New Hope for Poor Families Stuck in High-Poverty Neighborhoods

The U.S. Department of Housing and Urban Development has tried for some time to get more poor families out of poor neighborhoods and into those with better opportunities for work, a decent education and the like.

Now it’s proposed a rule that would go further — and at the same time, probably make more housing more affordable in neighborhoods that will remain high-poverty, at least for now.

The proposal builds on a pilot that addresses a fundamental problem with the way HUD effectively caps rents for households with Housing Choice vouchers.

What HUD Does to Set Maximum Rents

Setting the maximum rents for units vouchers will subsidize is a two-step process — and more complex than I think one needs to understand in order to grasp either the problem or the solution.

Basically, HUD sets fair market rents based on what renters who recently moved in pay for decent, modestly-priced housing units. One FMR for a no-bedroom unit, another for a one-bedroom unit and so forth.

The FMRs reflect these rents throughout a metropolitan area the federal government has carved out based on how far workers commute to and from their jobs. These are, for the most part, counties, though some housing markets HUD defines are broader.

Local housing authorities then use the FMRs to set maximum rents that vouchers will subsidize. They’ve got some flexibility, but within a fairly narrow band defined by the FMRs for the market they operate in.

How the FMRs Limit Housing Choice

Housing markets may encompass neighborhoods with widely varying rents, as anyone who’s looked for a unit in a city or nearby suburb knows.

The high-rent neighborhoods are, of course, those with so-called amenities that better-off households can and will pay for, e.g., good schools, convenient public transportation, nearby grocery stores, relative safety on the streets.

The low-rent neighborhoods contrariwise. So they’re typically where most poor and near-poor families perforce live, including those with vouchers.

HUD boosts the FMRs when very few neighborhoods are home to unusually high numbers of voucher holders because so few units meet the regular FMR-based payment standards in the rest.

But the FMRs still apply to the entire metro area. The boost merely uses the median rents for the area, rather than the 40th percentile. So families with vouchers are still priced out of many high-opportunity neighborhoods, as HUD (and others) call them.

At the same time, landlords in low-opportunity neighborhoods charge more than they otherwise could because the FMR-based payment standards will cover higher rents than they could get on the open market.

They also have an insurance, of sorts, that they’ll get regularly paid at least a goodly portion of what’s owed. So they recruit voucher holders, an in-depth study of tenant “sorting” in Baltimore suggests.

That, of course, reduces housing choice for the majority of low-income people, since fewer than one in four households have vouchers. They must rent units that don’t meet the safety and other qualify standards public housing authorities require, pay far more than they can afford or both.

The perverse incentives built into Housing Choice help account for the high concentrations of poor and near-poor people in poor neighborhoods — and, not coincidentally, for persistent housing segregation, as the Baltimore researcher explains.

How HUD Plans to Change FMRs

The rule HUD proposes would make rent caps much more sensitive to rental costs in metro areas that meet certain criteria — ballparked by HUD at thirty-one.

It would set small area FMRs — specifically, one for each zip code within the select metro areas. So families would get higher subsidies if they found landlords that would rent to them in better neighborhoods.

And landlords couldn’t charge as much in high-poverty neighborhoods. This would not only reap savings to partly offset the costs of vouchers in high-opportunity neighborhoods. It would also probably make more units more affordable for poor and near-poor families without them.

What Will Probably Happen and What Should

The period for public comments on the proposed rule just ended. We’ll probably see a final rule before year’s end — in part to amplify the HUD Secretary’s legacy of efforts to fulfill the promise of the Fair Housing Act.

Like that promise itself, the promise of more choice for Housing Choice voucher holders will become a reality only if the next administration doesn’t backtrack — and then only if local housing authorities act affirmatively.

It’s one thing to adjust rent caps, quite another to make sure that families understand the new opportunities they have — and to help them find places to rent in neighborhoods unfamiliar to them.

That will require, among other things, persuading landlords to accept them as tenants when they can’t jack up their rents, as landlords in high-poverty neighborhoods have.

Even in the best of cases, the small area FMRs will be only one better tool in the affordable housing toolkit. We’ll still need more funding to help finance the construction of more affordable housing — and preservation of what already exists. We’ll need zoning to support both.

We’ll need more funding for housing vouchers too, of course. Because, as things stand now, we’ve got some 7.2 million households whose choice is whether to stave off eviction by paying more than half their income for rent or to have food on the table till they’re kicked out.

 

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