Robert Collison and Peter Ganong conclude in a study, The Incidence of Housing Voucher Generosity, that Small Area Fair Market Rents (SAFMRs) allow voucher recipients to live in higher quality housing and better neighborhoods with less poverty and crime, with little change in overall costs to the voucher program. SAFMRs allow voucher payment standards to be higher in high cost, high opportunity neighborhoods and lower in low cost, low opportunity neighborhoods.
Fair Market Rents (FMRs) established by HUD are used to calculate the maximum allowable monthly subsidy for a voucher holder. An FMR with adjustments by apartment size is normally applied across an entire metropolitan area or county, with no variations for smaller, more localized geographies. There have long been concerns that a single FMR for a metropolitan area or county concentrates voucher holders in low cost, low opportunity neighborhoods where rents are more likely to be below the maximum subsidy. Rents in high opportunity areas are more likely to be above the maximum subsidy.
In response to these concerns, HUD announced in 2010 a SAFMR Demonstration Program in the Dallas Metropolitan Area. Five other Public Housing Authorities in Chattanooga, TN, Laredo, TX, Long Beach, CA, Cook County, IL and Mamaroneck, NY were added to the demonstration in 2012. SAFMRs are set for zip codes within a metropolitan area, allowing higher rent subsidies in higher cost neighborhoods and lower rent subsidies in less costly neighborhoods.
The researchers tested the impact of SAFMRs on neighborhood quality in the Dallas metropolitan area by comparing the change in neighborhood quality among voucher holders in Dallas to those in Fort Worth, TX. Fort Worth served as a “control case” with a single FMR for the entire metropolitan area. Dallas voucher holders, on average, experienced greater declines in neighborhood poverty, unemployment, and violent crime rates compared to those experienced by voucher holders in Fort Worth. The improvements in neighborhood quality came without any increase in average rents in the voucher program.
When they evaluated rents paid by voucher holders in the Dallas area who moved, the researchers found that rents increased in zip codes with higher SAFMRs but that those increases could be attributed in part to higher housing quality. For every $1 increase in a SAFMR, rents increased by an average of 57ȼ from 2010 to 2013; 19ȼ could be attributed to the voucher holders moving to higher quality housing.
The researchers also evaluated two previous across-the-board metropolitan area FMR increases. In 2001, HUD increased FMRs to the 50th percentile of local rents in select metropolitan areas (FMRs are normally set at the 40th percentile) where voucher holders were highly concentrated in low cost areas. The 50th percentile FMRs, adjusted for apartment size, were applied to the entire metropolitan areas. The higher maximum rent subsidy was intended to enable voucher holders to move to higher cost, high opportunity neighborhoods. In both cases, landlords benefitted from across-the-board FMR increases by collecting higher rents but voucher holders realized little, if any, improvement in housing or neighborhood quality. For every $1 increase in FMRs, rents rose by 47ȼ, but there was no significant change in housing quality among voucher holders.
The authors also evaluated the impact of FMR readjustments HUD made in 2005 to better align them with 2000 Census data. The readjustment resulted in significant across-the-board FMR changes in many counties. The authors found that for every $1 increase in FMR, average rents increased by 41ȼ. Only 5ȼ could be attributed to tenants living in higher quality housing or better neighborhoods.
The Incidence of Housing Voucher Generosity is available at http://bit.ly/1kFwu1C.