How Much Rent Do Vouchers Cover?
The amount of rent a voucher can cover is capped by a payment standard
set by the housing agency. A housing agency is allowed to set the payment
standard anywhere between 90 percent and 110 percent of the fair market
rent, which is HUD’s estimate of the amount needed to cover
the rent and utility costs of moderately priced housing units in the area.
Housing agencies can set payment standards outside this range if they get
HUD’s approval.
HUD sets fair market rents annually in each metropolitan area and non-metropolitan
county for units with different numbers of bedrooms. In most areas, the fair
market rent is set at an amount sufficient to pay rent and utility costs for
40 percent of the recently rented units in the area, excluding new units.
In 1999, HUD determined that in 39 metropolitan areas, however, these “40th
percentile rents” were insufficient to enable voucher holders to rent
housing outside a few low-cost neighborhoods. To avoid concentrating voucher
holders in these neighborhoods, HUD now sets the fair market rent for those
39 areas at the 50th percentile instead.
The amount that a voucher pays is based on: (1) the payment standard, (2)
the actual rent and utility costs of the housing unit, and (3) the family’s
annual “adjusted income,” which includes deductions for each child
as well as any child care costs. (Households in which the head or spouse is
elderly or disabled receive a special deduction; and may have unreimbursed
medical expenses and costs of assistance for a disabled person deducted as
well.)
- If a family rents a unit with rent and utility costs that exactly equal
the payment standard, the voucher pays the landlord the payment standard
minus 30 percent of the family’s adjusted income, and the family pays
the rest. (Since the early 1980s federal policy has set 30 percent of income
as the maximum a low-income family should devote to housing, given other
demands on family budgets; many experts think this standard is too high
for the lowest income families.) In rare cases when families have high child
care costs or medical deductions, they will be required to contribute 10
percent of gross income if that amount is higher than 30 percent of adjusted
income.
- If rent and utility costs are below the payment standard, the family
still pays 30 percent of its adjusted income and the voucher covers the
remaining cost.
- If rent and utility costs exceed the payment standard, the voucher covers
the payment standard minus 30 percent of the family’s income and the
family pays the rest. As a result some families with vouchers pay more than
30 percent of their income for housing. However, new participants in the
program and families moving to new units are not allowed to rent units that
would cause them to pay more than 40 percent of adjusted income for housing.
- If the housing agency has established a minimum rent (which may be up
to $50 per month), the family is required to pay the minimum rent regardless
of how big a share of its adjusted income the minimum rent constitutes,
as long as rent and utility costs do not exceed the payment standard. If
these costs do exceed the payment standard and the family’s share
of the costs is more than 40 percent of their adjusted income, the voucher
may not be used to rent that particular unit.
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