Order Code RL32284
CRS Report for Congress
Received through the CRS Web
An Overview of the Section 8 Housing Program
Updated January 10, 2005
Maggie McCarty
Analyst in Social Legislation
Domestic Social Policy Division
Congressional Research Service ˜ The Library of Congress

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An Overview of the Section 8 Housing Program
Summary
The Section 8 low-income housing program is really two programs: the voucher
program and the project-based Section 8 program. Vouchers are portable subsidies
that low-income families can use to lower their rents in the private market. Vouchers
are administered at the local level by quasi-governmental public housing authorities
(PHAs). Project-based Section 8 is a form of rental subsidy that is attached to a unit
of privately owned housing. Low-income families who move into the housing pay
a reduced rent, based on their incomes.
The Section 8 program began in 1974, primarily as a project-based rental
assistance program. However, by the mid-1980s, project-based assistance came
under criticism for seeming too costly and concentrating poor families in high-
poverty areas. Congress stopped providing new project-based Section 8 contracts in
1983. In their place, Congress created vouchers as a new form of assistance. Today,
vouchers — numbering over 2 million — are the primary form of assistance provided
under Section 8, although over 1 million units still receive project-based assistance
under their original contracts or renewals of those contracts.
Congressional interest in the Section 8 program has increased in recent years,
particularly as the program costs have rapidly grown. In order to understand why
costs are rising so quickly, it is important to first understand how the program works
and its history. This report presents a brief overview of that history and introduces
the reader to the program. For an expanded discussion of costs and funding in the
Section 8 voucher program, see CRS Report RL31930, Section 8 Housing Choice
Vouchers: Funding and Related Issues. This report will be updated as warranted.

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Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Background Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Early Section 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
New Construction and Substantial Rehabilitation . . . . . . . . . . . . . . . . . 3
Moderate Rehabilitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Existing Housing Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
The Voucher Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Today’s Section 8 Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Project-Based Section 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Housing Choice Vouchers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

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An Overview of the Section 8
Housing Program
Introduction
The rental assistance programs authorized under Section 8 of the United States
Housing Act of 1937 (42 U.S.C. § 1437f) have become the largest component of the
Department of Housing and Urban Development’s (HUD) budget, with
appropriations of more than $20 billion in FY2005. The rising cost of providing
rental assistance is due, in varying degrees, to expansions in the program, the cost of
renewing expiring long-term contracts, and rising costs in housing markets across the
country. Many Members of Congress have shown concern about the escalating costs
of Section 8 and have expressed interest in methods to reduce those costs. The
following statement was taken from the FY2004 Consolidated Appropriations
Conference Report (H.Rept. 108-401):
The conferees are concerned about the spiraling increase in the cost of providing
assistance under the voucher program. The conferees are aware that the national
average cost per voucher has increased at a rate of more than double the average
increase in the private rental market in each of the last two years, including a
10% increase in 2002 and an additional estimated 9% increase in 2003. At the
same time, the rental housing market has softened.
In order to understand why the program has become so expensive, it is first
important to understand the mechanics of the program and its history. This paper
will provide an overview of the Section 8 program and its history. For an expanded
discussion of funding and related current issues, see CRS Report RL31930, Section
8 Housing Choice Vouchers: Funding and Related Issues.
Background Information1
From 1937 until 1965, public housing and the subsidized mortgage insurance
programs of the Federal Housing Administration (FHA) were the country’s main
forms of federal housing assistance. As problems with the public housing and other
bricks and mortar federal housing construction programs (such as Section 235 and
Section 236 of the National Housing Act) arose — particularly their high cost —
interest grew in alternative forms of housing assistance. In 1965, a new approach
was adopted (P.L. 89-117). The Section 23 program assisted low-income families
1 This section is derived from earlier research by CRS Analyst Susan Vanhorenbeck.

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residing in leased housing by permitting a public housing authority (PHA)2 to lease
existing housing units in the private market and sublease them to low-income and
very low-income families3 at below-market rents. However, the Section 23 program
did not ameliorate the growing problems with HUD’s housing construction programs
and interest remained in developing and testing new approaches. The Experimental
Housing Allowance Program is one example of such and alternative approach.
The Experimental Housing Allowance Program
The Experimental Housing Allowance Program (EHAP) began with a mandate to HUD from
Congress in 1970 to test the impacts and feasibility of providing low-income families with
allowances to assist them in obtaining existing, decent rental housing of their choice (P.L. 91-
152). Congress was interested specifically in finding the answers to several key questions:
! How many families would make use of allowance payments?
! What kind of housing would they choose and in what neighborhoods?
! How would housing markets respond to the increased demand for housing?
! At what cost could a housing allowance program be administered?
In order to answer these questions, HUD contracted for the conduct of three experiments: the
Demand Experiment to test how families would respond to a housing allowance, the Supply
Experiment, to test how markets would respond to subsidies and the Administrative Agency
Experiment, to test the administrative capacity and funds required to administer a housing
allowance program. The first reports came out in 1973, and a final report was issued in 1980.
The EHAP’s key findings are listed below:
! In order to ensure housing quality, subsidies have to be tied to housing
standards; however, stricter housing standards limit participation.
Participation is also linked to subsidy amount; as the subsidy increases, so
does participation.
! Mobility and location of residence are mainly governed by ties to relatives,
neighbors, and friends and are not affected by housing allowance payments.
! A housing allowance program has virtually no effect on the price of housing
and does not stimulate new construction or major rehabilitation. However, it
does help preserve the existing housing stock by stimulating repairs.
! A housing allowance program can be effectively administered at the local
level.
The early findings of EHAP helped to set the tone for the debate that created the Section 8
program.
(Raymond Struyk, “Policy Questions and Experimental Responses,” in Housing Vouchers for
the Poor: Lessons from a National Experiment, edited by Raymond Struyk and Marc Bendick
Jr. [Washington: Urban Institute Press, 1981].)
2 PHAs are state or local quasi-governmental bodies that administer public housing and
Section 8 vouchers.
3 HUD uses a relative measure of income for determining benefits and eligibility for Section
8. “Low-income families” have adjusted gross incomes at or below 80% of the local area
median income; “very low-income” families have adjusted gross incomes at or below 50%
of the local area median income; and “extremely low-income” families have adjusted gross
incomes at or below 30% of the local area median income

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Due to criticisms about cost, profiteering, and slumlord practices in federal
housing programs, President Nixon declared a moratorium on all existing federal
housing programs, including Section 23, in 1973. During the moratorium, HUD
revised the Section 23 program and sought to make it the main assisted housing
program of the federal government. However, at the same time, Congress was
considering several options for restructuring subsidized housing programs. After all
the debates and discussions that typically precede the passage of authorizing
legislation were completed, Congress voted in favor of a new leased housing
approach, and the Section 8 program was created.
Early Section 8
The Section 8 program is named for Section 8 of the United States Housing Act
of 1937. The original program, established by the Housing and Community
Development Act of 1974 (P.L. 93-383), consisted of three parts: new construction,
substantial rehabilitation, and existing housing certificates. The 1974 Act and the
creation of Section 8 effectively ended the Nixon moratorium. In 1978, the moderate
rehabilitation component of the program was added, but it has not been funded since
1989. In 1983, the new construction and substantial rehabilitation portions of the
program were repealed, and a new component — Section 8 vouchers — was added.
In 1998, existing housing certificates were merged with and converted to vouchers.
New Construction and Substantial Rehabilitation. Under the new
construction and substantial rehabilitation components of the early Section 8
program, HUD entered into long-term (20- or 40-year) contracts with private
for-profit, non-profit, or public organizations that were willing to construct new units
or rehabilitate older ones to house low- and very low-income tenants. Under those
contracts, HUD agreed to make assistance payments toward each unit for the duration
of the contract. Those assistance payments were subsidies that allowed tenants
residing in the units to pay 25% (later raised to 30%) of their adjusted income as rent.
The program was responsible for the construction and rehabilitation of a large
number of units. Over 1.2 million units of housing with Section 8 contracts that
originated under the new construction and substantial rehabilitation program still
receive payments today.
By the early 1980s, because of the rising costs of rent and construction, the
amount of budget authority needed for the Section 8 rental assistance program had
been steadily increasing while the number of units produced in a year had been
decreasing. At the same time, studies emerged showing that providing subsidies for
use in newly constructed or substantially rehabilitated housing was more expensive
than the cost of providing subsidies in existing units of housing. Also, because
contracts were written for such long terms, appropriators had to provide large
amounts of budget authority each time they funded a new contract (see below for an
illustration of the implication of long-term contracts). As the budget deficit grew,
many Members of Congress became concerned with the high costs associated with
Section 8 new construction and substantial rehabilitation, and these segments of the
Section 8 program were repealed in the Housing and Urban-Rural Recovery Act of
1983 (P.L. 93-181).

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What Do Long Term Contracts Mean for Congress?
The following example illustrates how Congress appropriates funds for long-term contracts,
compared to one-year contracts.
In 2003, a housing subsidy cost an average of $6,000 per year. If Congress wanted to fund 10 new
Section 8 subsidies in 2003, the cost of doing so would depend on the length of the contract
Congress decided to fund:
If the contract was a 40-year contract, as was the case in the beginning of the Section 8 program,
then Congress must appropriate:
10 vouchers x $6,000 x 40 years = $2.4 million.*
If the contract was a one-year contract, as is the case with Section 8 contracts today, then Congress
must appropriate:
10 vouchers x $6,000 x 1 year = $60,000.
Thus, it would have cost Congress less in 2003 to provide one year contracts than it would have
to provide multiyear contracts. The trade-off is the cost in subsequent years. For example, assume
that Congress intends to maintain those 10 subsidies in 2004. If Congress funded those subsidies
under 40-year contracts in 2003, then the subsidies would not require funding again until 2043,
meaning they would cost Congress nothing in 2004; however, if Congress funded those subsidies
under one-year contracts in 2003, then the subsidies would require another year’s worth of funds
in 2004.
* Note, this example does not include an estimate for inflation. When funding multiyear contracts,
Congress generally includes an estimate of inflation and adds it to the total cost.
Moderate Rehabilitation. The Housing and Community Development
Amendments of 1978 (P.L. 95-557) added the moderate rehabilitation component to
the Section 8 program, which expanded Section 8 rental assistance to projects that
were in need of repairs costing at least $1,000 per unit to make the housing decent,
safe, and sanitary. Over the next 10 years, however, this component of the program
was fraught with allegations of abuse; the process of awarding contracts was
considered unfair and politicized. Calls for reform of the moderate rehabilitation
program led to its suspension. It has not been funded since 1989.
Existing Housing Certificates. The existing housing certificate component
of the Section 8 program was created in the beginning of the Section 8 program and
continued until 1998. Under the existing housing certificate program, PHAs and
HUD would enter into an Annual Contributions Contract (ACC) for the number of
units that would be available to receive assistance. Contracts were originally written
for five years and were renewable, at HUD’s discretion, for up to 15 years. In the
contract, HUD agreed to pay the difference between the tenant’s rental payment and
the contract rent of a unit. The contract rent was generally limited to the HUD-set
Fair Market Rent (FMR) for the area.

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What is Fair Market Rent (FMR)?
FMRs are gross rent estimates that include both shelter rent paid by the tenant to the landlord and
the cost of tenant-paid utilities, except telephones. HUD sets FMRs either at the 40th percentile rent
or at the 50th percentile rent for each metropolitan or non-metropolitan statistical area in the nation,
as well as for each state. For most areas, the FMR is set at the 40th percentile rent paid by recent
movers, which means that 40% of all standard quality rental housing units rented within the past
18 months have rents at or below the FMR. For some high cost areas, the FMR is set at the 50th
percentile rent or the median rent, so that 50% of standard units fall at or below the FMR. In some
low-cost communities, the FMR is raised to the statewide FMR, if it is higher.
After entering into a contract with HUD, PHAs would advertise the availability
of certificates for low-income tenants. The existing housing certificate program was
primarily tenant-based, meaning that the assistance was given to the tenant. Families
selected to receive assistance were given certificates as proof of eligibility for the
program; with their certificates, families could look for suitable housing. Housing
was considered suitable if it rented for the FMR or less and met Housing Quality
Standards (HQS).4 Once the household found a unit, they signed a lease and agreed
to pay 30% of their adjusted income for rent. The remainder of the rent was paid by
HUD to the landlord on behalf of the tenant. If a family vacated a unit in violation
of the lease, HUD had to make rental payments to the landlord for the remainder of
the month in which the family vacated, and pay 80% of the contract rent for an
additional month. If the family left the unit at the end of their lease, they could take
their certificate with them and use it for their next home. HUD also paid the PHA
an administrative fee for managing the program. The amount of this administrative
fee was set by Congress in appropriations legislation each year.
Project-Based Existing Housing Certificates. PHAs were permitted to use
up to 15% of their Section 8 certificates for project-based housing. In project-based
Section 8 existing housing, the subsidy was attached to the unit and not to the tenant.
This meant that when a tenant vacated a unit, another eligible tenant would be able
to occupy it, and HUD would subsidize the rent as long as a contract was in effect
between the PHA and the owner.
In 1998, the Quality Housing and Work Opportunity Reconciliation Act
(QHWRA) (P.L. 105-276) merged the Section 8 existing housing certificate program
with the voucher program (see below) and converted all certificates to vouchers,
effectively ending the Section 8 existing housing certificate program.
The Voucher Program. The largest component of today’s Section 8
program, the voucher program, was first authorized by the Housing and Urban-Rural
Recovery Act of 1983 (P.L. 93-181). It was originally a demonstration program, but
was made permanent in 1988.
Like the Section 8 existing housing certificate program, the voucher program
is administered by PHAs and is tenant-based, with a project-based component.
4 Housing Quality Standards (HQS) are minimum standards set by HUD that set acceptable
conditions for interior living space, building exterior, heating and plumbing systems, and
general health and safety.

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However, under the voucher program, families can pay more of their incomes toward
rent and lease apartments with rents higher than FMR.
Today’s Section 8 Program
Today’s Section 8 program is really two programs, which, combined, is serving
almost 3.5 million households.
Project-Based Section 8. The first program under Section 8 can be
characterized as project-based Section 8 rental assistance. This program includes
units created under the new construction, substantial rehabilitation, and moderate
rehabilitation components of the earlier Section 8 program that are still under
contract with HUD. Although no new construction, substantial rehabilitation, or
moderate rehabilitation contracts have been created for a number of years, about 1.3
million of these units are still funded under multiyear contracts that have not yet
expired or multiyear contracts that had expired and are renewed annually.
Families that live in project-based Section 8 rental assistance units pay 30% of
their incomes toward rent. In order to be eligible, families must be low-income;
however, at least 40% of all units must be available for very low-income families.
If a family leaves the unit, the owner will continue to receive payments as long as he
or she can move another eligible family into the unit.
Owners of properties with project-based Section 8 rental assistance receive a
subsidy from HUD, called a Housing Assistance Payment (HAP). HAP payments
are equal to the difference between the tenant’s payments (30% of income) and a
contract rent, which is agreed to between HUD and the landlord. Contract rents are
meant to be comparable to rents in the local market, and are adjusted annually by an
automatic Annual Adjustment Factor (AAF). The AAF is derived from data on
residential housing costs in particular market areas. Project-based Section 8 contracts
are managed by contract administrators. In many cases, regional HUD offices act as
contract administrators, although HUD often contracts the function out to state
agencies, PHAs, or private agencies.
In 2000, about 60% of the households that lived in project-based Section 8 units
were elderly households, about 15% were disabled households, and about 21% were
non-elderly, non-disabled households with children. Of the non-elderly, non-disabled
households (including the approximately 5% who did not have children), about half
received income solely from work, about 16% received income solely from welfare,
about 10% combined work and welfare, and about 20% reported no income or
income from other sources (such as child support). The average earnings of the non-
elderly, non-disabled households were a little over $11,000 per year.5
Housing Choice Vouchers. When QHWRA merged the voucher and
certificate programs in 1998, it renamed the voucher component of the Section 8
5 CRS calculation of data in Jeffrey M. Lubell, Mark Shroder, Barry Steffen, “Work
Participation and Length of Stay in HUD-Assisted Housing,” Cityscape, vol. 6, no. 2 (2003).

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program the Housing Choice Voucher program. The government currently funds
over 2 million Section 8 Housing Choice Vouchers.
Vouchers are tenant-based in nature, meaning that the subsidy is tied to the
family, rather than to a unit of housing. In order to be eligible, a family must be very
low-income, although 75% of all vouchers must be given to extremely low-income
families. Families who receive vouchers can use them to subsidize their rents in
private market apartments. Families with vouchers pay between 30% and 40% of
their incomes toward rent. HUD, through local PHAs, pays a subsidy amount to
landlords who rent to voucher tenants to help make up the difference between the
tenant payment and the rent for the unit. (See below for an example.) A
voucher-assisted household may rent a unit where the rent is higher than the FMR,
but the amount must be approved by HUD as “reasonable” based on comparable
rents in the area. After one year, a family can choose to move, even outside of the
jurisdiction of their PHA, and retain their voucher assistance.
Project-Based Vouchers. Vouchers, like Section 8 existing housing
certificates, can be project-based. In order to project-base vouchers, a landlord must
sign a contract with a PHA agreeing to set-aside up to 25% of the units in a
development for low-income families. Each of those set-aside units will receive
voucher assistance as long as a family that is eligible for a voucher lives there.
Families that live in a project-based voucher unit pay 30% of their adjusted
household income toward rent and HUD pays the difference between 30% of
household income and a reasonable rent agreed to by both the landlord and HUD.
PHAs can choose to project-base up to 20% of their vouchers.
How is a Voucher Subsidy Calculated?
First, a PHA sets a payment standard. A payment standard is a maximum subsidy level that is
equal to anywhere between 90% and 110% of Fair Market Rent (FMR). Then, a PHA calculates
a maximum Housing Assistance Payment (HAP). A HAP is the amount that the PHA will pay the
landlord and it is equal to the greater of the rent for an apartment or the payment standard, minus
30% of a family’s income. The family can then go out to the rental market and find an apartment.
In order to be approved that apartment cannot rent for more than the maximum HAP plus 40% of
a family’s income. If the rent for the unit is less than the HAP plus 30% of a household’s income,
the household must still pay 30% of their income toward rent, but the HAP will be reduced.
For example, consider a family who earns $900 per month and lives in a community with an FMR
of $800 per month for the appropriate size apartment. If their PHA has a payment standard of
110% of FMR, then the maximum HAP a family can receive is $610 per month [($800 * 110%) -
($900 * 30%)]. The family can therefore shop for an apartment with a rent of up to $970 per
month [$610 + ($900 * 40%)].
If the family finds an apartment for $970 per month, the PHA will pay the maximum HAP ($610)
and the family will pay 40% of their income per month ($360).
If the family finds an apartment for less than the payment standard, say $750 per month, the family
will pay 30% of their income toward rent, and the PHA will pay the difference between the rent
and 30% of the family’s income. In this case, the family will pay $270 [$900 * 30%] and the PHA
will pay $480 [$750 - (900 * 30%)].

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The voucher program also has several special programs or uses. These include
Welfare-to-Work vouchers, family unification vouchers, and vouchers used for
homeownership. Fifty-thousand Welfare-to-Work vouchers were authorized in
1999.6 Specifically, these vouchers are intended for families whose housing needs
interfere with their ability to obtain or retain employment. They were designed to be
paired with services such as job training, child care, and other work supports. Family
unification vouchers are given to families for whom the lack of adequate housing is
a primary factor in the separation, or threat of imminent separation, of children from
their families or in the prevention of reunifying the children with their families.
According to the Child Welfare League of America, at the end of 2001, there were
over 42,000 authorized family unification vouchers. While there are no
“homeownership vouchers,” since 2000 certain families have been eligible to use
their vouchers to help pay for the monthly costs associated with homeownership.
Eligible families must work full-time or be elderly or disabled, be first-time
homebuyers, and agree to complete first-time home buyer counseling. According to
data provided to CRS from HUD, by June 2003 PHAs estimated that 1,395 families
would close on homes using vouchers.
In 2000, about 17% of households with vouchers were elderly households, about
22% were disabled households, and about 53% were non-elderly, non-disabled
households with children. Of the non-elderly, non-disabled households (including
the approximately 8% that did not have children), about half received their income
solely from work, about 20% received their income solely from welfare, about 6%
combined work and welfare, and about 22% reported no income or income from
other sources (such as child support). The average earnings of the non-elderly, non-
disabled households were a little over $12,000 per year.7
Conclusion
The Section 8 program is the largest direct housing assistance program for low-
income families. With a FY2005 budget of over $20 billion, it reflects a major
commitment of federal resources. That commitment has led to some successes. More
than 3 million families are able to obtain safe and decent housing through the
program, at a cost to the family that is considered affordable. However, these
successes come at a high cost to the federal government. Given current budget
deficit levels, Congress has begun to reevaluate whether the cost of the Section 8
program is worth its benefits. Proposals to reform the program abound and whether
the current Section 8 program is maintained largely in its current form, changed
substantially, or eliminated altogether are questions currently facing Congress.
6 Vouchers are “authorized” when Congress provides funding for them in an appropriations
bill. While Congress currently funds vouchers in one-year increments — which is why new
vouchers are called incrementals — they have always been added to the number of vouchers
that require renewal when calculating the cost of the program for the next year.
7 CRS calculation of data in Jeffrey M. Lubell, Mark Shroder, Barry Steffen, “Work
Participation and Length of Stay in HUD-Assisted Housing,” Cityscape, vol. 6, no. 2 (2003).

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