Direct Rental Assistance: Returning to the Roots of Housing Allowances

At $30 billion in expenditures annually, the Housing Choice Voucher program is the federal government’s largest rental housing assistance program. Although seen as highly successful in many ways, the voucher program suffers from three interrelated challenges: the program imposes high administrative burdens on recipients, landlords, and housing authorities; many recipients are unable to successfully use their vouchers to rent homes after waiting years to receive them; and program rules distort behaviors in ways that undermine the program’s goal of leveraging market efficiency. Amid interest in reforming or expanding the voucher program, this article considers whether and how providing the voucher rental subsidy directly to the recipient might mitigate those challenges. It outlines a set of design considerations for such a program and proposes a demonstration that could inform both voucher reforms and a direct rental assistance program.

The Housing Choice Voucher (HCV) program is the federal government’s largest rental housing assistance program, spending approximately $30 billion each year to support 2.3 million lowincome households. However, when Congress appropriated an extraordinary $46.5 billion for emergency rental assistance in response to the COVID-19 pandemic, funds were not sent through the HCV program. Instead, the Emergency Rental Assistance (ERA) program was administered by the U.S. Department of the Treasury (Treasury), presumably in the hope that the funds might flow faster. Initially, ERA payments went to the landlord on behalf of an eligible renter, following the HCV model, but when local program administrators had trouble disbursing funds—partly due to the challenge of reaching landlords and persuading them to participate—Treasury officials adjusted program guidelines to allow payments to be made directly to eligible households. That policy pivot helped to motivate the “direct rental assistance” concept presented in this article.

ERA was not, however, the first time the federal government provided rental assistance directly to renters. Fifty years ago, the U.S. Department of Housing and Urban Development (HUD) Experimental Housing Allowance Program (EHAP)—which laid the foundation for what would become the HCV program—provided eligible households with a housing subsidy that they could use along with their own funds to pay the full rent to their landlord. It was, essentially, cash assistance earmarked for housing. When Congress created the Section 8 program in 1974, it shifted key responsibilities to the local public housing authority (PHA) and landlord, making the program less like cash and more like in-kind assistance. In the HCV program, the PHA must inspect and approve the unit, the landlord must agree to a Housing Assistance Payment (HAP) contract with the PHA, and the PHA must pay the subsidy directly to the landlord. This article explores how certain key challenges the HCV program currently faces could be overcome by returning to a direct rental assistance approach like the “housing allowances” tested in EHAP.