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D.C. Fair Housing and Predatory Lending

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A Step Away From Homelessness

Housing Choice Voucher Holders Denied Housing in Montgomery County, MD

_____________________________________________

A Step Away From Homelessness

Housing Choice Voucher Holders
Denied Housing in Montgomery County, MD
_____________________________________________

The Equal Rights Center
11 Dupont Circle, N.W.
Suite 450
Washington, D.C. 20036
www.equalrightscenter.org

October 2008

© Equal Rights Center - 2008 All Rights Reserved

Table of Contents

Executive Summary                                                                                          1

Introduction                                                                                                       4

I.          Organization Introduction:  The Equal Rights Center                        5

II.         The Housing Choice Voucher Program                                               6

III.       The Housing Market – Montgomery County, Maryland                   9

IV.       The Housing Choice Voucher Program – Montgomery                    11

County, Maryland                 

V.        Protections for Housing Choice Voucher Holders –                          12

Montgomery County, Maryland      

Project Overview                                                                                               13

Project Methodology                                                                                         14

Test Results                                                                                                       14

A.   Outright Refusals                                                                 15

B.  Restrictions on the Use of Vouchers                                    15

C.  Differing Terms and Conditions                                           16   

Impact of Discrimination Against Housing Vouchers                                      16

Conclusion                                                                                                          17

Executive Summary

Montgomery County, a suburb of Washington, D.C., is today the most populous jurisdiction in the State of Maryland and the second most populous jurisdiction in the Washington area.1  In 2006, Montgomery County’s population was 947,000 people, and projections estimate that the County will reach a population of one million people by 2010.  This rapid population increase has led to a housing “crunch” in the County.  The lack of sufficient affordable housing to meet demand is of particular concern in areas, such as Montgomery County, where the County’s lower income population is disproportionately comprised of protected classes – racial and ethnic minorities, families with children and people with disabilities.2  One valuable tool used to ameliorate this critical shortage of affordable housing is the government funded housing subsidy, known as the Housing Choice (Section 8) Vouchers.  These vouchers are a “source of income” that may be used by low-income families to rent safe housing.  They are often all that stands between a family and homelessness.

Housing discrimination based on a person’s source of income, including Section 8 Vouchers, has been prohibited under Montgomery County Code, Chapter 27, Article I since 1991.  This law bars anyone from refusing to sell, rent, negotiate or otherwise transfer housing because of a person’s source of income.3

A Section 8 Voucher holder has, in Montgomery County, 90 days to find housing and use the voucher or risk losing it.  When discrimination contributes to a family’s inability to find housing within the allotted period many families are faced with unacceptable choices – taking unsafe or unfit housing, depending on friends or relatives for shelter, or homelessness.

In order to determine the rate at which housing providers in Montgomery County are complying with the law, the Equal Rights Center (the ‘ERC’) began an investigation in March 2008, testing 99 privately owned rental properties run by 45 property management companies in 12 different municipalities within Montgomery County.  The investigation was designed to determine the existence and scope of discrimination against voucher holders in the County.  The study found a 15 percent discrimination rate against voucher holders when seeking housing – as evidenced by outright refusals to accept vouchers, limiting the use of vouchers, or imposing different terms and conditions for voucher applicants.

Thus, even though “source of income” has been a protected class in Montgomery County for more than 15 years, there is much left to do to protect the residents, and those who will become residents, of Montgomery County from this form of discrimination.          

Introduction

The Housing Choice Voucher Program (the “Voucher Program”), is the nation’s largest, federal, low-income housing assistance program.4  Initiated in 1974, the Voucher Program was originally designed to open the doors to more housing opportunities in the private market for very low-income households.  Without such federal housing assistance, many families and    individuals would be forced to pay more than half of their income for rent.5

The Voucher Program is administered by the Department of Housing and Urban Development (“HUD”) and provides subsidies to more than 2 million households.6  Today, however, a significant number of voucher holders find the doors to private housing closed to them because of discriminatory practices by landlords all across the country.  Discrimination against a person merely because he or she wishes to use a subsidy voucher to pay rent has been outlawed by civil and human rights laws in more than 12 states and in several local jurisdictions, including the District of Columbia and several counties in Maryland.7  Despite theses laws, however, landlords and management companies in some instances continue to   refuse to rent to voucher holders because of stereotypes about the households who participate in public assistance programs, or as a guise for discrimination based on race or familial status.8  Discrimination against holders of housing vouchers is particularly harmful because often times a voucher is all that stands between a family and homelessness.

Discrimination against voucher holders was first brought to the ERC’s attention in 2003, when the organization began receiving complaints from voucher holders in the District of Columbia that landlords were refusing to accept their vouchers. The ERC conducted a testing investigation of District landlords and issued a report in 2005 that documented a staggering rate of discrimination (61 percent of tests) against ‘voucher holder’ testers.  The ERC conducted a similar investigation in Howard County, Maryland in 2006 to determine the level of discrimination against voucher holders there.  That investigation documented a 25 percent discrimination rate against voucher holder testers in that jurisdiction.9

Over the last few decades, Montgomery County, Maryland has quickly grown into the most highly populated area in that state.10  The County currently faces a shortage of affordable housing, making discrimination against voucher holders a critical problem to address.11  As part of its continuing effort to expose and combat discrimination against voucher holders, the ERC has now conducted a testing investigation in Montgomery County.  This report documents the ERC’s findings.

Organizational Introduction: The Equal Rights Center

Originally formed in 1983 as the Fair Housing Council of Greater Washington, the ERC is a non-profit civil rights organization dedicated to identifying, challenging, and eliminating discrimination in housing, employment, disability rights, access to public accommodations,  access to government services and immigrant rights.  The ERC provides a multi-disciplinary program of counseling, education and outreach, diversity training, research, advocacy, and enforcement for both the public and private sectors in the District of Columbia, and throughout the United States.  In its 25-year history, the ERC has developed an expertise in civil rights  testing that has been recognized by federal and state governments, other civil rights organizations and the courts.

The Housing Choice Voucher Program

The federal government has provided housing assistance for low-income families since 1937.  Early on, assistance came in the form of low-rent public housing.  However, in 1974, the federal government instituted the Voucher Program as an alternative to high-rise public      housing, so as to alleviate the effect of concentrating low-income families in high-poverty neighborhoods.  Through the Voucher Program, the federal government shifted its focus and resources away from funding public housing or providing “project-based” housing subsidies, and toward providing market-based housing vouchers.  These vouchers quickly proved to be more cost-effective than other federal low-income housing programs.

While federally funded, vouchers are distributed and administered by a network of 2,400 local, state, and regional housing agencies.12  The subsidy under a voucher is equal to a payment standard that varies with the size unit needed by the household and by location, minus 30 percent of the household’s income.13

The Voucher Program has been associated with a wide spectrum of positive effects for families who can successfully use their vouchers.  Primarily, by subsidizing rent for low-income families, families with children, the elderly, and people with disabilities, the Voucher Program enables some of the poorest and most vulnerable members of our society to afford safe and sanitary housing in the private market.  Vouchers also sharply reduce homelessness and housing instability by helping families move to lower-poverty neighborhoods with better schools and higher rates of employment.  By substantially reducing the number of families living in poverty, vouchers enable families and communities to spend more on other basic needs.14  Researchers have also found that using a voucher also contributes to lowering rates of mental and physical health problems.15

The Voucher Program is a particularly successful vehicle for serving families with   children.  Almost two-thirds of voucher households have children, compared with only 42 percent of families in public housing and 30 percent of families in privately owned project-based assisted housing. People with disabilities are also well-served by the Voucher Program, with 17 percent of voucher holders being persons with disabilities.

A family or individual may apply for a voucher at any of the 2,400 state or local agencies which administer the Voucher Program.  However, there are a limited number of vouchers available in each area, so vouchers become available only when families leave the program or the agency receives new vouchers.16  In many jurisdictions the average wait time for a voucher is increasing dramatically, and in many agencies wait lists for vouchers are being closed to new applicants altogether.  In 2004, of 25  major cities throughout the United States surveyed, the average wait time to obtain a housing voucher was 27 months, and 40 percent of the housing agencies in those cities had completely closed their wait lists to new applicants.17

Even after a housing voucher is received, voucher holders still face significant obstacles to obtain housing.  A voucher holder must first find a unit where the rent meets or falls below a ‘fair market’ rent limit set each year by HUD.  Then, the local housing agency must inspect the unit to determine that it meets health and safety standards.  Finally, the voucher holder is required to pay a portion – up to 30 percent – of the rent, while the local housing authority pays the remaining part of the rent directly to the landlord.18

Always looming over a voucher holder is a time limit to “use or lose” the voucher.  In Montgomery County, a voucher holder is initially given 90 days to find appropriate housing and use the voucher.19  If an applicant cannot find housing during this period, and no extensions are granted, he or she may lose the voucher and be placed back at the end of a multi-year waiting list.20  A family that loses this voucher and has to return to the waiting list faces a myriad of challenges, the threat of eviction or utility cutoffs based on inability to pay, a continued need to share housing, and/or a need to go to a shelter for the homeless.

A recent study that compared families with children randomly assigned to receive vouchers with those who remained on the waiting lists found that 39 percent of those who were unable to use vouchers were in crowded conditions and a quarter had insecure housing, i.e., they had no place of their own to live.  Almost 7 percent reported that they had been literally homeless – living in shelters or on the street – during the past year.21  And if the waiting list is closed, as it is in Montgomery County, the applicant loses his or her opportunity to participate in the Voucher Program altogether.22

The Housing Market – Montgomery County, Maryland

Montgomery County, Maryland has grown from a quiet suburb of the greater Washington, D.C. area to the region’s second largest employment center.23  In 2006, with 947,000 people, it was the most highly populated area in the State of Maryland.24  Due to this recent rapid growth in population and economic activity, housing costs in Montgomery County now constitute some of the highest in the nation.

Housing costs in Montgomery County have increased at a much faster rate than has household income in the County, leading to a lack of affordable housing in the area.  In 2005, the Area Median Income (“AMI”) for a family of four in Montgomery County was $89,300.  Generally, a family is believed to be able to afford housing that is 2.5 times their annual income.  Thus, in Montgomery County, the median “affordable” home purchase price would be $223,250.25  However, in 2005, the median sales price for all single-family homes (both attached and detached) in Montgomery County was $440,000.26  The median sale price for only new detached single-family home was $759,933.  Thus, a family in Montgomery County earning the AMI ($89,300) would in fact have only one-half of the income needed to purchase the median priced home ($440,000) and only one-third of that needed to purchase a median priced detached home ($759,933).27  For households applying for voucher use, incomes are  substantially lower than the AMI, thus placing home buying even further out of reach. Unfortunately, rental rates in Montgomery County have also continued to increase disproportionately.

In 2004 in Montgomery County, the average annual household income for voucher holders was only $14,438.28  If the affordability standard of 30 percent of income for rent is used, the average voucher holder in Montgomery County would be able to afford a monthly rent of $360.95.  Yet the actual average monthly rent is three times as high, having increased from $1,030 to $1,212 between 2001 and 2006.  As a result, currently half of all Montgomery County renters are spending more than they can afford for housing — a  situation that can lead to more overcrowding, evictions, and ultimately, homelessness.29

Finally, the group of voucher holders in Montgomery County is disproportionately  comprised of minority groups.30  Based on the most recent census (2000), 66 percent of voucher holders in Montgomery County were African American, 78 percent of voucher holders were female heads of households with children under 18, and 95 percent of voucher holders were  female heads of households.31  These numbers are higher than the demography of voucher holders generally across the country.32  Based on these demographics, even if not intentional, discrimination against voucher holders has a disparate impact on certain protected segments of our population.

The disparity between incomes and housing costs in Montgomery County gives clarity to how important a housing voucher is for some families, and how damaging discrimination against a voucher holder can be.  If a voucher holder cannot find housing within 90 days in Montgomery County, he or she loses the voucher and is forced back into a housing market that far exceeds his or her income.

The Housing Choice Voucher Program – Montgomery County, Maryland

The affordable housing shortage in Montgomery County has led to a particularly low success rate for housing voucher holders in the County.  In 2004, Montgomery County’s voucher program had the lowest success rate of all the jurisdictions in the greater D.C. area, with only 22.2 percent of voucher holders able to find housing in the County.  By comparison, six other jurisdictions in the greater D.C. area for which success rate information was available – Arlington County, the District of Columbia, Fairfax County, Frederick County, Loudon County, Prince William County and Rockville – had a higher success rate than Montgomery County.  Four of those six counties had a success rate of greater than 85 percent.33  See Figure 1.

Figure 1.  Voucher Holder Success Rates for Counties in the greater Washington, D.C. area

Figure 2. Discriminatory Treatment Against Housing Choice Voucher Holders in Montgomery County, Maryland

Specifically, the ERC’s testing showed:

Outright Refusals:  Of the 99 tests that were conducted, landlords or property managers refused outright to accept vouchers during 11 tests (11 percent of the time). 

Restrictions on the Use of Vouchers:  Landlords of property managers improperly restricted the use of vouchers   during three tests (3 percent of the time).39  In these tests, testers were told that although the property accepted vouchers, voucher holders were limited to a certain number of “set-aside” units.  Such a quota is in direct violation of Montgomery County law. Landlords and property management companies are required to consider voucher holders along with other potential residents for all available housing units. 

Differing Terms and Conditions:  In one test (1 percent of the time) a landlord or property manager sought to impose differing terms and conditions on a voucher applicant by stating that, although vouchers were accepted, voucher applicants did not qualify for advertised incentives.  For example, these incentives currently include one month of free rent on a 12-month lease, and a $300 ‘quick decision’ bonus for signing the contract on the property.  This disparity in terms and conditions constitutes blatant discrimination, and imposes a significant economic disadvantage on those least able to afford it.

Impact of Discrimination Against Housing Voucher Holders

A housing voucher often times is all that stands between a family and homelessness.  This is particularly true where, as in Montgomery County, the average annual income of voucher holders falls well below what is required to actually afford housing in the County.  When discrimination contributes to a family’s inability to find qualifying housing within the allotted time period, that family loses their opportunity to use a voucher and is faced with a housing market they cannot afford.

Moreover, discrimination against voucher holders has been shown in many cases to serve as pretext for discrimination against other already marginalized groups.  Due to the  demographic breakdown of voucher holders, African-Americans, female heads of households, families with children, and other minority groups absorb disproportionately most of this discrimination.  Even if not intentional, discrimination against voucher holders has a disparate and unfortunate impact on many protected classes of people.

Conclusion

The combination of an increasing population, rising rents and fewer available apartments has created barriers to finding affordable housing for voucher holders in Montgomery County.  Montgomery County has made concerted and laudable attempts to protect voucher holders from the disastrous effects of discrimination through local legislation.  Unfortunately, the reality is that a significant amount of “source of income” discrimination  continues to exist in the County.  While this form of discrimination targets those participating in the Voucher Program, it also disparately impacts minorities, individuals with disabilities,   families with children, families with female heads of households, and the elderly — those most vulnerable within our society.

Discrimination in housing, based on “source of income,” has been outlawed in Montgomery County for 17 years.  However, without education and enforcement, victims,  landlords, and property managers often do not understand their rights or responsibilities.  The ERC hopes that this study will serve as an initial platform to educate voucher holders, landlords, and property managers, as well as the general public, about this critical civil rights issue.

Endnotes

1  Analysis of Impediments to Fair Housing Choice, Montgomery County, Maryland.  April 2007.

2  Id.

3  Any lawful source of income paid directly or indirectly to a renter or buyer of housing is protected by this amendment.  Sources include any lawful profession or occupation; any government or private assistance, grant or loan program; any gift, inheritance, pension, annuity, alimony, child support or other compensation or benefit; or any sale or pledge of tangible assets.  The definition also includes participation in a housing subsidy program such as Section 8 Rental Assistance.  Under this law, a housing provider may not refuse to rent to a person with a Section 8 certificate or voucher merely because the person is participating in the program. Montgomery County, Maryland Office of Human Rights. “Fair Housing: Source of Income Familial Status Occupancy Standards; How to Recognize Discriminatory Practices.”  October 2001.

4  Center on Budget and Policy Priorities. “Introduction to the Housing Voucher Program.”  Available at: http://www.cbpp.org/5-15-03hous.htm.

5  U.S. Department of Housing and Urban Development. Affordable Housing Needs 2005: Report to Congress. Office of Policy Development and Research, 2007.

6  HUD’s Resident Characteristics Report, at https://pic.hud.gov, accessed September 29, 2008, shows 2,208,802 voucher units under contract between HUD and program administrators.  The same Web site reports the number of public housing units at 1,187,251.

7  Center for Policy Alternatives, Source of Income Discrimination. Available at: http://www.cfpa.org/issues/issue.cfm/issue/SourceofIncomeDiscrimination.xml.

8  Thabault, Isabelle M. and Platts-Mills, Eliza T.  “Discrimination Against Participants in the Housing Choice Voucher Program: An Enforcement Strategy.”  Poverty & Race Research Action Council.  Available at: http://www.prrac.org/full_text.php?text_id=1071&item_id=9757&newsletter_id=85&header=Economic+%2F+Community+Development

9  Equal Rights Center.  Howard County Investigation.  October 2006.

10  Analysis of Impediments to Fair Housing Choice, Montgomery County, Maryland.  April 2007.

11  Id.

12  Center on Budget and Policy Priorities. “Introduction to the Housing Voucher Program.”  Available at: http://www.cbpp.org/5-15-03hous.htm.

13  Khadduri, Jill. “Should the Housing Voucher Program Become a Block Grant?”  Housing Policy Debate, 14:3, 223 (2003).

14  U.S. Department of Housing and Urban Development.  Affordable Housing Needs 2005:  Report to Congress. Office of Policy Development and Research, 2007.

15  Introduction to the Housing Choice Voucher Program.  Center on Budget and Policy Priorities.  July 6, 2007.  Available at: http://www.centeronbudget.org/5-15-03hous.htm.

16  Khadduri, Jill.  “Should the Housing Voucher Program Become a Block Grant?”  Housing Policy Debate, 14:3, 242 (2003).

17  Baran, Madeleine. “Economic Hardship Causing Drastic Increase in U.S. Homelessness.” The New Standard.  September 12, 2004.  Available at: http://newstandardnews.net/content/index.cfm/items/978.

18   Center on Budget and Policy Priorities. “Introduction to the Housing Voucher Program.” Available at: http://www.cbpp.org/5-15-03hous.htm.

19    Montgomery County Housing Opportunity Commission.    

20    Studies have found that the proportion of voucher holders who are able to actually use their vouchers (the “success rate”) fell from 81 percent in the early 1990s to 69 percent in 2000.   This decline appears to reflect, at least in part, tighter housing markets -- affordable housing becomes scarce; voucher holders have a difficult time finding eligible rental units where they can use their vouchers. See “Study on Section 8 Voucher Success Rates” Vol I, Quantitative Study of Success Rates in Metropolitan Areas.  Prepared for Robert Leonard, U.S. Department of Housing and Urban Development and Research, Washington D.C.

See: http://www.huduser.org/publications/pdf/sec8success.pdf. 

21  Mills, Gregory, et al.  “Effects of Housing Vouchers on Welfare Families.”  U.S. Department of Housing and Urban Development, Office of Policy Development and Research, p. 139.  September 2006.

22  Because of the high demand for housing vouchers, wait lists periodically close themselves to new applicants by region.  In Montgomery County, for instance, the wait list was re-opened in 2006 for a one month period during which time 17,800 individuals applied for an allotted 1,550 units – 99 percent of which were already filled.

Levitz, Dena. “Waiting-list for low-income housing open in Montgomery.” The Examiner. September 20, 2006. Available at: http://www.examiner.com/a-298205~Waiting-list%20for%20low-income%20housing%20open%20in%20Montgomery.html.

23  Analysis of Impediments to Fair Housing Choice, Montgomery County, Maryland.  April 2007.

24  U.S. Census Bureau.  State and County QuickFacts.  Available at: http://quickfacts.census.gov/qfd/states/24/24031.html.

25  Analysis of Impediments to Fair Housing Choice, Montgomery County, Maryland.   April 2007.

26  Single-family detached housing is a free standing residential building on a lot bigger than the structure itself.  Singly-family attached housing, alternatively, is one of a group of adjoining houses, which share a common wall and external property rights.

Rhode Island Real Estate Sales & Mortgage Financing.  “Types of Housing.”  Available at: http://www.homesalesri.com/Housing_Types.php#single.

27  2004 Assisted Housing Survey.  Metropolitan Washington Council of Governments.  March 2005.

28  Id.

29  According to the April 2007 Analysis of Impediments to Fair Housing Choice in Montgomery County, Maryland, renters were paying a greater percentage of their household income for their housing costs, which resulted in 10 percent fewer households able to afford rent in 2003 than in 1997.

Equal Housing Opportunity. Analysis of Impediments to Fair Housing Choice in Montgomery County, Maryland.  April 2007.  Available at: http://www.montgomerycountymd.gov/content/dhca/community/Impediments_to_Fair_Housing/analysis_of_impediments_dhca_final.pdf.

30  Id.

31  HUD Data collected in 2000.  “Comparison of Montgomery County Section 8 Voucher Holders to Voucher Holders Across U.S.”  Available at: www.huduser.org/picture2000/index.html.   

32  In 2007, nationally 43.8 percent of voucher holders in the country were African American, 55 percent were families with children under 18, and 83 percent were female heads of households.

33  HUD 2007 Annual Report on Fair Housing.  Available at: http://www.hud.gov/offices/fheo/library/FairHousing-FY2007AnnualReport.pdf.

2005 Assisted Housing Survey.  Metropolitan Washington Council of Governments.  March 2005.

34  Analysis of Impediments to Fair Housing Choice, Montgomery County, Maryland.  April 2007.

35  Montgomery County Code: Chapter 27, Article 1 (1991).

36  Montgomery County Maryland, Sources of Income General Guidelines.  Available at: http://www.montgomerycountymd.gov/dhctmpl.asp?url=/Content/DHCA/housing/landload_T/income.asp.

37  Id.

38  Housing Opportunities Commission of Montgomery County, MD, Voucher Payment Standards.  Available at: http://www.hocmc.org/Housing/HCV/HCV-VPS.asp.

39  In five additional tests (5 percent of the time) testers were told that only vouchers issued by a specific local housing authority, e.g., the City of Rockville, were accepted.  This statement, while technically acceptable, is an artificial barrier.  One of the most important factors regarding housing vouchers is that they are “portable”- a voucher may be used for qualifying housing outside the jurisdiction of the Public Housing Authority (PHA) that originally issued the voucher.  If an applicant finds a housing unit in a different PHA’s jurisdiction, the PHA where the property is located will “absorb” that applicant into its jurisdiction and issue a “local” voucher.  Landlords  putting up this limitation, whether intentionally or not, may discourage an incoming voucher holder from seeking housing at all.