Rental Options Are Limited for Voucher Holders in the Largest Counties

An article by Alexander Casey at Zillow, Here’s Where Housing Assistance Falls Short, examines the supply of rental housing available to Housing Choice Voucher (HCV) recipients. Mr. Casey’s research found that in nearly half of the 100 largest U.S. counties fewer than 25% of rental listings are affordable to voucher holders.

An HCV recipient contributes 30% of household income towards rent, while the voucher covers the remaining rental cost up to a payment standard based on HUD’s Fair Market Rent (FMR). The FMR should represent the price at which 40% of recently available rental units are priced at or below the FMR, and 50% for certain regions where voucher holders are geographically concentrated within the region. FMRs, however, can be too low compared to rents in the actual market. Fewer than 40% of listed two-bedroom rental units were priced at or below the FMR in 75 of the largest 100 counties. Fewer than 25% were priced at or below the FMR in 48 of the largest counties, and fewer than 20% of the listed two-bedroom rental units were priced at or below the FMR in 34 of the largest counties.

This problem exists for two principal reasons. First, annual growth in FMRs can lag behind annual growth in market rents in rapidly changing markets. HUD typically uses American Community Survey data to determine FMRs, which can lag behind real-time rental costs. Los Angeles County, CA, for example, has seen rents rise by 24.6% since 2012, while the two-bedroom FMR has increased by only 6.8%. Secondly, metropolitan-wide FMRs often include multiple counties, so an inexpensive county in a region may lower the metropolitan FMR.

Mr. Casey proposes calculating FMRs for smaller-sized areas so that they better reflect more locally defined housing markets. NLIHC advocates for Small Area FMRs at the ZIP code level to better reflect rents among neighborhoods within metro areas. Small Area FMRs result in lower payment standards in less expensive neighborhoods and higher payment standards in more expensive neighborhoods. HUD recently suspended a rule that would have required public housing agencies in 23 metropolitan areas to base their voucher payment standards on Small Area FMRs (see Memo, 8/21).

Mr. Casey also recommends more funding for HCVs to serve a greater number of eligible households and longer-term efforts to address rental affordability. These efforts include greater production of affordable housing through grants and tax credits at the federal level and inclusionary and incentive zoning at the local level. He argues pro-housing land use policies at the local level should allow the market to create more rental housing to meet growing demand.

For his research, Mr. Casey calculated the percentage of Zillow’s on-line listings of two-bedroom apartments that listed at or below the area’s FMR. The author acknowledges that the on-line listings may exclude some less-expensive rental properties renting at or below the FMR that may be less likely to be listed online. If this is the case, more units are available than the analysis indicates. No national database of such listings exists.

Here’s Where Housing Assistance Falls Short is available at: