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SPAA Professor Kirk McClure explains impact of proposed public housing rate increases

Monday, April 30, 2018

LAWRENCE — A proposal by U.S. Department of Housing and Urban Development Secretary Ben Carson to increase minimum flat rents and make other changes would likely cause many single-parent families in public housing to buy less food and medication, according to an analysis by a University of Kansas researcher of federal affordable housing programs.

Kirk McClure, professor of urban planning in the School of Public Affairs & Administration, is available to discuss the HUD proposal that would increase the monthly contribution each household makes toward rent as well as the minimum flat rent from $50 to $150 for non-elderly, able-bodied households.

"The typical work-able assisted household is very poor," McClure said. "The average income in 2015 was $12,574, which means that these families are trying to subsist on about $1,000 per month. It is worth noting that 73 percent of these households have minor children in the household. The average number of children in these work-able families is 2.2."

McClure is a former scholar in residence at HUD's Department of Policy Development and Research and has testified before Congress on housing issues. He has authored several studies on federal housing programs, including a recent one that focused on how the length of stays in federal housing could strain the federal rental assistance program's ability to serve families.

Q: What does HUD propose to do?

McClure: Ben Carson announced that the percentage of income that an assisted household in any of HUD's rental assistance programs must contribute toward rent will increase from 30 percent of income to 35 percent. The increase will apply to all non-elderly, able-bodied households. HUD calls these households "work-able." 

Carson also announced that among work-able households who live in public housing and are paying the minimum flat rent, this minimum flat rent would be raised from $50 per month to $150 per month. Finally, he announced that new work requirements would be imposed on work-able households.

Q: What is the important historical context?

McClure: It is interesting to note that federal housing programs began in 1937 with the income ceiling set at five times the rent charged for public housing, effectively setting the housing cost burden at 20 percent of income. With the Brooke Amendment in 1969, the standard was adopted that assisted households should pay 25 percent of income toward their housing costs. In 1981, the Reagan administration upped the standard to 30 percent. Now the Trump administration wants to raise the standard to 35 percent.

Q: How many households will be affected?

McClure: About 5.61 million households participate in the various rental assistance programs administered by HUD. More than one-half of these households are either elderly or disabled. The remaining 2.51 million households are non-elderly and able-bodied, thus they are "work-able" in HUD's terms. 

Q: What would this change look like in a family's budget?

McClure: A work-able assisted household in any of HUD's rental assistance programs usually pays about 30 percent of income toward the cost of rent plus utilities. The average tenant contribution is $317 per month. 

If the tenant contribution increases from 30 percent to 35 percent, the typical work-able household will see tenant contributions increase by $50 per month or the equivalent of a 16 percent increase in rent. Thus, the impoverished families will have $50 less to spend on food, clothing and other necessities.

Q: How would the proposed changes influence people in HUD's housing choice voucher program, those in public housing and those in Section 8 project-based programs?

The impact of an increased tenant contribution does vary some by program. The incomes of housing choice voucher and public housing households are about $1,100 per month, so the households pay rents of about $345 per month. These would increase by $40 to $50 per month if HUD increases the tenant contribution requirements.

The incomes of Section 8 project-based households are even lower at about $800 per month.  Thus, if the increase is imposed by HUD, the 5 percentage point increase on this lower-income population will increase rent about $33 for tenants.

Q: What will be the impact of raising the minimum flat rent?

McClure: Flat rents are minimum rents that are charged to households living in public housing, independent of their income levels. The flat rent is equal to the rent which the Public Housing Authority estimates it could lease the unit in the marketplace. The minimum flat rent is now $50 per month, but under the proposed changes the minimum flat rent would rise to $150.

Of the approximately 830,000 work-able households living in public housing, 217,312, or 26 percent, have tenant contributions of $150 per month or less and would be potentially affected by a mandatory minimum $150 flat rent. These households are extremely poor, with a mean income of only $155 per month.

They already suffer from a rent burden — annual rent as a percent of annual income — exceeding 100 percent, an unstable and threatening condition. Raising the flat rent of these households will only increase the already considerable threats they confront in life.

Q: What will be the likely effect of new work requirements?

McClure: While the work-able households in the various HUD programs are very poor, more than one-half — 56 percent — of them are employed. Given this employment, the employed households have income that is higher than the income of the unemployed households.

However, even with the wages earned, that income is not high. The average employed work-able assisted household has a total annual income of $18,698 — $1,558 per month — with virtually all of that income derived from wages, whereas the unemployed households have a staggeringly low average annual income of only $4,758 — $397 per month.

Because the employed household have higher incomes, they pay a higher amount of money toward rent. Because the tenant minimum contribution is a fixed at 30 percent of income, any increased income from employment is, in effect, taxed at 30 percent because the tenant contribution is increased by 30 percent of each incremental dollar of increased income. The employed households pay an average tenant contribution of $459, which will increase by $86 per month if HUD imposes its proposed increases.

The one-half of all work-able households in HUD-assisted housing programs who already work will presumably not be affected by new work requirements. Despite the fact that more than one-half of this population works and suffers under the 30 percent employment disincentive imposed by the programs, employment does not deliver these households out of poverty. 

Rather, they remain poor and in need of housing assistance. Those households who are unemployed typically suffer from abject poverty, and their ability to gain and retain employment is suspect.

To arrange an interview with McClure, contact George Diepenbrock at 785-864-8853 or gdiepenbrock@ku.edu.


Ruth DeWitt, Communications Manager
KU School of Public Affairs and Administration
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