HUD Expands Promising Policy to Support Housing Choice

The Department of Housing and Urban Development (HUD) published a notice last week expanding a promising policy that has been found to enable families with housing vouchers to choose to live in a wider range of neighborhoods. Giving voucher holders greater choice about where they live can have far-reaching positive effects on families and especially on children, research shows. HUD’s action will also help ensure that the voucher program furthers fair housing goals, as federal law requires.

Under the notice, state and local housing agencies in 41 metro areas will be required to use neighborhood-level rent caps referred to as small area fair market rents (SAFMRs). These will be in addition to the 24 metro areas where SAFMRs were required starting in 2018 or earlier. (See map.)

Housing vouchers help people with low incomes afford housing of their choice in the private market. The family pays 30 percent of their income for rent and the voucher covers the rest, up to a cap based on a fair market rent (FMR) that HUD sets each year to reflect typical market rents in an area.

HUD usually sets FMRs at a single level for an entire metro area, which means that rental units affordable to voucher holders tend to be concentrated in lower-rent neighborhoods within the area. These neighborhoods often have inadequate public infrastructure and services due to a history of discriminatory actions and inadequate investment by governments at all levels. And metro-level FMRs can make it difficult for voucher holders to move to neighborhoods with rents at the higher end of the local market, which often have higher-performing schools and other important resources and amenities. Since many of these neighborhoods are predominantly white and the majority of voucher holders are Black and Latino, this can also reinforce racial segregation.

SAFMRs, by contrast, are set based on market rents in individual ZIP codes, which means that HUD typically sets dozens of SAFMRs for each metropolitan area. As a result, SAFMRs better reflect actual neighborhood-level housing costs — that is, they are higher in high-rent neighborhoods and lower in low-rent ones. This means that some units in each ZIP code are affordable to voucher holders, greatly broadening the choices available to them. SAFMRs were first used in the Dallas metro area in 2011 under a settlement of fair housing litigation showing that metro-level FMRs denied Black and Latino voucher holders the option of moving to many majority-white neighborhoods.

Researchers have found that SAFMRs have been effective at enabling families to live in a wider range of neighborhoods, including those with low poverty rates. And other studies have shown that when families use vouchers to move to low-poverty areas, adults’ health improves and children’s long-run earnings and chances of attending college both rise.

SAFMRs have the added benefit of making it harder for owners in low-rent neighborhoods to charge above-market rents (together with other administrative safeguards that help prevent this). This is one reason why available data indicate that SAFMRs have reduced voucher program costs at the same time that they have expanded choice for participants.

HUD selected the 41 areas covered by the new notice based on data showing that SAFMRs would be especially effective there at expanding housing choice for voucher holders. Housing agencies in those areas must start using SAFMRs by January 1, 2025, but can opt to begin using them sooner. In addition, agencies in metro areas where SAFMRs are not required can voluntarily use them in all or part of their jurisdiction, as 80 agencies have already done. (HUD should also enable agencies in counties outside metro areas to use SAFMRs voluntarily, since the policy could expand housing choice there as well, but this is not allowed today because HUD has not published SAFMRs for non-metropolitan counties.)

In implementing SAFMRs, it will be important that housing agencies act to avoid harm to voucher holders living in low-rent neighborhoods. Most critically, HUD rules allow agencies to block any reduction in the amount the voucher pays as long as a family remains in the same unit. In addition, HUD has given most agencies broad flexibility to raise subsidy levels up to 120 percent of the SAFMR, a step agencies should take in both high- and low-rent neighborhoods if needed to enable voucher holders to find units they can rent.

While SAFMRs are an important step in the right direction, much more needs to be done to ensure that all voucher holders have real choice about where they live. Research shows that neighborhood-level rent limits can expand choice far more if they are combined with other supports, especially navigators who can provide customized support to help families look for housing.

Federal, state, and local governments should also do more to enforce existing bans on discrimination against voucher holders and establish new bans in places where they do not yet exist. And Congress should enact reforms — such as streamlining housing quality inspections and allowing vouchers to pay for security deposits — that will help more families use their vouchers successfully to rent a home that meets their needs.