The HUD Section 8 program is by far the largest rental assistance program in the country. Section 8 Housing Choice Vouchers are portable and can be used in any private market apartment, as long as the landlord is willing to participate and the apartment meets federal habitability standards. The vouchers allow low-income tenants to pay one-third of their income toward rent. The rest of rent is paid by HUD. The amount that HUD is willing to pay to the landlord to subsidize rent is set as the "Fair Market Rent" (FMR).
Since market rent varies from community to community, the FMR also varies depending on where the apartment is located. FMRs are set annually according to market factors as calculated by HUD. In the past, FMRs have been set for entire counties or metro areas. However, markets can vary widely even within counties or metro areas. For example, a downtown neighborhood may have much higher rents than inner ring suburbs of the same metro area. This has caused most voucher holders to concentrate in weaker market areas that have market rents that are lower than the FMR. Because landlords in stronger market areas can demand higher rents and can pick and choose from a larger pool of tenants, they are far less likely to accept Section 8 voucher holders.
The historic lack of market sensitivity of FMRs has significantly impaired voucher holders' access to neighborhoods with economic growth, jobs, quality schools, and other amenities. It has also contributed to segregation, as a higher proportion of voucher holders are people of color than the population in general. In an effort to address this problem, the Obama administration began exploring an initiative called the Small Area Fair Market Rent Rule (SAFMR). This rule allows HUD to set FMRs at the zip code level to account for market variations within a county or metro area.
Under Obama, HUD initiated a pilot in 2012 and decided to adopt it as a policy beginning on January 1, 2018 after a four and a half year rule-making process with extensive public input. In response to President Trump's Executive Order 13777, HUD Secretary Ben Carson announced that he would delay implementation of the policy for two years. In response, anti-segregation groups filed a lawsuit in an effort to allow the SAFMR to proceed. In late December, a district court in Washington D.C. issued a preliminary injunction against HUD, stating that HUD did not have the authority or a compelling rationale to block implementation of the policy. HUD has 20 days to appeal the decision, but in the meantime the policy that was supposed to be implemented as of January 1st is in effect.
It will be revealing to measure how SAFMR impacts neighborhood segregation. We will also be able to assess its impact on achieving a more healthy jobs-housing balance and reducing traffic congestion. While it is not the only solution to these problems, it has the potential to be an important tool in the toolbox to address poverty, segregation, economic development, and long commutes.