Recent Changes to the Section 8 Voucher Renewal Funding Formula

Publication Date: March 2007

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Social conditions

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Abstract:

Changes enacted by Congress during the appropriations process in each of the past several years have significantly altered the way that public housing authorities (PHAs) receive funding to administer the Section 8 Housing Choice Voucher program. Prior to FY2003, PHAs received funding for each voucher they were authorized to administer, based on their average costs from the previous year, plus inflation. Most PHAs were not using all of their vouchers, and each year the Department of Housing and Urban Development (HUD) was able to recapture unspent funds. Some Members of Congress expressed concern about the underutilization of vouchers and the amount of recaptures.

Beginning in FY2003 and culminating in FY2006, Congress fundamentally changed the way PHAs receive voucher funding. The changes were designed to limit the amount of unspent funds held by PHAs and limit the cost of vouchers, which had begun to grow rapidly, due in part to market changes and in part to policy changes. In FY2006, PHAs were funded based on what they had received in the previous year (regardless of changes in their costs and utilization), plus an inflation adjustment, prorated to fit within the amount appropriated. Under this formula, some agencies received more funding than they were legally permitted to spend, while other agencies did not receive enough funding to distribute all of the vouchers they were authorized to administer.

The Administration supported this conversion to a "budget-based" formula, and has requested that Congress enact permanent reforms to complement the new funding method. Low-income housing advocates and PHA industry groups have generally opposed both the funding changes and the Administration's proposed policy reforms.

In FY2007, Congress again changed the voucher funding formula through the appropriations process. PHAs are now eligible to receive funding based on what they were spending in the previous year (rather than what they had been allocated in the previous year). As a result, PHAs that had not been spending all of their funding in FY2006 may see a reduction in funding in FY2007. Nonetheless, preliminary estimates indicate that all PHAs will receive more than 100% of their 2006 costs and utilization.

The Section 8 voucher renewal funding formula may again be a focus of debate as Congress considers the FY2008 funding legislation. The President has requested that Congress enact a Section 8 voucher funding formula similar to that in place in FY2006. However, bipartisan voucher reform proposals considered in the 109th Congress -- and may be reintroduced in the 110th Congress -- contained formula changes more closely aligned with those included in the FY2007 funding act.

This report describes changes in the formula included in appropriations bills for FY2003 through FY2007. For more information on Section 8, see CRS Report RL32284, An Overview of the Section 8 Housing Programs, and CRS Report RL33270, The Section 8 Housing Voucher Program: Reform Proposals.