contract with HUD. The rationale is that this
is a more stable funding stream, more stable because Congress has been more willing to fully
appropriate Section 8 than public housing. The Section 8 contract can be used to leverage
private financing, as well as local or state public resources, for capital investment to preserve or
replace the units involved. The project-based contract also looks good to PHAs as a more
reliable source of operating revenue than the public housing operating subsidy.
13
 There are two paths for conversion off of the public housing platform. In the “project-
based voucher (PBV)” approach, the PHA ties some of its housing choice vouchers to specific
units in specific buildings; those vouchers no longer move with the tenants. This type of
conversion continues under the regulatory purview of HUD’s Office of Public and Indian
Housing (PIH), which oversees public housing and housing choice voucher programs. The
second path is “project-based rental assistance (PBRA)”; here, ownership of the units is
transferred from the PHA to a private owner. (That private owner might be a non-profit
affiliated with the PHA.) The Section 8 assistance contract takes the form of the contracts with
other private owners of assisted housing, and regulatory purview over the project moves away
from HUD’s Office of Public and Indian Housing to the Office of Multifamily Programs, which
deals with privately owned subsidized projects. The Office of Multifamily Programs regulates
with a lighter touch, and any particular PHA may place a high value on this change.

HUD and Congress clearly want to transition all remaining public housing off the public
housing platform. When RAD was first authorized in 2012, there was a cap of 60,000 on the
number of units that PHAs could convert, and a 2015 deadline for PHAs to submit their
applications. In 2015 the cap was raised to 185,000 and the application deadline extended to
2018; the number of approved applications reached the cap. In 2017 the cap was raised again, to
225,000 and the deadline extended to 2020 (Gramlich 2018). That cap too has been reached, and
there is a waiting list of applications. The 2018 omnibus budget law authorized a new cap of
455,000 units and extended the deadline to 2024 (NAHRO 2018). Speaking in May 2018 at a
RAD training in Washington, HUD Secretary Ben Carson highlighted the most recent rise in the
cap, continuing that “We hope it’s only a stop along the way of getting rid of the cap altogether
(HUD 2018d).”

Challenges for PHA Managers

Putting together a conversion package is complex. A range of options has developed as
individual PHAs have experimented since 2012 and HUD has interacted with them with some
flexibility. Beyond the choice of the project-based voucher versus project-based rental
assistance path, four types of conversion models (preserve, rehab, redevelop, transfer assistance)
and four major types of financing packages (public housing-only funds, debt, tax credits,
combination) have emerged. Resident participation and resident protection requirements have
become more robust (HUD 2018e). Consultants are needed. The RAD authorization does not
include funds for planning activity; PHAs have to find money.

Despite the complexity of the conversion process, each PHA needs to engage it. Public
housing’s subsidy streams have been unreliable for decades, and HUD and Congress have clearly
signaled that they want to be out of the public housing business. Many PHAs see the writing on
the wall, and have capacity for planning and for orchestrating the actual conversion. Some see
what’s coming, but do not have adequate administrative capacity to navigate the new
environment. Some may not see this coming. In any of these cases, PHAs will be more
successful in preserving their affordable units if local governments and other stakeholders in the
community understand the challenges and partner with their local public housing agencies to
confront the problem.

14
 Concluding Remarks

Housing affordability is a persistent problem in communities across the United States.

Local public housing agencies are a crucial administrative resource for addressing the problem.
PHAs develop, own, and manage apartments for low-income renters. They step in when private
owners of project-based assisted housing opt out. They administer vouchers for very-low
income renters in the market, and run interference for those renters with landlords. This is to say
they offer a substantial supply of affordable housing and they also make tenant-based assistance
work.

Some PHAs will flourish in their communities as federal constraints loosen. They will
continue to address the needs of the lowest-income families, sometimes assisting these families
temporarily until they get on their feet, sometimes with assistance for the long term when there is
need that does not go away. They may expand to develop and manage housing for families in
the moderate-income range who are also increasingly challenged to find rental units they can
afford. Some PHAs may develop high-end units in their well-located properties, and use the
revenue stream to support their affordable housing mission.

Other PHAs will not make it. Their hard units will be disposed of in HUD’s Section 18
process, replaced with vouchers that a neighboring PHA administers. That would not be all bad
for particular assisted families, but the community will lose an administrative asset and
organized advocacy for confronting its particular configuration of housing needs.

1
3,824 is the number of PHAs with available subsidized units of any type (public housing, Section 8, moderate
rehab) in 2017 in HUD’s “Picture of Subsidized Households” dataset (HUD 2018a).
2
Exceptions include 39 state-level agencies located in 29 states, the Virgin Islands, the Northern Marianas, and
Puerto Rico (Colorado, New York, and Puerto Rico have two each.); and 25 social service organizations in the
District of Columbia and 12 states (Seven states have with multiple agencies.).
3
By the mid-1950s, the elderly were also seen as worthy of federal largesse, and people with disabilities were soon
added.
4
A fourth program – Section 8 Moderate Rehabilitation – was added in 1978. Mod Rehab resembles Section 8
Existing in that it is administered by PHAs and applies to existing units available in the market, but it allows for
modest upgrade cost to be figured into the payment to the landlord. The program has been repealed with no units
authorized since 1991, but a small number of PHAs continue to administer legacy Mod Rehab programs (Gramlich
2018.) 179 PHAs, 4.7% of all PHAs, have mod rehab programs; these programs collectively have 18,820 available
units, accounting for half of one percent of all PHAs’ available units (HUD 2018a).

15
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