Subsidized Rental Housing


A range of programs exists to address the lack of affordable housing. These programs are not nearly enough to meet the demand from those who are housing cost-burdened. They encourage the preservation of existing subsidized housing units, as well as building new subsidized housing units. One key challenge is that many subsidized rental housing units are at risk of being converted to more expensive market-rate housing. Rising property values, especially in areas with proximity to community amenities, give proprietors an incentive to move away from the affordable housing market. As contracts expire, proprietors often charge the highest market rents or sell their buildings. This can leave people with low and moderate incomes without access to affordable housing. 

Federal, state, and local governments all play important roles in financing and implementing subsidized housing programs. 

Federal role 

The largest source of funding for subsidized housing comes from the federal government. These subsidies are aimed at people with low incomes. Those earning up to 80 percent of the area median income (AMI) are considered low income. Those who earn between 30-50 percent of AMI are considered very low income. And those who earn less than 30 percent of AMI are considered extremely low income. Federal programs, however, are limited. Not everyone who qualifies receives a subsidy. In many communities, people with moderate incomes also face housing affordability challenges. Thus, many who need assistance cannot receive it. Another key challenge is the lack of coordination among the various programs. 

The following is an overview of key federal subsidized housing programs. 

Public housing units: Built decades ago, these units are managed by state or local housing agencies and receive funding by the Department of Housing and Urban Development. A key focus has been to preserve these units or to ensure one-to-one replacement of affordable units when older public housing complexes are torn down. 

Housing Choice Voucher Program: This program, formerly known as Section 8, reimburses private building proprietors the difference between what the renter can afford and the cost of the housing up to a maximum. Demand for these vouchers greatly surpasses their supply.  

Even among those who receive vouchers, securing appropriate housing that will accept the voucher can prove challenging. Roadblocks can include a proprietor’s refusal to rent to a tenant who uses a voucher. Policymakers can address this by banning so-called source-of-income discrimination. Another obstacle for renters in high-cost neighborhoods is how the Department of Housing and Urban Development calculates fair-market rent. This figure is the maximum rent that a voucher will cover. Generally, fair-market rents are set at the metropolitan area. This can make it difficult for people to be able to use a housing voucher in relatively high-rent neighborhoods in a given metropolitan area. By using a small-area fair-market rent, the maximum amount the voucher will cover better reflects rents in a given neighborhood. Finally, housing counseling programs can help voucher holders secure housing in high-opportunity neighborhoods near good jobs and amenities. They can also help pay for a security deposit or other costs. 

Section 8 project-based rental-assistance contracts: These contracts allow private owners to rent some or all of their housing units to families with low incomes. Tenants pay 30 percent of their income toward rent, with government covering the remainder (up to a maximum). Section 8 project-based housing subsidies are different from “tenant-based” Housing Choice Vouchers. Tenant-based voucher recipients may rent any private residence that meets program guidelines. Fifty-one percent of the families living in Section 8 project-based rental-assistance units are headed by people age 62 and older. Those who obtain subsidized housing through these contracts risk losing their homes as contracts expire. This is especially the case in areas where rents have been rising. Proprietors may prefer to move units to market-rate rentals. They are then not obligated to accept below market rents, and households with low incomes lose affordable housing options. 

The Low-Income Housing Tax Credit (LIHTC): This provides tax incentives for developers to offer affordable rental housing units at below market rates. LIHTC has produced approximately 23 million affordable rental units. The LIHTC units remain affordable for a minimum of 30 years, with some states such as California and Oregon requiring longer terms of affordability. However, there is a provision within the program called the qualified contract, which can trigger the release of the property from the affordability requirements after 15 years. LIHTC provides housing for many households with low incomes. These households earn no more than 60 percent of the AMI. Older adults and people with disabilities are among those households that have benefited the most from this program. Projects that provide services are eligible for LIHTC, but payment for those mandatory services must be included in gross rent. As with other forms of subsidized rental housing, a proprietor can charge residents no more than 30 percent of their monthly income. With program eligibility limited to those with incomes no more than 60 percent of the area median, rents would easily be pushed beyond the allowable ceiling by including the cost of services. Typically, LIHTC properties remain affordable to tenants for 30 years. After that period, rents rise to market rate, which can make it unaffordable for residents to continue to live there. Providing a transition period for rents to rise can help avoid a sudden steep rent increase. In addition, longer terms extend the time that units remain affordable. Some jurisdictions have extended the loan term to even 50 years. Unfortunately, a loophole exists to reduce the affordability term from 30 years to just 15 years. This is called the qualified contractor loophole. 

Section 202, Supportive Housing for the Elderly Program: This program provides funding to nonprofits that develop and operate housing for people age 62 and older across a wide range of abilities and needs and who have very low incomes. It serves approximately 400,000 older adult households making under 50 percent of the median income of the area where they live. The program serves both frail and non-frail populations in an integrated community. Long wait lists reflect the immense need for affordable housing with supportive services for older adults with very low incomes. 

Funding for Section 202 saw a 21 percent increase in FY22, expecting to produce an estimated 2,200 new homes. This was the most funding for new Section 202 construction since 2010. The Department of Housing and Urban Development currently also funds rental-assistance contracts, support-service coordinators (who help connect residents with health providers), assisted living conversion projects, and emergency rehabilitation for a portion of existing properties. Nevertheless, many projects lack the staff and supportive features needed to serve the growing number of frail residents who reside in Section 202 housing. 

Section 811, Supportive Housing for People with Disabilities Program: This is similar to Section 202 but targets people with disabilities of all ages. 

The National Housing Trust Fund: Funds to build or preserve rental housing for people with extremely low incomes are available through this program. 

The HOME Investment Partnerships Program: States and localities can use this flexible block grant to address affordable housing shortages. 

Community Development Block Grants (CDBG): This program provides funding flexibility and can be used for a number of community development needs. CDBG funds cannot be used for new construction. However, they can be used to rehabilitate housing or to develop infrastructure in low-income neighborhoods. In some cases, CDBG funds can be combined with the HOME program to support affordable housing units. 

Choice Neighborhoods Initiative (CNI): The successor to the HOPE VI program that was eliminated in 2012, CNI is designed to create housing and livable communities in distressed neighborhoods. CNI requires a one-for-one replacement of units. Each community receiving a CNI grant must submit a comprehensive plan to detail how it will redesign its community according to the program’s primary goals. 

Section 515: Run by the Department of Agriculture’s Rural Housing Service (RHS), this program provides low-interest loans to fund the construction of apartments for renters with extremely low incomes in rural areas. Yet when the mortgage used to fund the construction is paid off, the affordability obligation expires, and renters can experience a substantial increase in the cost of housing. As such, much of the existing affordable housing provided through the Section 515 program is also at risk of being lost. As assistance contracts expire, owners convert their units to market-rate rentals. Displacement can have serious consequences for existing residents. Although they are given priority on the waiting list for Section 515 housing elsewhere, residents may find that alternative units are unavailable. 

The Section 515 program is sometimes paired with the RHS Section 521 program to offer very low-income renters additional subsidies. However, when a property exits the Section 515 program because the mortgage has been paid off, the additional rental assistance offered to very low-income renters also expires. When this happens, renters with very low incomes are at high risk of displacement. Without a housing subsidy, they are unlikely to be able to find suitable housing that they can afford. 

Section 504: The Rural Housing Service Section 504 program provides home-repair assistance to homeowners in rural areas. It has had four times as many eligible applicants as it has available funds. 

Self-help housing programs: These programs are run by organizations such as Habitat for Humanity. They enable low-income people who otherwise would not be able to own a home to become homeowners by helping to build homes through “sweat equity.” This is the value of the labor they put into a project. Future homeowners work alongside volunteers to construct their houses, which lowers construction costs and fosters stability and growth in communities.

State and local roles 

State and local governments also play essential roles in expanding and preserving affordable housing options for older adults and protecting their rights. They coordinate policy and administer federal housing programs. In addition, all states and the District of Columbia have housing finance agencies. These agencies help fund the construction of affordable single-family and multifamily housing. Almost all states and over a half-million localities have housing trust funds. These trusts support new construction, home repair, and rental rehabilitation. 



Subsidized rental housing expansion

Policymakers should preserve the existing stock and expand the availability of affordable, accessible, safe housing, particularly for those with the most severe cost burdens. This can be accomplished through: 

  • one-to-one replacement of public housing units that are torn down; 
  • increased availability of housing vouchers, housing trust funds, tax credits, and other mechanisms to promote and develop new subsidized housing; 
  • policies to preserve existing subsidized housing units; and 
  • public and private incentives to preserve and create more affordable, accessible units. 

Congress should provide enough funding for subsidized housing to meet demand among those who qualify. At a minimum, it should provide enough funding to maintain the existing number of units and to assist all renters who have severe rent burdens (spending more than half their gross income on rent). 

Policymakers should prioritize funding for projects that preserve affordable housing for longer periods of time, rehabilitate existing properties to create more affordable units, or renew rental-assistance contracts. 

Congress should provide matching grants to encourage state and local governments to preserve their housing that is insured or assisted by the Department of Housing and Urban Development (HUD) and the U.S. Department of Agriculture. 

State and local policymakers should use tax credits, bond proceeds, and redevelopment funds to encourage the development of housing for people with low incomes. They should also establish their own housing trust funds if they have not already done so (see also Livable Communities Financing). 

People who receive subsidized housing should receive assistance for security deposits and the first and last months’ rent. 

Vouchers should be allowed in shared housing. This includes Housing Choice Vouchers and other forms of housing vouchers. 

Policymakers should support programs that help voucher recipients secure appropriate housing, such as housing mobility counseling and incentive programs

Mandated rent increases in public housing should consider the impact on all residents, including those with very low and extremely low incomes. 

Public housing residents should have the “right of return” when public housing is converted to subsidized housing. 

HUD should develop, maintain, and promote the use of a publicly available national database of federally subsidized housing. 

Congress should modify the Low-Income Housing Tax Credit (LIHTC) program to enable greater flexibility in the development of housing projects for older adults. 

Funding from trust funds, legal awards, settlements, or new federal programs dedicated to creating or preserving affordable housing should not be used to replace existing funding sources. It should be used only for intended purposes. 

Local governments should convert or develop suitable surplus public properties into subsidized housing for vulnerable populations. 

Policymakers should prioritize surplus state, county, municipal, school district, and military property development or conversion into housing. 

People who are displaced from subsidized housing due to expiring assistance contracts or prepayments should receive relocation assistance. This includes tenants displaced from the 515, Section 8, and LIHTC programs. 

The Rural Housing Service (RHS) should target assistance under its programs, including the Section 515 and Section 504 programs, to underserved groups, particularly older farm workers and older adults from racial and ethnic groups that are discriminated against.

HUD and local public housing authorities should maintain utility allowances and ensure that these allowances keep pace with rising utility costs. 

Rural housing subsidies

Policymakers should increase subsidies for low-income rural housing to preserve existing affordable housing units and construct new units.

Policymakers should explore options for extending the affordability of rural rental housing units whose subsidies are set to expire.

Policymakers should ensure that renters with very low income have access to Section 521 rental assistance even when the underlying Section 515 mortgage is paid off. That is, Section 521 rental assistance should be decoupled from the underlying Section 515 mortgage. To ensure sustained affordability, this decoupling should be paired with long-term rental assistance contracts, ideally at least 20 years, contingent on annual appropriations.

Self-help housing programs

Self-help housing programs, which enable low-income households to become homeowners by working together to build homes through “sweat equity,” should be supported.

Extending affordability terms

Policymakers should explore options for extending the affordability of rental housing units whose subsidies are set to expire. These include: 

  • requiring owners to have a plan in place at the beginning of the affordability term to reduce the risk of financial hardship and displacement once affordability requirements expire,
  • ensuring a reasonable transition period in which rent increases incrementally and offering relocation assistance to tenants who cannot afford the market-rate rent, and
  • offering relocation assistance to tenants who cannot afford the market-rate rent. 

Subsidized housing options in livable communities

Policymakers should increase the availability of subsidized housing in mixed-use, walkable communities that promote aging in place. This includes by using incentives and housing trust funds to build housing in livable communities. Subsidized housing options should incorporate universal design, visitability, inclusive design, green buildings, and transit-oriented development. 

HUD should adopt and implement a measure of housing affordability that includes housing and transportation costs. 

State and local policymakers should preserve affordable housing in areas near transit, services, shopping, and other community amenities. 

Subsidized housing with services

Policymakers should increase the availability of subsidized housing with services. This includes providing service coordinators and supportive housing arrangements in subsidized housing. 

Federal, state, and local policymakers should collaborate to develop greater capacity to serve frail older adults and people with disabilities, including in the Section 202 program. 

The Department of Housing and Urban Development should prioritize projects that incorporate services and features that increase the ability to age in place. 

Congress and states should authorize the use of funds for modifications to enhance service delivery, accessibility, and safety for those who seek to age in place. 

Congress should change the definition of the income rent cap under the LIHTC program for service-enhanced housing (such as assisted living). It should either raise the 30-percent-of-income rent cap, which is inappropriate for housing models that include basic services in the monthly rent, or modify the definition of rent so that it does not include the cost of basic services. 

The RHS should allow staff to provide personal care services, including medication management. 

Subsidized housing program coordination and consolidation

Policymakers should coordinate and consolidate existing housing programs to improve service delivery, safeguard assets, and cost efficiency. This includes creating a streamlined system for developing and coordinating policies on housing and services for older adults and people with low and moderate incomes. 

Congress should refrain from converting the Section 202 or Section 8 Housing Choice Voucher programs into a block grant. Policymakers should increase the production of specialized supportive housing. 

Protections for renters of foreclosed properties

Policymakers should mitigate the effects of foreclosures on renters. Policymakers should establish protections for renters living in foreclosed homes, including:

  • providing renters of foreclosed properties with adequate time to find new housing;
  • ensuring that new landlords of foreclosed properties continue to pay for utilities and maintenance; and
  • only allowing eviction for just cause.

Mitigation of neighborhood effects of foreclosures

Policymakers should mitigate the negative impacts of foreclosures on neighborhoods. Strategies should consider the needs of older adults. They should ensure safety, safeguard service delivery, and prevent isolation. Approaches should include buying and rehabilitating foreclosed homes both to stabilize the neighborhoods around them to provide additional affordable housing. 

Housing Vouchers

Policymakers should help voucher recipients secure appropriate housing. This includes: 

  • requiring proprietors to rent to voucher holders who are otherwise qualified (see also Fair Housing section: Source-of-income discrimination policy), 
  • supporting housing mobility counseling and incentive programs, and 
  • adopting small-area fair-market rents. 

Policymakers should educate both tenants and proprietors about their legal rights and responsibilities, including with respect to housing vouchers. 

Low-Income Housing Tax Credit (LIHTC) program

Congress should modify the LIHTC program to enable greater flexibility in the development of housing projects for older adults. It should eliminate the Qualified Contract Loophole, which removes federal and state affordability restrictions after 15 years rather than the 30-year minimum requirement. 

Policymakers should increase the affordable housing eligibility term for LIHTC-financed projects to more than 30 years.