When the federal government seeks housing for low-income families in Washington, it has learned that its monthly rent subsidy for a two-bedroom apartment in a high-rise building will run $650 or more.
That's one reason the federal rent subsidy program is running out of money. It's the main reason Congress trimmed the program in the budget reconciliation bill.
Nonetheless, the federal government already is committed to spending more than $100 billion over the next 40 years in rent subsidies. Congress' changes save some dollars but hardly make the program a model of austerity.
The program is officially called the Lower Income Rental Assistance Program, or Section 8 for short, because it is an amendment to Section 8 of a 1937 housing act.
The irony is that Section 8 was born in 1974 to proud Republican parents and hailed as an effort to solve public problems by involving private enterprise. The government would simply help private developers house the nation's poor.
Section 8 subsidies cover 75 percent of the rent for low-income families. Developers are guaranteed the subsidy will be continued for up to 40 years. The rationale is that with such guarantees, developers can raise private financing to build housing.
But experience has proven that low-income housing is not the same as low-cost housing. From 1977 to 1980 the program's cost soared from $367 million to $2.1 billion. Since the program commits the federal government to pay rents for up to 40 years, the bills will come in for decades.
The Department of Housing and Urban Development, which administers Section 8, calculates that more than $110 billion is committed in future rents. A congressional expert places the figure at $160 billion.
Congress made these changes in Section 8:
* Only 128,500 housing units will be added to Section 8, down from the 151,000 President Reagan suggested in his preliminary budget.
* Renters will have to pay 30 percent of their monthly adjusted income toward rent instead of 25 percent. This boost will be phased in over five years.
* New Section 8 housing will consist of at most 55 percent new construction or substantial rehabilitation, and not less than 45 percent existing buildings with only modest changes, down from a current ratio of 60-40. New construction costs roughly twice as much as use of existing buildings.
* The HUD secretary must assure that the housing is "modest in design."
* Ninety percent of the renters must have incomes of less than half the median income. Those poor people are more expensive to house because they have less money to contribute toward rent.
HUD Secretary Samuel R. Pierce Jr. has called Section 8 far too expensive and a presidential housing commission is investigating alternatives. A General Accounting Office report found that Section 8 "costs more than it should and is serving only a fraction of those in need."
HUD keeps track of "fair rental value" in cities across the country so that it knows how much rent to pay. But those bench marks often seem high: in Washington, the standard for a high-rise apartment building is $491 per month for one bedroom and $654 for two bedrooms.
In addition, HUD has added up to 25 percent to those figures this year and last to compensate developers for high interest rates. When these adjusted rents of $700 or $800 per month are multiplied by 12 months and then by 30 years for the life of a contract, the result is a commitment to pay hundreds of thousands of dollars.
"We'd be better off to go to poor people and say, 'Here's a check for $60,000 -- go buy a house of your own,'" said one congressional expert.
Congressional staffers say there are many hidden costs to Section 8 -- such as $1 billion or more lost each year in taxes because of investment tax rules and write-offs for the housing developers.
"Quite frankly, we're lucky we have any program at all," said Cushing N. Dolbeare, president of the National Low Income Housing Coalition. "We did better than we thought we would."