Major Changes Are Needed in the New Leased-Housing Program

CED-77-19: Published: Jan 28, 1977. Publicly Released: Jan 28, 1977.

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The Department of Housing and Urban Development (HUD) section 8 leasing program, the principal Federal program for housing lower income persons, has had limited success in providing occupancy for lower income persons and stimulating new housing starts.

Major changes are needed to improve administration and increase activity under four section 8 programs: existing, newly constructed, substantially rehabilitated, and State agency housing. Weaknesses in HUD methods to establish program rents resulted in rents which appear too low to encourage sufficient participation by private housing owners. Owner's unwillingness to assume the management risks associated with housing lower income families with children will result in disproportionate assistance to lower income elderly persons to the detriment of large and very-low-income families. Some owners are reluctant to participate in the program because they believe that the HUD-established fair market rents will not compensate them for complying with the section 8 requirements and for accepting the heavier management burden which they believe comes with renting to lower income persons. Some smaller communities and public housing agencies have refused or were unable to participate. Program activity has been limited by program regulations which assign lower income participants numerous complex responsibilities and by public housing agency-imposed residency requirements which restrict participant mobility. Private developers have limited their activity because of lack of financing, owner's numerous program responsibilities compared with the low financial rewards, and low HUD-established fair market rents. State agencies have been unable to sell bonds to finance section 8 projects because the bonds lack the security and higher return available in the corporate bond market.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Housing and Urban Development should: (1) implement the section 8 program more promptly and effectively by insuring that HUD field offices have sufficient trained staff; (2) allocate section 8 funding to communities in accordance with program mixes as contained in local communities' housing assistance plans; (3) justify to the HUD central office use of any factors not specifically identified in the Housing and Community Development Act; (4) revise HUD procedures to insure that fair market rents are at least equal to private rents for similar units; (5) insure that fair market rents and rent reasonableness tests for new construction and substantial rehabilitation reflect the current costs of producing and financing units as well as meeting section 8 management requirements; (6) develop separate fair market rent schedules for individual housing submarket areas instead of one fair market rent schedule for an entire standard metropolitan statistical area or county group; (7) determine if a premium rent is necessary to encourage owners and developers to provide section 8 housing to nonelderly families, especially those requiring large units; (8) consider, as an alternative to increasing fair market rents, reducing some of the owners' section 8 responsibilities to overcome their reluctance to participate in the program; (9) continue the section 32 leasing program; (10) allocate sufficient funds to a community to permit effective, efficient, and economical program administration; (11) prohibit housing authorities from making residency a program requirement; (12) consider suggested alternatives to enhance a developer's ability to obtain financing and increase developer interest in the program; (13) coordinate more aggressively with the Farmers Home Administration so that rural areas can get more housing assistance; and (14) encourage construction of projects with a mixture of subsidized and nonsubsidized units. The Secretary of Agriculture should have the Administrator, Farmers Home Administration, coordinate more aggressively with HUD to resolve program differences so that rural areas can get more housing assistance.

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