How the federal government is trying to fix the gap between rising rents and inadequate subsidies

The federal government is acknowledging what local renters with housing subsidies know from experience: Vouchers aren’t keeping up with rising rents.

This month, the U.S. Department of Housing and Urban Development announced the new prices it will view as “fair market rents” — the annual values that determine the maximum amount a housing choice voucher will cover in a given zip code. The new values take effect starting Oct. 1, the beginning of the federal fiscal year.

Nationwide, the department’s definition of fair market rents will increase by an average of about 10%. And in the Philadelphia region, the values are rising even more.

HUD’s calculation of fair market rents across the entire Philadelphia metropolitan area — which includes Camden and Wilmington — will increase more than 13%, or $172, compared with rents in the fiscal year that’s about to end.

» READ MORE: New Jersey renters can apply for a shot at state rental vouchers for the first time in 5 years

Households with housing choice vouchers (formerly called Section 8) must pay 30% of their monthly income for rent and utilities. Vouchers cover the rest, as long as the local public housing authority — which uses HUD’s fair market rent standards — determines the rent charged is reasonable.

“One of the reasons that housing voucher holders are unable to use those vouchers is because the value of their vouchers has not kept up with rapid rent increases,” HUD Secretary Marcia L. Fudge said in a statement. “These new [fair market rents] will make it easier for voucher holders facing this challenge to access affordable housing in most housing markets, while expanding the range of housing opportunities available to households.”

Nationally, the 2.3 million households with vouchers make up about 5% of the rental market, according to HUD.

Fair market rents are HUD’s estimate of the money needed to cover rent and utility expenses on 40% of the rental housing units in a local area. So 40% of units in a market should cost less than the level of the fair market rent, according to HUD.

HUD’s fair market rents are hyper local and vary by zip code to account for massive variations in prices within and among cities and towns.

Fair market rents for a two-bedroom home vary across the region from $1,150 in zip codes such as 08007 (Barrington Borough, Camden County) and 19136 (Holmesburg section of Philadelphia) to $2,210 in zip codes such as 19425 (Chester Springs area of Chester County), 19130 (Philadelphia’s Art Museum area), and 19066 (Merion Station area around St. Joseph’s University).

In Philadelphia, the highest of the two-bedroom fair market rents are concentrated in greater Center City, including $2,210 in the Society Hill area, and the tip of Northwest Philadelphia, including $2,000 in Chestnut Hill.

This year, HUD used both public- and private-sector data in its calculations to determine its fair market rents because of disruptions to public data due to the pandemic. This change is meant to ensure that fair market rents “accurately reflect recent, steep rent increases in many communities and will make it easier for households in those communities to use their vouchers to rent affordable homes,” according to HUD.

The change is in effect only for the coming fiscal year.

Because the federal government doesn’t have enough housing vouchers for all the households that need them, families spend years on wait lists. The Philadelphia Housing Authority’s voucher wait list has been closed for years.

» READ MORE: How to find affordable housing in Philly

The American Rescue Plan Act and the current federal budget included almost 100,000 new housing choice vouchers. President Joe Biden’s proposed budget for the 2023 fiscal year includes 200,000 more housing vouchers.

It’s still not nearly enough. In the Philadelphia metro, about 41,000 vouchers were available in 2020 for more than 206,000 eligible households, according to the Housing Initiative at Penn.

But even after households receive vouchers, finding a home that meets HUD’s price caps and inspection standards — and that a rental property owner is willing to rent to a person with a voucher — can be difficult.

» READ MORE: Renters in the Philly area have fewer options than in most of the country

The current tight rental market allows rental property owners to be more choosy when considering tenants, and some don’t want to deal with the red tape that comes with federal subsidies. Rising rents further limit the homes that are available and affordable for households that use housing vouchers. These factors have reduced the number of voucher holders that are able to use their subsidies, according to HUD.

This spring, Chester County pleaded with landlords to accept the vouchers of households whose homes were destroyed by the remnants of Hurricane Ida seven months earlier. Residents of the federally subsidized University City Townhomes in West Philadelphia have been told they must leave by Oct. 8, and they worry they won’t be able to find new homes in their neighborhood with the housing vouchers many have just recently received.

Higher rent caps will help more voucher holders find homes, but renters will continue to face challenges.

» READ MORE: PHA is offering cash to try to entice landlords to accept tenants using federal housing vouchers

The Philadelphia Housing Authority has been seeing more people struggle to find rentals. A year ago, PHA began offering cash incentives to try to get rental property owners to accept tenants who use federal housing vouchers. The housing authority also started streamlining the approval process once landlords accept voucher holders and offering landlords up to $2,500 to cover damage to their units beyond normal wear and tear.

HUD said it will continue working with public housing authorities, landlords, tenants, and others to try to get more landlords to accept vouchers.