Four years ago the Nixon administration announced a major shift in federal housing policy - a new program under which, instead of subsidizing new housing projects to "warehouse" poor people, the government would give them money so they could shop for better housing themselves.
By one standard that program has been a failure. It has not spurred the building of much new housing for the poor; after three years, only 5,300 families had been placed in new units.
But judged another way, as a quasi-welfare program, it has had a smashing impact. Though its cost is smaller so far, it is to housing what food stamps are to eating: nearly 200,000 families this year are paying reduced rents and getting a chance to move into better housing.
And unlike many other housing programs that wound up benefitting builders and middle-class homeowners, this one has funnelled its money right on target into the nation's poorest households.
The low-income housing plan, usually called "Section 8," is a $1.2 billion Nixon administration remnant that is blossoming into the most sought-after housing program offered by the federal government. Money to finance up to 400,000 units has been snapped up in two consecutive years and poor tenants would quickly absorb any more offered.
The Section 8 program was launched in 1973 by President Nixon as an alternative to conventional public housing, which he said had merely stuck the poor into federal "warehouses." The new initiative was designed to give low-income families a freedom to choose their own homes with government help. They would be given cash assistance to help meet higher rents. With the new money floating into the market, builders would be encouraged to put up more decent housing for the low-income market.
Builders who have been burned in the past by federal housing debacles like it. "Those developers accustomed to building in federal programs think it's great," says Charles L. Cope, director of federal programs for the National Association of Home Builders. It's the biggest subsidy the federal government has ever offered."
Although it's a Republican administration leftover, Section 8 has captured the support of President Carter's people in the Department Carter's people in the Department of Housing and Urban Development. After a few weeks in office, they sent in a supplemental appropriations request to add 138,000 units.
"We have a good program and the money in place and we're going to make it produce," says Lawrence B. Simons, HUD assistant secretary. "We couldn't expect the American people to wait while we come up with something totally new."
The basic popularity of Section 8 isn't surprising, because just about everybody involved gets more money. Tenants receive subsidies, often enough to halve their monthly rent payments, simply by proving they don't have much money. Builders and landlords like Section 8 because it assures them steady rents - often higher than what they were charging - and permits them to raise those rents to cope with inflation.
It works this way: any family whose income does not exceed 80 per cent of the median income in his area can qualify for a subsidy. (Nationally, a family of four with an income as high as $9,500 would qualify). The family is expected to pay up to 25 per cent of its monthly income for rent. The government pays the difference between that amount and what it considers the fair rent for the area.
In Washington, for example, the official fair-market rent for a two-bedroom walk-up apartment is $351 a month. A family of three with adjusted monthly income of $300 would be expected to pay a fourth, or $75 a month, for rent. The government pays, directly to the landlord, the difference of $276 a month.
That formula, embedded in the 1974 housing act amendments, was expected to spur a revival of low-rent apartment construction. (The previous one, which had offered a mortgage-interest subsidy for developers, had ended with a rash of foreclosures.) It didn't. Builders' wariness of government programs, a tangle of red tape (it took HUD eight months just to write regulations), and the shortage of financing produced a dearth of new construction. By last March, after two years of operations, there had been new construction starts on only about 13,000 units.
With more financing available and a new amendment extending mortgage time from 20 to 30 years. HUD is receiving a surge in applications for new construction. Simons estimates that 80,000 new units will be started this fiscal year and about 120,000 next year.
But the other half of Section 8 - subsidizing tenants in already existing apartments - moved fast off the mark. Nearly 200,000 tenant families live in subsidized units now. HUD officials think every dollar appropriated could be used up quickly for existing housing. One reason is that HUD has used about one-fourth of Section 8 money to bail out properties it had financed in previous low-rent programs, properties it would have to acquire if they continued to run deficits and face foreclosure.
Very low-income families - many of them elderly and a considerable number on welfare - have been the major beneficiaries. Nearly 80 per cent of the recipients have incomes amounting to less than half the median income in their area.
Roughly speaking, about three out of every four subsidized families have incomes below the official poverty level of $5,600.
It is explained largely by the fact that much of the first Section 8 money was turned over to local public housing agencies, whose clients are usually the welfare poor. Those agencies turned first to the waiting lists for traditional public housing to find tenants eligible under Section 8. They found, of course, a large pool of poor families eager to find new homes or to have their rental payments reduced by subsidies.
Section 8 also has guaranteed a new element of personal choice in housing, one of its key goals. The subsidized tenant can shop around and move into any apartment certified by HUD as acceptable and not charging excessive rents. Most beneficiaries initially chose to remain where they were, but recent statistics show they are moving out of their old neighborhoods. A study of the northeastern and mid-Atlantic states found that 44 per cent moved to different sections of their city with their subsidies and 26 per cent moved to another city or town in their area.
But drawbacks are beginning to show up in Section 8. For one thing, it's very expensive. Studies by the Library of Congress found that its apartment units cost 14 per cent more than comparable units which could be built under conventional public housing. HUD's Simons says he does not accept that comparison yet.
"We're still trying to quantify that," he said. "Public housing may be cheaper, but most of that is built in low-income areas where land costs are cheaper." Nevertheless, pressure has grown in Congress to shift some of the Section 8 money back into conventional public housing, all but abandoned under the Nixon administration.
Another threat is the growing hostility of many city mayors who say they lack any effective control over where new apartments will be built. Cities are required to submit comprehensive plans, indicating where the housing should be located, but they have no power to assume the plans will be followed.
Memphis mayor Wyeth Chandler found that one plan HUD approval for his city would have required the removal of a large number of middle-in-come black families to make way for other black families with incomes low enough to qualify for Section 8 subsidies.
All of the current tenants objected stenuously. "We sided with them and tried to get it killed," Chandler said. "We though we had it killed four or five times, but it kept rising like the Phoenix from the ashes." Memphis had ranked that apartment 35th on a list of 35 potential Section 8 projects. "It seems to me that a mayor, if he tries to act objectively, should be allowed to select the site where the project goes," Chandler said.
Similarly, Portland, Ore., Mayor Neil Goldschmidt fought HUD for months over two projects, a rehabilitated hotel which clashed with a down-town renewal program and an apartment building for elderly persons which was to be located far beyond the reach of bus lines.
"We aren't adversaries of the program," Goldschmidt said, "but we do want a veto over what goes where."