"The truth will set you free. But first it will piss you off."

Gloria Steinem

Friday, September 12, 2014

Housing Choice Vouchers: Here's What Is SUPPOSED To Happen

In Bureaucracy World, the Housing Choice Voucher Program works precisely like this:
A household seeking a voucher applies to the MCHA.  He/she fills out several forms, wherein he/she lists each person in the household and all sources of income, among other things.
The MCHA conducts background checks, including a criminal one, to make sure that all voucher recipients are of good character and honest.  It totals the household income and determines the critical 30% figure that the household can pay for rent.  It then calculates how much assistance will be given, i.e., the difference between the 30% figure and “The Fair Market Rent”.
With everything in place, the household then seeks out housing for which it has qualified (that pretty much means number of bedrooms).
Once the household has found housing of the right size whose landlord is willing to submit to the rigorous standards that will be imposed on him, the MCHA again enters the picture.
Every potential housing unit is first inspected by the MCHA, thus ensuring that it meets all current code standards.  If any deficiencies are found, the landlord quickly makes them good until the MCHA is satisfied.  The potential landlord then signs a “Housing Assistance Payments Contract” with the MCHA, in which he devoutly promises to follow the rules.
Once everyone is satisfied and all standards fully met, the landlord and the tenant execute a standard lease, and the household moves into its new home.  They faithfully pay their share of the rent—and dutifully report all future changes in either household income or composition—while the landlord ensures that they continue to live in a safe and healthy environment, the MCHA punches another ticket toward its “A” grade, and everyone lives happily afterward.  God Bless America.
What a wonderful world this would be.  Of course, that phrase comes from the song about the guy who “don’t know nothing ‘bout history,” so be advised.
Let’s examine the basic structure of this all-American fantasy for its weak spots, because they are where The Benjamins leak out.  We will climb our way up the leakage scale, because more leakage means more expense to you, the taxpayer.  Let’s follow the money, continuously asking the same question: who stands to profit by not following the rules?
The voucher program is a tri-party arrangement; the housing authority, the income-eligible household and the private sector landlord.  If each fulfills its end of the bargain, then harm is mitigated, and the larger good may actually surpass the local damage done.  Maybe.  If any party fails in its obligations, however, it only encourages one or both of the others to do so also.  An increasing scale of harm results. 
If the failure is on the part of the tenant, it is in the interests of both the landlord and the housing authority to either correct the failure or expel the tenant.  Money is usually involved somehow, but neither the landlord or the housing authority stands to profit (Yes, the landlord may be “in on it,” but let’s keep a reasonable balance here).
If the landlord fails to keep his part of the bargain, things get complicated because the profit motive enters into it, at least for the landlord, who has a very personal understanding of the concept.  Correcting the problem is in the interests of both the tenant and the housing authority, but ratting out one’s landlord is rarely in the interests of the tenant, so the housing authority may not even be informed of it.
If, however, the housing authority fails to do what it is supposed to do—properly monitor the reality of what the other two components are doing—then both the other components have the opportunity for illicit profit.  Both are also prime candidates for seizing such an opportunity, so trouble is pretty much guaranteed.
That’s why we will conclude this financial ascent focusing on the MCHA.  Ironically, that’s where you will find by far the least actual malfeasance, but how diligently the MCHA performs the functions it is supposed to do makes all the difference, either opening or closing loopholes through which the two other components either profit improperly or be forced to obey the rules, as the case may be.
That’s also why I begin with malfeasance by the tenant.  It is frequently the most obvious and is the most castigated because it is the most wrong in the eyes of most people.  I’m going to disagree with that assessment based solely on my adherence to The Benjamins as my guiding criteria, not by comparing the heinousness of various crimes.  Tenant malfeasance in the Housing Choice Voucher Program is yet another example of “gaming the system from the bottom”.  I don’t ignore it, I don’t mitigate it, I encourage relentless pursuit and elimination of all examples of it, but I contend that “gaming the system from the top” costs us all a lot more.  It’s nowhere near as obvious, and easy to overlook.  But if you follow the money, it’s not where you start that counts, it’s where you end up.  That is the route we will follow, and the next post moves up the scamming ladder, because we will add the possibility of profit that is legal, although of dubious morality.  
The real cost of tenant malfeasance is very locally focused, in the immediate neighborhood, and The Benjamins are only one method of measuring it.  That real cost to a neighborhood and its people is the reason I’m going to wrap up this post with some non-advice about what to do.  There is not necessarily any actual difference between malfeasance and crime, so it’s best you stay as far as possible from both.  I don’t want to ignore this enormously important aspect of the problem, but neither am I qualified to make any valuable contribution to those who find themselves among it.  I would never offer any fatuous, from a distance advice to anyone about how to deal with a situation in your neighborhood.  There are several things more important than The Benjamins, and always put them first.
Let me finish with a question.  Why, given “what everybody knows about housing voucher holders,” would a potential landlord even consider entering a program when they could easily—and legally—avoid it and all the obvious hassle?

Gee, what do you think?

Friday, September 5, 2014

Housing Choice Vouchers: What Can You Expect From A Bureaucracy?

The problems that Housing Choice Vouchers present to Norristown and Pottstown—as well as other towns—need to be addressed.  The question is not who is to blame, but who is to blame for what.  Our focus is on the central player in this ongoing drama, the Montgomery County Housing Authority (MCHA).  The question thus becomes what can we realistically expect from it, and in what areas?  The key to that, in turn, lies in understanding just what the MCHA is.  That’s no mystery, it’s a Government Bureaucracy, and that is a beast we need to understand at a very fundamental level.  The fact that it is a Federal bureaucracy only makes it more dispersed than any other level, and thus the hardest to target.  Bureaucracy is sensitive to only a few, carefully targeted pressures; most of those applied are wide of the mark, and are shed like water off a duck’s back, to no discernible effect. 
At the root of this is the fundamental disconnect between bureaucracy and the real world.  The fiercest critics of the MCHA are those who live in the real world, often near its clients.  They view the problems on an individual basis, and at no small risk to themselves.  They know something is wrong, not just because of the numbers around them, but in the behavior of all too many of the program’s beneficiaries, their neighbors.  This viewpoint is widely shared at the municipal level, for all the obvious reasons.  If those in closest contact with voucher recipients issued grades for program achievement, the MCHA would probably flunk.
Did you know that the Department of Housing and Urban Development (HUD) does grade each of its local housing authorities on how they do their job?  And did you know that the MCHA routinely receives an “A” grade?  How can this be, if local discontent is so rife?  This is actually one of those rare cases where the answer is simple: the MCHA earns its high grade by strict adherence to the regulations that govern its work, not by striving to address the issues that those regulations create when they interact with the real world.  It’s not that the people don’t care, they do.  They are professionally trained in a field that does not pay all that well and offers little emotional job satisfaction, but they do it anyway and would like to continue.  That means they do it strictly according to the regulations, and to them alone.
I cannot emphasize this too strongly.  There is nothing strange at all about this, every organization does i.  Policies and adherence to them are rigidly enforced, in fields that range from finance to football.  Government bureaucracies alone, however, are not required to “win,” offer the best service, beat the competition, offer a better price, whatever.  There is usually no competition, because no one has figured out a way to make money doing it.  In such a structure, career advancement begins with—and depends on—rigid adherence to the rules.  That’s the core of the disconnect, because bureaucracies undertake the activities that require dealing with a great many people, who thus present a great many difficulties interpreting just how they fit into the regulations.  And they must fit into the established niches; a bureaucracy has no choice but to assign them to one if they are to do anything for them at all.  This holds true in all fields, at all levels.  Few of you deal with HUD, but each of you deals with the DMV, right?  Need I say more?  Rigidity does tend to increase as you go up the government food chain, but it is evident everywhere.
Bureaucracies are the worst in insisting on fitting a complex reality into a rigidly arranged structure, but let’s be fair here.  How many of you work for a company that allows you to deviate from its policy?  Or lets you allocate money in different amounts or to different people that the rules specify?  Thought so.  So why expect it from a bureaucracy?  Remember, it’s spending YOUR tax money.  Don’t you want every precaution taken to avoid waste and graft?  Do you really want a Federal agency to be able to just experiment with your money?
In the interest of full disclosure, I must reveal that after my graduation from college, I worked in a Federal bureaucracy.  My time was spent playing a very small role in what in what I believe to be a contender for the title of “most colossal and corrupt bureaucratic waste of money ever”.  I also know a little something about trying to help those most in need with entirely inadequate resources while adhering strictly to rules written by the type of bureaucracy whose office has no windows to the real world.  I loved my work, but I quickly established an adversary relationship with the Federal bureaucracy itself, and hence my tenure was brief.  The fundamental lesson, however, has stayed with me, and has remained relevant in my later professional studies.  It provides a clarifying filter through which to understand what you can get a bureaucracy to do, and what you can’t.
While conducting an interview at the MCHA, and despite my hard-earned underlying assumption about what the answer would be, I asked Joel Johnson and his assembled staff what plans they had to address the problem of too many housing vouchers in specific locations.  Their answer was prompt and delivered without hesitation.  They plan to do nothing further than the one thing they already do.   They do it because it’s the only thing HUD allows them to do, and even that’s optional.  They wouldn’t lose any grade points if they didn’t do it.  The lesson is clear: do not look to a bureaucracy for new ideas; there is virtually no reason for one to generate them.
Real, fundamental change in the several HUD programs we lump together as “Section 8” will require careful, reasoned action by Congress, and we all know that’s not going to happen anytime soon.  So, if we actually want to do some good, let’s look at what can be accomplished under the existing program regulations.  In a previous post I argued that we can only discuss Public Housing or any of the various Low Income Housing Tax Credit programs on an individual basis.  Last week I made the too-often overlooked point that vouchers are not held by any “THEY”.  That means that issues with Housing Choice Vouchers also need to be addressed on an individual basis.  Recipients are individuals, and deserve that.  The MCHA only administers regulations, but it interacts individually with each recipient household and each landlord to ensure that relevant portions of its regulations are enforced.  Or at least it is supposed to.  These are the areas where public pressure, properly applied has a chance of being effective.  So, let’s focus on actually making things better, and save your venting for Facebook.

This week's post was about what you can't get a bureaucracy to do.  Next week we get more detailed and discuss what the MCHA is actually supposed to do.  That's where you, the readers, get to chime in, because you know the reality in your neighborhoods.  I will work on getting that message passed along, and together we will monitor what happens, or doesn't.  It's a long-term endeavor, and very tiresome, but it's worth it.

Friday, August 29, 2014

Housing Subsidies, Housing Vouchers; It’s Complicated, People!

Last week I discussed the unpleasant fact that the Housing Choice Voucher Program is specifically designed to help low-income families to somewhat better housing, whether you describe it as “medium-quality” or “modest”.  The Benjamins then do their part, as too many better neighborhoods are simply out of reach for a voucher household.  Please don’t jump to conclusions; this does not begin to excuse the result when that result so concentrates housing vouchers in just a few communities.  That is simply unacceptable.
I am proposing the exact opposite of acceptance; the need is for correction.  Correction, in turn, requires understanding the way things are and why they actually got that way, rather than seeing in a situation what you have already decided you want to see.  This has been my mantra from the beginning, and in “Section 8” I can see no other subject more in need of this approach (Okay, “Obamacare” probably ranks higher today, but “Section 8” has been around a lot longer).
That’s why I don’t like the term “Section 8”.  The phrase long ago became a buzzword, employed only to deliver unspoken messages to those who hear it.  Several completely different programs, administered at different levels of government, comprise the available spectrum of rental housing subsidies.  They are lumped together in the public consciousness as “Section 8,” and the result is predictable: the frequent exchanging of nonsense someone read on the Internet. 
I separated out Public Housing in a previous post, because it does not belong in the same conversation as Housing Choice Vouchers or Low Income Tax Credits.  Or at least I tried to.  A reader proceeded to comment about how they seem to be owned by just a few landlords.  This is an example of the honest, but all-too prevalent confusion that results from lumping together very different programs under one buzzword.  Public Housing is completely free of “private landlords”; when you see a problem, you know who to call: the MCHA. 
Public Housing is pretty much unique in its administration, but vouchers and LITC subsidies do involve private landlords.  That’s an important shared quality, and we will return to it.  The programs themselves, however, are completely different, and there are others that show up from time to time in new development proposals.  Any rational attempt to correct the all-too-apparent problems with the programs first requires an understanding of how they are different and what each is actually designed to do.
The various subsidy programs to builders should be discussed by the individual case, whether we are talking about earlier projects—such as the conversion of Rittenhouse School in Norristown—or any new ones that appear (here’s where I get to mention “Pennrose” once more).  Their boundaries can be easily identified, and the discussion focused.  Housing Choice Subsidies possess no boundaries, at least theoretically.  Last week’s post should begin to clear up why that doesn’t happen, but there is more to examine.  The obvious financial boundary I discussed last week does not by itself explain why so many vouchers end up within the boundaries of Norristown and Pottstown.  There are additional reasons.
It is time for me to disappoint some of you by rejecting the argument that the concentration of housing choice vouchers in Norristown and Pottstown is the result of some sort of conspiracy.  The staff of the Montgomery County Housing Authority is not meeting in secret devising ways to lure people to Norristown and Pottstown.  At the same time, I am not any more willing to believe that every recipient of a housing choice voucher chose to live in Norristown or Pottstown because that’s where they wanted to go than I am that someone simply threw a dart at a map blindfolded to locate public housing.  Reality has this annoying way of being complex, despite our best efforts to ignore that basic fact.  There are several aspects to the problems of housing choice vouchers and moral judgments—particular quick ones—should be avoided, if possible.  The evidence is incontrovertible, but a conspiracy is not a necessary part of the explanation.  Norristown and Pottstown have become “dumping grounds,” even if no one has performed any conscious “dumping,” and the blame for that can be spread around.
They are not in Norristown and Pottstown because of a conspiracy, but they are also not there just through the workings of “market forces” either.  They weren’t dumped there, they weren’t directed there, they didn’t end up there because they need other services, nor for any other reason or even combination of reasons.  Why?  Because "THEY" DO NOT EXIST.  They” are a collection of individuals, with individual reasons for being in the program.  What we must all do is begin by rejecting any explanation that results from viewing Housing Choice Voucher recipients as being any one thing, regardless of what that is.  Allusions to homogeneity, regardless of what they focus on, tend to trigger visceral reactions that deliver subtle, often subconscious judgments that are not justified by the collection of individual realities that actually exist.  Voucher holders exist across a broad spectrum; from second or third generation recipients for whom this condition has become a way of life to those who are on it temporarily because of individual circumstance, often health related.  People enter the program, people leave it, just not nearly enough of them; dependency is clearly an issue.  The voucher program aids many of those who need it most, and some of them show their gratitude by scamming it.  You might perhaps remember that I have previously written about “gaming the system from below,” and the principle certainly applies here.
All this exists, and more (Wait until I get to discussing the part landlords play in this).  Recognition doesn’t mean acceptance, and is absolutely necessary if you actually want to do something about the problem other than just denounce its results.  The point is that ANY and EVERY attempt to lump voucher recipients under one classification will produce conclusions that are self-defeating if translated into action.

Next week I take a look at the central player in this complex maze, the Montgomery County Housing Authority, and how we must understand it for what it is if we are to have any positive effect in correcting the evident shortcomings of the Housing Choice Voucher Program.

Thursday, August 21, 2014

Housing Choice Vouchers: It's Not All About The Benjamins

But a lot of it is, and that’s what I will focus on this time.  Be warned: the Housing Choice Voucher Program is enormously complicated, and this is no place for a detailed analysis.  I will stick to the basics, because understanding why voucher holders seem to end up in one of two locations isn’t about corruption or conspiracy (although I accept that corruption is not absent), it’s about what the program is designed to do and how the regulations say it must be done.  These ultimately derive from the funding that is available, so it’s The Benjamins that I begin with.

First, I want to clear up an issue of terminology.  In my first post on housing assistance I used the term “individual” to describe a voucher holder.  While an individual can receive a voucher, the program is structured around the household, and that is the term I will employ from now on.  The amount of a voucher is calculated utilizing both household income and household size, (and a few other things, of course). 

The 2012 report that I have been using for my data lists 2,625 vouchers in effect as of that year, and I will continue to use that data.   Keep in mind that anything produced in 2012 utilizes data from no later than 2011, and it’s now 2014, so don’t fixate on the precise numbers.  They have probably changed a little, but the reasons for the disparity in voucher locations most certainly have not.

The Montgomery County Housing Authority (MCHA) administers the housing choice voucher program as the jurisdictional public housing authority for the county.  At the foundation of everything, of course is the fact that the MCHA has only a fixed—and inadequate—amount of money to distribute on an annual basis.  HUD also caps the number of vouchers that MCHA can issue, but the money allotted is not enough to fund all the vouchers it could issue.  There is also a waiting list with about 900 households on it, but no new names have been added to it since 2007.

Each voucher amount is a separate calculation, but all derive from obedience to the rules and use of the formulas.  The formulas aren’t basic at all, but we only need to know about them, not the details.  I will be just skimming the surface of a hugely complicated program, but will try to outline its fundamental rules.

The foundation of the whole program of housing subsidies is a belief that an American family should have to pay no more than 30% of its net income for housing.  A lot of research (and no small amount of controversy) went into establishing this baseline number, and a lot of misunderstanding has resulted.  Despite all the lip service paid to this number, the program is not structured to cover the difference between 30% of a voucher-holding household’s income and the amount it pays for rent, as we will see.  But what makes the 30% figure so important is that we are talking about this percentage of the income of the lowest earners on the local wage front.  The average annual income of program participants in Montgomery County, Pa. is $15-16,000.  Keep in mind that’s an average figure, with some lower and some higher.  The voucher holder is required to pay 30% of its income to the private landlord, and that may not be very much.  The MCHA thus ends up paying a substantial amount of the rent (directly to the landlord), but even that will not usually make up the difference between the rent and the tenant’s contribution.  You’ll see why—and how important it is—if you stick with me through this.

Remember, the vouchers are portable, so there is theoretically no barrier to a household moving where it wishes to live.  But The Benjamins say otherwise.  The Housing Choice Voucher Program is not designed to make up the difference between 30% of a household’s income and the prevailing market rent in any particular neighborhood.  The actual amount is determined by several bureaucratic calculations, the combination of which reduces how much a voucher is actually worth.

The first is something called the “Fair Market Rent” (FMR).  Note the terminology: “fair,” not “free”.  That’s important.  The term “Fair Market Rent” is borrowed from the real estate industry, although the end product is pretty much the opposite of what the term means in that context.  It’s not determined by local supply and demand, but by HUD, and it is customized for the huge variation in rental prices in the different “jurisdictions” all across the country.  HUD basically collects rental rates from several locations in a jurisdiction such as Montgomery County, Pa., from the low to the high.  It then processes this information and arrives at a net figure that applies throughout the county, regardless of a housing unit’s actual free market rent.  This doesn’t mean that the FMR is a single number.  The amount is based on the number of bedrooms in a unit and how the tenant pays utilities (the FMR includes the cost of utilities in addition to the rent), which makes for an enormous number of variations in the actual amount of each voucher.

There is a second number that figures in here.  HUD has different arrangements with each of its jurisdictions about how much of the FMR it is actually going to pay.  It’s called the Percentile.  As the FMR is assumed to be a figure near the middle, the ideal arrangement is when HUD allows a housing authority to spend at the 50th Percentile.  Then—and only then—is the amount the authority can pay for a voucher equal to the FMR.  The allowed percentile varies with jurisdictions, and can be lowered.  HUD pays Montgomery County at the 50th percentile, and thus at the FMR.  This becomes the maximum amount the MCHA can offer in a voucher.

This is so important that I will review the point:  a public housing authority allocates a specific amount of money to a voucher according to a calculation utilizing bureaucratically-processed information.  The voucher holder then has to utilize that voucher in the free market world of real estate.  That is a major disconnect, because while criticism of the housing choice voucher program derives from real world experience, all housing authority actions—with The Benjamins most definitely included—take place in accordance with a voluminous and detailed collection of regulations.  To say that “reality doesn’t matter” does not overstate the point by much.

The FMR is an average number, and should be somewhere around the middle of the true free market rents available around the county.  The actual rents charged are, of course, determined by private landlords.  The market rent for a specific bedroom unit in Wynnewood, for example, is considerably more than for the same bedroom unit in Norristown or Pottstown.  So, which landlords are most likely to reject the voucher program?  Clearly, those whose rents are so high that the subsidy doesn’t make up the difference, and that pretty much means at least half of all the available rental units in the county. 

Here’s the bottom line:  The current structure of the Housing Choice Voucher Program, even before considering any other of its many issues, strongly directs the recipients into the less expensive half of the rental units in Montgomery County.  Before we continue with a critique of what the program fails to accomplish, we must understand that this is exactly what the voucher program was designed to do: aid low-income families to move into what Wikipedia calls “medium-quality apartments”.  The MCHA says the actual wording of the Act is “modest”.  Please note that I said "understand," not "accept".  I plan to continue educating you about not just the program's shortcomings, from from where they truly originate, so that blame--and thereby corrective action--can be more effectively focused.

At a fundamental level the problem is all about The Benjamins in that with a great deal more money the other obstructions could be overcome.  That’s not a real world scenario, however, and adding a smaller amount would have opposite effects on the two goals I set out at the beginning of my first post on this subject.  Simply “throwing more money at the problem”—adding to the housing authority’s budget but not altering any of the rules under which it is distributed—would at least lessen the number of needy people on the county waiting list, and that’s a good thing.  But it would also increase the number of housing vouchers in Norristown and Pottstown, and that’s not.  More money by itself is not the answer.  Next time we discuss more about why this is true.

My thanks to Joel Johnson and his staff at the Montgomery County Housing Authority for leading me through the maze of the programs they administer (and some they don’t).  All errors of fact expressed above—and in future posts—are mine alone.