Do housing vouchers work when rental markets don’t? Demand-side assistance amid extreme rental shocks

• In Event: Federal Rental Assistance: Markets, Mobility, and Well-Being

Abstract

In recent years, the affordable housing crisis has worsened, as rents increased rapidly in the wake of the COVID-19 pandemic. Demand-side housing assistance programs, including housing vouchers, rely on the private market provision of housing, and are therefore heavily exposed to shocks to the rental market. In this paper, we investigate how the Housing Choice Voucher program operated amid rapidly rising rents, and how different program adjustments can moderate effects.

We document that in 2021 and 2022, when the country experienced unprecedented rapid growth in rents, voucher lease-ups (or “success rates”) dropped sharply. Even households who were successful in using their vouchers had to search for longer, and were substantially more likely to end up in over-crowding housing conditions. At the same time, costs rose sharply for housing authorities. Across all outcomes, new voucher recipients were more impacted than existing voucher holders, and the greatest changes occurred in places that saw steeper increases in rents.

We explore three different program implementation strategies that either enabled some housing agencies to avoid a decline in success rates, allowed others to rebound more quickly, or may help to avoid these outcomes in a future rent shock. First, we show that Moving-to-Work (MTW) agencies avoided declines in success rates, and provide suggestive evidence that this may be due in part to their ability to raise rent ceilings beyond conventional limits. Second, we evaluate one policy response by the Department of Housing and Urban Development (HUD), which provided an expedited process to raise rent ceilings in a set of metro areas with rapidly changing rental market conditions. We show that these expedited waivers did lead agencies to increase payment standards, and success rates rebounded quickly as a result. Finally, we explore the implications of HUD’s change to its methodology used to calculate rent ceilings, which may help to prevent a future programmatic downturn.

Author

• Sarah Strochak, University of Wisconsin-Madison
  Presenting Author