Association for Public Policy Analysis & Management

This paper evaluates the impact of a rent reform at one PHA, the Santa Clara County Housing Authority (SCCHA), to its rent policy. In the face of federal budget cuts to the HCV program in 2013, SCCHA reduced subsidies across all households rather than terminating the participation of some households from the program. The primary component of its rent reform was to increase the tenant rent contribution rate from 30 percent of adjusted income (equivalent to about 27 percent of gross income) to 35 percent of gross income (eliminating all deductions and allowances) for all subsidy households. A second rent reform component changed the voucher size policy, which resulted in a smaller voucher size for some households.

SCCHA increased its tenant contribution rate to the level at which the total savings from lower subsidies would allow the PHA to continue to serve all households in the HCV program at that time. SCCHA’s projections of savings assumed that the increase in the tenant contribution rate would not cause residents of HCV households to work or earn less. They had little evidence on which to base these projections, however. Economic theory suggests multiple possibilities: On the one hand, increasing the tenant contribution rate effectively increases the “tax” on tenants’ earnings (in other words, tenants keep a smaller portion of their earnings under the new policy compared with the former policy), creating a disincentive to work. If tenants did reduce their earnings, it would have resulted in SCCHA having to increase the subsidy levels, effectively counteracting the HAP savings the housing agency hoped to achieve. On the other hand, tenants who are able to work may increase their employment to compensate for the loss of net income. A third possibility is that households may absorb their increased housing costs without changing their employment behavior, by reducing their spending or incurring debt.

This paper examines the effects of the SCCHA rent reform for the cohort of nonelderly, nondisabled households and individuals receiving HCV subsidies at the time of SCCHA’s rent reform. The study estimates the effects of the rent reform on residents’ employment rates, average earnings, average housing subsidies and the percent of households continuing to receive housing subsidies using a combination of quasi-experimental methods. It also uses descriptive analyses to explore households’ housing decisions and levels of rent burden after the rent reform was implemented. The paper will present findings for the full cohort of nonelderly, nondisabled individuals, and will present separate findings for the 77 percent of those households that were only affected by the tenant contribution rate change and the 23 percent of households that were affected by the voucher size rule change in addition to the tenant contribution rate change. It will also discuss the potential for the policy change the affect families’ material hardships, which could not be measured. The paper will conclude with lessons of the findings for policy.