An old idea -- using housing allowances to help house the poor -- is poking its head out of the many current proposals for improving subsidized housing.
Housing allowances or vouchers would offer relatively unrestricted cash subsidies to low-income persons. A hybrid, it looks more like an income transfer or welfare program than the more familiar public housing projects or federally financed downtown apartment towers for the elderly.
Considered by policy makers in every decade since the 1930s, allowances almost certainly will become a prime candidate when the Reagan administration looks for ways to redesign the slew of categorical programs now administered by the Department of Housing and Urban Development.
The allowance system has been a durable proposal and yet has proved difficult to institute. Proponents say it is more equitable, less costly in the long run and more flexible for poor persons, who would be able to decide both where they want to live and whether they want to spend the entire allowance on housing or on other needs. The only requirement would be that recipients occupy units that meet minimum physical standards.
A cash subsidy system would allow the market, rather than the federal government, to respond to housing demand and would encourage tenants receiving aid to bargain with landlords for the best rental deal, the idea's supporters say.
Political opposition may be expected, however, from congressional committees asked to replace the specific housing programs over which they exercise power with a cash payment system. Taxpayers, it is argued, find it easier to support goods and services for the poor, rather than money with few strings attached.
Other opponents say it is not the structure of current programs that needs changing but rather that funding levels are inadequate. Developers would be likely to fight the allowance system if it meant they would lose HUD support for new construction.
In the past, the allowance decision has been swayed by uncertainties over how the system would work and how much it would cost. Other questions that arose include who it might serve, how the money might be used and what effect the program might have on local housing markets.
To answer some of these questions, HUD has been conducting a massive demonstration project on the allowance system idea for nearly 10 years, at a cost of $160 million. It has involved more than 30,000 households in 12 locations. The program, authorized by Congress in 1970 and begun at demonstration sites in 1973, now is nearly completed.
Analyses of the project have been made by the Rand Corp. in Santa Monica, Abt Associates in Cambridge and The Urban Institute in Washington. Most recently, Ray Struyk, formerly at HUD and now with the Urban Institute, and Jill Khadduri of HUD have put together a justification for a housing allowance program during a time of fiscal restraint.
Based on the demonstration's findings, they outline a program designed to appeal to the Reagan administration's budget conscience, while at the same time instituting an entitlement program that would add 2.5 million households to the rolls of those receiving housing aid by 1987.
In the housing future they envision, Congress would make revisions in the current program most similar to allowances, Section 8 rent subsidies for existing units, and use the new system to replace all new construction and major rehabilitation programs.
Eligible recipients would be those households with an income less than 50 percent of the area median income, a drop from the current HUD-assisted housing level of 80 percent. Payments would be figured on the assumption that tenants pay 30 percent of their income for housing.
Demonstration results show that of the 6.4 million renting households whose incomes fall below the U.S. median, about 2.5 million are likely to participate. Allowance recipients would come mostly from three overlapping groups -- welfare recipients, minority-headed households and single-parent families -- with lower participation expected from the elderly, husband-wife households, whites and those earning an income.
Although offering allowances to homeowners was studied in the demonstration, Khadduri and Struyk eliminate this group from the proposed beneficiaries, because its addition would double the program size and make it exceed current budget limits.
Under the allowance system, tenants would not be held to the rent ceiling imposed by the Section 8 program. Research shows that landlords, upon entering their units in the Section 8 program, tend to raise rents to match the ceiling, as if it were a target.
Dropping that restriction would mean that a family could use its allowance to rent a more expensive unit but would have to finance the extra amount itself. The allowance would hold steady at the difference between the HUDS-designated fair market rent in an area and 30 percent of the recipients' income.
An open enrollment program using existing units would require $1,770 per subsidized household (in 1979 dollars), or about $4.4 billion per year, for the 2.5 million additional households that would join the program, according to Khadduri and Struyk.
Rather than opening the program immediately to all those eligible, the researchers suggest phasing it in over a six-year period, starting with 500,000 units and adding 400,000 each year thereafter. Budget authority or the government's long-term cost commitment, for the first year would be $18.2 billion, the same amount President Reagan is requesting for $175,000 additional units of assisted housing in fiscal 1982.
By the seventh year of an allowance program, budget authority would be needed only for rent increases and would have dwindled to an estimated $500 million.
The government's yearly outlays of funds to pay for the allowances would rise steadily as households were added, to $6.4 billion (in 1982 dollars) in the seventh year, with full 2.5 million enrollment.
Comparable expenditures under the Reagan budget, if it were continued at the proposed fiscal 1982 level, would be $4.7 billion to serve 1.44 million household, Khadduri and Struyk figure.
General findings of the allowance experiment are compiled in a recently published book, edited by Struyk and Marc Bendick Jr., "Housing Vouchers for the Poor, Lessons from a National Experiment."
Researchers found, for example, that low-income participants used most of their cash payments, not to greatly improve their home quality but rather on other items. Thus the major effect of allowances on meeting the housing needs of the poor is to reduce their rent burden, the percentage of income spent for rent, they concluded.
Researchers also said that the allowance system does not cause local rents to rise and that it neither increases nor dampens the rate of new private construction. Nor would the program empty public housing projects, they conclude. In South Bend, Ind., one of the demonstration sites, public housing projects continued to be filled, probably because of the additional services the projects offer.
Although participants have more choice of where to live, allowances don't lead to frequent moves, the demonstration indicates. The location of relatives, friends, neighborhoods, work and school are more important factors than housing allowances in deciding where a family lives, researchers said.
"The housing allowances appear to have had little if any impact on the extent of income and racial segregation, on the length of the journey to work, on neighborhood quality, or on movement between the central city and suburbs," report Struyk and Bendick.
The first major reconsideration of housing allowances this year is likely to come in a presidential housing commission, an as-yet-unappointed body of housing experts who will be assigned the task of providing policy guidelines for HUD housing programs.