The Reagan administration is proposing to lower rents landlords may charge tenants receiving federal subsidies, a move that critics say would cause owners to stop renting to poor Americans and force many low-income families into substandard housing in urban ghettos.
The Reagan administration's budget for the Department of Housing and Urban Development would drop the rent levels in 63 cities and 734 nonmetropolitan areas and increase them slightly or hold them at current levels in the rest of the country. About 785,000 U.S. households receive the rental assistance.
Although rents in most areas have risen steadily in recent years, HUD is planning to reduce the rent ceilings for the first time in the history of the Section 8 rental assistance program, opponents of the proposal said.
"I'm concerned that the ceilings do not reflect local market rents and that they are likely to result in a steep drop-off in the number of landlords willing to rent subsidized apartments to eligible tenants," said Rep. Barney Frank (D-Mass.), whose home state would suffer some of the steepest rental cuts under the administration's proposal. Frank heads the House Government Operations Committee's employment and housing subcommittee, which held hearings recently on the proposed rent ceilings.
In the subcommittee's hearing, Paul Graziano of the National Leased Housing Association, an owners trade group, said the proposed ceilings, known as fair market rents, were calculated "by a system which does not accurately reflect rental costs and, in fact, artificially reduces them. Nor does it allow for variations in local rental markets." One effect would be to "create or reinforce existing patterns of racial and economic segregation in center cities," he said.
HUD believes, however, that its proposed changes would correct "past inaccuracies" and "equalize the treatment of program participants from community to community," said Kenneth J. Beirne, the agency's general deputy assistant secretary for policy development and research.
Under Section 8 of the 1974 housing and community development law, HUD pays the difference between the "fair market rent" charged by owners and the amount low- and moderate-income residents are required to contribute. Tenants paid 25 percent of their income for rent until 1981, when the proportion was raised to 30 percent.
HUD sets the ceilings at the 45th percentile of rent paid by all households who have moved within the past two years, a level "that makes available roughly half of all standard units" to eligible families, Beirne said.
But critics argue that the lower rents would not benefit low-income tenants because the amount they pay still would depend on their income, but they might convince apartment owners to end their participation in the subsidy program.
In setting the proposed ceilings for 1986, HUD used data collected in the 1980 census and in American Housing Surveys conducted since 1980, updated by the rent inflation factors contained in the consumer price index. In the past, the rent ceilings were based on updated 1970 census figures and information from the housing surveys, which cover 54 metropolitan areas about every two years. The surveys are conducted for HUD by the Bureau of the Census.
Graziano contended that the census and housing survey information is "usually several years out of date." He said his association recommends that HUD "rely primarily upon local housing market studies" in establishing its fair market rents.
Several metropolitan areas would get substantial increases in ceilings, including Washington, where the rent ceilings would rise 20 percent. In the District of Columbia, for example, the ceiling permitted for a two-bedroom apartment would go up from $440 a month to $530; in Montgomery County, the increase would be from $279 monthly to $336. Two-bedroom units are used as the benchmark for the rent ceilings, with adjustments up and down for larger or smaller apartments.
Chicago would not be so fortunate. The rent ceiling there would decrease by $86 to a monthly rent of $435, a 16 percent drop, according to the HUD statement. In Chicago, ceilings at the beginning of the decade were "on track" with census and 1979 American Housing Survey data, but outpaced the program standard each time the rents were changed, according to HUD.
The Chicago Housing Authority is the nation's fourth-largest and supervises 8,800 housing units under the Section 8 rental program, according to Zirl T. Smith, the authority's executive director. The new ceilings could price low-income families "out of the nonminority areas and make it more difficult for us to meet a court order to remedy past practices of segregation," he said.
Because the fair market rents are gross rents, including the cost of utilities, "a family paying its own gas heat would have to find a two-bedroom unit renting for no more than $355," Smith said. He added that, to find housing at this price, housing authority officials would have to "confine ourselves to Chicago's most depressed and impacted neighborhoods . . . and lower our housing quality standards."
The Chicago official said the Reagan administration wants to eliminate the Section 8 subsidies "in favor of its own housing vouchers." With the vouchers -- the only form of new housing assistance the administration wants to provide in the future -- families receive the difference between 30 percent of their income and HUD's fair market rent, and can keep the difference if the rent is lower than the ceiling. Tenants using vouchers are not limited to housing where rents do not exceed the ceilings, as they are under the Section 8 program.
In Massachusetts, where housing costs are the highest in the nation, the rent ceilings would be cut in most areas of the state, often to levels much lower than the average on the local market, according to Rep. Gerry E. Studds (D-Mass.), who testified before the subcommittee.
Public housing organizations in about 600 of HUD's 2,755 fair market rent areas have protested the proposed ceilings, a dramatic increase over the 100 to 200 areas from which the agency usually gets complaints when it changes the ceilings, according to Beirne, the HUD official. The appeals will be reviewed by HUD and ceilings in those areas modified if there is "reasonable evidence" for the change, he said. HUD does not need congressional approval of rent ceiling changes.