Adjusting Payment Standards Could Offer Voucher Holders Greater Access to Opportunity

Having a safe place to live and raise a family is critical to economic security, health, and many other aspects of daily life. Maryland has some of the highest housing costs in the country and, despite recent progress on tenants’ rights and worker protections like raising the state’s minimum wage and guaranteeing paid leave, too many people are forced to pay far more than they can afford in rent or accept unsafe, unhealthy housing conditions.

In a new paper and data visualization, MDCEP and the Baltimore Neighborhood Indicators Alliance-Jacob France Institute examined one possible option for increasing access to affordable housing for Baltimore City residents.

The Housing Choice Voucher Program (HCV) is the nation’s largest federal rental assistance program and assists over 5 million people in 2.2 million low-income households. Assisting over 17,000 households in Baltimore City, the program, administered by the Housing Authority of Baltimore City (HABC), offers a voucher to qualifying applicants whose incomes are at 80% of the federal poverty level or below. This amounts to $10,872 annually for a single household or $18,424 for a household of three. Federal housing choice vouchers assist households by subsidizing rent so that households do not spend more than 30% of their income on housing, but public housing authorities are allowed to range the income cap between 30-40%. Unfortunately, only 1 in 4 households that qualify for housing assistance receive it due to inadequate funding. While more than 17,000 households have access to a housing voucher, an additional 23,000 are on a waiting list.

Moreover, the HCV program has led to artificial inflation of existing rental prices in middle-market neighborhoods due to high rates of voucher recipients in these neighborhoods. This results in market pressure among other renters in the same neighborhood, causing those without any housing assistance to struggle more to pay rent. The neighborhoods with the rates of highest voucher use saw the greatest increases in rent burden, meaning more renters paying more than 30% of their income to rent.

The data visualization tool shows the spatial relationship between high voucher usage rates and rental unaffordability (paying more than 30% of income in rent) among several other demographic indicators. Using this tool as well as examining literature on Public Housing Authorities and the policies they use to set payment standards, safeguard voucher recipients, and administer, we recommend that the housing authority adopt a new method of setting the value of vouchers, known as Small Area Fair Market Rent.

Renters Face Unaffordable Costs

Although the rent burden in Baltimore City has decreased over the last decade overall, there has been a significant increase in a select few neighborhoods in the number of people spending more than 30% of their income on rent. Neighborhoods such as Belair-Edison, Edmonson Village, Pigtown/Carroll Park, and McElderry Park are a few examples of these clustered voucher units.

Why do certain neighborhoods that experience an increase in voucher usage also see an increase in their rent burden? We believe it lies in how the payment standard is set. HABC calculates the payment standard by taking gross median rents for the Baltimore-Columbia-Towson metro area, referred to as Fair Market Rents (FMR) and raises this amount broadly to 110% of FMR. Below is the payment schedule for vouchers by unit size.

Table 1: Census Tracts at 110% of FMR – All Remaining Census Tracts

Because of the large reach of the metro area, many wealthy neighborhoods outside Baltimore City have higher rents that skew average rent costs. The result is that voucher has the same value across the City and is in effect worth more to landlords in neighborhoods that would otherwise rent below the payment standard. Taking rents from the metro region does not account for neighborhood variation in Baltimore City. A landlord that accepts a voucher tenant can demand near or at the payment standard, even if the unit would rent lower for unassisted renters. The payment standard typically cannot cover the rents in high-income areas, so voucher holders tend to cluster in low- to middle-income neighborhoods. To view the relationship between high voucher rates and rental unaffordability, click the link below to explore our dashboard.

Exploring the Baltimore Metro Area’s Housing Landscape

If payment standards are above asking rents in low-income neighborhoods but below asking rents in high-income neighborhoods, how can housing authorities adjust payment standards to allow voucher families to access these neighborhoods?

In 2016, the United States Department of Housing and Urban Development, updated their guidance for calculating payment standards titled Small Area Fair Market Rent. SAFMRs take FMRs at the ZIP code level rather than the metro statistical area (MSA). The formula uses the FMRs for the Baltimore Metro Area and applies a weight to set the payment standard for ZIP codes in the city. Based on the payment schedule, the voucher would be worth more in high-opportunity areas, like Federal-Hill, Mount Washington, and Fells Point, and less in low-income areas, like Edmondson Village and Belair-Edison.

Table 2: Comparison of median FMR vs SAFMR October 2022 Data

ZCTA = ZIP Code Tabulation Areas

Implementing SAFMR would provide more choices for voucher recipients by raising the payment standard in high-opportunity neighborhoods, (defined as areas with good access to jobs, public goods and services, transportation, and schools), increasing the affordability of housing in those areas. Adjusting the rent ceilings to account for neighborhood variations can reduce clusters of voucher holders by reducing payment ceilings in low-income neighborhoods, which could in turn reduce over-inflation of rents and decrease the rent burden for unassisted renters.

However, it is also important that the public housing authority takes steps to gradually implement any decreases in payment standards to avoid displacing renters currently living in those communities:

• Applying reductions of payment standards at the second annual review, which gives families one to two years of notice before the new payment standard goes into effect.
• Phase the payment standard reduction in gradually, for example by applying a 15% percent payment standard reduction in three increments of 5% percent per year.
• Permanently hold families harmless by continuing to use the previous, higher payment standard for as long as a family remains in the same unit.
• Applying a portion of the reduction and then holding families harmless after that, for example by applying only 5 percentage points of a 15% percent reduction (again no sooner than the second annual review).

Baltimore, like many American cities, is facing an affordable housing crisis that limits the places
and spaces that low-income people can access. While there’s no doubt the voucher
program has aided many low-income families, there are many more in need of assistance,
particularly in Baltimore where the average wait for a voucher is 14 months. Additionally,
vouchers are not a silver bullet to the issues of affordable housing and housing discrimination. Implementing policies that factor neighborhood characteristics can allow for greater choice in where people live. Whether those benefits are realized, however, will depend on the actions the city housing authority takes to implement the tools and mechanisms to help families make the most of their opportunities.

For a more detailed look at the pros and cons of adopting SAFMR in Baltimore City and to explore the interactive data map, view the full report.