Research Provides Considerations for Direct Rental Assistance Program Design

By Mackenzie Pish, NLIHC Research Analyst 

A recent report, “Direct Rental Assistance and Landlords: Considerations for Program and Pilot Design,” examines how landlords might respond to direct rental assistance (DRA) that provides cash payments directly to tenants to help them afford housing. Based on landlords’ perspectives of the Housing Choice Voucher (HCV) program, which provides rental assistance payments directly to landlords, the authors found that landlords who rent to low-income renters would likely prefer to rent to DRA recipients than to unsubsidized renters. However, landlords’ preference between DRA and HCVs depends on how landlords weigh the benefit of HCVs’ more reliable rent payments against the cost of HCVs’ administrative requirements.   

The authors conducted 2-hour interviews with 157 landlords and property managers who rent to low-income renters in Baltimore, Maryland; Washington, D.C.; Cleveland, Ohio; and Dallas, Texas. Participating landlords managed a range of rental portfolios, from one rental home to thousands, with rents at or below 150% of the metropolitan area Fair Market Rent. About 70% of the landlords accepted vouchers, many of whom had not done so previously. Interviews focused on landlords’ perceptions of the HCV program, business and screening strategies, and engagement with subsidy programs generally. The authors also observed landlords during their daily operations to supplement findings from interviews. The interviews did not focus on DRA, but the authors suggest they provide important considerations for designing DRA programs. 

The authors found that landlords might perceive tenants with DRA as a greater risk than tenants with HCVs, but they would still prefer them to unsubsidized low-income renters. For landlords, the reliability of rental payments is the most important distinction between HCVs, DRA, and no subsidy. Landlords prefer tenants who they believe will pay their rent in full and on time. Landlords value HCVs’ guaranteed rental payments enough to deal with pragmatic administrative burdens. Despite research demonstrating that renters prioritize rental payments, landlords interviewed believed that renters were irresponsible, lacked budgeting skills, and spent money on novelties. This suggests that landlords won’t trust tenants to prioritize DRA for rent without some form of programmatic verification that rent was paid.  

DRA programs may be most effective if used to stabilize households with non-zero incomes and already residing in their homes, particularly in markets with rapidly increasing rents. For renters who have already secured housing, DRA could help them afford the rent and reduce involuntary displacement. For tenants searching for housing, however, the potential impact of DRA may be mixed and depend partially on whether landlords find DRA payments reliable, and what rent multiplier they apply to DRA income when considering whether tenants have sufficient income to rent. Landlords interviewed typically assess the ability of prospective tenants to reliably afford their rent by requiring their incomes to be three times the rent, which is a ‘rent multiplier’ of three. The authors found that landlords are willing to relax the rent multiplier when a renter’s income source is more reliable. HCVs and fixed income sources like social security are more reliable than low-income wages. If landlords do not apply a lower multiplier for DRA income, then DRA assistance will likely be less effective than HCVs at helping recipients secure housing.  

Further, the authors find that landlords are opposed to time-limited income sources. Landlords welcome HCV holders because they are more likely to renew leases and remain in the same homes for longer periods than unsubsidized tenants, creating fewer turnover costs. Ideally, DRA programs would provide long-term assistance similar to HCVs. If DRA programs are unable to offer long-term direct assistance, the authors recommend they include a mechanism to transition DRA recipients to HCVs or other long-term subsidies.  

DRA may be more appealing for landlords with smaller portfolios who struggle to comply with HCV requirements. Small landlords without full-time staff find HCV requirements burdensome. Landlords identified the HCVs’ rent reasonableness and inspection processes as frustrating and unduly time consuming. Inspection inconsistencies and delays obstruct tenants’ move-in, delay rent payments for weeks or months, and may result in termination of HCV contracts. DRA programs could be designed to remove these administrative features. DRA programs could provide a maximum subsidy amount not based on their homes’ rental price, relieving administrative burden for landlords and incentivizing renters to “shop” for homes with lower rent to save any leftover subsidy for other needs. DRA programs could also eliminate housing inspections or focus housing inspections on significant health and safety issues.  

The study concludes that DRA should not replace the HVC program, but it could be a valuable tool for communities to keep renters stably housed. HCVs may be best suited to help the lowest income renters secure housing that they could not otherwise afford, while DRA may be better suited to help tenants maintain housing in the face of financial setbacks or rising rents.  

Read the report here.