NCPA - National Center for Policy Analysis

Time Running Out For Many "Section 8" Housing Units

July 17, 2001

The strong real estate market in much of the country has created an incentive for developers to drop their contracts to rent out federally-subsidized apartments -- known as Section 8 units, or sometimes referred to as "affordable housing."

Section 8 tenants are low-income families who pay up to 30 percent of their income to rent the designated units from apartment building owners. In exchange, the building owners receive federal subsidies for construction or renovation, and a federally guaranteed stream of rental income.

Many of the 20-year contracts between landlords and the government have already expired, or soon will expire. And the landlord-developers are in a position to rent out the formerly subsidized units at much higher market rates.

  • Since 1996, about 125,000 subsidized units have been freed from federal subsidies nationwide as landlords chose not to renew their government contracts.
  • The nation's Section 8 supply -- a term which refers to the law authorizing the subsidies -- now stands at about 1.3 million units.
  • Nearly two-thirds of those have contracts which are due to expire between now and 2004.
  • Just as demand for Section 8 apartments is rising, the properties are now more valuable than the developers ever imagined possible.

Over the years, providing Section 8 housing has become less popular with developers because it has been tainted by scandal -- especially during the 1980s, when politically connected figures collected millions in questionable "consulting" fees. The program also became notorious for its red tape and ossified bureaucracy.

Source: Jonathan Eig, "Landlord's Dilemma: Help Poor Tenants or Seek More Profit?" Wall Street Journal, July 17, 2001.

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