Under the voucher program, an assisted household pays 30 percent of its  monthly adjusted income in rent; the remainder of the rent is paid through  a HUD-subsidized “voucher,” which generally is equal to the difference  between (1) the lesser of the unit’s gross rent (generally, rent plus  utilities) or a local “payment standard” and (2) the household’s payment. Later in this  report we discuss the extent to which housing agencies have  accumulated subsidy reserves and steps Congress and HUD could take  to reduce future budget requests or reallocate the reserve funds. Once  adjusted for inflation, housing agencies’ expenditures increased by a  smaller rate, approximately 8.8 percent. The formula HUD uses to pay  administrative fees to housing agencies is not directly tied to the cost of  performing the administrative tasks the program requires. Congress and HUD Have Taken Steps to Limit Cost Increases in the Voucher Program

In light of increasing program costs, Congress and HUD have taken  several steps to limit the extent of increases from fiscal years 2003  through 2011, while maintaining assistance for existing program  participants. First,  improved information on the level of subsidy reserve funding housing  agencies should maintain could aid budget decisions and reduce the  need for new appropriations. Over time, large sums of money can accumulate. For example, in its fiscal year 2012  voucher program budget proposal, HUD requested the authority to offset  excess reserves. According to the proposal, if given this authority, the  department first would reallocate the funds to housing agencies to make  up any difference between the appropriated amount and the total funding  for which housing agencies were eligible based on the renewal formula  and then redistribute any remaining funds to housing agencies based on  “need and performance.” However, the proposal did not specify how HUD  would calculate excess subsidy reserves or a detailed methodology for  redistributing the funds, and HUD officials acknowledged that  redistributing excess funds among housing agencies will increase the size  and the cost of the program over time because if housing agencies are  able to lease more vouchers with these funds, Congress will have to  appropriate more funding for renewal vouchers in subsequent years. While a reserve for contingencies is prudent, without clear and consistent  criteria for determining what constitutes an appropriate level for housing  agency reserves, it is difficult to judge how well HUD managed the  funding Congress has provided for the voucher program. Administrative Reforms Could Streamline Burdensome Requirements and Reduce Costs

HUD officials have noted that certain requirements for administering the  voucher program have grown burdensome and costly and could be  streamlined. This formula is not tied to the program’s current  administrative costs or requirements. Rent Reform and Consolidation Could Result in Reduced Costs or More Households Served, but Both Involve Trade- offs

If implemented, rent reform (that is, changes to the calculation of  households’ payment toward rent) and the consolidation of voucher  administration under fewer housing agencies could yield substantial cost  savings, allow housing agencies to serve additional households if  Congress were to reinvest annual cost savings in the voucher program, or  both.cost savings or additional households served could be greater if both  options were implemented. Further, implementation of these options may  involve some trade-offs, including increased rent burdens for assisted  households. Specifically, rather  than providing funding based on the number of vouchers housing  agencies are permitted to lease, Congress currently provides funding  based on housing agencies’ prior-year subsidy expenses. In addition to previous reforms HUD has proposed, examples from the  MTW program and HUD’s study on administrative fees can offer options  to Congress for streamlining and simplifying administrative activities and  aligning the administrative fee structure with actual administrative  expenses. Implementing rent reform and  administrative consolidation would require policymakers to consider some  potential trade-offs—in the balance are issues such as the rent burden of  assisted households, concentration of poverty, and the extent of local  control over voucher programs. Nevertheless, these options have certain  advantages over the current program structure. While the response noted that the  draft report provided an accurate assessment of the program and its  current outcomes, HUD identified several points for clarification and  emphasis, including:
HUD commented that the stated purpose of our report of  identifying options for increasing efficiencies and simplifying  program administration was inconsistent with our  recommendations for agency action because some of the options  do not result in both efficiencies and simplification. Appendix I: Objectives, Scope, and Methodology

The objectives of our review were to (1) determine the factors that have  affected costs in the Housing Choice Voucher (voucher) program from  2003 through 2011 and the actions Congress and the Housing and Urban  Department (HUD) took to manage these costs and (2) identify additional  steps HUD, housing agencies, or policy makers can take to limit cost  growth in the voucher program and more effectively provide decent, safe,  and affordable housing.
Why GAO Did This Study

The Department of Housing and Urban Developments (HUD) Housing Choice Voucher (voucher) program subsidizes private-market rents for approximately 2 million low-income households. HUD pays a subsidy that generally is equal to the difference between the units rent and 30 percent of the households income. HUD also pays an administrative fee, based on a formula, to more than 2,400 local housing agencies to manage the program. Over time, program expenditures steadily have risen, causing some to questionhow well HUD managed costs and used program resources. This report (1) discusses the key drivers of cost growth in the voucher program and the actions taken to control this growth and (2) analyzes various options to cut costs or create efficiencies. For this report, GAO analyzed HUD data; reviewed budget documents, program laws and regulations, guidance, academic and industry studies, and GAO reports; and interviewed officials from HUD, industry groups, and 93 housing agencies.

What GAO Found

Several factorsincluding rising rents, declining household incomes, and decisions to expand the number of assisted householdswere key drivers of the approximately 29 percent increase (before inflation) in housing agencies expenditures for the voucher program between 2003 and 2010. Congress and HUD have taken steps to limit cost increases while maintaining assistance for existing program participants. For example, Congress moved away from providing funding to housing agencies based on the number of voucher-assisted households they were authorized to subsidize and instead provided funding based on the generally lower number of voucher-assisted households housing agencies actually subsidized in the prior year. Further, HUD has proposed administrative relief and program flexibility for housing agencies, including streamlining program requirements and reducing subsidies paid.
GAO identified several additional options that, if implemented effectively, could substantially reduce the need for new appropriations, cut costs (expenditures), or increase the number of households assisted.
Reduce housing agencies subsidy reserves. Housing agencies have accumulated approximately $1.8 billion in subsidy reserves (unspent funds). They can hold the funds in reserve or spend them on authorized program expenses in future years. Over time, large sums can accumulate. Although HUD has sought the authority to offset (reduce) its future budget requests by the amount of  excess subsidy reserves, it has not provided Congress with complete or consistent information on how much of these reserve funds housing agencies should retain for contingencies. GAO has highlighted the importance of providing clear and consistent information on housing agencies reserves to Congress so it can make informed funding decisions.
Implement administrative reform. HUD officials have noted that certain requirements for administering the voucher program are burdensome and costly and could be streamlined. In addition, the formula HUD uses to pay administrative fees to housing agencies is not tied to current administrative costs or requirements. HUD has an administrative fee study underway, which intends to identify specific reforms to ease administrative burden, increase efficiencies, and suggest ways to align the administrative fee formula with the functions housing agencies perform. Without this information, Congress may not have the information necessary to make fully informed policy and funding decisions related to the voucher program.
Implement rent reform and consolidate voucher administration. Rent reform (for example, reducing subsidies by requiring households to pay more toward rent) and consolidation of program administration under fewer housing agencies could yield substantial cost savingsapproaching $2 billionor allow housing agencies to serve additional households, provided annual savings were reinvested in the program. However, while these options may have some advantages over the current program structure, they would require policymakers to consider some potential trade-offs, including increased rent burdens for low-income households, increased concentration of assisted households in high poverty areas, and more limited local control over voucher programs.

What GAO Recommends

GAO identifies options for increasing efficiencies and recommends that HUD (1) determine what level of reserve funding housing agencies should maintain and reduce future budget requests by the amount of excess reserves and (2) consider proposing options for simplifying program administration and changes to the administrative fee formula. HUD did not agree or disagree with the recommendations. While it noted that the draft provided an accurate assessment, it offered some clarifications and responses.