Panel Paper: Using Data to Develop a Funding Formula for the Housing Choice Voucher Program

Saturday, November 5, 2016 : 3:50 PM
Embassy (Washington Hilton)

*Names in bold indicate Presenter

Meryl Finkel, Abt Associates

The housing choice voucher (HCV) program is HUD’s largest assisted housing program, providing housing for over 2 million low-income households. In 2013, HUD provided more than $1.8 billion in administrative fees to support the local administration of the program by nearly 2,300 local public housing agencies (PHAs) nationwide. Currently, HCV administrative fees are allocated to PHAs based on a formula that is loosely tied to local housing rents, which do not necessarily reflect the costs of operating the program. In 2010, HUD contracted with Abt Associates to measure the costs of operating a high-performing and efficient HCV program, identify the main cost drivers that account for variation in administrative costs among PHAs, and propose a new administrative fee formula based on those findings. The HCV Administrative Fee Study was completed in 2015.

This paper presents an important example of how HUD is using research to improve its understanding of HCV administrative costs and to improve the formula for funding program administration.

Study Design Features:

 

  • Direct measurement of staff time spent on local program administration at 60 PHAs across the country. Measurement of staff time was conducted using specially programmed smartphones and random moment sampling.
  • Time estimates, along with detailed data on labor, non-labor, and overhead costs were used to translate the time spent on the HCV program into overall and per unit administrative costs.
  • The 60 PHAs in the study sample operated high-performing and efficient HCV program and were diverse in terms of program size, region of the country, urban setting, organizational structure, and client characteristics.
  • A large and active Expert and Industry Technical Review Group (EITRG) provided input at key stages of the study. (EITRG included representatives from the major affordable housing industry groups, Executive Directors and HCV Program Directors from high performing PHAs, affordable housing industry technical assistance providers, housing researchers, and industrial engineers).
  • The study used Ordinary Least Squares (OLS) regression modeling to identify the factors that accounted for variation in administrative costs across the study sample and to develop a formula that captured those costs as accurately as possible.

Study Findings:

  • The average annual administrative cost was $840 per voucher and the median was $778 per voucher in 2013 dollars. 
  • Key factors driving variation in administrative costs are: the number of vouchers being administered, average wage and benefit levels for local government workers in the PHA’s area, and characteristics of the households served by each PHA.

 

  • The study’s analysis and recommended formula was able to explain 65 percent of the variation in program costs.

Policy Use of Study Findings:

 

  • Following the release of the study, HUD published online tools that would allow PHAs to assess the funding impact of the study’s recommended formula and solicited feedback through listening sessions across the country and a public solicitation of comment notice.

 

  • Based on this feedback, HUD is working on revising the study’s recommended formula and publishing a proposed rule as the first step toward changing the funding formula for the local administration of the voucher program.