Housing Choice Voucher Program (HCVP)

Section 8 Changed

Premise: HUD has determined that tenants should pay no more than 30% of their household income for total housing expense. They believe that any housing costs over that amount should be subsidized by the federal government.

What's New

      On Oct. 1, 1999, the Section&nbsp8 certificate and voucher programs were merged into the new Housing Choice Voucher Program (HCVP). The new program creates greater flexibility for subsidized tenants by putting the choice of where to live within much greater control of tenant households. The HCVP has also changed some of the rules, especially relative to the rents the household may pay.

Key differences between the old and new programs.

      Under the old certificate program, subsidized rents were held to a standard under which the combined subsidy rent amount, tenant-paid rent and utility allowance could not exceed the permitted fair market rent (FMR) for the housing. Many times, a discrepancy existed between the FMRs and actual market rents. If the FMRs were lower, owners tended to avoid accepting certificates because the tenants were prohibited from paying the difference in rent.

      Rental housing owners who needed the occupancy for cash flow purposes and whose tenant population depended heavily on Section 8, had to absorb the lost revenue. For instance, if the certificate FMR was $400 monthly and the actual market rent was $475, the loss of $75 per month in income had a dramatic impact. This lost revenue could even be compounded by the higher public housing authority (PHA) utility allowances that are required to be used if a Section 8 household moves into a private rental unit.

      Under the old voucher program, the household was permitted to pay the difference between the restricted rent and the market rent. Using the same scenario, the household could pay the $75 difference so a property owner could maintain cash flow and value. The more flexible voucher program's only rent requirement was "reasonable rent" for the unit.

      Those programs have been phased out around the country and replaced with the Housing Choice Voucher Program. 
      Key components of the new program (24 CFR Part 982) are:

• The Payment Standard: Local PHAs (Public Housing Authorities) set a "payment standard" based on their analysis of the local rental market.
  

• Rents for Units below Standard: Households that lease units with rents below this standard pay the higher of these options: 30% of their monthly adjusted income, 10% of their monthly gross income, or the PHA statutory minimum rent.

 Examples:

• Rents below standard: The PHA sets the payment standard at $400 per month for a two-bedroom unit. A tenant household wants to rent a unit priced at $350 per month, which is below the payment standard. If the household has a gross income of $12,000 and an adjusted income of $10,000, using the new "higher of requirement would mean that the household's portion would be $250 per month, which is the greater of 30% of its adjusted income ($250) when compared to 10% of the household's gross income ($100). The subsidy portion would be $100.

• Rents for Units above Standard: A similar rule applies above the payment standard, but there's a twist. If the household seeks to lease a unit with rent above the payment standard, the same "higher of" standards apply with one additional factor: the household may then pay any additional rent beyond the payment standard as long as its total rent contribution does not exceed 40% of its adjusted income at the time it first receives assistance for a particular unit. After the first year, the household would be released from this 40% requirement and could pay the full difference.

Looking at an example of this situation, and using the same household criteria; if the payment standard is $400 per month, and the Household wishes to rent a two-bedroom for $500, the same household would still be required to pay $250 per month based on the payment standard. The subsidy portion would remain at $100. However, since the rent is higher than the payment standard, the household could pay up to 40% of its adjusted monthly income or an additional $83.33 per month ($10,000/12 x 40% = $333.33) toward the rent of $500. Even at this higher amount, it is clear that the total rent payment would fall short of the $500 rent in the first year.

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