WEBVTT 00:00:00.000 --> 00:00:02.259 Welcome back to the Deep Dive. Today, we are 00:00:02.259 --> 00:00:04.660 going to tackle a phrase that I guarantee every 00:00:04.660 --> 00:00:07.620 single person listening has heard. Oh, absolutely. 00:00:07.879 --> 00:00:09.839 It's one of those terms that's everywhere. Right. 00:00:10.060 --> 00:00:11.939 You've heard it on the news. You've heard it 00:00:11.939 --> 00:00:14.240 in movies. Maybe you've heard it whispered at 00:00:14.240 --> 00:00:18.379 a neighborhood association meeting. It is a term 00:00:18.379 --> 00:00:20.260 that carries an incredible amount of weight. 00:00:20.480 --> 00:00:23.059 It really is. It's loaded with cultural baggage, 00:00:23.300 --> 00:00:26.280 surrounded by stereotypes, and frankly, it's 00:00:26.280 --> 00:00:28.359 often used as a shorthand for a lot of unsaid 00:00:28.359 --> 00:00:31.109 assumptions. Exactly. Assumptions about poverty, 00:00:31.250 --> 00:00:35.009 about crime, and about who belongs in which neighborhood. 00:00:35.250 --> 00:00:37.969 It's really one of those terms that has escaped 00:00:37.969 --> 00:00:41.189 the dusty policy manuals and entered the general 00:00:41.189 --> 00:00:43.369 cultural lexicon. That's a great way to put it. 00:00:43.490 --> 00:00:46.890 But in that process, it's lost almost all of 00:00:46.890 --> 00:00:50.030 its actual technical meaning. It's become a symbol 00:00:50.030 --> 00:00:52.329 rather than a specific program. A symbol, yes. 00:00:53.090 --> 00:00:55.890 We are talking, of course, about Section 8. And 00:00:55.890 --> 00:00:57.869 I think for a lot of people, when they hear that, 00:00:57.950 --> 00:01:00.770 they have a very specific mental image. Maybe 00:01:00.770 --> 00:01:03.609 it's a towering concrete high rise with broken 00:01:03.609 --> 00:01:06.430 windows. Maybe it's a government check. Maybe 00:01:06.430 --> 00:01:08.530 it's just a headline they saw about property 00:01:08.530 --> 00:01:11.870 values. But today we are going to strip all of 00:01:11.870 --> 00:01:14.250 that baggage away. Get back to basics. Right. 00:01:14.329 --> 00:01:17.290 And ask the fundamental questions. What is it 00:01:17.290 --> 00:01:21.189 actually? Is it a building? Is it a law? Is it 00:01:21.189 --> 00:01:25.019 a lottery ticket? It's surprisingly complex. 00:01:25.239 --> 00:01:28.079 And to answer your first question, it is literally 00:01:28.079 --> 00:01:30.879 a section of a law. OK, so it really is just 00:01:30.879 --> 00:01:33.680 Section 8 of something. Exactly. Specifically, 00:01:33.680 --> 00:01:37.579 Section 8 of the Housing Act of 1937. 1937. See, 00:01:37.640 --> 00:01:39.579 I think that already surprises people. That dates 00:01:39.579 --> 00:01:42.019 it way, way further back than the 70s or 80s, 00:01:42.019 --> 00:01:44.019 which is where I think most people place it in 00:01:44.019 --> 00:01:47.000 their heads. Right. But the program, as we know 00:01:47.000 --> 00:01:49.060 it today, the voucher system, that's evolved 00:01:49.060 --> 00:01:51.140 significantly since the Great Depression. So 00:01:51.140 --> 00:01:53.219 what's the core definition now? At its core, 00:01:53.459 --> 00:01:55.620 Section 8 is the United States federal government's 00:01:55.620 --> 00:01:57.799 major program for assisting very low -income 00:01:57.799 --> 00:02:01.019 families, the elderly and the disabled, to afford 00:02:01.019 --> 00:02:04.200 decent, safe, and sanitary housing in the private 00:02:04.200 --> 00:02:06.680 market. And that last part is key. I would double 00:02:06.680 --> 00:02:08.840 underline that last part, the private market. 00:02:09.259 --> 00:02:11.379 That is the key distinction we need to make right 00:02:11.379 --> 00:02:13.960 up top. We aren't talking about government -owned 00:02:13.960 --> 00:02:16.439 concrete blocks here. We aren't talking about 00:02:16.439 --> 00:02:20.240 the projects in the way you see it on TV. No, 00:02:20.300 --> 00:02:22.879 not primarily. We are talking about private landlords. 00:02:23.479 --> 00:02:25.780 private apartments, and the real estate market 00:02:25.780 --> 00:02:27.500 that you and I participate in. And the scale 00:02:27.500 --> 00:02:30.699 of this is just, it's massive, which is why it 00:02:30.699 --> 00:02:32.800 matters even if you don't use it. It's huge. 00:02:33.020 --> 00:02:36.340 We are looking at about 2 .3 million households 00:02:36.340 --> 00:02:39.659 using these vouchers. Wow. And to give you some 00:02:39.659 --> 00:02:42.599 context, there are about 5 .2 million households 00:02:42.599 --> 00:02:44.960 receiving some form of rental assistance in the 00:02:44.960 --> 00:02:48.240 U .S. So Section 8 makes up a huge chunk, nearly 00:02:48.240 --> 00:02:50.680 half of that federal footprint. So it's the heavy 00:02:50.680 --> 00:02:53.759 lifter of American housing policy. It is. And 00:02:53.759 --> 00:02:56.300 it involves this complex dance between the federal 00:02:56.300 --> 00:02:59.120 government, that's HUD, the Department of Housing, 00:02:59.259 --> 00:03:02.419 and urban development local public housing agencies, 00:03:02.620 --> 00:03:06.139 usually called PHAs. PHAs, got it. And thousands 00:03:06.139 --> 00:03:07.960 of private landlords who may or may not want 00:03:07.960 --> 00:03:10.460 to be involved. And that is the mission for this 00:03:10.460 --> 00:03:12.949 deep dive. We aren't just going to recite the 00:03:12.949 --> 00:03:15.629 rules. We want to look at the tension in this 00:03:15.629 --> 00:03:18.009 system. Right. Because it seems like a paradox. 00:03:18.289 --> 00:03:21.210 It's a government safety net that tries to exist 00:03:21.210 --> 00:03:24.770 within a, well, a ruthless capitalist real estate 00:03:24.770 --> 00:03:27.310 market. And that tension creates some really 00:03:27.310 --> 00:03:30.789 bizarre and sometimes heartbreaking outcomes. 00:03:31.270 --> 00:03:33.939 Absolutely. So here's the roadmap. We're going 00:03:33.939 --> 00:03:35.900 to get into the lottery system of just trying 00:03:35.900 --> 00:03:38.099 to get on the list and why calling it a safety 00:03:38.099 --> 00:03:40.580 net might be a little generous. A lot generous. 00:03:40.819 --> 00:03:42.960 We'll look at the strange math the government 00:03:42.960 --> 00:03:45.199 uses to decide if you're core enough, including 00:03:45.199 --> 00:03:47.599 a really weird rule about savings accounts that 00:03:47.599 --> 00:03:49.560 I had to read three times. The imputed income 00:03:49.560 --> 00:03:52.479 rule. It's a classic. We'll also tackle the controversy 00:03:52.479 --> 00:03:54.879 over whether this program impacts crime rates, 00:03:54.960 --> 00:03:57.900 which is a huge heated debate. A massive one. 00:03:58.039 --> 00:04:00.319 And then we'll look at the future, the new experiments 00:04:00.319 --> 00:04:05.250 with using zip codes to set rent prices. So let's 00:04:05.250 --> 00:04:06.930 just jump right in. Let's unpack this. Let's 00:04:06.930 --> 00:04:08.909 do it. I want to start with the mechanism itself, 00:04:08.990 --> 00:04:11.509 because I think a lot of people still have that 00:04:11.509 --> 00:04:14.330 image of the projects. When they hear public 00:04:14.330 --> 00:04:17.629 housing, they think of Cabrini Green in Chicago 00:04:17.629 --> 00:04:20.129 or these huge high -rise towers concentrated 00:04:20.129 --> 00:04:22.670 in one part of the city. But you're saying Section 00:04:22.670 --> 00:04:25.930 8 is different. It is distinct, but there is 00:04:25.930 --> 00:04:28.829 some overlap that can be confusing. So within 00:04:28.829 --> 00:04:31.410 Section 8, there are really two main categories 00:04:31.410 --> 00:04:34.050 you need to understand. Okay. There is project 00:04:34.050 --> 00:04:36.649 -based assistance and there is tenant -based 00:04:36.649 --> 00:04:38.910 assistance. Right. Break those down. Project 00:04:38.910 --> 00:04:41.790 -based sounds like the traditional image. It's 00:04:41.790 --> 00:04:44.790 closer to it. With project -based vouchers, the 00:04:44.790 --> 00:04:47.550 subsidy is tied to the actual unit, the apartment 00:04:47.550 --> 00:04:50.050 itself. Not to the person. Not to the person. 00:04:50.149 --> 00:04:52.410 Yeah. Imagine a specific building on Main Street. 00:04:52.829 --> 00:04:54.730 The government has a contract with that building's 00:04:54.730 --> 00:04:57.589 owner. If you live in apartment 4B, you get the 00:04:57.589 --> 00:05:00.750 help. Okay. But if you decide, I don't like this 00:05:00.750 --> 00:05:02.810 neighborhood or I want to move closer to my mom, 00:05:02.990 --> 00:05:05.509 and you leave apartment 4B. The help stays behind. 00:05:05.750 --> 00:05:07.910 The subsidy stays there. You leave the help behind. 00:05:08.370 --> 00:05:11.069 The next person who moves into 4B gets it. So 00:05:11.069 --> 00:05:13.449 you are tethered to the building. It's like a 00:05:13.449 --> 00:05:15.670 gift card that only works at one specific store. 00:05:16.089 --> 00:05:19.009 If that store doesn't have what you need. Too 00:05:19.009 --> 00:05:21.569 bad. That's a great analogy. And public housing 00:05:21.569 --> 00:05:25.069 agencies, the PHAs, can allocate up to 20 % of 00:05:25.069 --> 00:05:27.930 their vouchers for this specific purpose. And 00:05:27.930 --> 00:05:30.050 what's the thinking there? Why do that? Well, 00:05:30.129 --> 00:05:32.709 it guarantees that certain buildings remain affordable 00:05:32.709 --> 00:05:35.189 in the long term, which is good for stability 00:05:35.189 --> 00:05:38.269 in the local housing stock. But the much larger 00:05:38.269 --> 00:05:40.509 and perhaps more revolutionary side of the program 00:05:40.509 --> 00:05:43.589 is the tenant -based voucher. And this is what 00:05:43.589 --> 00:05:45.709 is formally known as the Housing Choice Voucher, 00:05:45.709 --> 00:05:48.550 or HCV. Exactly. This is the one most people 00:05:48.550 --> 00:05:50.069 are thinking of, even if they don't know the 00:05:50.069 --> 00:05:52.870 name. This is the golden ticket. The golden ticket. 00:05:53.029 --> 00:05:55.370 Because the subsidy is tied to you, the tenant. 00:05:55.449 --> 00:05:58.310 It's in your backpack, so to speak. You get the 00:05:58.310 --> 00:06:00.069 voucher, and then you go out into the private 00:06:00.069 --> 00:06:02.250 market and find a landlord who will rent to you. 00:06:02.709 --> 00:06:06.110 And the idea here is mobility. Mobility and choice. 00:06:06.709 --> 00:06:10.069 You aren't stuck in a specific complex. Theoretically, 00:06:10.069 --> 00:06:11.930 you can move to a neighborhood with better schools, 00:06:12.209 --> 00:06:14.930 better jobs, or lower crime. And I read that 00:06:14.930 --> 00:06:17.709 you can even port these vouchers. Which sounds 00:06:17.709 --> 00:06:19.910 like something from a sci -fi movie, but I assume 00:06:19.910 --> 00:06:22.449 it just means moving cities. Yes. Portability 00:06:22.449 --> 00:06:24.949 is a huge feature. It means you can transfer 00:06:24.949 --> 00:06:28.250 the voucher to a different jurisdiction. If you 00:06:28.250 --> 00:06:30.589 have a voucher in Detroit, but you get a job 00:06:30.589 --> 00:06:33.949 offer in Atlanta, you can, in theory, take that 00:06:33.949 --> 00:06:37.420 voucher with you to Atlanta. So... Anywhere in 00:06:37.420 --> 00:06:39.459 the country. It allows for movement across the 00:06:39.459 --> 00:06:42.300 entire United States and its territories wherever 00:06:42.300 --> 00:06:44.639 a Section 8 program is operating. That sounds 00:06:44.639 --> 00:06:46.920 incredible on paper. It sounds like freedom. 00:06:47.220 --> 00:06:49.519 But as we're going to find out, the paper version 00:06:49.519 --> 00:06:51.800 of this program and the street version are often 00:06:51.800 --> 00:06:54.420 very, very different. Worlds apart. So let's 00:06:54.420 --> 00:06:56.139 talk about the money. How does the payment actually 00:06:56.139 --> 00:06:58.939 work? Does the tenant pay anything? They do. 00:06:59.360 --> 00:07:01.759 This isn't free housing, which is a common myth. 00:07:01.939 --> 00:07:04.680 The general rule is the 30 % rule. Okay, I've 00:07:04.680 --> 00:07:06.660 heard this number. The family is expected to 00:07:06.660 --> 00:07:09.160 pay 30 % of their adjusted income toward rent 00:07:09.160 --> 00:07:12.459 and utilities. The government, via the voucher, 00:07:12.540 --> 00:07:15.259 pays the landlord the difference up to a specific 00:07:15.259 --> 00:07:17.980 cap. 30 % seems to be the standard benchmark 00:07:17.980 --> 00:07:20.759 for affordability in general economics, right? 00:07:20.899 --> 00:07:23.019 It is. It's considered the point where housing 00:07:23.019 --> 00:07:25.379 becomes a burden if you're paying more than that. 00:07:25.600 --> 00:07:26.980 Right. But you mentioned something important, 00:07:27.160 --> 00:07:29.379 adjusted income. Right. I feel like whenever 00:07:29.379 --> 00:07:31.959 the government uses the word adjusted, there's 00:07:31.959 --> 00:07:34.180 a lot of fine print involved. There is always 00:07:34.180 --> 00:07:38.279 fine print. It's not your gross salary. Adjusted 00:07:38.279 --> 00:07:41.699 income is your gross income minus specific mandatory 00:07:41.699 --> 00:07:45.079 deductions. Okay. Like what? For example, if 00:07:45.079 --> 00:07:47.500 you have dependents under 18, you get a deduction 00:07:47.500 --> 00:07:51.220 of $480 per dependent. If the head of the household 00:07:51.220 --> 00:07:54.519 is elderly or disabled, There are deductions. 00:07:54.600 --> 00:07:56.579 There are also deductions for certain medical 00:07:56.579 --> 00:07:59.100 or child care expenses if they exceed a certain 00:07:59.100 --> 00:08:01.259 percentage of your income. So they are trying 00:08:01.259 --> 00:08:04.620 to get to a net income that reflects what you 00:08:04.620 --> 00:08:07.139 actually have available to spend on survival. 00:08:07.339 --> 00:08:10.060 That's the goal. But here is where it gets really 00:08:10.060 --> 00:08:12.000 interesting and a little bureaucratic. There 00:08:12.000 --> 00:08:14.540 is something called the asset test. I saw this 00:08:14.540 --> 00:08:16.220 in the notes and I had to read it twice. This 00:08:16.220 --> 00:08:18.480 feels like one of those rules that probably made 00:08:18.480 --> 00:08:21.420 sense in a boardroom in 1980, but feels wild 00:08:21.420 --> 00:08:24.199 in practice. It's a way to ensure people aren't, 00:08:24.199 --> 00:08:27.079 you know, sitting on a gold mine while claiming 00:08:27.079 --> 00:08:31.019 poverty. But the threshold is quite low. If a 00:08:31.019 --> 00:08:35.220 family has net assets over $5 ,000, say you managed 00:08:35.220 --> 00:08:37.940 to save up $5 ,500 in a savings account for a 00:08:37.940 --> 00:08:40.710 rainy day. Which is an amazing accomplishment 00:08:40.710 --> 00:08:43.090 for a low -income family. A huge accomplishment. 00:08:43.289 --> 00:08:46.549 But if you do, HUD has to factor that in. Okay, 00:08:46.610 --> 00:08:48.370 play the government's advocate for a second. 00:08:48.429 --> 00:08:50.590 If I have money in the bank, I'm earning interest 00:08:50.590 --> 00:08:52.789 on it. That is technically income, so they should 00:08:52.789 --> 00:08:56.129 count it, right? In theory, yes. But let's look 00:08:56.129 --> 00:08:58.570 at the real world. If you have $6 ,000 in the 00:08:58.570 --> 00:09:00.490 standard savings account right now, you might 00:09:00.490 --> 00:09:04.149 be earning, what, 0 .01 % interest? If you're 00:09:04.149 --> 00:09:06.909 lucky. That's like 60 cents a year. It's negligible. 00:09:06.970 --> 00:09:08.169 Right, you can't buy a stick of gum with that. 00:09:08.409 --> 00:09:11.710 Exactly. But HUD uses a formula. They look at 00:09:11.710 --> 00:09:14.330 the actual income from the asset, the 60 cents. 00:09:14.509 --> 00:09:17.850 But MUT, if the assets are over $5 ,000, they 00:09:17.850 --> 00:09:19.490 compare the actual income to something called 00:09:19.490 --> 00:09:22.669 imputed income. Imputed. That sounds like imaginary. 00:09:23.190 --> 00:09:26.269 It essentially is. HUD establishes a standard 00:09:26.269 --> 00:09:29.830 passbook savings rate. This is a percentage they 00:09:29.830 --> 00:09:31.889 decide represents what savings should be earning. 00:09:32.470 --> 00:09:34.970 Let's say they set that passbook rate at 0 .4 00:09:34.970 --> 00:09:37.350 % or higher, depending on the year. Okay. They 00:09:37.350 --> 00:09:39.710 basically say, We think you should be earning 00:09:39.710 --> 00:09:43.009 this much interest on that money. And even if 00:09:43.009 --> 00:09:46.470 the bank is paying you zero, HUD calculates your 00:09:46.470 --> 00:09:49.590 income as if you were earning that passbook rate. 00:09:49.710 --> 00:09:52.370 They add that imaginary income to your real income. 00:09:52.549 --> 00:09:54.210 Let's run the numbers on this because this is 00:09:54.210 --> 00:09:57.250 mind bending. I scrimped and save. I have six 00:09:57.250 --> 00:09:59.070 thousand dollars. My bank pays me one dollar 00:09:59.070 --> 00:10:01.330 in interest. The government says, no, we think 00:10:01.330 --> 00:10:03.809 you made fifty dollars. So they add fifty dollars 00:10:03.809 --> 00:10:06.490 to my income. Since my rent is 30 percent of 00:10:06.490 --> 00:10:08.659 my income, my rent just went up. because of money 00:10:08.659 --> 00:10:10.779 I never actually received. That is the mechanism. 00:10:11.000 --> 00:10:13.840 It's called imputed income from assets. Now, 00:10:13.879 --> 00:10:15.580 the financial impact might be small in terms 00:10:15.580 --> 00:10:17.279 of monthly dollars. Maybe your rent goes up by 00:10:17.279 --> 00:10:19.360 15 or 20 dollars. But think about the principle. 00:10:19.500 --> 00:10:21.460 It's the principle. It's a disincentive. It adds 00:10:21.460 --> 00:10:24.159 a layer of complexity and, frankly, a disincentive 00:10:24.159 --> 00:10:27.059 to save liquid cash beyond that $5 ,000 mark. 00:10:27.320 --> 00:10:29.240 It's a tax on building a safety net of your own. 00:10:29.450 --> 00:10:31.570 It's those little friction points that make the 00:10:31.570 --> 00:10:34.669 system so hard to navigate. But the biggest friction 00:10:34.669 --> 00:10:37.389 point isn't the math. It's getting the voucher 00:10:37.389 --> 00:10:39.250 in the first place. This is the heartbreak of 00:10:39.250 --> 00:10:42.190 the program. We call it a safety net. But a safety 00:10:42.190 --> 00:10:44.330 net is supposed to catch you when you fall. Right, 00:10:44.450 --> 00:10:46.850 immediately. If you fall off a trapeze, the net 00:10:46.850 --> 00:10:49.570 is there immediately. Section 8 is more like 00:10:49.570 --> 00:10:52.649 a safety lottery that you enter 10 years before 00:10:52.649 --> 00:10:55.809 you fall. The wait lists! I've heard horror stories. 00:10:55.889 --> 00:10:58.980 How bad are we talking? They are tragic. In many 00:10:58.980 --> 00:11:01.460 localities, the wait lists are thousands and 00:11:01.460 --> 00:11:04.500 thousands of households long. We are not talking 00:11:04.500 --> 00:11:07.759 about a wait of a few months. A year. Two years. 00:11:07.899 --> 00:11:10.960 We are talking about 10 to 20 years in some major 00:11:10.960 --> 00:11:14.179 metropolitan areas like Los Angeles or New York 00:11:14.179 --> 00:11:17.159 or Miami. Stop there for a second. 20 years. 00:11:17.580 --> 00:11:19.960 If I apply when I have a newborn baby because 00:11:19.960 --> 00:11:22.580 I'm struggling to pay rent, that baby could be 00:11:22.580 --> 00:11:24.720 a sophomore in college by the time my name is 00:11:24.720 --> 00:11:27.299 called. Exactly. The crisis you were in when 00:11:27.299 --> 00:11:30.379 you applied, it's either resolved or, well, you 00:11:30.379 --> 00:11:32.320 faced the consequences of it long, long ago. 00:11:32.419 --> 00:11:34.059 And that's assuming you can even get on the list. 00:11:34.509 --> 00:11:36.889 That's the thing. Many public housing agencies, 00:11:36.990 --> 00:11:40.649 or PHAs, keep their lists closed entirely. They 00:11:40.649 --> 00:11:43.190 are so overwhelmed, they simply cannot handle 00:11:43.190 --> 00:11:45.889 more names. I read about the opening of the lists. 00:11:46.090 --> 00:11:48.309 It sounds less like a bureaucratic procedure 00:11:48.309 --> 00:11:51.309 and more like a rock concert ticket drop. It 00:11:51.309 --> 00:11:54.750 is an event. A chaotic... desperate event. There 00:11:54.750 --> 00:11:56.870 are cases where a city might open its wait list 00:11:56.870 --> 00:12:00.210 for just five days. And this might happen once 00:12:00.210 --> 00:12:02.690 every seven years. You'll see news reports of 00:12:02.690 --> 00:12:05.409 government websites crashing because 50 ,000 00:12:05.409 --> 00:12:07.389 people are hitting refresh at the same time. 00:12:07.549 --> 00:12:09.730 You'll see lines forming around city blocks, 00:12:09.889 --> 00:12:11.909 people camping out overnight just to get a paper 00:12:11.909 --> 00:12:15.169 application. That is just unbelievable. And even 00:12:15.169 --> 00:12:16.889 if you get on the list during that five day window, 00:12:16.970 --> 00:12:18.950 it's not first come first served, right? It's 00:12:18.950 --> 00:12:21.350 not like waiting in line at the deli. Rarely. 00:12:21.710 --> 00:12:23.870 Because the demand is so impossibly high compared 00:12:23.870 --> 00:12:27.009 to the supply. Some PHAs use a lottery system. 00:12:27.210 --> 00:12:29.970 A literal lottery. Literal lottery. So imagine 00:12:29.970 --> 00:12:32.950 100 ,000 families apply for 10 ,000 spots on 00:12:32.950 --> 00:12:35.250 the waiting list. Not 10 ,000 vouchers. No, no. 00:12:35.330 --> 00:12:37.850 10 ,000 spots to rate for a voucher for the next 00:12:37.850 --> 00:12:40.149 decade. So you win the lottery just to get the 00:12:40.149 --> 00:12:42.590 privilege of standing in line for 10 years. Correct. 00:12:42.889 --> 00:12:45.850 And that lottery might be weighted. PHAs can 00:12:45.850 --> 00:12:48.509 set preference policies. They might prioritize 00:12:48.509 --> 00:12:51.539 veterans or the elderly or people. with disabilities 00:12:51.539 --> 00:12:54.299 or people who already live in that local jurisdiction. 00:12:54.600 --> 00:12:56.820 Or people fleeing domestic violence. I saw that 00:12:56.820 --> 00:12:59.779 was a common one. Yes. Which makes sense ethically. 00:12:59.899 --> 00:13:02.299 You want to help the most vulnerable, the people 00:13:02.299 --> 00:13:05.559 in immediate danger, but it creates this weird 00:13:05.559 --> 00:13:08.500 tier system. Right. If you are just a standard 00:13:08.500 --> 00:13:10.840 low -income family working two jobs and struggling 00:13:10.840 --> 00:13:13.600 to pay rent, you might just be perpetually pushed 00:13:13.600 --> 00:13:15.539 down the list by people with higher priority. 00:13:16.000 --> 00:13:18.919 Precisely. There is absolutely no guarantee that 00:13:18.919 --> 00:13:21.129 anyone on a wait list will ever be selected. 00:13:21.330 --> 00:13:24.210 It creates a state of permanent anxiety. You 00:13:24.210 --> 00:13:26.610 have this potential lifeline, but you can't plan 00:13:26.610 --> 00:13:28.789 your life around it. It really reframes the way 00:13:28.789 --> 00:13:31.090 we think about American poverty assistance. We 00:13:31.090 --> 00:13:33.210 often hear political arguments about people living 00:13:33.210 --> 00:13:36.289 off the system or dependency. But looking at 00:13:36.289 --> 00:13:38.629 these numbers, the door to the system is barely 00:13:38.629 --> 00:13:41.570 cracked open. It's a resource -constrained system. 00:13:42.149 --> 00:13:45.830 It is not an entitlement. That's a crucial legal 00:13:45.830 --> 00:13:47.889 and philosophical distinction. What do you mean 00:13:47.889 --> 00:13:50.529 by entitlement? Unlike food stamps, which is 00:13:50.529 --> 00:13:53.809 now called SNFP or Medicaid, where if you meet 00:13:53.809 --> 00:13:56.389 the eligibility criteria, the government must 00:13:56.389 --> 00:13:59.169 give it to you by law. Housing assistance is 00:13:59.169 --> 00:14:01.629 not guaranteed. It's discretionary funding. It's 00:14:01.629 --> 00:14:04.090 subject to congressional appropriation each year. 00:14:04.809 --> 00:14:07.750 And the result is that only about one in four 00:14:07.750 --> 00:14:10.250 households who are income eligible for rental 00:14:10.250 --> 00:14:13.710 assistance. actually get it. That is a staggering 00:14:13.710 --> 00:14:17.529 statistic. One in four. That means 75 % of the 00:14:17.529 --> 00:14:19.750 people who follow the rules and qualify are just 00:14:19.750 --> 00:14:22.429 left to fend for themselves in the market. That's 00:14:22.429 --> 00:14:24.309 the reality. Okay, before we get into the market 00:14:24.309 --> 00:14:26.590 dynamics and why landlords might say no to this 00:14:26.590 --> 00:14:29.210 golden ticket, I want to step back. How did we 00:14:29.210 --> 00:14:31.690 get here? You mentioned 1937. Why did we change 00:14:31.690 --> 00:14:34.610 from building houses to giving out coupons? It's 00:14:34.610 --> 00:14:37.070 a fascinating history of failure and a shift 00:14:37.070 --> 00:14:39.250 in philosophy. Back in the Great Depression, 00:14:39.470 --> 00:14:42.529 the Housing Act of 1937 was passed. The original 00:14:42.529 --> 00:14:45.090 mindset was construction. The government as developer. 00:14:45.350 --> 00:14:47.409 Right. The private market wasn't building for 00:14:47.409 --> 00:14:49.629 the poor. Because there's no profit in it. So 00:14:49.629 --> 00:14:51.789 the government said, fine, we will become the 00:14:51.789 --> 00:14:53.809 developer. We will build it. That's what the 00:14:53.809 --> 00:14:55.669 classic public housing projects came from. The 00:14:55.669 --> 00:14:58.789 bricks and mortar approach. Right. And at first, 00:14:58.830 --> 00:15:01.169 they were actually seen as a stepping stone for 00:15:01.169 --> 00:15:04.470 the working class. But over decades, due to racial 00:15:04.470 --> 00:15:07.350 segregation, chronic underfunding for maintenance 00:15:07.350 --> 00:15:10.909 and poor design. Many of these projects became 00:15:10.909 --> 00:15:13.649 islands of concentrated poverty. They became 00:15:13.649 --> 00:15:15.950 isolated. They became dangerous. They became 00:15:15.950 --> 00:15:18.169 symbols of government failure. So the solution 00:15:18.169 --> 00:15:21.789 became the problem. Exactly. By the 1970s, the 00:15:21.789 --> 00:15:24.210 thinking started to shift. A lot of studies were 00:15:24.210 --> 00:15:25.789 coming out showing that the problem in America 00:15:25.789 --> 00:15:28.350 wasn't necessarily that there were no houses. 00:15:28.370 --> 00:15:30.409 We had a housing stock. The problem was rent 00:15:30.409 --> 00:15:32.789 burden. Meaning the physical houses existed, 00:15:32.929 --> 00:15:35.029 but people just didn't have the cash to access 00:15:35.029 --> 00:15:38.129 them. Precisely. The percentage of income people 00:15:38.129 --> 00:15:39.850 were spending on housing was just destroying 00:15:39.850 --> 00:15:43.990 families. So in 1974, Congress passed the Housing 00:15:43.990 --> 00:15:46.269 and Community Development Act, which amended 00:15:46.269 --> 00:15:49.690 the 1937 Act to create Section 8. And the philosophy 00:15:49.690 --> 00:15:52.809 pivoted. It pivoted from we will build housing 00:15:52.809 --> 00:15:55.970 to we will help you pay for existing housing. 00:15:56.129 --> 00:15:58.690 It's a shift from a supply -side intervention 00:15:58.690 --> 00:16:01.309 building stuff to a demand -side intervention 00:16:01.309 --> 00:16:04.190 giving people money. Very well put. And that 00:16:04.190 --> 00:16:08.029 evolution continued. In 1998, we got the QHWRA, 00:16:08.210 --> 00:16:10.409 the Quality Housing and Work Responsibility Act. 00:16:10.610 --> 00:16:13.649 That's a mouthful. It is. But this was a major 00:16:13.649 --> 00:16:16.250 modernization. Before this, there were certificates 00:16:16.250 --> 00:16:18.970 and vouchers, and they had slightly different 00:16:18.970 --> 00:16:23.269 confusing rules. QHWRA merged them into the single 00:16:23.269 --> 00:16:25.710 housing choice voucher program we have today. 00:16:25.929 --> 00:16:27.929 And it added more flexibility, right, for the 00:16:27.929 --> 00:16:30.029 tenants. Yes. It allowed tenants to choose to 00:16:30.029 --> 00:16:32.110 pay more than 30 % of their income if they found 00:16:32.110 --> 00:16:33.730 a place they really liked that was a little above 00:16:33.730 --> 00:16:36.309 the payment standard. to 40%. They gave them 00:16:36.309 --> 00:16:38.710 more choice. So bringing us closer to the present, 00:16:38.809 --> 00:16:40.710 there have been other specific programs carved 00:16:40.710 --> 00:16:44.190 out, like HUDVA -ish for veterans. Yes. In 2008, 00:16:44.289 --> 00:16:46.470 that was a big one. It specifically allocated 00:16:46.470 --> 00:16:49.649 funds, I think it was $75 million to start, to 00:16:49.649 --> 00:16:52.009 combine these housing vouchers with case management 00:16:52.009 --> 00:16:55.330 from the VA for homeless veterans. It was a recognition 00:16:55.330 --> 00:16:57.970 that just a voucher isn't enough. Sometimes people 00:16:57.970 --> 00:17:00.529 need support services, too. Right. Now, there 00:17:00.529 --> 00:17:02.549 was another significant update recently regarding 00:17:02.549 --> 00:17:05.730 the Earned Income Disallowance, or EID. This 00:17:05.730 --> 00:17:07.849 sounds like another one of those dense bureaucratic 00:17:07.849 --> 00:17:10.589 terms, but it actually affects people's motivation 00:17:10.589 --> 00:17:14.130 to work. Can you explain the benefit cliff here? 00:17:14.369 --> 00:17:17.009 It's a huge, huge problem in social policy. The 00:17:17.009 --> 00:17:19.509 EID was designed to prevent the benefit cliff. 00:17:19.609 --> 00:17:22.410 OK, so what's the cliff? Imagine you are on disability 00:17:22.410 --> 00:17:24.509 and you're receiving housing assistance. You 00:17:24.509 --> 00:17:26.390 want to go back to work, but you're terrified. 00:17:26.880 --> 00:17:29.240 Why? Because the moment you earn a paycheck, 00:17:29.480 --> 00:17:31.819 your adjusted income goes up. And since I have 00:17:31.819 --> 00:17:34.359 to pay 30 % of my income, my rent immediately 00:17:34.359 --> 00:17:37.299 skyrockets. So I might work 40 hours a week and 00:17:37.299 --> 00:17:39.059 end up with the same amount of money in my pocket 00:17:39.059 --> 00:17:42.200 as when I wasn't working. Or even less. Exactly. 00:17:42.279 --> 00:17:44.579 That is the cliff. Why take the risk of working 00:17:44.579 --> 00:17:47.799 if it's a wash? So the EID would temporarily 00:17:47.799 --> 00:17:51.180 disregard that new income. It would freeze your 00:17:51.180 --> 00:17:53.900 rent for a specific time, usually 12 months fully. 00:17:54.500 --> 00:17:56.559 Then another 12 months partially. So you could 00:17:56.559 --> 00:17:59.140 get on your feet. Exactly. You could build up 00:17:59.140 --> 00:18:01.500 some savings, buy work clothes, fix your car 00:18:01.500 --> 00:18:04.099 without being immediately penalized by a massive 00:18:04.099 --> 00:18:06.559 rent hike. That sounds incredibly smart. It's 00:18:06.559 --> 00:18:08.299 like training wheels for reentering the economy. 00:18:08.619 --> 00:18:11.140 It was. It was very popular with advocates. But 00:18:11.140 --> 00:18:14.059 under a law called HOTMA, the housing opportunity. 00:18:14.890 --> 00:18:17.690 Through Modernization Act of 2016, this is changing. 00:18:17.809 --> 00:18:20.950 It's being eliminated. As of 2023, HUD announced 00:18:20.950 --> 00:18:23.250 the elimination of the EID provision for new 00:18:23.250 --> 00:18:25.630 participants. Whoa, so that safety buffer is 00:18:25.630 --> 00:18:27.970 just gone for new people coming into the system. 00:18:28.029 --> 00:18:30.670 Essentially, yes. The stated reason is to streamline 00:18:30.670 --> 00:18:32.910 the income calculation rules and reduce administrative 00:18:32.910 --> 00:18:36.349 errors. But the effect is losing EID changes 00:18:36.349 --> 00:18:38.529 the incentives for self -sufficiency. It's a 00:18:38.529 --> 00:18:40.970 very controversial move. Now, if you start earning, 00:18:41.170 --> 00:18:43.670 your rent starts rising much sooner. That feels 00:18:43.670 --> 00:18:45.809 like a step backwards. So we have the history 00:18:45.809 --> 00:18:48.670 from building towers to writing checks to trying 00:18:48.670 --> 00:18:51.210 to tweak the incentives. But now we have to face 00:18:51.210 --> 00:18:54.329 the reality of the market. You have your voucher. 00:18:54.569 --> 00:18:57.130 You survived the 20 -year waitlist. You have 00:18:57.130 --> 00:19:00.769 your golden ticket. You are ready to rent. But 00:19:00.769 --> 00:19:03.380 there is a gatekeeper. The landlord. The landlord. 00:19:03.400 --> 00:19:05.200 And this is the market friction. This is where 00:19:05.200 --> 00:19:07.779 the rubber meets the road. It is. Because in 00:19:07.779 --> 00:19:10.359 most areas of the United States, landlord participation 00:19:10.359 --> 00:19:13.430 in Section 8 is completely voluntary. They can 00:19:13.430 --> 00:19:15.809 just say no thanks. They can. And many do. Yeah. 00:19:15.869 --> 00:19:18.710 And we have to look at why. It's easy to villainize 00:19:18.710 --> 00:19:21.450 landlords. But let's put ourselves in their shoes 00:19:21.450 --> 00:19:23.849 for a moment to understand the business incentives. 00:19:24.049 --> 00:19:26.089 OK, let's role play this. I'm a landlord. I have 00:19:26.089 --> 00:19:28.450 a decent two bedroom apartment. I put it on Zillow. 00:19:28.450 --> 00:19:31.069 I get two applications. Applicant A is a young 00:19:31.069 --> 00:19:33.970 couple with decent jobs and good credit. Applicant 00:19:33.970 --> 00:19:37.849 B has a Section 8 voucher. Why am I hesitating 00:19:37.849 --> 00:19:40.750 on applicant B? Time and bureaucracy. That's 00:19:40.750 --> 00:19:43.150 the first hurdle. If you pick applicant A, they 00:19:43.150 --> 00:19:44.849 sign the lease today, they give you a deposit, 00:19:44.950 --> 00:19:46.730 and first month's rent, they move in tomorrow. 00:19:46.930 --> 00:19:50.049 Done. Revenue starts flowing. Simple. Clean. 00:19:50.710 --> 00:19:54.289 And applicant B. With the voucher holder, you 00:19:54.289 --> 00:19:57.609 can't just sign. You have to submit a request 00:19:57.609 --> 00:20:00.089 for tenancy approval to the local PHA. Okay, 00:20:00.150 --> 00:20:03.019 so paperwork. A lot of paperwork. Then... You 00:20:03.019 --> 00:20:04.440 have to wait for an inspector to come out. They 00:20:04.440 --> 00:20:06.720 have to check the entire unit against a long 00:20:06.720 --> 00:20:10.059 list of housing quality standards, or HQS. They 00:20:10.059 --> 00:20:11.940 check the windows, the paint, the locks, the 00:20:11.940 --> 00:20:14.039 plumbing, the smoke detectors. Which sounds good. 00:20:14.099 --> 00:20:16.359 We want safe housing. But how long does that 00:20:16.359 --> 00:20:18.220 take? It could be a week. It could be three weeks. 00:20:18.519 --> 00:20:20.680 If you fail the inspection because of something 00:20:20.680 --> 00:20:22.839 minor, like a cracked outlet cover, you have 00:20:22.839 --> 00:20:24.700 to fix it and then schedule a re -inspection. 00:20:24.819 --> 00:20:26.940 That's another week. All that time, the unit 00:20:26.940 --> 00:20:29.069 is sitting empty. So taking the voucher could 00:20:29.069 --> 00:20:31.109 cost me a month of vacancy right off the bat. 00:20:31.289 --> 00:20:33.470 In a hot market, that's thousands of dollars. 00:20:33.670 --> 00:20:36.190 Exactly. That's lost money. Then there's the 00:20:36.190 --> 00:20:38.829 fear of payment delays. The tenant pays their 00:20:38.829 --> 00:20:42.430 share, but the PHA pays the rest. Sometimes those 00:20:42.430 --> 00:20:44.230 government checks are slow to get set up for 00:20:44.230 --> 00:20:46.930 the first time. Bureaucracy is not known for 00:20:46.930 --> 00:20:49.829 its speed. So that's the con list. But on the 00:20:49.829 --> 00:20:52.049 flip side, there have to be reasons to accept 00:20:52.049 --> 00:20:54.990 them. Otherwise, nobody would do it. Definitely. 00:20:55.269 --> 00:20:58.720 The biggest pro is stability. guaranteed income. 00:20:58.980 --> 00:21:01.140 The government's check doesn't bounce. It never 00:21:01.140 --> 00:21:03.700 bounces. It's direct deposit into your account 00:21:03.700 --> 00:21:07.640 month after month. If the economy tanks, think 00:21:07.640 --> 00:21:10.440 about COVID or the 2008 crash, and your tenant 00:21:10.440 --> 00:21:12.779 loses their job, a normal tenant stops paying 00:21:12.779 --> 00:21:14.660 rent. And I have to go through the eviction process, 00:21:14.740 --> 00:21:17.539 which costs... thousands and takes months. Right. 00:21:17.700 --> 00:21:20.099 But with a Section 8 tenant, if they lose their 00:21:20.099 --> 00:21:23.420 income, they report it to the PHA. Their portion 00:21:23.420 --> 00:21:26.119 of the rent goes down, sometimes to zero, and 00:21:26.119 --> 00:21:27.839 the government's portion goes up to cover the 00:21:27.839 --> 00:21:29.980 difference. The landlord still gets the full 00:21:29.980 --> 00:21:32.119 check. That is a recession -proof investment. 00:21:32.339 --> 00:21:34.480 It's like a government bond wrapped in an apartment. 00:21:34.660 --> 00:21:37.400 It is. And there's a huge pool of potential tenants. 00:21:37.579 --> 00:21:40.779 You'll never have a vacancy for long. Also, historically, 00:21:41.140 --> 00:21:44.509 Section 8 tenants stay longer. Turnover is expensive 00:21:44.509 --> 00:21:47.089 for landlords. Painting, marketing, screening. 00:21:47.430 --> 00:21:49.650 Section 8 tenants tend to stay for years because 00:21:49.650 --> 00:21:51.509 it's so hard to find another place that will 00:21:51.509 --> 00:21:54.190 accept them. And they have a huge incentive to 00:21:54.190 --> 00:21:57.670 be good tenants. A massive incentive. If you 00:21:57.670 --> 00:22:01.190 get evicted for destroying the unit or for criminal 00:22:01.190 --> 00:22:04.359 activity, you lose the voucher. Potentially forever. 00:22:04.660 --> 00:22:06.779 Potentially forever. Remember, you waited 20 00:22:06.779 --> 00:22:10.579 years for it. You are highly, highly incentivized 00:22:10.579 --> 00:22:13.420 to follow the rules. So you have a tenant who 00:22:13.420 --> 00:22:15.859 essentially has a good behavior bond hanging 00:22:15.859 --> 00:22:18.180 over their head worth hundreds of thousands of 00:22:18.180 --> 00:22:20.759 dollars over a lifetime. So you would think that 00:22:20.759 --> 00:22:23.400 would make them ideal tenants, but refusal rates 00:22:23.400 --> 00:22:25.400 are still high. They are. And this brings us 00:22:25.400 --> 00:22:27.740 to the darker side of the friction. Discrimination. 00:22:28.250 --> 00:22:30.309 Source of income. Discrimination. This is the 00:22:30.309 --> 00:22:33.269 legal term for refusing to rent to someone solely 00:22:33.269 --> 00:22:36.109 because their money comes from a voucher instead 00:22:36.109 --> 00:22:39.069 of a paycheck. Some states and a growing number 00:22:39.069 --> 00:22:41.769 of cities have passed laws making this illegal. 00:22:42.089 --> 00:22:44.490 Their argument is money is money. Exactly. Money 00:22:44.490 --> 00:22:46.609 is money, whether it comes from a job, a trust 00:22:46.609 --> 00:22:49.910 fund or HUD. It's all green. But not everywhere 00:22:49.910 --> 00:22:54.480 has these laws. No. As of late 2022. Stats showed 00:22:54.480 --> 00:22:57.880 that only about 57 % of voucher households lived 00:22:57.880 --> 00:23:00.259 in jurisdictions with these legal protections. 00:23:00.859 --> 00:23:03.859 In the rest of the country, huge swaths of the 00:23:03.859 --> 00:23:06.700 South and Midwest. A landlord can legally put 00:23:06.700 --> 00:23:09.940 up a sign that says, no Section 8. It is perfectly 00:23:09.940 --> 00:23:13.619 legal discrimination. Yes. And even where it 00:23:13.619 --> 00:23:16.339 is illegal. I imagine it's incredibly hard to 00:23:16.339 --> 00:23:18.799 enforce. A landlord isn't going to say, I'm rejecting 00:23:18.799 --> 00:23:20.759 you because of the voucher. Of course not. No, 00:23:20.819 --> 00:23:22.279 they're smarter than that. They use proxies. 00:23:22.299 --> 00:23:24.279 They can demand a credit score of 750, knowing 00:23:24.279 --> 00:23:26.259 that most low -income families might have a 600. 00:23:26.559 --> 00:23:28.519 They can reject you based on a minor criminal 00:23:28.519 --> 00:23:31.720 history from years ago or a past eviction. It's 00:23:31.720 --> 00:23:34.079 very easy to find a neutral reason to deny an 00:23:34.079 --> 00:23:36.579 application if you simply don't want those people 00:23:36.579 --> 00:23:38.970 in your building. Wow. Now, there is another 00:23:38.970 --> 00:23:40.849 layer to this market friction, and that is the 00:23:40.849 --> 00:23:44.609 price itself, the fair market rent, or FMR. How 00:23:44.609 --> 00:23:46.170 does the government decide what an apartment 00:23:46.170 --> 00:23:48.369 is worth? Because rent in downtown San Francisco 00:23:48.369 --> 00:23:51.619 is not rent in rural Ohio. Right. HUD calculates 00:23:51.619 --> 00:23:54.339 the FMR annually for over 2 ,500 different areas. 00:23:54.500 --> 00:23:57.099 It's usually set at the 40th percentile of gross 00:23:57.099 --> 00:24:00.960 rents in the area for a, quote, modest non -luxury 00:24:00.960 --> 00:24:03.660 unit. OK, 40th percentile, so slightly below 00:24:03.660 --> 00:24:06.720 average. Not the Ritz, but not a slum. That's 00:24:06.720 --> 00:24:08.259 the idea. They want to pay enough to get you 00:24:08.259 --> 00:24:11.960 a decent place. The problem is geography. FMRs 00:24:11.960 --> 00:24:14.359 are historically calculated for a whole metropolitan 00:24:14.359 --> 00:24:16.759 statistical area. I see where this is going. 00:24:16.819 --> 00:24:19.460 A metropolitan area can be huge. Take a place 00:24:19.460 --> 00:24:22.279 like Atlanta or Chicago. That includes the expensive 00:24:22.279 --> 00:24:24.900 downtown, the wealthy suburbs and the struggling 00:24:24.900 --> 00:24:27.799 outskirts all lumped together. Exactly. So imagine 00:24:27.799 --> 00:24:29.839 the average rent for the whole metro is calculated 00:24:29.839 --> 00:24:33.059 at, say, $1 ,500 for a two bedroom. HUD says, 00:24:33.180 --> 00:24:36.039 OK, your voucher is worth up to $1 ,500. Well, 00:24:36.099 --> 00:24:38.339 in the wealthy suburb with great schools, an 00:24:38.339 --> 00:24:41.680 actual two -bedroom rent's for $2 ,500. You're 00:24:41.680 --> 00:24:43.960 priced out. You can't live there. The voucher 00:24:43.960 --> 00:24:45.680 isn't enough. And in the struggling neighborhood 00:24:45.680 --> 00:24:48.259 with high crime and poor schools, the market 00:24:48.259 --> 00:24:51.359 rent is only $900. Right. So if you use your 00:24:51.359 --> 00:24:54.339 $1 ,500 voucher there, the landlord is thrilled. 00:24:54.579 --> 00:24:57.279 They're getting paid way above market rate for 00:24:57.279 --> 00:24:59.759 a subpar unit. They have an incentive to rent 00:24:59.759 --> 00:25:02.650 to you. So the math creates a funnel. It locks 00:25:02.650 --> 00:25:05.269 tenants out of the high opportunity neighborhoods 00:25:05.269 --> 00:25:07.869 they're supposed to be moving to. And it funnels 00:25:07.869 --> 00:25:09.750 them into the poorer neighborhoods where the 00:25:09.750 --> 00:25:11.990 voucher is actually worth more than the market 00:25:11.990 --> 00:25:15.309 rate. Precisely. It inadvertently reinforces 00:25:15.309 --> 00:25:18.650 economic and racial segregation. The math of 00:25:18.650 --> 00:25:21.670 the FMR creates a barrier to the very mobility 00:25:21.670 --> 00:25:24.430 the program was designed to offer. And this leads 00:25:24.430 --> 00:25:26.150 us perfectly into the controversy surrounding 00:25:26.150 --> 00:25:28.509 the program, because if the system is funneling 00:25:28.509 --> 00:25:31.029 people into specific areas or failing to move 00:25:31.029 --> 00:25:33.369 them out of others, that has social consequences. 00:25:33.589 --> 00:25:36.789 And there is a very specific, very loud accusation 00:25:36.789 --> 00:25:39.789 that gets thrown at Section 8. Yes, the accusation 00:25:39.789 --> 00:25:42.710 that Section 8 brings crime. We need to dig into 00:25:42.710 --> 00:25:44.630 this. because this is often the elephant in the 00:25:44.630 --> 00:25:46.750 room at town hall meetings. Don't bring vouchers 00:25:46.750 --> 00:25:49.190 here. You'll bring the crime. It is a longstanding 00:25:49.190 --> 00:25:52.470 theory. It was championed by critics like Howard 00:25:52.470 --> 00:25:54.630 Hussock from the conservative Manhattan Institute. 00:25:55.329 --> 00:25:59.349 He argued in a 2003 book that Section 8 was essentially 00:25:59.349 --> 00:26:03.230 a vehicle for exporting inner city social problems 00:26:03.230 --> 00:26:05.950 to the suburbs. The idea being if you tear down 00:26:05.950 --> 00:26:08.390 the projects and give people vouchers, they don't 00:26:08.390 --> 00:26:10.190 leave their problems behind. They move to the 00:26:10.190 --> 00:26:12.190 suburbs and bring the instability with them. 00:26:12.619 --> 00:26:14.859 That is the argument. And this really exploded 00:26:14.859 --> 00:26:17.660 into the public consciousness in 2008. There's 00:26:17.660 --> 00:26:19.660 an article in The Atlantic by a journalist named 00:26:19.660 --> 00:26:22.599 Hannah Rosen called American Murder Mystery. 00:26:22.799 --> 00:26:24.700 I remember hearing about this. It was a bombshell 00:26:24.700 --> 00:26:26.380 at the time, right? It was hugely influential. 00:26:26.660 --> 00:26:29.980 Rosen focused on Memphis, Tennessee. She looked 00:26:29.980 --> 00:26:32.119 at data showing that as public housing projects 00:26:32.119 --> 00:26:34.380 were demolished and residents were given vouchers, 00:26:34.460 --> 00:26:37.380 crime seemed to spread outward into the suburbs. 00:26:37.579 --> 00:26:39.940 So she tracked it. She quoted researchers who 00:26:39.940 --> 00:26:42.940 overlaid heat maps, literally red blobs on a 00:26:42.940 --> 00:26:46.109 map. One map showed where crime was rising. The 00:26:46.109 --> 00:26:48.009 other map showed where Section 8 households were 00:26:48.009 --> 00:26:49.789 moving. And they matched. They seemed to fit 00:26:49.789 --> 00:26:52.529 perfectly. It was a visual smoking gun. It looked 00:26:52.529 --> 00:26:54.589 like a one -to -one correlation. That sounds 00:26:54.589 --> 00:26:57.470 incredibly damning. The crime followed the vouchers. 00:26:57.509 --> 00:26:59.849 If I'm a suburban homeowner and I see that map, 00:26:59.990 --> 00:27:02.829 I'm terrified. It sounds damning. And politicians 00:27:02.829 --> 00:27:05.839 latched onto it. Cities like Lancaster, California, 00:27:06.099 --> 00:27:09.500 use this kind of rhetoric to try and block housing 00:27:09.500 --> 00:27:12.299 programs, effectively declaring war on Section 00:27:12.299 --> 00:27:16.640 8 voucher holders. But, and this is a huge, bold, 00:27:16.799 --> 00:27:19.579 underlined but, we have to look at the rebuttal. 00:27:19.599 --> 00:27:22.319 Because in social science, correlation is not 00:27:22.319 --> 00:27:24.799 causation. This is where Greg Anrig comes in. 00:27:24.880 --> 00:27:27.640 Yes, writing in the American Prospect. Anrig 00:27:27.640 --> 00:27:30.200 and other researchers tore into Rosen's methodology. 00:27:30.559 --> 00:27:32.680 They argued she was missing the bigger picture. 00:27:33.039 --> 00:27:34.740 What was the flaw? What did she miss? First, 00:27:34.819 --> 00:27:37.279 the economic context. During the period Rawson 00:27:37.279 --> 00:27:39.440 studied in Memphis, the economy was cratering. 00:27:39.460 --> 00:27:41.720 It was the mid -2000s leading up to the Great 00:27:41.720 --> 00:27:44.160 Recession. Male unemployment had nearly doubled 00:27:44.160 --> 00:27:46.559 in that time. So a lot of desperation. A lot 00:27:46.559 --> 00:27:48.380 of economic desperation affecting everyone in 00:27:48.380 --> 00:27:50.559 those areas, not just the new arrivals with vouchers. 00:27:51.019 --> 00:27:53.299 Annerig argued that was the primary driver of 00:27:53.299 --> 00:27:55.880 crime. Okay, but what about the heat maps? If 00:27:55.880 --> 00:27:58.559 the vouchers and the crime are in the same place, 00:27:58.779 --> 00:28:01.680 isn't that a link? Not necessarily a causal link. 00:28:01.859 --> 00:28:04.359 There is a concept that researchers explored 00:28:04.359 --> 00:28:07.460 called reverse causality. A study done for HUD 00:28:07.460 --> 00:28:10.380 suggested that the cycle actually works in reverse. 00:28:10.740 --> 00:28:12.759 Walk me through that. How does that work? Okay. 00:28:12.960 --> 00:28:16.460 Step one. A neighborhood starts to decline economically. 00:28:16.839 --> 00:28:19.599 Maybe a factory closes. Crime starts to rise 00:28:19.599 --> 00:28:22.380 slightly and property values start to fall. Step 00:28:22.380 --> 00:28:25.289 two. The people who have the money and the means 00:28:25.289 --> 00:28:28.450 to move, the middle class, they leave. They flee 00:28:28.450 --> 00:28:30.529 the decline. That creates vacancies. Exactly. 00:28:30.890 --> 00:28:33.930 Step three, this creates vacancies. Lots of empty 00:28:33.930 --> 00:28:36.430 apartments. And landlords hate vacancies more 00:28:36.430 --> 00:28:38.190 than anything. So they get desperate. They get 00:28:38.190 --> 00:28:40.690 desperate. Landlords, desperate to fill empty 00:28:40.690 --> 00:28:43.089 units in a declining neighborhood, become more 00:28:43.089 --> 00:28:45.690 willing to accept Section 8 tenants because they 00:28:45.690 --> 00:28:48.940 are the only reliable money left in town. I see 00:28:48.940 --> 00:28:51.420 it now. The vouchers didn't cause the crime. 00:28:51.619 --> 00:28:54.180 The crime and economic decline caused the vacancies, 00:28:54.420 --> 00:28:57.839 which attracted the vouchers. This Section 8 00:28:57.839 --> 00:29:00.460 tenants were moving into areas that were already 00:29:00.460 --> 00:29:02.740 destabilizing. They weren't the invasion force. 00:29:02.920 --> 00:29:05.099 They were the backfill. They were the effect, 00:29:05.359 --> 00:29:08.299 not the cause of the decline. That is a critical, 00:29:08.359 --> 00:29:11.000 critical distinction. But was there any harder 00:29:11.000 --> 00:29:14.200 data on this beyond just arguing over maps and 00:29:14.200 --> 00:29:16.779 timelines in one city? Yes. And this is the gold 00:29:16.779 --> 00:29:19.640 standard of research. The Moving to Opportunity 00:29:19.640 --> 00:29:21.980 or MTO study. Right. This is a big deal. It was 00:29:21.980 --> 00:29:24.559 a massive randomized policy experiment where 00:29:24.559 --> 00:29:26.990 they tracked thousands of families. over many 00:29:26.990 --> 00:29:29.730 years. They gave some families vouchers with 00:29:29.730 --> 00:29:32.529 counseling to move to low -poverty areas, some 00:29:32.529 --> 00:29:35.250 regular vouchers, and a control group got nothing. 00:29:35.490 --> 00:29:38.130 A true scientific experiment. Well, what did 00:29:38.130 --> 00:29:40.609 they find about crime? The study concluded that 00:29:40.609 --> 00:29:42.690 there was no increase in violent or property 00:29:42.690 --> 00:29:44.410 crime in the neighborhoods where the voucher 00:29:44.410 --> 00:29:47.230 holders moved. The fear was unfounded. That seems 00:29:47.230 --> 00:29:49.970 pretty definitive. It is. It's the most rigorous 00:29:49.970 --> 00:29:53.019 evidence we have. The reality is that even with 00:29:53.019 --> 00:29:55.700 vouchers, many families chose to stay in poorer 00:29:55.700 --> 00:29:58.700 areas because of those FMR caps we talked about 00:29:58.700 --> 00:30:00.880 or because they wanted to stay near their support 00:30:00.880 --> 00:30:03.559 networks, grandma, the church, the kids' school. 00:30:03.819 --> 00:30:05.640 Which makes sense. Of course. Yeah. But when 00:30:05.640 --> 00:30:07.740 they did move, they didn't bring a crime wave 00:30:07.740 --> 00:30:09.920 with them. They actually experienced significant 00:30:09.920 --> 00:30:13.140 gains in mental and physical health. It's a classic 00:30:13.140 --> 00:30:16.099 case of a moral panic versus the statistical 00:30:16.099 --> 00:30:20.000 reality. But the perception persists. And that 00:30:20.000 --> 00:30:22.359 perception makes landlords even more hesitant, 00:30:22.599 --> 00:30:24.960 which brings us back to that friction problem. 00:30:25.119 --> 00:30:27.660 It creates a vicious cycle. The myth of crime 00:30:27.660 --> 00:30:30.359 leads to landlord refusal, which limits where 00:30:30.359 --> 00:30:32.920 tenants can go, which forces them back into high 00:30:32.920 --> 00:30:35.799 poverty areas, which then reinforces the original 00:30:35.799 --> 00:30:37.859 stereotype. It's a self -fulfilling prophecy. 00:30:38.099 --> 00:30:41.059 So if the problem is that FMRs are too blunt 00:30:41.059 --> 00:30:43.140 one price for a whole city and that landlords 00:30:43.140 --> 00:30:45.859 are scared or misinformed, what are the solutions? 00:30:46.119 --> 00:30:48.140 Because we have some innovations on the table 00:30:48.140 --> 00:30:50.500 that are trying to break this cycle. We do. And 00:30:50.500 --> 00:30:52.640 the biggest structural fix is something called 00:30:52.640 --> 00:30:56.289 SFMR, small area fair market rents. Okay, so 00:30:56.289 --> 00:31:00.809 we are going from fair market rents to small 00:31:00.809 --> 00:31:03.089 area fair market rents. What's the difference? 00:31:03.269 --> 00:31:05.450 The difference is granularity. Instead of calculating 00:31:05.450 --> 00:31:08.829 one rent price for the entire metro area, HUD 00:31:08.829 --> 00:31:12.519 now calculates rents by ZLIP code. That makes 00:31:12.519 --> 00:31:14.759 so much more sense. It treats the rental market 00:31:14.759 --> 00:31:17.200 like a pixelated map instead of a big blurry 00:31:17.200 --> 00:31:19.839 watercolor. It's so much more logical. It means 00:31:19.839 --> 00:31:22.460 the voucher is worth more in a high -opportunity 00:31:22.460 --> 00:31:24.980 zip code, like a nice suburb, and it's worth 00:31:24.980 --> 00:31:27.720 less in a low -opportunity zip code where rents 00:31:27.720 --> 00:31:30.059 are already cheap. So it boosts the buying power 00:31:30.059 --> 00:31:31.839 of the tenant if they want to move to a better 00:31:31.839 --> 00:31:34.640 area, and it stops the government from overpaying 00:31:34.640 --> 00:31:37.960 for apartments in slums. It's designed to incentivize 00:31:37.960 --> 00:31:40.480 mobility. Exactly. HUD officially implemented 00:31:40.480 --> 00:31:42.099 this in a couple dozen years. in metro areas 00:31:42.099 --> 00:31:45.779 in 2017 aiming to deconcentrate poverty. But 00:31:45.779 --> 00:31:48.039 the results have been, well, they've been mixed. 00:31:48.180 --> 00:31:50.299 It hasn't been a silver bullet. No. And the comparison 00:31:50.299 --> 00:31:52.839 between Dallas, Texas and Chattanooga, Tennessee 00:31:52.839 --> 00:31:55.099 is really illuminating. Okay, let's bring that 00:31:55.099 --> 00:31:57.259 down. What happened in Dallas? Dallas was an 00:31:57.259 --> 00:31:59.700 early adopter, actually due to a court order 00:31:59.700 --> 00:32:02.940 related to a desegregation lawsuit. They implemented 00:32:02.940 --> 00:32:05.619 SAFMRs and the results were largely positive. 00:32:06.279 --> 00:32:08.559 Voucher holders actually started moving to... 00:32:08.859 --> 00:32:11.400 Better neighborhoods. The policy worked as intended. 00:32:11.599 --> 00:32:13.940 The extra money unlocked doors that were previously 00:32:13.940 --> 00:32:17.119 closed. Okay, so success story in Dallas. What 00:32:17.119 --> 00:32:19.859 went wrong in Chattanooga? In Chattanooga, the 00:32:19.859 --> 00:32:22.579 results were poor. Even with the higher voucher 00:32:22.579 --> 00:32:25.160 values for the nicer zip codes, tenants didn't 00:32:25.160 --> 00:32:27.660 or couldn't move. Why? If the money was there. 00:32:27.740 --> 00:32:30.640 If I hand you a check for $2 ,000, why can't 00:32:30.640 --> 00:32:33.160 you rent the $2 ,000 apartment? Because the units 00:32:33.160 --> 00:32:35.740 weren't there. Researchers found that the rental 00:32:35.740 --> 00:32:38.099 stock in the high opportunity areas of Chattanooga 00:32:38.099 --> 00:32:40.359 just didn't exist in the way it did in Dallas. 00:32:40.900 --> 00:32:43.220 The good neighborhoods were mostly single family 00:32:43.220 --> 00:32:46.039 homes occupied by owners, not renters, or the 00:32:46.039 --> 00:32:48.400 rental units that did exist had vacancy rates 00:32:48.400 --> 00:32:50.440 near zero. So there was literally nowhere to 00:32:50.440 --> 00:32:52.380 move to. Exactly. This is a crucial insight. 00:32:52.539 --> 00:32:54.059 You can throw money at the problem. You can say 00:32:54.059 --> 00:32:56.259 here's a voucher for a million dollars. But if 00:32:56.259 --> 00:32:58.960 there is no apartment to rent, the money is useless 00:32:58.960 --> 00:33:01.420 paper. So it highlights that Section 8 is a demand 00:33:01.420 --> 00:33:03.420 side solution. It gives people purchasing power, 00:33:03.559 --> 00:33:07.099 but it cannot fix a supply side problem. Precisely. 00:33:07.339 --> 00:33:10.440 If there is a structural lack of housing or if 00:33:10.440 --> 00:33:13.259 local zoning laws ban apartments in rich neighborhoods, 00:33:13.539 --> 00:33:16.059 vouchers can't conjure units out of thin air. 00:33:16.220 --> 00:33:18.940 So SAFMRs are a better tool, but they are not 00:33:18.940 --> 00:33:21.799 a magic wand. You still need the physical housing. 00:33:22.240 --> 00:33:24.539 What about the human element? We talked about 00:33:24.539 --> 00:33:27.339 landlords being scared of bureaucracy. Is there 00:33:27.339 --> 00:33:30.180 a fix for that? Yes. And it's a role that is 00:33:30.180 --> 00:33:33.259 becoming more and more common. The housing placement 00:33:33.259 --> 00:33:35.180 specialist or sometimes just housing specialist. 00:33:35.279 --> 00:33:38.019 The fixing. Basically. A researcher named Matthew 00:33:38.019 --> 00:33:40.319 Marr published a study on this in Los Angeles. 00:33:40.539 --> 00:33:43.880 He found that vouchers are just paper. To make 00:33:43.880 --> 00:33:45.900 them work in a tight competitive market, you 00:33:45.900 --> 00:33:48.460 need a human intermediary. What does a housing 00:33:48.460 --> 00:33:50.440 specialist actually do? Paint the picture for 00:33:50.440 --> 00:33:53.559 me. Imagine you are a voucher holder. You are 00:33:53.559 --> 00:33:55.700 nervous. Maybe you're not great at selling yourself 00:33:55.700 --> 00:33:58.079 to a skeptical landlord. The housing specialist 00:33:58.079 --> 00:34:00.759 acts as your broker and your advocate. They make 00:34:00.759 --> 00:34:03.019 the first call. They make the first call. They 00:34:03.019 --> 00:34:06.380 say, hi, I'm from XYZ Nonprofit. I represent 00:34:06.380 --> 00:34:08.199 a tenant with guaranteed government funding. 00:34:08.420 --> 00:34:10.800 I will handle the inspections. I will make sure 00:34:10.800 --> 00:34:13.039 the paperwork is perfect. If there's an issue, 00:34:13.179 --> 00:34:16.619 you call me, not a 1 -800 number at the housing 00:34:16.619 --> 00:34:18.940 authority. They de -risk the transaction for 00:34:18.940 --> 00:34:21.219 the landlord. They take the headache away. They 00:34:21.219 --> 00:34:24.980 soothe the landlord apprehension, which, as Marr 00:34:24.980 --> 00:34:27.440 points out in his research, is often rooted in 00:34:27.440 --> 00:34:30.199 racial stereotypes or just a fear of government 00:34:30.199 --> 00:34:33.480 red tape. Having a professional say, I am your 00:34:33.480 --> 00:34:36.199 single point of contact. I will handle this makes 00:34:36.199 --> 00:34:38.519 a huge difference. It seems like such a necessary 00:34:38.519 --> 00:34:40.760 layer. You can't just hand someone a complex 00:34:40.760 --> 00:34:42.980 federal document and say, good luck out there 00:34:42.980 --> 00:34:45.079 in the private market. No, especially not when 00:34:45.079 --> 00:34:46.780 the private market is looking for any reason 00:34:46.780 --> 00:34:49.860 to say no. The specialist turns the voucher from 00:34:49.860 --> 00:34:52.639 a potential burden into a simple, safe business 00:34:52.639 --> 00:34:54.960 opportunity for the landlord. So let's recap 00:34:54.960 --> 00:34:57.619 where we are. We've gone from the 1937 origins 00:34:57.619 --> 00:35:00.639 of building public housing towers to the modern 00:35:00.639 --> 00:35:03.659 Section 8 voucher, which tries to integrate low 00:35:03.659 --> 00:35:05.960 -income families into the private rental market. 00:35:06.219 --> 00:35:08.820 We look at the intense scarcity. The 20 -year 00:35:08.820 --> 00:35:10.780 waitlist that turned a safety net into a lottery, 00:35:10.900 --> 00:35:14.380 the complex math of imputed income that can penalize 00:35:14.380 --> 00:35:17.280 saving, the tension with landlords who have the 00:35:17.280 --> 00:35:20.179 ultimate power to say yes or no based on profit, 00:35:20.340 --> 00:35:23.800 and sometimes prejudice. And the controversies 00:35:23.800 --> 00:35:26.239 over whether this mobility spreads crime, which 00:35:26.239 --> 00:35:28.519 the best data says it doesn't, and the attempts 00:35:28.519 --> 00:35:30.900 to fix the system with zip code level pricing, 00:35:31.059 --> 00:35:33.320 which we've learned works only if the apartments 00:35:33.320 --> 00:35:36.219 actually exist to be rented. It is a massive, 00:35:36.400 --> 00:35:40.159 creaky... vital and deeply flawed machine. It 00:35:40.159 --> 00:35:42.179 really brings us back to that core tension we 00:35:42.179 --> 00:35:44.659 started with. The United States has decided as 00:35:44.659 --> 00:35:46.820 a matter of policy that we don't want to build 00:35:46.820 --> 00:35:49.139 government housing anymore. We want to use the 00:35:49.139 --> 00:35:51.039 private market. That's the path we've chosen. 00:35:51.260 --> 00:35:53.780 But the private market is driven by profit, not 00:35:53.780 --> 00:35:58.280 by charity. And Section 8 is the awkward bureaucratic 00:35:58.280 --> 00:36:00.719 handshake between those two completely different 00:36:00.719 --> 00:36:04.320 worlds. It is. It relies on private actors, landlords, 00:36:04.420 --> 00:36:07.150 to fulfill a public mission. And when those interests 00:36:07.150 --> 00:36:10.190 align, it works. It provides stability for millions 00:36:10.190 --> 00:36:13.289 of children, elderly folks, and veterans. But 00:36:13.289 --> 00:36:15.510 when they clash or when the housing supply just 00:36:15.510 --> 00:36:18.530 isn't there, the system leaves millions more 00:36:18.530 --> 00:36:21.110 waiting on a list that might never move. I want 00:36:21.110 --> 00:36:23.389 to leave the listener with a final thought, something 00:36:23.389 --> 00:36:27.449 to chew on. We call Section 8 a safety net. But 00:36:27.449 --> 00:36:30.010 if you fall off the tightrope and the net takes 00:36:30.010 --> 00:36:33.849 10 to 20 years to deploy, is it actually a safety 00:36:33.849 --> 00:36:36.349 net? Or is it something else entirely? That is 00:36:36.349 --> 00:36:38.090 the fundamental question. And I'd add another 00:36:38.090 --> 00:36:40.670 one. With the shift to small area fair market 00:36:40.670 --> 00:36:43.150 rents, we are trying to engineer opportunity 00:36:43.150 --> 00:36:45.590 by tweaking a spreadsheet. We're changing the 00:36:45.590 --> 00:36:48.130 numbers. But are we solving the root cause of 00:36:48.130 --> 00:36:50.570 segregation and poverty? Or are we just making 00:36:50.570 --> 00:36:52.809 the map more complicated? A heavy question. And 00:36:52.809 --> 00:36:54.710 here is a challenge for you listening right now. 00:36:54.929 --> 00:36:58.039 Go to Google. Look up HUD fair market rent for 00:36:58.039 --> 00:36:59.940 your specific zip code. You can find the data 00:36:59.940 --> 00:37:01.840 pretty easily. Look at the number they say a 00:37:01.840 --> 00:37:03.639 two bedroom apartment is worth. That's public 00:37:03.639 --> 00:37:06.179 information. Then go to Zillow or Craigslist 00:37:06.179 --> 00:37:08.760 or whatever you use and look at what apartments 00:37:08.760 --> 00:37:11.019 actually cost in your neighborhood. See if the 00:37:11.019 --> 00:37:13.599 math works. You might be very surprised by the 00:37:13.599 --> 00:37:16.059 gap. It's an eye opening exercise. It explains 00:37:16.059 --> 00:37:19.119 why so many vouchers, even after people get them, 00:37:19.239 --> 00:37:22.139 end up going unused. The money just isn't enough. 00:37:22.639 --> 00:37:25.179 That is it for this deep dive into Section 8. 00:37:25.219 --> 00:37:27.099 We hope you learned something new about the mechanics 00:37:27.099 --> 00:37:29.179 behind the headlines. Thanks for listening.