Are Section 8 Housing Subsidies Too High?

The Section 8 Existing Housing Program, currently the largest housing program administered by HUD, provides subsidies to low-income families living in privately-owned rental units of their own choosing. Under current rules and budgets, funds have not been sufficient to serve all eligible families willing to participate in the program, and public housing agencies have not limited assistance to the poorest eligible families. Instead, they serve many families above the poverty line while denying assistance to the majority of those below it. A simple proposal for targeting more assistance to the poorest families and eliminating the horizontal inequity resulting from offering assistance to some, but not all, families with the same characteristics is to decrease the subsidy at each income level by the same amount. One objection to this proposal is that the poorest eligible families would not be able to find units meeting the program’s space and quality standards if subsidies were lower. This paper finds that the program’s subsidy to the poorest eligible families greatly exceeds the minimum rent of units meeting the program’s standards. It also shows that the most common objections to reducing subsidy levels under the program are inconsistent with existing evidence.