1). HUD estimated that  over 9 million very low income households (about 59 percent) did not  receive assistance and had housing needs. Increases in the Number of Vouchers Drove Growth in the Size of Section 8 from 1998 through 2004

The combined number of authorized vouchers and project-based units  grew from about 2.93 million to 3.36 million from 1998 through 2004—an  overall increase of about 15 percent and an average annual increase of  about 2 percent (see fig. Renewal of an Increasing Number of Expiring Contracts Contributed to Much of the Growth in Budget Authority

Appropriations of new budget authority for Section 8 grew from $9.4 billion  in 1998 to $19.3 billion in 2004, an overall increase of about 105 percent and  an average annual rate of 13 percent (see fig. Specifically, after adjusting for inflation,  outlays dropped from $8.3 billion to $7.8 billion, a decrease of 6 percent. The growth in voucher outlays, however, significantly outpaced the rate of  inflation, increasing from $8.5 billion to $14.6 billion (71 percent) in  inflation-adjusted dollars. Policy Decisions and Market Factors Drove Increases in Section 8 Outlays, but HUD and Congress Have Acted to Limit Further Growth

A number of policy decisions and market factors contributed to the growth  in total Section 8 outlays from 1998 through 2004, including decisions to  expand the number of households receiving vouchers, increases in the  average rental subsidy per household, and other program costs. To reduce their costs, these PHAs can raise the minimum rent to $50. Changes in market rents explained a significant part of the  increase in the average rental subsidy per household. Specifically, we  estimate that from 1999 through 2004, over one-half of the increase in the  average per household subsidy was explained by higher market rents, all  other things being equal. Household and Neighborhood Characteristics of Voucher Holders Did Not Have a Significant Effect on the Growth in the Average Rental Subsidy per Household

We analyzed certain household characteristics, such as family size, family  types (for example, whether the household was headed by an elderly  person or a person with a disability), and others, and found that, while they  were major determinants of per household rental subsidies, they did not  vary enough over this period to effect significant change in the average per  household rental subsidy. Objectives, Scope, and Methodology

This report provides information on trends in the size and cost of the  Department of Housing and Urban Development’s (HUD) Section 8  program from 1998 through 2004. Specifically, our report objectives were to  determine (1) the annual numbers of vouchers in the voucher program and  units in the project-based programs, (2) the annual new budget authority  and outlays for each program, (3) the factors that have affected outlays,  and (4) the impact of factors on the average rental subsidy cost per  household for the voucher program. These subsidies, which make up the difference between  households’ payments (usually 30 percent of adjusted income) and the  actual unit rent, are limited by the payment standards set by local public  housing agencies. Trends in Rents and Household Payments for the Voucher and Project-Based Programs

The rental subsidy per household of both Section 8 programs is the  difference between a household’s payment and the lesser of either the  payment standard or the unit’s gross rent.
Why GAO Did This Study

Annual appropriations for the Department of Housing and Urban Development's (HUD) Section 8 programs--a key federal tool for subsidizing rents of low-income households--have increased sharply in recent years, raising concerns about their cost. Section 8 pays the difference between a unit's rent and the household's payment (generally 30 percent of adjusted income). Section 8 includes a voucher program administered by public housing agencies (PHA) that allows eligible households to use vouchers to rent units in the private market and a project-based program administered by property owners who receive subsidies to rent specific units to eligible households. In both programs, contracts between HUD and the administrators specify the duration and amount of the subsidy. GAO assessed Section 8 trends from fiscal years 1998 through 2004 and examined (1) annual budget authority and outlays for each program; (2) factors that have affected outlays; and (3) the estimated impact of factors, such as market rents, on the average rental subsidy per voucher household.

What GAO Found

From 1998 through 2004, annual budget authority for Section 8 grew from $9.4 billion to $19.3 billion (105 percent, or 82 percent after adjusting for inflation), while outlays grew from $14.8 billion to $22.2 billion (50 percent, or 33 percent after inflation adjustment). The steep rise in budget authority was partly due to the additional funding needed to cover the cost of renewing long-term contracts. GAO estimates that voucher outlays grew by 93 percent from 1998 through 2004 (71 percent after inflation adjustment), accounting for almost all of the growth in total Section 8 outlays. Estimated project-based outlays grew by 6 percent (and actually declined after inflation adjustment) over this period. GAO estimates that about 43 percent of the growth in voucher outlays from 1998 through 2004 stemmed from policy decisions that increased the number (from 1.6 million to 2.1 million) and use of vouchers, while over half of this growth was due to an increase in the average rental subsidy per household. For the project-based program, a modest increase in the average rental subsidy per household drove the growth in outlays but was partly offset by a reduction of 62,000 in the number of units. On the basis of statistical analysis of cost data, GAO estimates that growth in the average annual rental subsidy per voucher household from 1999 through 2004 is primarily explained by changes in market rents (about one-half of the growth), PHAs' decisions to increase the maximum subsidized rents (about one-quarter), and lagging growth in assisted household incomes (about 16 percent.) Household and neighborhood characteristics, while important cost determinants, did not vary enough to cause a substantial change in the average rental subsidy per household.