The Feds Want Organizations to Give Cash Straight to Renters. But Who Will Pay for It?

Why give people cash?

The idea of giving cash directly to people in need, known as guaranteed income, is swiftly gaining traction in California. Nonprofits, cities and counties throughout the state have launched dozens of local programs. Even Gov. Gavin Newsom recently set aside $35 million (PDF) to fund a handful of programs testing the idea. Early results suggest this model has helped people become more financially stable.

Philadelphia is already testing giving 300 renters cash instead of housing vouchers — a program HUD is keeping a close eye on.

So far, cash aid programs have been limited to scattered, small-scale, temporary pilots that lack the resources to scale up. HUD jumping into the ring marks the first time a federal agency is taking a cohesive look at the model and potentially creating a path for it to influence national policy.

“That’s what’s exciting about this, the fact that the initial call has come from HUD,” said Alexa Rosenberg, who co-leads Enterprise’s economic mobility initiatives.

HUD operates the country’s Housing Choice Voucher program (also known as Section 8), which doles out vouchers to low-income tenants who can’t afford market-rate rent. The program started in the 1970s as an alternative to place-based subsidized housing. Instead of having to rent an apartment in a building specifically designated as affordable housing, the tenant can use the voucher to pay a portion of the rent at any market-rate property. Payments under the voucher system go directly to the landlord, who first has to pass a housing inspection. Tenants pay 30% of their income toward rent, and the voucher covers the rest.

That system, which is a cornerstone of America’s subsidized housing program, has several problems. People languish for years on waitlists before they get a voucher, and many never get one at all. Only about one in four households eligible for rental assistance receives it, according to the Center on Budget and Policy Priorities.

For those tenants lucky enough to score a voucher, about 40% can’t use it (PDF): They either can’t find an apartment that meets HUD’s requirements or a landlord willing to accept the voucher, according to HUD data. Though California prohibits landlords from discriminating against a potential tenant based on their source of income, many still refuse to rent to voucher-holders.

The direct cash program could eliminate some of those issues. The housing department (PDF) envisions allowing the tenant to inspect their own unit rather than having to wait for an official inspection from their local housing authority. And the landlord would not have to sign a contract with the housing authority. Instead, the renter would pay the landlord directly, just like any other renter. Advocates say that could help prevent discrimination.

Santa Clara County’s housing authority is “very interested” in participating, said deputy executive director Angie Garcia-Nguyen. Her team has been attending monthly virtual meetings hosted by HUD.

“We thought this would be a good opportunity to learn where we have been a barrier in folks achieving housing,” she said.

Margarita Lares, chief programs officer for the Housing Authority of the City of Los Angeles, is less convinced. She worries that without oversight, renters will spend the cash they get from this program on things other than rent — leaving their landlords in the lurch.

Not everyone within HUD is convinced cash is necessarily the answer, either. The current voucher system is working, said Richard Monocchio, principal deputy assistant secretary of HUD’s Office of Public and Indian Housing. He called it “the best homelessness prevention program of all time.” While he said he has nothing against testing cash aid, he doesn’t think it will prevent discrimination, and he’s focused instead on increasing resources for the existing program.

“I don’t want to do anything to diminish this program,” he said. “I mean, it’s the largest rental assistance program in history, and it works.”

So, who’s paying for this?

Santa Clara County’s main hang-up when it comes to a cash-aid pilot? A lack of money.

HUD said it doesn’t have the authority to use federal funds to pay for this experiment. Garcia-Nguyen disagrees. She said Santa Clara County, as part of HUD’s Moving to Work program — which is supposed to fund innovation — should be allowed to use federal dollars.

Without federal money, Garcia-Nguyen doesn’t see a way forward. Their average housing voucher payment is $2,200 per month. HUD envisions these pilots lasting up to four years, and experts say each one likely would need a few hundred people in order to demonstrate convincing results.

“We’re going to need a lot of money,” Garcia-Nguyen said.

HUD has indicated it will reconsider its position on Moving to Work funds, Garcia-Nguyen said, and now they’re waiting for the agency’s final determination.

HUD declined to comment to CalMatters on the funding question.

In the meantime, HUD expects nonprofits to pay for this effort. But so far, none has committed.

“We haven’t seen our members jumping at this,” said Amanda Misiko Andere, CEO of Funders Together to End Homelessness, an organization made up of homelessness nonprofits.

Housing organizations generally support the concept of cash aid, but are reluctant to be the first one to throw their hat in the ring, said Jeanne Fekade-Sellassie, executive director of Funders for Housing and Opportunity. Before they commit, they want more details about what the programs will look like.

So far, HUD’s best bet is likely Enterprise. The national housing nonprofit could act as an umbrella agency that helps coordinate the pilots — making sure they operate with similar guidelines, setting evaluation metrics and bringing together funders, Rosenberg said.

Enterprise wants a year to plan its approach, pick locations for pilots and identify resources. Just to fund that year of planning, Enterprise will need about $850,000, Rosenberg said. After that, she estimates it would cost between $4.7 million and $7.7 million to fund each pilot for between three and five years, plus an additional $2 or $3 million in infrastructure costs. She hopes they launch at least five pilots.

But Enterprise isn’t committing to anything until it has funding in hand.

What comes next for HUD rent experiment?

Even if these pilot programs get off the ground and succeed — essentially proving to the federal government that cash payments work — what happens next is unclear. HUD has promised to watch these pilots carefully and learn from them, and if they work, it could use the data to encourage Congress to fund larger programs where HUD plays a bigger role.

Any overarching change to the way HUD doles out housing assistance also would require Congressional approval, which is no small feat. That could take years if it happens at all.

But in the meantime, HUD could incorporate the change into its policy in smaller ways. For example, HUD could decide that the roughly 130 members of its Moving to Work program (including Santa Clara County) can give cash directly to renters, Rosenberg said.

Garcia-Nguyen hopes the pilot program will help spark some sort of federal change.

“Would I see it in my lifetime? I don’t know,” she said. “But I hope to at least be part of it, part of what helped discover it.”