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The big change that could help poor people afford wealthier neighborhoods

(iStock; Washington Post Illustration)

In the Washington D.C. area, a federal housing voucher for a two-bedroom home will cover up to $1,623 a month in rent. That's $1,623 if the two-bedroom is in wealthy Dupont Circle or in lower income Congress Heights. In either neighborhood, the family pays what it can afford — 30 percent of its income. The Housing Choice Voucher program handles the rest.

The practical implication of this system is two-fold: Hardly anyone with a voucher lives in Dupont Circle. That sum simply won't get you a two-bedroom there. And families who spend their vouchers in Congress Heights tend to overpay — or, rather, the government does on their behalf.

This week, the Department of Housing and Urban Development unveiled a proposed new rule that would remake this system, adjusting the maximum value of vouchers in many major markets to account for the wide variation in what it costs to live in different neighborhoods. Instead of setting "fair market rent" standards at the metropolitan level, in about 30 major metros including Washington, New York and Chicago, HUD will set them by ZIP code instead. That shift will mean significant change for a program that serves 2.2 million households, more than live in public housing projects.

The policy is designed to enable low-income families to use their housing aid to move to neighborhoods with less poverty, lower crime and better schools — an opportunity that research has shown can boost prospects for poor kids. Until now, the voucher program that was supposed to give families a chance to move out of deeply poor housing projects has largely concentrated them instead in deeply poor neighborhoods. In cities such as the District, a voucher just isn't worth enough to afford entry into truly "high opportunity" places.

The new rule, though, will also have a second, less obvious consequence: It will undercut slumlords who have profited handsomely off the voucher program, distorting its intended effects.

In poor neighborhoods, a family with a voucher is a prized tenant. The program guarantees a rent check on time every month, so a landlord doesn't have to worry about late or missing payments, or the instability that accompanies poverty. And the rents landlords can get from tenants with vouchers are often higher than what they can get from renters without them.

“Everybody prefers Section 8,” one Baltimore landlord told researcher Eva Rosen, now a postdoctoral fellow at Johns Hopkins who has studied landlords. “It’s tough times now. If the tenant doesn’t pay the mortgage, you have to. Section 8 ensures that you going to get your money.”

Another landlord Rosen followed managed to get $250 more for an apartment rented to a voucher holder than for an identical unit rented in the same building to someone without a voucher, as she recounted in a piece last year in the Atlantic describing her field work. The gulf between those two numbers has made the voucher program a boon to landlords who specialize in low-income housing.

"That’s led to a shift from a program 10 to 15 years ago that was more highly stigmatized to one in certain places that offers these huge advantages to landlords," Rosen said in an interview. But, she adds, "it offers advantages especially in poor neighborhoods. It’s in poor neighborhoods where the alternative isn’t very appealing."

In Milwaukee, where sociologist Matthew Desmond has chronicled life at the rock bottom of the housing market, landlords routinely make more by renting to voucher holders. In a forthcoming study with Kristin L. Perkins, Desmond calculates that voucher holders are charged $51-$68 more in monthly rent than tenants without housing assistance in comparable properties. That adds up to $3.8 million a year — a total that could fund vouchers for 620 more families in Milwaukee.

The current program effectively wastes money, even as voucher waiting lists stretch into the thousands in many cities. And it has set up incentives that are directly at odds with HUD's goal of helping poor families escape concentrated poverty.

"What you get is this incentive for landlords to look for voucher holders particularly in these neighborhoods that are most disadvantaged," Rosen says. And families are steered right back into poverty.

HUD's proposed rule change won't necessarily save money; ideally, it will funnel the excess profits landlords have pocketed in low-income areas into rents tenants can spend in more competitive neighborhoods.

Dallas was the first city to pilot a change like this, starting in 2011, and research by Robert Collinson and Peter Ganong suggests that the shift worked. After the ZIP code-level adjustments were implemented, they found that voucher holders moved to neighborhoods with lower poverty levels, less crime and less unemployment.

That's a notably different result from what happened in the past when HUD raised fair market rent standards across the board. Raise them everywhere, Collinson and Ganong found, and the rents paid by voucher holders go up. But those gains mostly went to landlords. Collinson and Ganong found little evidence that the additional money translated into better quality homes for renters, or homes in better neighborhoods.

Raise rent standards everywhere, in other words, and landlords benefit. Adjust them strategically — lowering them in some places and raising them in others — and tenants do.

HUD is clear about what all of this will mean. The government will start paying more in low-poverty neighborhoods, and less in high-poverty ones. And the people who stand to lose out will no doubt object. Critics warn that poor renters will be evicted when landlords realize their vouchers are suddenly less profitable. But Collinson and Ganong didn't see much evidence that this happened in Dallas. And in the long run, if some landlords decide the voucher program is no longer worth it to them, that may not be such a bad thing.

As for more poor people armed with housing vouchers moving into neighborhoods like Dupont Circle? It'll become more likely, but it's not guaranteed. These hyper-local rent levels aren't set yet. And there are still other factors like potential landlord discrimination — which remains legal in many communities — that could get in the way.