FY 1998 SuperNOFA Guidebook

Section 8 Rental Certificates and
Rental Vouchers Programs and Contract Renewals

The Section 8 program is designed to increase the housing choices available to very low-income households by making privately owned rental housing affordable to them. The main way it accomplishes this is by providing funding to local public housing agencies (PHAs) so that they may provide rental certificates or rental vouchers to qualified very low-income households. These rental certificates and vouchers provide rent subsidies that generally equal the difference between 30 percent of the household's adjusted income and the HUD-approved fair market rent (for certificates) or the PHA-approved payment standard (for vouchers). The subsidies are paid directly to the landlord by the PHA. Most Section 8 rental certificate funding and all Section 8 rental voucher funding is used for tenant-based assistance . Tenant-based assistance can be provided for any eligible rental unit, as long as the landlord agrees to participate in the program. Each PHA has the option to use up to 15 percent of its Section 8 rental certificate funding to provide project-based assistance (PBC) to competitively selected units that are rehabilitated or newly constructed under the rules for PBC assistance. No new funding is provided for the PBC program option. All Section 8 certificate and voucher units must be inspected by the PHA to ensure their compliance with HUD housing quality standards.

There are two basic types of Section 8 rental certificates and vouchers�fair-share and special purpose. The largest portion of rental certificates and vouchers is fair-share. Fair-share funding is initially awarded through a competition. In recent years, including FY98, no funding for new fair-share certificates and vouchers has been appropriated; thus, no competitions for such funding have occurred.

Some Section 8 rental certificate and vouchers are provided for a variety of special purposes, such as relocating public housing tenants that are displaced because of public housing rehabilitation, converting mixed-use public housing units to single use (that is, disabled and elderly to elderly only), and enacting court settlements. These certificates and vouchers are often provided as part of a competitive grant program, such as HOPE VI, Section 8 Mainstream, or Section 8 Designated Housing. Unlike the fair-share rental certificates and vouchers, the special purpose rental certificates and vouchers have received appropriations in recent years. Thus, competitions for these programs are still taking place. Those occurring in FY98 are announced in the SuperNOFAs.

Once funding for either fair-share or special purpose Section 8 rental certificates and vouchers is awarded to a PHA, the PHA receives funding from HUD on an annual basis until the contract for the funding expires. Unless new funding is appropriated by Congress to renew the expiring contracts, the PHA will no longer be able to provide the rental certificates and vouchers. In FY98, approximately $5.9 billion is appropriated to renew expiring contracts.

In addition, approximately $2.3 billion is appropriated in FY98 for renewing a different type of Section 8 rental assistance contract not discussed above. This appropriation is for renewing expiring contracts that were enacted between HUD and private owners of multifamily housing. These contracts provide project-based rental assistance in association with Federal Housing Administration mortgage guarantees. The mortgage guarantees are provided on the condition that the property owner will make a certain portion of the rental units available to Section 8 renters for the duration of the contract.

The $8.2 billion that is appropriated for renewal of the Section 8 contracts described above represents the largest single line item appropriation�excluding housing loan guarantees�in HUD's FY98 budget.

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