Blast From the Past: How the Experimental Housing Allowance Program of the 1970s Can Inform the Moving to Work Expansion Today

Blast From the Past: How the Experimental Housing Allowance Program of the 1970s Can Inform the Moving to Work Expansion Today

Todd M. Richardson, Acting Deputy Assistant Secretary for Policy Development.

As a new employee at HUD in 1991, I had the good fortune to receive wise advice from longtime employees. I now try to pass along some of their wise advice to our newer employees. One piece of advice was, “Don’t throw out your old reports and policy memos, because those ideas will come around again.”

This advice has served me well. My office is full of old reports and policy memos. But it’s not enough that this advice serves me well; better that it serves us all well.

To that end, the HUDUSER.gov website features a special “ Publication Archives” section to which we have been adding past HUD reports that are on our bookshelves but not generally available online. We have been focusing mostly on research that we believe stands the test of time and can help inform today’s policy conversations.

Included are the reports of one of the demonstrations that defined the Office of Policy Development and Research (PD&R) in its early years, the Experimental Housing Allowance Program (EHAP). EHAP, which was authorized in 1970, tested two different versions of housing allowances, each with several variations. HUD researched one variation, the “Demand Experiment,” between 1973 and 1976, and it tested another variation, the “Supply Experiment,” from 1974 to 1979. As sometimes happens, before the research was complete, Congress moved ahead with legislation in 1974 to create the housing allowance program that we know today as the Housing Choice Voucher (HCV) program, which serves 2.2 million families. The 1974 program was substantially informed by the research on the implementation of EHAP, but not so much by the final reports. This was partly because the housing allowances in EHAP were different from the program created by Congress, most notably in that EHAP made payments to tenants rather than to landlords. It is nevertheless instructive to remember the lessons we learned from EHAP.

As I have previously reported in PD&R Edge, Congress has recently moved to expand the Moving to Work (MTW) program to waive some of the program rules for public housing and housing choice vouchers. Embedded in that expansion is research that tests the most innovative ideas on how to improve housing assistance programs. The MTW Research Advisory Committee identified several areas that researchers should study, including rent reforms that could provide cost efficiencies and improve household self-sufficiency as well as methods to improve housing choice.

To inform this MTW conversation, I’ve been digging into the old reports. Although rental markets, household formation, and welfare have certainly changed since 1973, when HUD began the EHAP demonstration, I unearthed a few valuable findings from those studies that likely have not changed. EHAP tested variations on two different models of housing allowances in Phoenix and Pittsburgh:

1. Percent of Rent plans offered eligible households rebates equal to some fraction of their gross monthly rent. “Households were divided into five groups, receiving rebates of 20, 30, 40, 50, or 60 percent of their monthly rent. Thus, for example, a household receiving a 50 percent rebate would be given $50 if its rent were $100 and $100 if its rent were $200.”¹ The theory was that receiving such a rebate would create an incentive to improve the quality of the housing you were renting. These plans had the added benefit that they were simple to administer.
2. Housing Gap plans offered to pay eligible households the difference between the average local cost of modest standard housing and some fraction of household income if they found housing that met program requirements. “Three different requirements were tested — Minimum Standards and two levels (High and Low) of Minimum Rent. Minimum Standards programs had to occupy housing that met certain physical and occupancy standards in order to receive payments. Households assigned to minimum rent programs had to spend a minimum amount for housing in order to receive their allowance payments.”² These plans are similar to today’s HCV program.

Participants in these programs were compared with control group households who received no assistance; a group of households who received an unconstrained income transfer; and public housing, Section 23 (private housing leased by a PHA and sublet to tenants), and Section 236 residents.

EHAP produced no fewer than 10 reports that are posted on HUDUSER.gov, so I will share only one important observation from these studies: a substantial tradeoff was made between how many families could successfully get a benefit from the program and the number of program requirements associated with receiving the benefit. As a result, we have to be cognizant of what we want housing assistance programs to achieve. In the case of EHAP, the primary goal was improving housing quality for low-income families. At the time of EHAP, housing quality was quite good for most Americans but quite bad for very poor households.

The Demand Experiment found that although Percent of Rent plans were very successful at achieving a high level of program participation — 84 percent of families offered to participate received the benefit — they did not improve housing quality. In fact, these plans appeared to primarily benefit landlords, who seemed to raise rents when families received the housing allowance payment.

The participation rate for the Housing Gap plans was half that of the Percent of Rent plans. The Housing Gap plans, however, did induce 25 percent of the assigned households to improve their housing quality.

Under this construct, we would (and did) adopt the Housing Gap model because it had the desired effect of improving housing quality even though fewer households could successfully use the program. After EHAP, HUD conducted another large experiment that compared the Housing Certificate program with a new Housing Voucher program model in an effort to see if we could improve program take-up and housing choice by offering more flexible program requirements. You can read about it here.

As we think about MTW, it will be very important to consider what we want to accomplish and carefully evaluate our progress at achieving those goals.