Scaling of Small-Area Fair Market Rents: Evidence on Neighborhood Choices of Voucher Recipients

• In Event: Promoting Housing Mobility for Families in the Housing Choice Voucher Program

Abstract

A large body of evidence shows that where families live shapes their children’s long-term outcomes. Research has shown that moving to lower-poverty neighborhoods increases college attendance and adult earnings, which explains a significant share of the Black-White earnings gap. However, despite more than $60 billion in annual federal housing assistance spending, an increasing share of Housing Choice Voucher (HCV) households still reside in high-poverty tracts, which motivates policies aimed at improving access to lower-poverty neighborhoods.

HUD first piloted Small Area Fair Market Rents (SAFMRs) in Dallas in 2011 following a court settlement aimed at reducing voucher concentration in high-poverty neighborhoods. The key policy innovation was to calculate subsidy caps at the ZIP Code level rather than at the broader metropolitan level. This design was expected to expand the stock of voucher-eligible units in higher-rent, opportunity-rich neighborhoods while reducing incentives to cluster in lower-rent, high-poverty tracts. Evidence from the Dallas pilot confirmed these expectations: voucher households substantially reduced their exposure to neighborhood poverty . Motivated by Dallas’s apparent success, HUD announced in 2016 that Public Housing Authorities (PHAs) in 24 metropolitan areas would be required to adopt SAFMRs by April 20184, with the mandate later extended to an additional 41 metropolitan areas in 2025.

Using 2015–2019 administrative data from the U.S. Department of Housing and Urban Development (HUD), we find that SAFMRs led voucher recipients to relocate to lower-poverty neighborhoods; however, relative to the Dallas pilot, effects attenuate by more than half. This “voltage drop” appears driven by differences in baseline rental market conditions and racial segregation across metropolitan areas, generating substantial heterogeneity in policy effectiveness. Moreover, White households benefited about three times more than Black households, highlighting how race-neutral payment-standard reforms can yield unintentional consequences without complementary supports. These results underscore the importance of accounting for implementation environments when scaling housing policy.

Author

• Eunjee Kwon, University of Cincinnati
  Presenting Author