November 13, 2013

Discretionary SpendingOption 23

Function 600 - Income Security

Increase Payments by Tenants in Federally Assisted Housing

(Billions of dollars) 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2014-2018 2014-2023
Change in Spending                        
  Budget authority 0 -0.6 -1.2 -1.8 -2.5 -3.2 -3.3 -3.3 -3.4 -3.5 -6.0 -22.7
  Outlays 0 -0.4 -1.0 -1.6 -2.3 -3.0 -3.2 -3.3 -3.4 -3.5 -5.3 -21.8

Note: This option would take effect in October 2014.

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). Those programs are funded by the Department of Housing and Urban Development (HUD) and generally require that tenants pay 30 percent of their gross monthly family income (after certain adjustments) for rent; the federal government subsidizes the difference between that amount and the maximum allowable rent. In 2012, by the Congressional Budget Office’s estimates, expenditures for all of HUD’s rental housing assistance programs came to an average of roughly $8,000 per household. That amount includes the housing subsidies and fees paid to the agencies that administer the programs.

Under this option, tenants’ rental contributions would gradually increase from 30 percent of adjusted gross family income to 35 percent over the 2015–2019 period and then remain at the higher rate. Provided that federal appropriations were reduced accordingly, those higher rent contributions would reduce outlays by a total of $22 billion from 2015 through 2023, CBO estimates (roughly $10 billion for the Housing Choice Voucher Program, about $5 billion for the Public Housing Program, and almost $6 billion for project-based assistance programs).

An argument in support of this option is that renters who do not currently receive vouchers or rent subsidies—“unassisted” renters—whose income is comparable to that of assisted renters spend, on average, roughly 40 percent of their income on rent. Thus, even if the required contribution for assisted renters was increased to 35 percent of family income, it would still be below the amount paid by most unassisted renters. 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 face increases in housing costs relative to income.

An argument against implementing this option is that housing costs for most renters who 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 the incentive for some participants to boost their income by working more.