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New Days, New Ways: Innovation is Needed to Tackle Housing Problems

April 18, 2013

During the past several months, there have been national conversations about what the appropriate next steps should be in federal housing policy as a national “housing recovery” becomes a reality for more and more Americans.

In February, after a 16 month process, the Bipartisan Policy Center (BPC) released its report, Housing America’s Future, in an effort to “provide a blueprint for an entirely new system of housing finance for both the homeownership and rental markets.” Several weeks later, the National Alliance to End Homelessness (NAEH) held a conference focusing on youth and family homelessness.

While each of these events approached the issues of housing and homelessness from different perspectives, there are commonalities. Some of the recommendations are already in practice in some communities, and can help other cities across the country in their ongoing efforts to eliminate homelessness.Within the guiding principles of the BPC report, two elements speak directly to the challenge of homelessness. First, the Commission recommends “a more targeted approach to providing rental assistance that directs scarce resources to the lowest-income renters while insisting on a high level of performance by housing providers.” In his remarks on behalf of the Commission, former Mayor of San Antonio and Secretary of Housing and Urban Development under President Clinton, Henry Cisneros, noted that federal housing assistance is provided to only one of every four extremely low income (ELI) households.

To put this in some context, for example, in Tampa/St. Petersburg, Florida, the area median income (AMI) is $56,800. For a household to be considered “extremely low income (ELI),” they must earn 30% or less of AMI. In the Tampa/St. Petersburg area, an ELI family earns about $17,040 annually (or $1,420 monthly). As local leaders consider the impact this level of income/poverty has on their overall economy, they would be wise to recognize that when the average rent for a two-bedroom apartment in the area is $915, there remains only $505 for medical costs, transportation, food, clothing, schooling expenses, etc., which likely does not stretch that far for a single mom and her two children.

As Mr. Cisneros points out, only one in four households at this level of poverty receives housing assistance. As a result, the negative economic impacts on the rest of the community resulting from those not receiving assistance are immense. These households may not have the purchasing power they require to meet all of their needs, which can impact local businesses’ revenue streams.

To combat this, the second BPC recommendation encourages reforming the current system used to distribute housing subsidies, such as Section 8, 202, or 811 vouchers, by targeting the use of vouchers towards ELI households. Currently, a “lottery” or “list-based” method is used to assign vouchers. In addition, the Commission recommended the broader use of “performance based contracting,” which establishes program standards that need to be met in order for an organization to continue receiving the contract guiding the administration of that program.

At the NAEH conference, there was also broad discussion regarding the benefits of “performance based contracting.” Attendees heard first-hand accounts from communities such as Fort Worth, Texas; Columbus, Ohio; and Hayward, Calif. about how this tool has had positive impacts on their city’s efforts to reduce homelessness. The use of financial incentives, publicly recognizing positive providers, engaging under-performing providers in technical assistance and, when necessary, reallocating contracts have shown promise in these communities and others.

While there continues to be renewed optimism about the recovery of the overall housing market, the stark reality is that most cities are still reeling from the impacts of the housing market collapse. However, the emerging housing recovery continues to mask the daunting challenges facing millions of renters, low-income homeowners and the cities in which they live.

For local leaders to help encourage a more robust recovery in their communities, learning about and implementing innovative practices, such as reforming how vouchers are distributed and performance-based contracting in the face of stagnant or declining revenues, will be critical.

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