The real challenge with Housing Choice Vouchers isn't lake views. It's segregation. - Metropolitan Planning Council

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The real challenge with Housing Choice Vouchers isn't lake views. It's segregation.

Ian Freimuth via Flickr

When public housing such as this building from Cabrini Green were demolished, most residents received Housing Choice Vouchers.

Daniel Kay Hertz, author of the blog "City Notes," contributed to this post.

Recently, the Chicago Sun-Times and the Better Government Association teamed up for an “exposé” of sorts on public housing voucher holders renting high-priced units with their government subsidy. The program that allowed higher rents on these very few units is being phased out, so the timing and intent of the story was puzzling.

Others such as Daniel Hertz and Amanda Kass have written stellar rebuttals, so I won’t do that here. Instead, I’d like to explore a question: If we agree that the point of Housing Choice Vouchers is to allow for more choice, how do we deal with the systemic barriers to that?

None of our options—including the status quo—are inexpensive.

The answer to that question is not about a tiny and dwindling number of voucher holders with lake views. It’s really not even about the private prejudice of landlords who turn down voucher holders, although I’ll get to that in a moment. The question gets to the heart of a system that perpetuates segregation through the economics of Fair Market Rent. But first…

Housing discrimination

Discrimination against voucher holders is real. A fall 2015 segment on WBEZ detailed how blatant discrimination against voucher holders through Craigslist ads is ongoing—50 years after the federal Fair Housing Act, and 15 years after the City of Chicago and three years after Cook County officially banned it.

There is a strong push-pull factor at play: Not only do landlords reject voucher holders in more affluent areas, they also actively lure renters to disinvested areas, as documented by Eva Rosen. Rosen asks why patterns of segregation are being recreated under a system that was meant to undo them, and finds that a big part of the answer is the role and power of landlords.

This makes sense, actually: As public housing was torn down in massive amounts in the 1990s and 2000s and rebuilt with dramatically fewer public housing units, public housing authorities increasingly turned to the private market to house their tenants with vouchers (more on that later).

"The segregation we see today was established by the federal government.”

– Richard Rothstein, Economic Policy Institute

This is, in other words, exactly what we expect to happen in a market economy in which distribution is based on market-determined supply and demand. Within such a system, an individual landlord’s prejudices become much less relevant than the economic factors that the market system sets up.

The Economic Policy Institute’s Richard Rothstein puts it this way:

“We have a national myth that the reason our metropolitan areas are segregated is for informal reasons – private prejudice, differences in income, demographic trends, racial steering by real estate agents and so forth. The reality is that the segregation we see today was established by the federal government.”

Fair Market Rent

Let’s take the concept of Fair Market Rent for starters. Fair Market Rent is the amount of money a property in a given area would rent for if available. The U.S. Dept. of Housing and Urban Development establishes Fair Market Rents to determine how much rent should be covered through a Housing Choice Voucher.

Traditionally, Fair Market Rents have been set by metro area. For Chicago, this includes everything from Joliet to Lincoln Park, Naperville to Austin. With such a wide geography, it should be immediately obvious why former U.S. Dept. of Housing and Urban Development Secretary Shaun Donovan referred to Fair Market Rent as akin to the Holy Roman Empire: Just as that was neither holy nor Roman, Fair Market Rent is neither fair nor market for the vast majority of its geography. 

Here’s how this plays out on the ground: Consider that a scan of the first dozen two-bedroom apartments on Craigslist for the Lakeview neighborhood yielded an average asking rent of $1,880. The same scan for Auburn Gresham found an average rent of $855.

Given that the 2016 Dept. of Housing and Urban Development-approved Fair Market Rent for a two-bedroom in the Chicago metro is $1,176, it’s clear why a landlord in Auburn Gresham would seek out Housing Choice Voucher tenants (in fact, many listings stated “Section 8 approved”) and why the Lakeview landlord would reject them.

Where rents are high, there is no economic incentive to rent to a voucher holder if you can command a higher rent without it (not to mention without paperwork and inspections). Conversely, where rents are low, there is every incentive.

This is how supply and demand in a market system works. This is the system we created, folks. It’s working exactly as it should, unfortunately.

How did we get here?

The federal government has moved to absolve itself from a great deal of the responsibility it previously held to solve this problem. After 50 years of directly building public housing units, in 1974 Congress passed a law that allowed the government to get out of the business of providing housing. Section 8 of the act created a voucher program in which residents could take their public vouchers and use them in the private market.

With the rise of the HOPE VI plan to revitalize public housing and the Chicago Housing Authority’s Plan for Transformation, dense highrises were demolished starting in the 1990s. Section 8 vouchers, later dubbed Housing Choice Vouchers, became an increasingly important part of public housing. In fact, by 2015 they were the dominant form of federal housing assistance. The nonprofit Center on Budget and Policy Priorities notes that more than 5 million people in 2.1 million low-income families use vouchers.

In a review of ongoing stigma associated with vouchers, Emily Badger at the Washington Post points out that there are now about twice as many families receiving vouchers as there are living in traditional public housing. This trend holds true in Chicago where by the end of 2015, 17,689 households resided in public housing units and more than 44,000 households used vouchers for their subsidy.

The creation and subsequent proliferation of vouchers has not only dramatically changed how the government functions from a planned economy to more of a market economy. It has also changed how public housing looks and is experienced by non-public housing residents across the region. We will see how this shift fed into the type of responses that the Chicago Sun-Times/Better Government Association garnered.

Remember that when massive public housing complexes were demolished, thousands of households who had previously been sequestered in segregated enclaves were given vouchers and told to go forth and house themselves. The void left by these developments, which had been easily visible and easily avoided, was quickly filled by a new and unfounded fear that, as explained by Emily Badger (emphasis hers):

As housing authorities scattered residents, now with Section 8 vouchers, it also scattered the crime that had become associated with them...This fear was already widespread in many cities. In research in Chicago and Atlanta, [Susan] Popkin routinely heard residents in communities that had never contained public housing blame changes in their neighborhoods on those Section 8 people. At a time when industrial jobs were disappearing, cities were rapidly losing population and public resources were drying up as a result, people kept saying, "It must be the Section 8 program." Even in neighborhoods where few voucher holders ever moved in.

A Lakeview-focused EveryBlock from March 13, 2016, shortly after the first Sun-Times/Better Gov. Association article came out, follows this pattern to a tee. In a post titled “This could be why we’re seeing more crimes on the northside and downtown,” an EveryBlock user framed his/her reaction this way:

“Well, I was floored when I read the Suntimes report about CHA vouchers being used to rent high-priced condos. We read about shootings/robberies on the north side and downtown and wonder – where do these thugs come from? Well, this may be part of the answer!”

What to do?

Recognizing the challenges with one rent standard for an entire metropolitan area, the U.S. Dept. of Housing and Urban Development has piloted a different system known as Small Area Fair Market Rent. Under this system, rents are determined by zip code with the hope that more locally determined rents will provide the flexibility needed to encourage landlords in hot markets to rent to voucher holders. The Housing Authority of Cook County has participated since 2013 in a demonstration program to try out this more tailored approach to setting rents.

The Chicago Housing Authority is not piloting Small Area Fair Market Rent and instead is exercising its ability to cover up to one-and-a-half times the Fair Market Rent. With the sharp lines drawn by neighborhood and the resulting impact on rents, even ZIP codes—while an improvement—are too large a geography to solve voucher rent mismatches.

Case in point: Take the rents discussed earlier in Lakeview and Auburn Gresham. Recall that the metro area Fair Market Rent for a two-bedroom is $1,176; under Small Area Fair Market Rent, the allowable two-bedroom rent in Lakeview would adjust upward from $1,176 to $1,280, and downward in Auburn Gresham to $970. The adjustment is clearly still a far cry from the $1,880 asking rents in Lakeview.

One-and-a-half times the Fair Market Rent, in contrast, brings the allowable two-bedroom rent as high as $1,764 if market rents are comparable or higher, as is the case in Lakeview. Exercising this option is allowing the Chicago Housing Authority to offer more choices to more of its voucher holders. Funding designated to help with higher security deposits and a “hold fee” to encourage landlords to hold a unit while necessary inspections take place are steps that would help to compete in the private market.

I have heard some argue that housing authorities should only pay the lowest rent possible in order to serve as many as possible. With 44,000 people on the waiting list to receive a voucher, I understand that argument; I just don’t agree with it.

The number of families served is one important part of the picture, but so is where those families are served and what kind of reasonable options people have to build the healthiest version of their family possible. If we are cranking out units according only to where rents are lowest, then we are simply perpetuating segregation and all of its associated challenges.

If we are cranking out units according only to where rents are lowest, then we are simply perpetuating segregation.

It is important to recognize that none of our options are inexpensive. Public housing authorities can build more hard units and thus lessen the role of individual landlords in deciding where people can live, but units built with public subsidies are running well over $300,000 each. Not cheap.

Or, we can pay rents that are higher than the lowest-rent areas and thereby allow households with vouchers more options, and that will cost more than if we didn’t. Not cheap.

Or, we can designate that people with vouchers should use them almost exclusively in the lowest-rent areas, and that will seem cheap. Except that the outcomes for them as individuals and the impact on our economy will end up being anything but cheap for everyone, not only voucher holders. We know this because the 42-year voucher experiment has taught us as much.

So there’s really no way to house people well on the cheap. If the federal government wants an increasingly indirect role in providing housing, then local housing authorities need funding to mitigate the challenges that come with housing through the private market. Many have said that it’s the government’s role to step in where the market fails. Assuming our goal is not to perpetuate segregation, this market system is failing voucher holders and, by extension, all of us.

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