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Section 8 Has Problems: Housing Quality is not One

Adam Rust's picture

Posted August 2, 2010

The problem with Section 8 is not that so many families are able to use their vouchers to rent nice homes.

The Wall Street Journal published a story today that points out the sudden shift in bargaining power among voucher holders. In overbuilt housing markets, landlords are increasingly eager to rent to tenants that are guaranteed to pay rent. That preference would seem to be crystal clear: Who can blame landlords for wanting to get paid on-time, every month?

It would be one thing if this was merely a story about a program that is working to shore up demand for housing at a time when rental vacancy rates are high. Unfortunately, that

is not the only point in the coverage. It essentially makes the argument that these tenants are problematic, and their ability to pay is somehow undeserved. We have heard this argument before. In the '80s, one conservative coined the term "welfare queen." Even though he was making it up, the characterization stuck. Perceptions matter, and that is why the WSJ's story deserves some attention.

Monday's report characterizes Section 8 voucher holders as "picky," and quotes residents that refer to them as "poison," and (in the extended print version) likely to throw huge parties.  One paragraph underscores the likelihood that property values will drop when there are concentrations of voucher holders in one area.  The story does not attempt to find a source with an opinion to the contrary about the voucher holders.

HUD's Housing Choice Voucher program is far from perfect, but the problem is not that voucher holders don't deserve to live in a nice place. The real problem is widespread lack of accountability among local housing authorities.

Most Section 8 tenants are not throwing huge parties. Parties are not free, and Section 8 are decidedly not well-off. Moreover, that isn't the lifestyle stage for most voucher holders. I have never met a voucher holder without children. Many are retired people, living on meager fixed incomes.  Is it consistent that they would simultaneously be retired, and also caring for kids, because so often, grandparents are the primary caregivers for young children.

Systemic Problems

There are two categories of problems: competence, or the lack of it, and all-too-frequent stories of fraud and financial mismanagement. Miami, Los Angeles, and New Orleans seem to be the giants of fraud, whereas general incompetence is on exhibit in my hometown.

Housing authorities make it difficult for both landlords and tenants. My opinions are borne out of experience. I own a rental property and I rent to voucher holders. The voucher is a godsend for most of these families. In many instances, a voucher is the most valuable asset that these families can claim.

Here is how it goes for a landlord: Applicants cannot tell you how much they are able to pay, and they often can't predict when they will be able to move in. Their vouchers indicate the bedroom size that they should qualify for, but not the specific value of that voucher. Landlords are asked to agree to rent to a tenant, not knowing how much the voucher will ultimately pay or how much of the rent the tenant will have to bear. The house does need to be inspected. Of course, the housing authority dictates the date and time of the appointment.  They promise to have things done in ten business days. If the landlord is out of town and gives advance word that he or she can;t make that time, it doesn't matter. The housing authority still sends the inspector. Upon finding that no one is at the house, the landlord must wait at least two more weeks for another appointment. Meanwhile, mortgage payments and utility payments still need to be made.

It is hard to communicate with the case workers. This is the case for both tenants and landlords. Why does a housing authority need to close for an entire day, once a week, in order to train staff?

Vouchers can run out, and generally they are only good for two months. Unfortunately, when a case worker goes on vacation, landlord and tenant must wait. Housing authorities insist that paperwork is done only be the case worker assigned to a voucher holder.

This happened to me. I had an application from a tenant that was trying to "port in." She was moving her voucher from one county to another, in order to live near the community college that she planned to attend in the fall.  She had to wait to get her port approved.  Then, she had to switch to a new caseworker in order to get the voucher issued. The Housing Authority told her that she would only qualify for a two-bedroom voucher, which was a change since she had a three bedroom voucher in her previous county. No matter, the numbers still worked.

What didn't work was the administration of the voucher. My tenant's case worker took time off for a family emergency for the three days prior to the July 4th weekend, and then for the four days following the holiday. The housing authority wouldn't allow another staff member to issue her voucher.

With two days left before the expiration of her voucher, she was finally approved. But, the authority had additional news for her. She would only get a one bedroom voucher. She had two children, and the new formula dictated that they would need to sleep in her bedroom.

The tenant's voucher expired. She will have to go back on the waiting list for a new voucher. Unfortunately, the waiting list is between two and four years.

It's particularly problematic when landlords can't rely on the size of a voucher. I've had at least three applicants that have had their bedroom size reduced during the application period. One family's voucher dropped from three bedrooms to just one.

There is a complete lack of accountability on the part of the housing authority.

Our local housing authority has an annual budget of $9 million. Three years ago, the local paper reported that $6.9 million was "missing." One firm received more than $2.1 million in payments, even though the housing authority could not produce any evidence that there was a formal contract for any work. The president was fired, for improper spending on his business charge card. In a separate action, a board member had to resign (and was later arrested) because she had been collecting voucher payments for a rental home that she owned, even though the tenant didn't have a voucher.

Oddly enough, payments for cutting occurred year-round, even though grass doesn't grow in the winter.

HUD's rules don't make that possible. Indeed, HUD prohibits no-bid contracts.

There might be voucher holders living in nice homes. For whom is that a problem? The landlords that are getting paid every month? The residents? The neighborhoods that don't have a vacant property in their midst?

It is good when voucher holders don't rent worn down properties. That is a good market signal. No landlord should be able to rent a substandard home.

The real problem is when the system doesn't work. In our local community, there were 2,400 families on waiting lists for vouchers in 2005. At that time, the housing authority owned 160 units that were vacant and waiting for repairs. More than $1 million had been spent on grass cutting. Now voucher amounts are being cut.

Not Just in our Town

Unfortunately, lots of local housing authorities can do things right.  Here are a few examples:

  • Chicago delegates the administration of its Section 8 program to a private firm. Employees of that firm are found to be creating fictitious rental contracts in order to funnel rent payments to their own accounts.
  • Employee embezzlement, Cambridge, Massachusetts.
  • No-bid contracts in Hillsborough County, Florida (Tampa).
  • Bribery and extortion by staff in the Paterson, New Jersey Housing Authority.
  • Tens of millions of dollars in missing funds in Miami-Dade. The Miami Herald has an excellent series on the topic (House of Lies).
  • Years of mismanagement in Baltimore.
  • The director of New Orleans' Housing Authority is forced to resign last fall, having appropriated $45,000 in funds from vouchers that he had given to himself. This was only the most recent violation, HUD first monitored the authority for malfeasance in 2002.

Los Angeles' Housing Authority seems to merit special attention. It isn't just missing funds, although more than $2 million is missing. Another million was spent on rehab projects, but no one can put their hands on receipts for the work. There's also the evidence of incompetence: the authority gave out 1,500 more vouchers than it had. More than $2.1 million in no-bid contracts. Staffers writing themselves checks for thousands of dollars. Other staffers may have been falsifying tax returns in order to create a paper trail to get voucher payments. In one instance, a staffer gave his brother $800,000 in no-bid work for the authority.  Written contracts paid $2,500 to firms for each toilet that they installed.

The housing authority hired a new chief in 2005. He has spent more than $7 million on internal investigations designed to clean up the mess. Initial findings suggested that someone was selling vouchers.

In the midst of this, there are more than 90,000 families on waiting lists for vouchers.

Back to WSJ

Some of the problems here are based in fraud, but that shouldn't mean that incompetence isn't a problem, either. The WSJ might find it interesting to say that these homes are awfully nice, but they are coming close to creating a myth. It is a story that we've heard before - witness the welfare queen that Ronald Reagan propagated - but it belies the real problem with what should be a relatively costless system. Section 8 taps private enterprise and the power of the markets.