The Department of Housing and Urban Development has proposed the most dramatic low-income housing policy change in decades, potentially affecting the more than 5 million tenants in public and voucher-subsidized housing. The new proposed regulation, announced on March 6, would permit local housing authorities to adopt both time limits and work requirements for these tenants, who are among the poorest Americans, with an average household income of $18,000. The goal is to “promote self-sufficiency for residents, promote economically mixed housing and address the affordable housing shortage.”
Expect protests that these households are at risk of losing their shelter.
There’s no doubt residents will face new pressure, just as cash welfare recipients did because of a 1996 five-year time limit. There are, however, good reasons for local housing authorities to consider these new policies (which exempt the elderly and disabled), and they are free to resist. Currently, only 1 in 4 households qualified for housing aid actually receive it — while those who do can remain indefinitely; indeed, 65% stay for 10 years or more. A minority, 46%, have income from working, at least that is recorded. In other words, the current system is a recipe for long waiting lists and economic stagnation.
But as strong a case there is for the changes HUD will suggest, another important reform is going unaddressed. We need to stop taxing these poor households as if they were rich.
We do so through a rule which, on the surface, seems like a good deal. Public and voucher housing tenants need to pay no more than 30% of their income, a widely accepted standard of the new buzzword affordability. But the rule has a serious unintended consequence: the more you earn, the higher your rent. Indeed, for every additional dollar in income, tenants must pay $0.30 more in rent — and housing authorities audit them carefully.
The top 10% of all taxpayers pay an effective federal tax rate of only 25%, and the top 1% pay just 29%; the overall average is 22%. If the goal of the new HUD rules is to encourage upward mobility, a work requirement alone is not enough.
That the income rule would handicap tenants contrasts with the goal of its original sponsor, Massachusetts Sen. Edward Brooke, the first black Republican since Reconstruction. In 1969, he responded to a crisis at one of the most notoriously dilapidated public housing projects, the 33 high-rises of Pruitt-Igoe in St. Louis, later famously “imploded” in a photogenic cloud of dust. Local officials desperately needed more revenue for repairs; tenants responded with a rent strike. The result was the “Brooke Amendment,” which limited rent, and the beginning of a long downward trajectory for public housing across the country. Congress could have stepped in with repair funds — but it didn’t.
The Brooke rule not only accelerated physical decline but gave tenants a reason not to increase their income or to hide it.
But because the 30% rule is law — part of the National Housing Act — only Congress can change it; there’s nothing HUD can do on its own. Those with experience administering public housing work requirements — a handful of housing authorities have had such discretion — underscore the need for change. Renee Glover, the former head of the Atlanta Housing Authority who instituted a work requirement, under a pilot Clinton administration program called Moving to Work, sounded a lot like former President Bill Clinton when she told me: “Let’s make work pay.” Tenants, she said, “shouldn’t have to worry about every incremental dollar they earn.”
For the proposed HUD reforms — work requirements and a time limit — to work, though, those rule changes alone won’t be enough. That’s the lesson of a California housing authority, which set a five-year time limit. The San Bernardino Housing Authority, one of just a handful around the country included in Moving to Work, has had great success in encouraging tenants to move out and up. It adopted the time limit in 2012, aware that it had eight families on its waiting list for each of its apartments. The results have been striking: income “at exit” had gone up 126%; those on public assistance declined from 343 to just six, and 18 families became homeowners.
It’s important to note, though, that the program included “coaching services” and introductions to employers. It was not sink-or-swim, and such services are costly.
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Expect an outcry when HUD announces its proposal to let the nearly 3,200 local housing authorities try the same approach as San Bernardino. But none will be required to do so — and each can assess its local housing market conditions first.
We may think of public housing as a big city program, but it’s found across America, including in small towns in the Deep South. If local officials decide that a time limit would lead to families being left on the street, that will be their choice. What makes sense in Birmingham won’t make sense for Brooklyn. But the utopian dream of public housing — originally thought to be a way to get rid of slums — has not turned out well. Changing its culture of long-term dependency is a good idea. But doing so should include letting tenants keep more of what they earn.
Howard Husock is the author of The Projects: A New History of Public Housing and is a senior fellow in domestic policy studies at the American Enterprise Institute.