PART II: HUD's Major Non-Competitive Programs
Section 8 Housing Choice Voucher Program Contract Renewals

The Section 8 tenant-based 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 vouchers to qualified very low-income households. New rental assistance will be provided entirely by vouchers. These rental vouchers provide rent subsidies that generally equal the difference between 30 percent of the household's adjusted income and the PHA-approved payment standard. Under the Housing Choice Voucher Program a family may select a more expensive unit, with a gross rent that exceeds the PHA's payment standard, but the family must pay the additional amount. The law restricts a voucher-holder, however, from renting a unit that would initially require the family to pay more than 40 percent of the family's adjusted income for rent. The subsidies are paid directly to the landlord by the PHA. 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 tenant-based funding to provide project-based assistance (PBV) to competitively selected units that are rehabilitated or newly constructed under the rules for PBV assistance. No new funding is provided for the PBC program option. All Section 8 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 vouchers—fairshare and special purpose. The largest portion of rental vouchers is fairshare. Fairshare funding is initially awarded through a competition. In recent years, including FY99, no funding for new vouchers was appropriated; thus, no competitions for such funding occurred. Fairshare funding is available however for FY 2000 and a notice will be issued in Spring 2000.

Some Section 8 rental vouchers are provided for a variety of special purposes, such as relocating public housing tenants that are displaced because of public housing rehabilitation, designating mixed-use public housing units to single use (that is, disabled and elderly to elderly only), and enacting court settlements. These vouchers are often provided as part of a competitive grant program, such as HOPE VI and Section 8 Mainstream. Unlike the fairshare rental vouchers, the special purpose rental vouchers received appropriations in FY 1999 and prior years.

Once funding for either fairshare or special purpose Section 8 vouchers is awarded to a PHA, the PHA receives funding from HUD on an annual basis until the contract for the funding expires.²⁰ Unless new funding is appropriated by Congress to renew the expiring contracts, the PHA will no longer be able to provide the vouchers. In FY2000, approximately $9.5 billion is appropriated to renew expiring contracts.

In addition, approximately $1.1 billion is appropriated in FY 2000 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 $10.6 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 FY 2000 budget.