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What GAO Found

Several factors—including rising rents, declining household incomes, and decisions to expand the number of assisted households—were key drivers of the approximately 29 percent increase (before inflation) in housing agencies’ expenditures for the voucher program between 2003 and 2010. Congress and HUD have taken steps to limit cost increases while maintaining assistance for existing program participants. For example, Congress moved away from providing funding to housing agencies based on the number of voucher-assisted households they were authorized to subsidize and instead provided funding based on the generally lower number of voucher-assisted households housing agencies actually subsidized in the prior year. Further, HUD has proposed administrative relief and program flexibility for housing agencies, including streamlining program requirements and reducing subsidies paid.

GAO identified several additional options that, if implemented effectively, could substantially reduce the need for new appropriations, cut costs (expenditures), or increase the number of households assisted.

  • Reduce housing agencies subsidy reserves. Housing agencies have accumulated approximately $1.8 billion in subsidy reserves (unspent funds). They can hold the funds in reserve or spend them on authorized program expenses in future years. Over time, large sums can accumulate. Although HUD has sought the authority to offset (reduce) its future budget requests by the amount of “ excess” subsidy reserves, it has not provided Congress with complete or consistent information on how much of these reserve funds housing agencies should retain for contingencies. GAO has highlighted the importance of providing clear and consistent information on housing agencies’ reserves to Congress so it can make informed funding decisions.

  • Implement administrative reform. HUD officials have noted that certain requirements for administering the voucher program are burdensome and costly and could be streamlined. In addition, the formula HUD uses to pay administrative fees to housing agencies is not tied to current administrative costs or requirements. HUD has an administrative fee study underway, which intends to identify specific reforms to ease administrative burden, increase efficiencies, and suggest ways to align the administrative fee formula with the functions housing agencies perform. Without this information, Congress may not have the information necessary to make fully informed policy and funding decisions related to the voucher program.

  • Implement rent reform and consolidate voucher administration. Rent reform (for example, reducing subsidies by requiring households to pay more toward rent) and consolidation of program administration under fewer housing agencies could yield substantial cost savings—approaching $2 billion—or allow housing agencies to serve additional households, provided annual savings were reinvested in the program. However, while these options may have some advantages over the current program structure, they would require policymakers to consider some potential trade-offs, including increased rent burdens for low-income households, increased concentration of assisted households in high poverty areas, and more limited local control over voucher programs.

Why GAO Did This Study

The Department of Housing and Urban Development’s (HUD) Housing Choice Voucher (voucher) program subsidizes private-market rents for approximately 2 million low-income households. HUD pays a subsidy that generally is equal to the difference between the unit’s rent and 30 percent of the household’s income. HUD also pays an administrative fee, based on a formula, to more than 2,400 local housing agencies to manage the program. Over time, program expenditures steadily have risen, causing some to questionhow well HUD managed costs and used program resources. This report (1) discusses the key drivers of cost growth in the voucher program and the actions taken to control this growth and (2) analyzes various options to cut costs or create efficiencies. For this report, GAO analyzed HUD data; reviewed budget documents, program laws and regulations, guidance, academic and industry studies, and GAO reports; and interviewed officials from HUD, industry groups, and 93 housing agencies.

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GAO identifies options for increasing efficiencies and recommends that HUD (1) determine what level of reserve funding housing agencies should maintain and reduce future budget requests by the amount of excess reserves and (2) consider proposing options for simplifying program administration and changes to the administrative fee formula. HUD did not agree or disagree with the recommendations. While it noted that the draft provided an accurate assessment, it offered some clarifications and responses.

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Housing and Urban Development To help reduce voucher program costs or better ensure the efficient use of voucher program funds, the HUD Secretary should provide information to Congress on housing agencies' estimated amount of excess subsidy reserves. In taking these steps, the Secretary should determine a level of subsidy reserves housing agencies should retain on an ongoing basis to effectively manage their voucher programs.
Closed - Implemented
To address this recommendation, HUD included the estimated level of Housing Assistance Payments (HAP) program reserves in its June 2018 Housing Choice Voucher Trends report to the Congress. The report also included information on HUD's determination for a reasonable level of program reserves housing agencies could maintain. This level is based on housing agency size - large housing agencies (those with more than 500 units) may retain reserves equivalent to 4 percent of their HAP renewal allocation; medium housing agencies (those with 251-500 units) may retain reserves equivalent to 6 percent of their HAP renewal allocation; and small housing agencies (those with 250 or fewer units) may retain reserves equivalent to 12 percent of their HAP renewal allocation. Housing agencies with reserves in excess of these balances are usually subject to offsets in years when the HAP national proration is below 100 percent (that is, in years when housing agencies are not fully funded).
Department of Housing and Urban Development Further, the Secretary should consider proposing to Congress options for streamlining and simplifying the administration of the voucher program and making corresponding changes to the administrative fee formula to reflect any new or revised administrative requirements. Such proposals should be informed by results of HUD's ongoing administrative fee study and the experience of the MTW program.
Closed - Implemented
Consistent with our recommendation, in the President's budgets for fiscal years 2013-2016, HUD proposed a number of statutory changes to streamline administrative requirements for the Housing Choice Voucher program. In addition, in January 2015, HUD published a proposed rule that included a number of program and administrative simplification measures for the Voucher program. Further, in April 2015, HUD released its Voucher program administrative fee study. HUD has indicated that it plans to commence work on developing a proposed rule for a new administrative fee formula based in the findings of the study. On the basis of HUD's actions, we consider this recommendation to be implemented.
Department of Housing and Urban Development To help reduce voucher program costs or better ensure the efficient use of voucher program funds, the HUD Secretary should provide information to Congress on its criteria for how it will redistribute excess reserves among housing agencies so that they can serve more households. In taking these steps, the Secretary should determine a level of subsidy reserves housing agencies should retain on an ongoing basis to effectively manage their voucher programs.
Closed - Implemented
In fiscal year 2014, Congress enacted an offset-reallocation provision that allows HUD to offset excess program reserves, including housing agency held reserves, for two purposes: (1) to increase the national Housing Assistance Payment (HAP) proration and (2) for shortfall prevention to protect families from eviction during years with lower HAP prorations. HUD monitors housing agencies' budget and leasing utilization to help ensure their level of reserves are reasonable (HUD sets reserve levels based on housing agency size, large, medium, and small) and also to ensure housing agencies are maximizing the number of families served with their program dollars. As a result of this authority and HUD's efforts, nationwide, the level of program reserves is between 7-8 percent of the annual HAP appropriation. HUD has determined this level to be reasonable given the complexities of rental markets, attrition rates, and other factors. HUD does not have any plans to change or add to the offset authorities granted by Congress. The agency maintains that preventing families from being terminated from the program due to funding shortfalls is its top priority.

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