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Chapter 1 -- Continued
Building the Report
This year's report uses data from the 1995 AHS and HUD administrative data as of January 1997. It builds on the 1996 report in the following ways:
- Detailed income categories are used to examine the housing needs of households. Like the 1996 report, this report distinguishes among extremely-low-income households (those with incomes below 30 percent of median income), other very-low-income households (those with incomes between 31 and 50 percent of median income), and other low-income households (those with incomes between 51 and 80 percent of median income).
The extremely-low-income category has become particularly important. Legislation under consideration since 1995 would replace the waiting list preference for worst case needs households by targeting assistance to those below 30 percent of area median income. As shown by this and earlier worst case needs reports, households with incomes below 30 percent of median are those most likely to have worst case needs.
Exhibit 1
Income Categories Used in Housing Programs
For many HUD programs and housing programs administered by other Federal agencies, eligibility
is restricted to households whose incomes do not exceed a specific percentage of the median family income for the area in which the household lives. HUD defines median income for each metropolitan area and non-metropolitan county, and the HUD-adjusted area median family income (HAMFI) varies by location and household size.*
In contrast, poverty status is determined by comparing income with national poverty thresholds that vary only by household size but not location. Because HUD's income limits vary with location and use smaller adjustments for household size, they cannot be compared directly with the Federal poverty line. Averaged across the United States, however, poverty thresholds correspond approximately with 30 percent of area median income.
The number of households below a specified percentage of HUD's area median income is not related to any break on the total income distribution, such as quintiles or deciles. For example, almost one-half (45 percent) of all U.S. households and 64 percent of all renters have incomes below 80 percent of their area median income. More than 26 percent of all U.S. households have incomes less than 50 percent of area median income.
The upper limits of income categories used in housing programs and in this report are as follows:
80 percent of area median income. Defined as lower income by the U.S. Housing Act and used for many rental and homeownership programs.
60 percent of area median income. Used in Low Income Housing Tax Credit and HOME programs.
50 percent of area median income. Defined as very low income by the U.S. Housing Act and used for many rental programs.
30 percent of area median income. Defined as extremely low income in pending housing authorization bills. Used as a proxy for households that, until 1995, would have received a Federal preference for rental housing assistance because they have worst case housing needs.
The table below shows how many U.S. renter households fell into the different income groups relevant for housing programs in 1995. To suggest the overlap between the HUD income groups and poverty, it also shows the share of each income group whose cash income fell below the poverty line or below 150 percent of the poverty line, which is the approximate eligibility cutoff for the U.S. Department of Agriculture Food Stamp program. As in this exhibit, this report frequently refers to specific income groups as ranges of percentages of area median income because official terms are so complex. For example, incomes 51-80 percent of area median are officially "low but not very low" incomes.
Exhibit 2 gives examples of HUD income cutoffs for nine large metropolitan areas.
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Percent Share of Households in Group With Income |
| Income as % of HUD-Adjusted Area Median Family Income (HAMFI) |
Share of U.S. Renters 1995 (%) |
Below the Poverty Level |
Below 150% of the Poverty Level |
| 0-30 |
25 |
86 |
99 |
| 31-50 |
17 |
15 |
64 |
| 51-60 |
8 |
0 |
19 |
| 61-80 |
13 |
0 |
4 |
*Appendix B discusses other adjustments.
Source: HUD-PD&R tabulations of the 1995 American Housing Survey |
Exhibit 2
Extremely Low, Very Low, and Low Income:
Examples of 1997 Income Limits for Four-Person Households
In 1997, the average poverty threshold for a family of four was $16,400.
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- The most recent information from HUD administrative records is used to show how rental assistance programs serve different income and demographic groups. The 1996 report used data from the Multifamily Tenant Characteristics System (MTCS) and the Tenant Rental Assistance Certification System (TRACS) as of December 1995. This report uses MTCS and TRACS data from February 1997.
Exhibit 3
Housing Assistance and Affordable Housing Programs
Federal rental assistance programs operate in three basic ways:
- Public housing. These units are owned by local public agencies. From 1937 to the mid-1980s, public housing was used extensively to produce additional assisted housing units. Today, there are 1.2 million occupied units of public housing.
- Project-based assisted housing. These programs supported the construction and rehabilitation of 1.4 million rental units for low-income households. Deep rent subsidies are attached to projects owned by for-profit and nonprofit sponsors that must rent units to eligible households. These programs added large numbers of assisted units from 1974 to the early 1980s.
- Tenant-based assisted housing. These programs provide direct rental assistance to 1.4 million renter households to enable them to find their own housing on the open market. The maximum subsidy is the difference between the tenant contribution and the local fair market rent (FMR), an average rent for standard quality housing in the area. Begun in 1974, this type of assistance has accounted for virtually all the incremental units, or additions to assisted housing, since the mid-1980s.
In all three types of programs, assisted households pay rents that are a percentage of their adjusted income -- usually 30 percent. This formula allows even the poorest households to live in assisted housing.
Other Federal programs produce affordable housing. There are a number of other Federal housing programs in which renters are charged fixed or flat rents, with the maximum determined by program rules. Households pay the established rent rather than a percentage of their income. Without an additional subsidy, the poorest households often cannot afford this housing. These programs include:
- The Low Income Housing Tax Credit program. This tax credit program subsidizes the capital costs of units that must bear rents affordable to households with incomes at or below 60 percent of area median income. HUD estimates that this program has produced more than 600,000 units since its enactment in 1986.4
- The HOME Investment Partnership (HOME) program. This is a formula grant to States and local governments that can be used to assist existing homeowners, first-time homebuyers, or renters. Between 1992 and September 1997, HOME produced 126,000 affordable rental units. Qualifying rents must be affordable to households with incomes at or below 65 percent of area median income, or below local FMRs.
- Older rental subsidy programs. The Section 221(d)(3) below market interest rate (BMIR) program and the Section 236 program were active from the early 1960s through the early 1970s. They were designed to produce housing affordable by families with incomes above the public housing income limits. Over time many projects or portions of projects in these programs became "project-based assisted housing" rather than "rental subsidy" as deep rental subsidies were attached to the units. There remain 300,000 units subsidized by these older programs that do not have deep rental subsidies.
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Exhibit 4
Household-Level Data From HUD Programs
The Multifamily Tenant Characteristics System (MTCS) is an automated data base of households assisted by public housing and the tenant-based Section 8 certificate and voucher programs and other programs administered by HUD's Office of Public and Indian Housing. The system contains information about the demographic characteristics of each household, the level and sources of the household's income, and the address of the housing unit. The information is based on the form used by public housing authorities (PHAs) to calculate each household's rent and subsidy levels. As of February 1997, the system contained nearly 2.4 million household records, or about 85 percent of the possible total.
The Tenant Rental Assistance Certification System (TRACS) is a similar system for households assisted in project-based Section 8 programs and other assisted projects administered by HUD's Office of Housing. Information in TRACS is based on forms completed by the private owner or manager of the project and submitted to HUD. As of June 1997, TRACS contained 1.6 million household records.
Tables providing additional information from MTCS and TRACS data on the income levels of assisted households can be found in Recent Research Results, published by HUD's Office of Policy Development and Research (PD&R) in March 1998 or at under "publications." For data from MTCS and TRACS summarized for each housing project and each census tract, see A Picture of Subsidized Households, published by PD&R in 1996 and 1997. These reports provide income and demographic information at the census tract and project level, along with national and regional reports, based on HUD's administrative records.
Another source of information on households receiving Federal housing assistance is:
Characteristics of HUD-Assisted Renters and Their Units in 1993, published by PD&R in May 1997. This report is based on case-by-case matching of administrative data on the addresses of assisted housing units to AHS data. |
- Data from SSA are used to better describe the housing needs of persons with disabilities and their participation in HUD programs. Because AHS does not specifically ask about disabilities, worst case needs reports published before 1996 identified people with disabilities by assuming that anyone under the age of 62 who reported receiving Supplemental Security Income (SSI) had a disability.5 The 1996 report used data from an audit of the SSI program to develop much more complete estimates of the number of worst case needs households with members who have disabilities. This report does not update the analysis of SSA data, but uses proportional relationships from the 1996 report to estimate the number of households with disabilities and worst case needs in 1995.
- 1995 AHS national data are used to update the evidence of mismatches between very-low-income renters and the availability of units affordable to them. In addition, a separate report, to be published shortly by PD&R, provides the detailed results and policy implications of a major study of gains and losses in affordable housing units in 41 metropolitan areas.
- The policy outlook is still uncertain. The 1996 report was titled Rental Housing Assistance at a Crossroads because Congress had begun to make major changes in housing assistance policy that could result in public and assisted housing serving many fewer families and individuals who otherwise would be categorized with worst case needs. This report is titled Rental Housing Assistance -- The Crisis Continues, because it supplies evidence that worst case needs do not decline in an economic expansion, but also because the turmoil in housing assistance policy is still under way (see exhibit 5).
A new dimension has been added to the uncertainty in housing assistance policy by the major overhaul of the Nation's welfare system. A year and a half after the enactment of welfare reform, uncertainty exists about its effects on the incomes of poor families with children and other categories of households affected.
Exhibit 5
Changes to Assisted Housing Policy: Recent and Proposed
Appropriations Actions
HUD's Appropriations Acts since 1996 have included the following measures:
- No funds for incremental rental housing assistance. Funds are provided only for the replacement of public and assisted housing units that leave the assisted housing stock, for other circumstances in which families and individuals who already have housing assistance need to be protected, or for very limited special purposes such as litigation settlements.
- Year-to-year suspension of the Federal preferences for public and assisted housing that target assistance to households with worst case housing needs, without changes substituting income targeting requirements.
- A required delay in the reissuance of tenant-based assistance by housing authorities when house-holds leave the program that, in effect, shrinks the number of households assisted at any one time.
Authorization Actions
Congress is considering new enabling legislation for public housing and tenant-based housing assistance. Provisions of this legislation would permanently end Federal preferences for households with worst case housing needs.
- Senate Bill S. 462, passed by the Senate in September 1997, would eliminate Federal preferences permanently and require a minimum of 40 percent of households newly admitted to public housing and 65 percent of households admitted to tenant-based rental assistance programs to have incomes below 30 percent of the area median. Seventy percent of households newly admitted to public housing and 90 percent of households admitted to tenant-based rental assistance would be required to have incomes below 60 percent of median. This would mean that 30 percent of households newly admitted to public housing and 10 percent of households newly admitted to tenant-based rental assistance programs could have incomes as high as 80 percent of area median income.
- House Bill H.R. 2, passed by the House of Representatives on May 14, 1997, would eliminate Federal preferences and require a minimum of 35 percent of households newly admitted to public housing to have incomes below 30 percent of area median income. Forty percent of households newly admitted to the tenant-based Section 8 program would have to have incomes below 30 percent of median. This would mean that 65 percent of households admitted to public housing and 60 percent of households newly receiving tenant-based Section 8 assistance could have incomes of up to 80 percent of the area median. If a public housing authority (PHA) exceeded the extremely-low-income targeting requirement for Section 8 tenant-based assistance, the public housing targeting requirements could be reduced by the amount of excess in targeting Section 8 tenant-based assistance. Thus, it would be possible for a PHA not to admit any extremely-low-income households to its public housing.
- The Clinton administration's position, reflected in H.R. 1447 and S. 784, would eliminate Federal preferences and require a minimum of 40 percent of families newly admitted to public housing and 75 percent of families newly admitted to tenant-based assistance programs to have incomes below 30 percent of median. For public housing, at least 90 percent of newly admitted households would be required to have incomes below 60 percent of median, while the remaining 10 percent could have incomes up to 80 percent of median. For Section 8 tenant-based assistance, the remaining 25 percent of newly admitted families would have to have incomes below 50 percent of the area median.
The Administration-supported bills also would require that at least 40 percent of the units in each public housing project be occupied by families with incomes not exceeding 30 percent of median, ensuring that some extremely-low-income individuals and households would be served in all projects, including the most desirable projects.
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Estimate assumes 100,000 units placed into service in 1996 and 1997.
AHS supplemental questions on disabilities were included in the 1978 and 1995 national surveys, but these questions cover only physical disabilities.
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