Increase Payments by Tenants in Federally Assisted Housing

Most low-income tenants who qualify for federal rental assistance receive aid through the Housing Choice Voucher Program (sometimes called Section 8), the Public Housing Program, or project-based assistance programs (which designate privately owned, government- subsidized units for low-income tenants). Funded by the Department of Housing and Urban Development (HUD), those programs usually require that tenants pay 30 percent of their gross monthly household income (after certain adjustments) for rent; the federal government subsidizes the difference between that amount and the maximum allowable rent. In 2010, the Congressional Budget Office estimates, the average combined federal expenditure for all of HUD's rental housing assistance programs was roughly $7,500 per household. That amount includes the housing subsidies and fees paid to the agencies that administer the programs.

This option would gradually increase tenants' rental contributions from 30 percent of adjusted gross family income to 35 percent over the 2012-2016 period. Provided that federal appropriations were reduced accordingly, those higher rent contributions would reduce outlays by a total of about $8 billion over 5 years: about $4 billion for the Housing Choice Voucher Program, almost $2 billion for the Public Housing Program, and about $2 billion for project-based assistance programs. Savings would total about $25 billion over 10 years.

An argument in support of this option is that, on average, renters not currently receiving vouchers or rent subsidies--"unassisted" renters--whose income is comparable with that of assisted renters spend roughly 40 percent of their income on rent. Even if the contribution requirement for subsidized renters increased to 35 percent of family income, that contribution would still be below the amount that unassisted renters currently spend on rent. Furthermore, households that received assistance would continue to benefit from paying a fixed percentage of their income toward housing, whereas unassisted renters with similar family income could confront increases in housing costs relative to their income.

An argument against implementing this option is that housing costs for most renters who currently receive assistance would rise, and even a modest increase in rent could be difficult to manage for households with very low income. In addition, by increasing the proportion of income that tenants are required to pay in rent, the option would reduce some participants' incentive to increase their income by working more.