• Housing Choice Vouchers are a crucial and underfunded form of assistance for low-income renters, leaving markets like Orlando, Austin, and Houston with about 10 times as many severely cost-burdened renter households as there are vouchers. 
• In many counties, the value of vouchers has failed to keep up with market-rate rents — and the faster rents have risen in a county, the less likely voucher values are to have kept pace with those rents.
• Stronger legal protections against source of income discrimination are necessary to improve access to housing for voucher holders

A chronic shortage of federal Housing Choice Vouchers (HCVs) — commonly known as Section 8, one of the main tools the government uses to assist the lowest-income renters — is putting renter households already hard-hit by the ongoing pandemic in an even more vulnerable position. Adding salt to the wound, the value of available vouchers themselves has failed to keep pace with rapidly rising market-rate rents in many areas, further limiting options for struggling tenants.

In several large markets nationwide, eligible, cost-burdened households exceed the number of available vouchers by 10 times or more, according to a Zillow analysis of rent burdens and voucher availability. And in almost half of counties analyzed — home to 38% of the US population — rents have grown faster in recent years than voucher values. A series of housing ideas from the Biden Administration aim to increase both the availability and value of HCVs, but the often yawning gaps between voucher availability and value relative to market rates have been widening for years, and will not close overnight.

And in addition to new proposals to help close these gaps in availability and value, more needs to be done to ensure that vouchers are accepted as a valid form of rent payment by more landlords, ending so-called source-of-income discrimination.

Not Meeting the Need

The recently passed $900+ billion pandemic relief legislation will offer substantive help to many struggling renters unemployed because of COVID-19. But it will not meaningfully help address longstanding challenges with the nation’s voucher programs. Long before the crisis, federal rental assistance administered through the Department of Housing and Urban Development (HUD) was crucial in helping keep low-income renter households afloat — and HCVs represented the bulk of that assistance. In 2019, about half (50.8%) of all households receiving HUD rental assistance were voucher holders — nationwide, 2,556,270 housing units out of a total of 5,034,685 across all HUD programs were funded for HCV use.

But the voucher program faces many critical challenges. For one, funding limits have resulted in a massive shortage in rental assistance relative to the number of low-income households who qualify.  An estimated 3 in 4 eligible low-income renter households don’t receive federal rental assistance — in other words, HUD programs only cover about 25% of the level of need nationwide. 

Because of that shortfall, many public housing agencies (PHAs) — the local agencies that administer the program — have to prioritize households in the most dire need. Some programs limit initial eligibility to extremely low income households — those that make less than 30% of the area median income, as opposed to 50% for low-income households. Programs with long wait lists may prioritize families that are homeless or involuntarily displaced. 

This prioritization means that many eligible households — even those with the highest rental cost burdens — are left trying to make ends meet without rental assistance. As of 2019, there were 9.7 million severely cost-burdened renter households — spending 50% or more of their incomes on housing — and just 2.6 million vouchers available. Among the largest 50 rental markets, Orlando stands out as having the largest ratio of cost-burdened renter households to assistance levels — there are about 13 severely cost burdened households for every 1 voucher, and about 28 moderately cost-burdened households (spending 30% or more of their income on rent) for every 1 voucher. 

Other metros within the Sun Belt — a region where both the population and rents have risen rapidly in recent years — are also among those with the largest disparities: Austin, Phoenix, Las Vegas, and Houston round out the top 5.

Limiting Mobility

Aside from overall voucher availability, rapidly rising rent is another critical issue for the efficacy of the voucher program. Voucher values — the maximum rental cost that a voucher will cover — are based on HUD’s calculations of fair market rents (FMRs), typically the 40th percentile of contract rents in a market. But in an area with steeply rising market-rate rents (the rents advertised on vacant units) the rate of increase in contract rents (the rent actually paid by tenants in an occupied unit) may lag behind the market. The upshot of rents rising faster than voucher values is that voucher holders are left with fewer, less-attractive options.

Using FMRs as a measure of voucher values, we found that the gap between market-rate rents and voucher values widened the most between 2015 and 2020 in places where market-rate rents grew the fastest. In other words, the faster market-rate rents grow, the less likely that voucher values have kept pace. Of the 303 counties analyzed — those in the largest 100 metropolitan areas with adequate rental price data — almost half (44%) saw market-rate rents rise more than voucher values from 2015 to 2020. These 44% of counties represent 38% of the total population of the US. 

Among those counties, Canyon County, Idaho, in the Boise metropolitan area is the most extreme example of rents outpacing voucher values. While the typical market-rate rental rose in price by 44% from 2015 to 2020 (the largest rent growth of all counties analyzed) voucher values only rose by 28%, a gap of about 16 percentage points. Pinal County, AZ — part of the Phoenix MSA — is a close second. Market rate rents there rose by just under 44% in the last five years, while voucher values rose by 29%. 

In a further illustration of the lagged effects between market-rates and voucher values, some of the most expensive rental markets actually saw this gap narrow over the past five years, particularly in areas where market-rate rent growth has been slow. Voucher values in the San Francisco area grew by 62% in the last five years, while market rate rents rose a scant 4%.

Even so, that’s little solace in the face of a mounting, decades-long affordability crisis in the Bay Area, and voucher holders in San Francisco have long faced slim pickings as rents kept rising. Previous Zillow research found that in 2016, only 20% of 2-bedroom rental listings in the HUD-defined San Francisco metro fell below the local FMR. Research from UC Berkeley looking at rentals advertised on Craigslist in 2014 found that only about 26% of listings in the broader San Jose–San Francisco–Oakland Combined Statistical Area fell below the FMR.

The immediate purpose of housing vouchers is to bridge the gap between what low-income renters earn and can reasonably pay, and what landlords, helping these households to afford and be safely housed in moderately-priced rentals. But some policymakers also hope to use the program to encourage mobility into areas of higher opportunity. When the value of vouchers fails to reflect the going rate of rentals on the market, households are likely to be left with only a few options located in areas with the highest concentrations of poverty. 

Unlocking More Opportunities

Conversely, if and when voucher values more-accurately reflect the market, more opportunities may be unlocked for low-income households to move to higher-opportunity areas potentially closer to their work or home to more cultural, educational and/or recreational amenities. Using Small Area Fair Market Rents (SAFMRs) set at the ZIP code level, instead of metro-wide FMRs, was found to increase the share of affordable listings in low-poverty neighborhoods often while also decreasing the share of affordable listings in high-poverty neighborhoods.

However, even if vouchers were more widely available and voucher values were more accurately set, HCV holders might still be handicapped by landlords refusing to accept those vouchers. Voucher holders are not protected under the federal Fair Housing Act, and absent specific state or local laws prohibiting source of income discrimination (SID), landlords can legally refuse to rent to some voucher holders. Enforcing even existing SID laws can be difficult, but studies show that jurisdictions with voucher non-discrimination laws are found to have significantly lower rates of landlord voucher refusals. Stronger legal protection against this kind of discrimination –both through passage of stronger non-discrimination laws and stronger enforcement of these laws — are necessary for the voucher program to be more fully effective. 

Methodology 

Zillow analyzed 1-year 2019 American Community Survey (ACS) data on rental cost burdens. We compared this data to HUD’s Picture of Subsidized Households data in 2019 to determine the ratio of cost-burdened renter households to the number of available Housing Choice Vouchers.

Zillow also compared HUD 2-bedroom FMR levels from 2015-2020 to a yearly median of monthly ZORI, at the county level. 2020 ZORI is a median of January through October monthly data. In this analysis, we use FMRs to represent voucher values. In reality, local PHAs set their own voucher payment standards (VPS) based on FMRs, for the most part within 10% of FMRs. In counties with multiple FMRs, a single FMR is calculated by a population-weighted average of subcounty FMR. 

The correlation coefficient between the 5-year change in ZORI (from 2015-2020) vs. the difference in the 5-year change of ZORI and the 5-year change in FMR levels is 0.30, statistically significant at the 1% level.