Welcome back to the Deep Dive. Today, we are
going to tackle a phrase that I guarantee every
single person listening has heard. Oh, absolutely.
It's one of those terms that's everywhere. Right.
You've heard it on the news. You've heard it
in movies. Maybe you've heard it whispered at
a neighborhood association meeting. It is a term
that carries an incredible amount of weight.
It really is. It's loaded with cultural baggage,
surrounded by stereotypes, and frankly, it's
often used as a shorthand for a lot of unsaid
assumptions. Exactly. Assumptions about poverty,
about crime, and about who belongs in which neighborhood.
It's really one of those terms that has escaped
the dusty policy manuals and entered the general
cultural lexicon. That's a great way to put it.
But in that process, it's lost almost all of
its actual technical meaning. It's become a symbol
rather than a specific program. A symbol, yes.
We are talking, of course, about Section 8. And
I think for a lot of people, when they hear that,
they have a very specific mental image. Maybe
it's a towering concrete high rise with broken
windows. Maybe it's a government check. Maybe
it's just a headline they saw about property
values. But today we are going to strip all of
that baggage away. Get back to basics. Right.
And ask the fundamental questions. What is it
actually? Is it a building? Is it a law? Is it
a lottery ticket? It's surprisingly complex.
And to answer your first question, it is literally
a section of a law. OK, so it really is just
Section 8 of something. Exactly. Specifically,
Section 8 of the Housing Act of 1937. 1937. See,
I think that already surprises people. That dates
it way, way further back than the 70s or 80s,
which is where I think most people place it in
their heads. Right. But the program, as we know
it today, the voucher system, that's evolved
significantly since the Great Depression. So
what's the core definition now? At its core,
Section 8 is the United States federal government's
major program for assisting very low -income
families, the elderly and the disabled, to afford
decent, safe, and sanitary housing in the private
market. And that last part is key. I would double
underline that last part, the private market.
That is the key distinction we need to make right
up top. We aren't talking about government -owned
concrete blocks here. We aren't talking about
the projects in the way you see it on TV. No,
not primarily. We are talking about private landlords.
private apartments, and the real estate market
that you and I participate in. And the scale
of this is just, it's massive, which is why it
matters even if you don't use it. It's huge.
We are looking at about 2 .3 million households
using these vouchers. Wow. And to give you some
context, there are about 5 .2 million households
receiving some form of rental assistance in the
U .S. So Section 8 makes up a huge chunk, nearly
half of that federal footprint. So it's the heavy
lifter of American housing policy. It is. And
it involves this complex dance between the federal
government, that's HUD, the Department of Housing,
and urban development local public housing agencies,
usually called PHAs. PHAs, got it. And thousands
of private landlords who may or may not want
to be involved. And that is the mission for this
deep dive. We aren't just going to recite the
rules. We want to look at the tension in this
system. Right. Because it seems like a paradox.
It's a government safety net that tries to exist
within a, well, a ruthless capitalist real estate
market. And that tension creates some really
bizarre and sometimes heartbreaking outcomes.
Absolutely. So here's the roadmap. We're going
to get into the lottery system of just trying
to get on the list and why calling it a safety
net might be a little generous. A lot generous.
We'll look at the strange math the government
uses to decide if you're core enough, including
a really weird rule about savings accounts that
I had to read three times. The imputed income
rule. It's a classic. We'll also tackle the controversy
over whether this program impacts crime rates,
which is a huge heated debate. A massive one.
And then we'll look at the future, the new experiments
with using zip codes to set rent prices. So let's
just jump right in. Let's unpack this. Let's
do it. I want to start with the mechanism itself,
because I think a lot of people still have that
image of the projects. When they hear public
housing, they think of Cabrini Green in Chicago
or these huge high -rise towers concentrated
in one part of the city. But you're saying Section
8 is different. It is distinct, but there is
some overlap that can be confusing. So within
Section 8, there are really two main categories
you need to understand. Okay. There is project
-based assistance and there is tenant -based
assistance. Right. Break those down. Project
-based sounds like the traditional image. It's
closer to it. With project -based vouchers, the
subsidy is tied to the actual unit, the apartment
itself. Not to the person. Not to the person.
Yeah. Imagine a specific building on Main Street.
The government has a contract with that building's
owner. If you live in apartment 4B, you get the
help. Okay. But if you decide, I don't like this
neighborhood or I want to move closer to my mom,
and you leave apartment 4B. The help stays behind.
The subsidy stays there. You leave the help behind.
The next person who moves into 4B gets it. So
you are tethered to the building. It's like a
gift card that only works at one specific store.
If that store doesn't have what you need. Too
bad. That's a great analogy. And public housing
agencies, the PHAs, can allocate up to 20 % of
their vouchers for this specific purpose. And
what's the thinking there? Why do that? Well,
it guarantees that certain buildings remain affordable
in the long term, which is good for stability
in the local housing stock. But the much larger
and perhaps more revolutionary side of the program
is the tenant -based voucher. And this is what
is formally known as the Housing Choice Voucher,
or HCV. Exactly. This is the one most people
are thinking of, even if they don't know the
name. This is the golden ticket. The golden ticket.
Because the subsidy is tied to you, the tenant.
It's in your backpack, so to speak. You get the
voucher, and then you go out into the private
market and find a landlord who will rent to you.
And the idea here is mobility. Mobility and choice.
You aren't stuck in a specific complex. Theoretically,
you can move to a neighborhood with better schools,
better jobs, or lower crime. And I read that
you can even port these vouchers. Which sounds
like something from a sci -fi movie, but I assume
it just means moving cities. Yes. Portability
is a huge feature. It means you can transfer
the voucher to a different jurisdiction. If you
have a voucher in Detroit, but you get a job
offer in Atlanta, you can, in theory, take that
voucher with you to Atlanta. So... Anywhere in
the country. It allows for movement across the
entire United States and its territories wherever
a Section 8 program is operating. That sounds
incredible on paper. It sounds like freedom.
But as we're going to find out, the paper version
of this program and the street version are often
very, very different. Worlds apart. So let's
talk about the money. How does the payment actually
work? Does the tenant pay anything? They do.
This isn't free housing, which is a common myth.
The general rule is the 30 % rule. Okay, I've
heard this number. The family is expected to
pay 30 % of their adjusted income toward rent
and utilities. The government, via the voucher,
pays the landlord the difference up to a specific
cap. 30 % seems to be the standard benchmark
for affordability in general economics, right?
It is. It's considered the point where housing
becomes a burden if you're paying more than that.
Right. But you mentioned something important,
adjusted income. Right. I feel like whenever
the government uses the word adjusted, there's
a lot of fine print involved. There is always
fine print. It's not your gross salary. Adjusted
income is your gross income minus specific mandatory
deductions. Okay. Like what? For example, if
you have dependents under 18, you get a deduction
of $480 per dependent. If the head of the household
is elderly or disabled, There are deductions.
There are also deductions for certain medical
or child care expenses if they exceed a certain
percentage of your income. So they are trying
to get to a net income that reflects what you
actually have available to spend on survival.
That's the goal. But here is where it gets really
interesting and a little bureaucratic. There
is something called the asset test. I saw this
in the notes and I had to read it twice. This
feels like one of those rules that probably made
sense in a boardroom in 1980, but feels wild
in practice. It's a way to ensure people aren't,
you know, sitting on a gold mine while claiming
poverty. But the threshold is quite low. If a
family has net assets over $5 ,000, say you managed
to save up $5 ,500 in a savings account for a
rainy day. Which is an amazing accomplishment
for a low -income family. A huge accomplishment.
But if you do, HUD has to factor that in. Okay,
play the government's advocate for a second.
If I have money in the bank, I'm earning interest
on it. That is technically income, so they should
count it, right? In theory, yes. But let's look
at the real world. If you have $6 ,000 in the
standard savings account right now, you might
be earning, what, 0 .01 % interest? If you're
lucky. That's like 60 cents a year. It's negligible.
Right, you can't buy a stick of gum with that.
Exactly. But HUD uses a formula. They look at
the actual income from the asset, the 60 cents.
But MUT, if the assets are over $5 ,000, they
compare the actual income to something called
imputed income. Imputed. That sounds like imaginary.
It essentially is. HUD establishes a standard
passbook savings rate. This is a percentage they
decide represents what savings should be earning.
Let's say they set that passbook rate at 0 .4
% or higher, depending on the year. Okay. They
basically say, We think you should be earning
this much interest on that money. And even if
the bank is paying you zero, HUD calculates your
income as if you were earning that passbook rate.
They add that imaginary income to your real income.
Let's run the numbers on this because this is
mind bending. I scrimped and save. I have six
thousand dollars. My bank pays me one dollar
in interest. The government says, no, we think
you made fifty dollars. So they add fifty dollars
to my income. Since my rent is 30 percent of
my income, my rent just went up. because of money
I never actually received. That is the mechanism.
It's called imputed income from assets. Now,
the financial impact might be small in terms
of monthly dollars. Maybe your rent goes up by
15 or 20 dollars. But think about the principle.
It's the principle. It's a disincentive. It adds
a layer of complexity and, frankly, a disincentive
to save liquid cash beyond that $5 ,000 mark.
It's a tax on building a safety net of your own.
It's those little friction points that make the
system so hard to navigate. But the biggest friction
point isn't the math. It's getting the voucher
in the first place. This is the heartbreak of
the program. We call it a safety net. But a safety
net is supposed to catch you when you fall. Right,
immediately. If you fall off a trapeze, the net
is there immediately. Section 8 is more like
a safety lottery that you enter 10 years before
you fall. The wait lists! I've heard horror stories.
How bad are we talking? They are tragic. In many
localities, the wait lists are thousands and
thousands of households long. We are not talking
about a wait of a few months. A year. Two years.
We are talking about 10 to 20 years in some major
metropolitan areas like Los Angeles or New York
or Miami. Stop there for a second. 20 years.
If I apply when I have a newborn baby because
I'm struggling to pay rent, that baby could be
a sophomore in college by the time my name is
called. Exactly. The crisis you were in when
you applied, it's either resolved or, well, you
faced the consequences of it long, long ago.
And that's assuming you can even get on the list.
That's the thing. Many public housing agencies,
or PHAs, keep their lists closed entirely. They
are so overwhelmed, they simply cannot handle
more names. I read about the opening of the lists.
It sounds less like a bureaucratic procedure
and more like a rock concert ticket drop. It
is an event. A chaotic... desperate event. There
are cases where a city might open its wait list
for just five days. And this might happen once
every seven years. You'll see news reports of
government websites crashing because 50 ,000
people are hitting refresh at the same time.
You'll see lines forming around city blocks,
people camping out overnight just to get a paper
application. That is just unbelievable. And even
if you get on the list during that five day window,
it's not first come first served, right? It's
not like waiting in line at the deli. Rarely.
Because the demand is so impossibly high compared
to the supply. Some PHAs use a lottery system.
A literal lottery. Literal lottery. So imagine
100 ,000 families apply for 10 ,000 spots on
the waiting list. Not 10 ,000 vouchers. No, no.
10 ,000 spots to rate for a voucher for the next
decade. So you win the lottery just to get the
privilege of standing in line for 10 years. Correct.
And that lottery might be weighted. PHAs can
set preference policies. They might prioritize
veterans or the elderly or people. with disabilities
or people who already live in that local jurisdiction.
Or people fleeing domestic violence. I saw that
was a common one. Yes. Which makes sense ethically.
You want to help the most vulnerable, the people
in immediate danger, but it creates this weird
tier system. Right. If you are just a standard
low -income family working two jobs and struggling
to pay rent, you might just be perpetually pushed
down the list by people with higher priority.
Precisely. There is absolutely no guarantee that
anyone on a wait list will ever be selected.
It creates a state of permanent anxiety. You
have this potential lifeline, but you can't plan
your life around it. It really reframes the way
we think about American poverty assistance. We
often hear political arguments about people living
off the system or dependency. But looking at
these numbers, the door to the system is barely
cracked open. It's a resource -constrained system.
It is not an entitlement. That's a crucial legal
and philosophical distinction. What do you mean
by entitlement? Unlike food stamps, which is
now called SNFP or Medicaid, where if you meet
the eligibility criteria, the government must
give it to you by law. Housing assistance is
not guaranteed. It's discretionary funding. It's
subject to congressional appropriation each year.
And the result is that only about one in four
households who are income eligible for rental
assistance. actually get it. That is a staggering
statistic. One in four. That means 75 % of the
people who follow the rules and qualify are just
left to fend for themselves in the market. That's
the reality. Okay, before we get into the market
dynamics and why landlords might say no to this
golden ticket, I want to step back. How did we
get here? You mentioned 1937. Why did we change
from building houses to giving out coupons? It's
a fascinating history of failure and a shift
in philosophy. Back in the Great Depression,
the Housing Act of 1937 was passed. The original
mindset was construction. The government as developer.
Right. The private market wasn't building for
the poor. Because there's no profit in it. So
the government said, fine, we will become the
developer. We will build it. That's what the
classic public housing projects came from. The
bricks and mortar approach. Right. And at first,
they were actually seen as a stepping stone for
the working class. But over decades, due to racial
segregation, chronic underfunding for maintenance
and poor design. Many of these projects became
islands of concentrated poverty. They became
isolated. They became dangerous. They became
symbols of government failure. So the solution
became the problem. Exactly. By the 1970s, the
thinking started to shift. A lot of studies were
coming out showing that the problem in America
wasn't necessarily that there were no houses.
We had a housing stock. The problem was rent
burden. Meaning the physical houses existed,
but people just didn't have the cash to access
them. Precisely. The percentage of income people
were spending on housing was just destroying
families. So in 1974, Congress passed the Housing
and Community Development Act, which amended
the 1937 Act to create Section 8. And the philosophy
pivoted. It pivoted from we will build housing
to we will help you pay for existing housing.
It's a shift from a supply -side intervention
building stuff to a demand -side intervention
giving people money. Very well put. And that
evolution continued. In 1998, we got the QHWRA,
the Quality Housing and Work Responsibility Act.
That's a mouthful. It is. But this was a major
modernization. Before this, there were certificates
and vouchers, and they had slightly different
confusing rules. QHWRA merged them into the single
housing choice voucher program we have today.
And it added more flexibility, right, for the
tenants. Yes. It allowed tenants to choose to
pay more than 30 % of their income if they found
a place they really liked that was a little above
the payment standard. to 40%. They gave them
more choice. So bringing us closer to the present,
there have been other specific programs carved
out, like HUDVA -ish for veterans. Yes. In 2008,
that was a big one. It specifically allocated
funds, I think it was $75 million to start, to
combine these housing vouchers with case management
from the VA for homeless veterans. It was a recognition
that just a voucher isn't enough. Sometimes people
need support services, too. Right. Now, there
was another significant update recently regarding
the Earned Income Disallowance, or EID. This
sounds like another one of those dense bureaucratic
terms, but it actually affects people's motivation
to work. Can you explain the benefit cliff here?
It's a huge, huge problem in social policy. The
EID was designed to prevent the benefit cliff.
OK, so what's the cliff? Imagine you are on disability
and you're receiving housing assistance. You
want to go back to work, but you're terrified.
Why? Because the moment you earn a paycheck,
your adjusted income goes up. And since I have
to pay 30 % of my income, my rent immediately
skyrockets. So I might work 40 hours a week and
end up with the same amount of money in my pocket
as when I wasn't working. Or even less. Exactly.
That is the cliff. Why take the risk of working
if it's a wash? So the EID would temporarily
disregard that new income. It would freeze your
rent for a specific time, usually 12 months fully.
Then another 12 months partially. So you could
get on your feet. Exactly. You could build up
some savings, buy work clothes, fix your car
without being immediately penalized by a massive
rent hike. That sounds incredibly smart. It's
like training wheels for reentering the economy.
It was. It was very popular with advocates. But
under a law called HOTMA, the housing opportunity.
Through Modernization Act of 2016, this is changing.
It's being eliminated. As of 2023, HUD announced
the elimination of the EID provision for new
participants. Whoa, so that safety buffer is
just gone for new people coming into the system.
Essentially, yes. The stated reason is to streamline
the income calculation rules and reduce administrative
errors. But the effect is losing EID changes
the incentives for self -sufficiency. It's a
very controversial move. Now, if you start earning,
your rent starts rising much sooner. That feels
like a step backwards. So we have the history
from building towers to writing checks to trying
to tweak the incentives. But now we have to face
the reality of the market. You have your voucher.
You survived the 20 -year waitlist. You have
your golden ticket. You are ready to rent. But
there is a gatekeeper. The landlord. The landlord.
And this is the market friction. This is where
the rubber meets the road. It is. Because in
most areas of the United States, landlord participation
in Section 8 is completely voluntary. They can
just say no thanks. They can. And many do. Yeah.
And we have to look at why. It's easy to villainize
landlords. But let's put ourselves in their shoes
for a moment to understand the business incentives.
OK, let's role play this. I'm a landlord. I have
a decent two bedroom apartment. I put it on Zillow.
I get two applications. Applicant A is a young
couple with decent jobs and good credit. Applicant
B has a Section 8 voucher. Why am I hesitating
on applicant B? Time and bureaucracy. That's
the first hurdle. If you pick applicant A, they
sign the lease today, they give you a deposit,
and first month's rent, they move in tomorrow.
Done. Revenue starts flowing. Simple. Clean.
And applicant B. With the voucher holder, you
can't just sign. You have to submit a request
for tenancy approval to the local PHA. Okay,
so paperwork. A lot of paperwork. Then... You
have to wait for an inspector to come out. They
have to check the entire unit against a long
list of housing quality standards, or HQS. They
check the windows, the paint, the locks, the
plumbing, the smoke detectors. Which sounds good.
We want safe housing. But how long does that
take? It could be a week. It could be three weeks.
If you fail the inspection because of something
minor, like a cracked outlet cover, you have
to fix it and then schedule a re -inspection.
That's another week. All that time, the unit
is sitting empty. So taking the voucher could
cost me a month of vacancy right off the bat.
In a hot market, that's thousands of dollars.
Exactly. That's lost money. Then there's the
fear of payment delays. The tenant pays their
share, but the PHA pays the rest. Sometimes those
government checks are slow to get set up for
the first time. Bureaucracy is not known for
its speed. So that's the con list. But on the
flip side, there have to be reasons to accept
them. Otherwise, nobody would do it. Definitely.
The biggest pro is stability. guaranteed income.
The government's check doesn't bounce. It never
bounces. It's direct deposit into your account
month after month. If the economy tanks, think
about COVID or the 2008 crash, and your tenant
loses their job, a normal tenant stops paying
rent. And I have to go through the eviction process,
which costs... thousands and takes months. Right.
But with a Section 8 tenant, if they lose their
income, they report it to the PHA. Their portion
of the rent goes down, sometimes to zero, and
the government's portion goes up to cover the
difference. The landlord still gets the full
check. That is a recession -proof investment.
It's like a government bond wrapped in an apartment.
It is. And there's a huge pool of potential tenants.
You'll never have a vacancy for long. Also, historically,
Section 8 tenants stay longer. Turnover is expensive
for landlords. Painting, marketing, screening.
Section 8 tenants tend to stay for years because
it's so hard to find another place that will
accept them. And they have a huge incentive to
be good tenants. A massive incentive. If you
get evicted for destroying the unit or for criminal
activity, you lose the voucher. Potentially forever.
Potentially forever. Remember, you waited 20
years for it. You are highly, highly incentivized
to follow the rules. So you have a tenant who
essentially has a good behavior bond hanging
over their head worth hundreds of thousands of
dollars over a lifetime. So you would think that
would make them ideal tenants, but refusal rates
are still high. They are. And this brings us
to the darker side of the friction. Discrimination.
Source of income. Discrimination. This is the
legal term for refusing to rent to someone solely
because their money comes from a voucher instead
of a paycheck. Some states and a growing number
of cities have passed laws making this illegal.
Their argument is money is money. Exactly. Money
is money, whether it comes from a job, a trust
fund or HUD. It's all green. But not everywhere
has these laws. No. As of late 2022. Stats showed
that only about 57 % of voucher households lived
in jurisdictions with these legal protections.
In the rest of the country, huge swaths of the
South and Midwest. A landlord can legally put
up a sign that says, no Section 8. It is perfectly
legal discrimination. Yes. And even where it
is illegal. I imagine it's incredibly hard to
enforce. A landlord isn't going to say, I'm rejecting
you because of the voucher. Of course not. No,
they're smarter than that. They use proxies.
They can demand a credit score of 750, knowing
that most low -income families might have a 600.
They can reject you based on a minor criminal
history from years ago or a past eviction. It's
very easy to find a neutral reason to deny an
application if you simply don't want those people
in your building. Wow. Now, there is another
layer to this market friction, and that is the
price itself, the fair market rent, or FMR. How
does the government decide what an apartment
is worth? Because rent in downtown San Francisco
is not rent in rural Ohio. Right. HUD calculates
the FMR annually for over 2 ,500 different areas.
It's usually set at the 40th percentile of gross
rents in the area for a, quote, modest non -luxury
unit. OK, 40th percentile, so slightly below
average. Not the Ritz, but not a slum. That's
the idea. They want to pay enough to get you
a decent place. The problem is geography. FMRs
are historically calculated for a whole metropolitan
statistical area. I see where this is going.
A metropolitan area can be huge. Take a place
like Atlanta or Chicago. That includes the expensive
downtown, the wealthy suburbs and the struggling
outskirts all lumped together. Exactly. So imagine
the average rent for the whole metro is calculated
at, say, $1 ,500 for a two bedroom. HUD says,
OK, your voucher is worth up to $1 ,500. Well,
in the wealthy suburb with great schools, an
actual two -bedroom rent's for $2 ,500. You're
priced out. You can't live there. The voucher
isn't enough. And in the struggling neighborhood
with high crime and poor schools, the market
rent is only $900. Right. So if you use your
$1 ,500 voucher there, the landlord is thrilled.
They're getting paid way above market rate for
a subpar unit. They have an incentive to rent
to you. So the math creates a funnel. It locks
tenants out of the high opportunity neighborhoods
they're supposed to be moving to. And it funnels
them into the poorer neighborhoods where the
voucher is actually worth more than the market
rate. Precisely. It inadvertently reinforces
economic and racial segregation. The math of
the FMR creates a barrier to the very mobility
the program was designed to offer. And this leads
us perfectly into the controversy surrounding
the program, because if the system is funneling
people into specific areas or failing to move
them out of others, that has social consequences.
And there is a very specific, very loud accusation
that gets thrown at Section 8. Yes, the accusation
that Section 8 brings crime. We need to dig into
this. because this is often the elephant in the
room at town hall meetings. Don't bring vouchers
here. You'll bring the crime. It is a longstanding
theory. It was championed by critics like Howard
Hussock from the conservative Manhattan Institute.
He argued in a 2003 book that Section 8 was essentially
a vehicle for exporting inner city social problems
to the suburbs. The idea being if you tear down
the projects and give people vouchers, they don't
leave their problems behind. They move to the
suburbs and bring the instability with them.
That is the argument. And this really exploded
into the public consciousness in 2008. There's
an article in The Atlantic by a journalist named
Hannah Rosen called American Murder Mystery.
I remember hearing about this. It was a bombshell
at the time, right? It was hugely influential.
Rosen focused on Memphis, Tennessee. She looked
at data showing that as public housing projects
were demolished and residents were given vouchers,
crime seemed to spread outward into the suburbs.
So she tracked it. She quoted researchers who
overlaid heat maps, literally red blobs on a
map. One map showed where crime was rising. The
other map showed where Section 8 households were
moving. And they matched. They seemed to fit
perfectly. It was a visual smoking gun. It looked
like a one -to -one correlation. That sounds
incredibly damning. The crime followed the vouchers.
If I'm a suburban homeowner and I see that map,
I'm terrified. It sounds damning. And politicians
latched onto it. Cities like Lancaster, California,
use this kind of rhetoric to try and block housing
programs, effectively declaring war on Section
8 voucher holders. But, and this is a huge, bold,
underlined but, we have to look at the rebuttal.
Because in social science, correlation is not
causation. This is where Greg Anrig comes in.
Yes, writing in the American Prospect. Anrig
and other researchers tore into Rosen's methodology.
They argued she was missing the bigger picture.
What was the flaw? What did she miss? First,
the economic context. During the period Rawson
studied in Memphis, the economy was cratering.
It was the mid -2000s leading up to the Great
Recession. Male unemployment had nearly doubled
in that time. So a lot of desperation. A lot
of economic desperation affecting everyone in
those areas, not just the new arrivals with vouchers.
Annerig argued that was the primary driver of
crime. Okay, but what about the heat maps? If
the vouchers and the crime are in the same place,
isn't that a link? Not necessarily a causal link.
There is a concept that researchers explored
called reverse causality. A study done for HUD
suggested that the cycle actually works in reverse.
Walk me through that. How does that work? Okay.
Step one. A neighborhood starts to decline economically.
Maybe a factory closes. Crime starts to rise
slightly and property values start to fall. Step
two. The people who have the money and the means
to move, the middle class, they leave. They flee
the decline. That creates vacancies. Exactly.
Step three, this creates vacancies. Lots of empty
apartments. And landlords hate vacancies more
than anything. So they get desperate. They get
desperate. Landlords, desperate to fill empty
units in a declining neighborhood, become more
willing to accept Section 8 tenants because they
are the only reliable money left in town. I see
it now. The vouchers didn't cause the crime.
The crime and economic decline caused the vacancies,
which attracted the vouchers. This Section 8
tenants were moving into areas that were already
destabilizing. They weren't the invasion force.
They were the backfill. They were the effect,
not the cause of the decline. That is a critical,
critical distinction. But was there any harder
data on this beyond just arguing over maps and
timelines in one city? Yes. And this is the gold
standard of research. The Moving to Opportunity
or MTO study. Right. This is a big deal. It was
a massive randomized policy experiment where
they tracked thousands of families. over many
years. They gave some families vouchers with
counseling to move to low -poverty areas, some
regular vouchers, and a control group got nothing.
A true scientific experiment. Well, what did
they find about crime? The study concluded that
there was no increase in violent or property
crime in the neighborhoods where the voucher
holders moved. The fear was unfounded. That seems
pretty definitive. It is. It's the most rigorous
evidence we have. The reality is that even with
vouchers, many families chose to stay in poorer
areas because of those FMR caps we talked about
or because they wanted to stay near their support
networks, grandma, the church, the kids' school.
Which makes sense. Of course. Yeah. But when
they did move, they didn't bring a crime wave
with them. They actually experienced significant
gains in mental and physical health. It's a classic
case of a moral panic versus the statistical
reality. But the perception persists. And that
perception makes landlords even more hesitant,
which brings us back to that friction problem.
It creates a vicious cycle. The myth of crime
leads to landlord refusal, which limits where
tenants can go, which forces them back into high
poverty areas, which then reinforces the original
stereotype. It's a self -fulfilling prophecy.
So if the problem is that FMRs are too blunt
one price for a whole city and that landlords
are scared or misinformed, what are the solutions?
Because we have some innovations on the table
that are trying to break this cycle. We do. And
the biggest structural fix is something called
SFMR, small area fair market rents. Okay, so
we are going from fair market rents to small
area fair market rents. What's the difference?
The difference is granularity. Instead of calculating
one rent price for the entire metro area, HUD
now calculates rents by ZLIP code. That makes
so much more sense. It treats the rental market
like a pixelated map instead of a big blurry
watercolor. It's so much more logical. It means
the voucher is worth more in a high -opportunity
zip code, like a nice suburb, and it's worth
less in a low -opportunity zip code where rents
are already cheap. So it boosts the buying power
of the tenant if they want to move to a better
area, and it stops the government from overpaying
for apartments in slums. It's designed to incentivize
mobility. Exactly. HUD officially implemented
this in a couple dozen years. in metro areas
in 2017 aiming to deconcentrate poverty. But
the results have been, well, they've been mixed.
It hasn't been a silver bullet. No. And the comparison
between Dallas, Texas and Chattanooga, Tennessee
is really illuminating. Okay, let's bring that
down. What happened in Dallas? Dallas was an
early adopter, actually due to a court order
related to a desegregation lawsuit. They implemented
SAFMRs and the results were largely positive.
Voucher holders actually started moving to...
Better neighborhoods. The policy worked as intended.
The extra money unlocked doors that were previously
closed. Okay, so success story in Dallas. What
went wrong in Chattanooga? In Chattanooga, the
results were poor. Even with the higher voucher
values for the nicer zip codes, tenants didn't
or couldn't move. Why? If the money was there.
If I hand you a check for $2 ,000, why can't
you rent the $2 ,000 apartment? Because the units
weren't there. Researchers found that the rental
stock in the high opportunity areas of Chattanooga
just didn't exist in the way it did in Dallas.
The good neighborhoods were mostly single family
homes occupied by owners, not renters, or the
rental units that did exist had vacancy rates
near zero. So there was literally nowhere to
move to. Exactly. This is a crucial insight.
You can throw money at the problem. You can say
here's a voucher for a million dollars. But if
there is no apartment to rent, the money is useless
paper. So it highlights that Section 8 is a demand
side solution. It gives people purchasing power,
but it cannot fix a supply side problem. Precisely.
If there is a structural lack of housing or if
local zoning laws ban apartments in rich neighborhoods,
vouchers can't conjure units out of thin air.
So SAFMRs are a better tool, but they are not
a magic wand. You still need the physical housing.
What about the human element? We talked about
landlords being scared of bureaucracy. Is there
a fix for that? Yes. And it's a role that is
becoming more and more common. The housing placement
specialist or sometimes just housing specialist.
The fixing. Basically. A researcher named Matthew
Marr published a study on this in Los Angeles.
He found that vouchers are just paper. To make
them work in a tight competitive market, you
need a human intermediary. What does a housing
specialist actually do? Paint the picture for
me. Imagine you are a voucher holder. You are
nervous. Maybe you're not great at selling yourself
to a skeptical landlord. The housing specialist
acts as your broker and your advocate. They make
the first call. They make the first call. They
say, hi, I'm from XYZ Nonprofit. I represent
a tenant with guaranteed government funding.
I will handle the inspections. I will make sure
the paperwork is perfect. If there's an issue,
you call me, not a 1 -800 number at the housing
authority. They de -risk the transaction for
the landlord. They take the headache away. They
soothe the landlord apprehension, which, as Marr
points out in his research, is often rooted in
racial stereotypes or just a fear of government
red tape. Having a professional say, I am your
single point of contact. I will handle this makes
a huge difference. It seems like such a necessary
layer. You can't just hand someone a complex
federal document and say, good luck out there
in the private market. No, especially not when
the private market is looking for any reason
to say no. The specialist turns the voucher from
a potential burden into a simple, safe business
opportunity for the landlord. So let's recap
where we are. We've gone from the 1937 origins
of building public housing towers to the modern
Section 8 voucher, which tries to integrate low
-income families into the private rental market.
We look at the intense scarcity. The 20 -year
waitlist that turned a safety net into a lottery,
the complex math of imputed income that can penalize
saving, the tension with landlords who have the
ultimate power to say yes or no based on profit,
and sometimes prejudice. And the controversies
over whether this mobility spreads crime, which
the best data says it doesn't, and the attempts
to fix the system with zip code level pricing,
which we've learned works only if the apartments
actually exist to be rented. It is a massive,
creaky... vital and deeply flawed machine. It
really brings us back to that core tension we
started with. The United States has decided as
a matter of policy that we don't want to build
government housing anymore. We want to use the
private market. That's the path we've chosen.
But the private market is driven by profit, not
by charity. And Section 8 is the awkward bureaucratic
handshake between those two completely different
worlds. It is. It relies on private actors, landlords,
to fulfill a public mission. And when those interests
align, it works. It provides stability for millions
of children, elderly folks, and veterans. But
when they clash or when the housing supply just
isn't there, the system leaves millions more
waiting on a list that might never move. I want
to leave the listener with a final thought, something
to chew on. We call Section 8 a safety net. But
if you fall off the tightrope and the net takes
10 to 20 years to deploy, is it actually a safety
net? Or is it something else entirely? That is
the fundamental question. And I'd add another
one. With the shift to small area fair market
rents, we are trying to engineer opportunity
by tweaking a spreadsheet. We're changing the
numbers. But are we solving the root cause of
segregation and poverty? Or are we just making
the map more complicated? A heavy question. And
here is a challenge for you listening right now.
Go to Google. Look up HUD fair market rent for
your specific zip code. You can find the data
pretty easily. Look at the number they say a
two bedroom apartment is worth. That's public
information. Then go to Zillow or Craigslist
or whatever you use and look at what apartments
actually cost in your neighborhood. See if the
math works. You might be very surprised by the
gap. It's an eye opening exercise. It explains
why so many vouchers, even after people get them,
end up going unused. The money just isn't enough.
That is it for this deep dive into Section 8.
We hope you learned something new about the mechanics
behind the headlines. Thanks for listening.