National Housing Law Project Housing Law Bulletin

New Welfare Law’s Effect on Welfare Recipients and
on Housing Programs and Their Participants

The fundamental premise of the new system is that people who do not meet their moral responsibilities can be, and probably will be, turned out on the streets. The Congress has reserved to itself the power to determine what those responsibilities will be. These include limiting reliance on welfare to five years during one's adult life; engaging in work after two years of welfare benefits; staying in school and making sure that one's children stay in school; for those who are not high school graduates, getting a high school equivalency degree; for unmarried minor parents, living at home, cooperating in efforts to establish paternity and to secure child support; and participating in a community service program.

The second basic premise of the system was supposed to be that people who do meet their responsibilities would get the assistance they need to become self sufficient. That would include education, job training, assistance in looking for and keeping employment, measures to create jobs for all who need them, as well as decent child care and medical coverage. Unfortunately, the Congress and the President have not fulfilled their responsibilities on this end of the bargain. Although they have authorized some more funding for child care, job training and job creation, they have done so at levels far lower than will be necessary to get the job done.

The end result of this will be severe adverse effects upon poor people and their housing situations. Poor people who are not already receiving housing assistance will have an even greater need for it as their incomes fall. They will face even greater competition for the limited housing assistance that is available, as hundreds of thousands of other families fall into poverty and apply for housing. Those who are now participating in the housing programs will face difficulties paying their rent if their welfare income falls, even if they are able to secure rent reductions. In addition, the housing budgets of both the federal agencies and of local landlords will come under increasing pressure as tenants' rental contributions drop and the claims for housing subsidies increase.

Aside from the changes to the welfare program itself, the new law also makes certain changes that directly impact the housing programs. These changes will either make some categories of people ineligible for housing programs or reduce their assistance or will decrease tenants' assistance under other benefit programs, such as food stamps, because of their receipt of housing assistance.

This article is intended to help people wade through this confusion. Before providing the bad news, it begins with a brief recognition of the benefits that the act may bring to some people and the housing implications of those benefits. It next shifts to the more troubling points, starting with a description of the major changes that the new law makes in the welfare programs, and then suggesting what some of the impacts will be on people participating in the housing programs or applying for them. Finally, it describes those provisions of the law that will directly affect operation of the housing programs themselves. A separate article in this Bulletin discusses the law's impact on the housing situations of immigrants, both legal and undocumented.²

The Benefits That May Accrue to Some

Before turning to the negative effects, one should acknowledge the positive outcomes that this legislation may produce for a portion of the welfare population. Some people, in fact more people than might otherwise be the case, may move from welfare to jobs that pay a living wage. One can see the necessity for the housing system to get ready to meet the needs of these people.

If public housing agencies (PHAs) and Section 8 landlords want to keep tenants who move from welfare to work, even for a short transition period, they will have to make some modifications of their rent calculation systems. PHAs currently have the authority to cap people's rents at a level somewhat below the private market, i.e., to create ceiling rents, so that tenants who succeed in the workplace do not face steep rent increases every time they get a raise.³ PHAs also now have the power to create deductions from earned income to cushion the transition to work and ensure that rent increases do not eat up all the extra income that tenants get by moving into the workplace.⁴ These safeguards, however, are discretionary with the PHAs. Those that do not put them into place may find themselves losing tenants who have succeeded under the new welfare program.

Congress, however, has not created comparable safeguards for Section 8 tenants who move from welfare to work. In fact, last January it repealed its one effort in that direction — Section 957 of the 1990 National Affordable Housing Act — which had limited to 10 percent per year for three years any rent increases resulting from going to work.⁵ Congress must now extend to Section 8 tenants the deductions from earned income that are needed to eliminate disincentives from going to work.

The positive outcomes from these changes in the welfare programs may also enable PHAs and Section 8 project-based landlords to achieve the economic mix that they have been advocating for so many years. There has been fairly widespread recognition that PHAs can not achieve economic mix by relying on admissions alone, and even some candor that admissions policies are not likely to produce any economic mix at all. The way to have more employed tenants in public and assisted housing is to help current tenants get jobs and encourage them to stay, at least for a while, when they succeed. Some of the changes in the new welfare law open up that opportunity for PHAs and Section 8 landlords.

To take best advantage of those opportunities, PHAs and Section 8 landlords will have to work closely with welfare departments and job training and counseling agencies to ensure that public and assisted housing tenants get their fair share, if not more, of the employment support and child care funding that is made available, even if it is not enough for everyone. In addition, PHAs and Section 8 landlords should contribute something as well, e.g., employment opportunities in the maintenance, renovation and management of their housing developments.

If this new approach is going to work well, even for some of the people on now welfare, all components of the system — housing, employment, education, child care and health care — are going to have to be involved. The people who run the housing programs should not turn their backs on welfare recipients. By actively supporting tenants in the move from welfare to work, they can improve the financial situations of their housing developments. At the same time, the housing programs must also be prepared to deal with the negative fallout from the changes in the welfare legislation. These negative effects may ultimately be of greater significance, and it is to these that we now turn our attention.

Changes to the Welfare Program

The law will most likely lead to lower grant levels in most states, either soon or eventually, for several reasons. It also imposes numerous limits on families' eligibility for these federal funds and authorizes the states to create other eligibility limits and to impose sanctions for "irresponsible" conduct. In addition, the law also makes changes to other benefit programs like food stamps and Supplemental Security Income (SSI) that will have an effect on the money that people will have available to pay rent. The following discussion describes each of these changes.

Factors Leading to Lower Benefit Levels

Over the past five years, welfare grant levels have been dropping in real dollars. Most states have not raised grants to offset inflation for more than a decade. Many states have gone further and have cut the already inflation-eroded grant levels. With this new welfare law, there are four reasons why those cuts are likely to continue into the future.

First, under the new program, a state will be allowed to cut by 25 percent the state funds it puts into its program without losing any federal dollars.⁷ Up until now, if a state cut its funding, it would loose a corresponding amount of federal funding because federal dollars had to be matched with state dollars. The match varied from state to state in accordance with the economic conditions in each, but they ranged up to 50 percent of the total grant. In California, where the match was 50 percent, cutting each family's monthly welfare grant by $100 saved the state only $50 a month per family. Under the new system, a state like California can cut $500 grants by $60 and use the entire savings to cut the state contribution to welfare, dollar for dollar. When the deterrence of losing federal monies is lifted, many states will certainly be tempted to to cut their contributions and grant levels to save state dollars.

Second, under the new program, states will not have to use all of their federal block grants to pay welfare benefits. States can use up to 30 percent of their federal funds to carry out programs under Title XX of the Social Security Act or under the Child Care and Development Block Grant Act.⁸ Given the child care needs that the new welfare act will create, it is likely that some of the federal funds will be diverted from welfare grants to child care assistance. In addition, under Title XX, funds may be also spent on other activities for the benefit of more powerful constituencies, including the elderly, people with disabilities and people with incomes up to 200 percent of the poverty level.⁹ Thus, additional funds could well be diverted to those activities.

Third, with the discretion granted states to devise their own welfare programs, they will be free to eliminate cash payments altogether or to combine some cash with in-kind assistance and vouchers for particular expenses.¹⁰ In doing so, the states may reduce the money that families have to pay their rent.

Fourth, even though the federal dollars that the new welfare law appropriates for welfare do not represent a cut, that level is now fixed for the next seven years.¹¹ As inflation gradually eats into the value of those dollars, the real value of the federal funds that have been appropriated will fall, and it is unlikely that a Congress driven to balance the budget will make adjustments for inflation later. In addition, except for a contingency fund that is widely recognized as inadequate, there is no provision to increase federal funding when the welfare rolls rise during future recessions. As more people apply for welfare, the state will have to cut the amount available to each family, because increased federal funds will not be available to meet the needs of greater numbers of families. The only alternatives will be increased state funding, which is not likely, or waiting lists, which people in the housing world are used to, but which should shock the nation's conscience if they were applied to welfare applicants.

Because of these four factors, it is most likely that welfare grants as a whole will be reduced in the future. Those reductions will have severe consequences for poor families as far as their housing situations are concerned, and indirectly for the housing programs themselves.

Ineligibility of Different Categories of Families for Welfare

Beyond increasing the likelihood that welfare grant levels will be reduced across the board, the law will make certain categories of people ineligible altogether, both because it denies eligibility to some people and because it grants the states discretion to develop their own eligibility criteria that can disqualify even more people.

The federal disqualifications are numerous. First, any family that contains a person who has received assistance under this new program for a total of 60 months (five years) at any time during his or her adult life will be disqualified for any federal assistance.¹² This rule is prospective only, so no one will be disqualified under this provision until five years after August 1996, i.e., September 2001 at the very earliest. In addition, states will be free to spend their own funds on people in this category if they wish to.¹³ And, of course, the rest of the family can kick the ineligible person out of the household in order to preserve their eligibility for federal funds. But if they do not, everyone in the family is disqualified from federal funding, even if they have not reached the five-year cutoff themselves and even if they are children.

As another article in this Bulletin explains in more detail,¹⁴ unqualified immigrants, i.e., immigrants who have not been admitted for permanent residence or as refugees or been granted asylum or had their deportation withheld, are ineligible for federally and state-funded welfare assistance.¹⁵ In addition, new lawfully admitted immigrants are disqualified for the first five years after their arrival, and thereafter their sponsor's income must be counted in determining whether they are eligible for welfare.¹⁶

Unmarried minor parents are also made ineligible for federal welfare benefits if they do not have or do not pursue a high school diploma and do not live in their parents' home.¹⁷ The only exceptions are that the minor parent may live with another relative or in another adult-supervised living arrangement if she has no living parent or adult relative who will take her in or she or her children are being subjected to abuse. The states are also given general power to waive this disqualification in appropriate circumstances.

Children who are away from home for 45 consecutive days are ineligible for federally funded welfare assistance.¹⁸ States may shorten the 45-day standard to 30 days or lengthen it to as long as 180 days. Once it becomes clear to a parent that a child will be away for the specified period, the parent must notify the state within five days and the state must reduce the grant accordingly.

Not surprisingly, the act also makes people who are fleeing the law to avoid prosecution or imprisonment ineligible for federally funded welfare, as well as people who are in violation of parole or probation.¹⁹ In addition, unless pardoned by the President, a 10-year disqualification is imposed on anyone who is convicted of fraudulently trying to get welfare in more than one state.²⁰

Beyond these federal restrictions, states are authorized to develop their own definitions of who is eligible for state and federally funded welfare. The statute specifically states that no individual or family is entitled to assistance under any state welfare program funded with the block grant.²¹ If the states wish to shorten the time limit from five years they may; if they wish to make individuals who are not citizens ineligible, they may do that as well.²² The eligibility criteria need only be objective and the applicants need only be treated fairly.²³ Thus many people who now are eligible for welfare under AFDC will have no guarantee that they will continue to be eligible under the new program.

The Imposition of Sanctions on Individual Families

Individual families may also have their welfare grants reduced or entirely withdrawn if they fail to fulfill numerous responsibilities imposed upon them by the new welfare act and the states. First, adults in the household must engage in work when the state determines they are ready to or after receiving benefits for two years, even if the state has not determined them to be ready.²⁴ Many things count as engaging in work, including employment, searching for a job, vocational education and job training, going to high school and community service.²⁵ The mandatory hours per week range from 20 to 35, depending upon family configuration and year. States may, but do not have to, exempt single parents with children under one year.²⁶ In addition, states cannot penalize parents with children under six years if they cannot secure child care.²⁷ All other parents who fail to engage in work, however, must have their grants reduced and may have them terminated, at the state's option.²⁸ Each state also must meet goals for ensuring that an ever increasing percentage of its welfare caseload is engaged in work.²⁹

After being on the program for two months, all individuals who are not engaged in work must participate in community service, unless the state opts out of that requirement.³⁰

Families must ensure that minor children attend school as required by the state's truancy laws. If a family does not, the state may reduce its grant.³¹ If the family includes an adult between the ages of 20 and 51 who is not a high school graduate, the state may reduce the family's grant if that person does not work toward a GED.³²

Parents must also cooperate with the state in efforts to establish the paternity of their children and to secure child support from the absent parent. If the parent does not cooperate, the state must deduct at least 25 percent from the grant and may deny the family assistance altogether.³³

As indicated above, when a family knows that a child will be absent from the home for a significant time, as defined by the state, the parent must notify the state. If the parent does not notify the state, the state must deduct from the grant the amount that assists that parent.³⁴ The act does not specify whether that is a lifetime sanction or one that applies only to the month of the failure to report.

If a state wishes to, it may develop an individual responsibility plan for each adult recipient that sets an employment goal for that person, a plan for meeting that goal and any specific obligations, such as attending school, imposed on the individual by the plan. If the person does not comply with the plan, the state may reduce the family's grant unless there is good cause for the noncompliance.³⁵

As with the new rules on eligibility, these powers to impose sanctions will increase the number of people who have less income to pay rent and who desperately need housing assistance. Their loss of income will also have an impact on their entitlement to housing assistance and on the housing programs' budgets.

The Disqualification of People from Food Stamps and SSI

In addition to the changes in the welfare program, the act also makes changes to the food stamp and SSI programs that will reduce some people's benefits and make others ineligible. For example, all immigrants, both unqualified and lawfully admitted, are made ineligible for the food stamp and SSI programs.³⁶ The only exceptions are for refugees and asylees, permanent residents who have at least 40 quarters of Social Security-eligible employment, veterans and people on active duty. States may also disqualify lawful immigrants from Medicaid, with the same exceptions as for food stamps and SSI.³⁷

The new welfare law also modifies the standards for the SSI eligibility of children with disabilities, more narrowly limiting the categories of children who are eligible and restricting the methods for demonstrating eligibility.³⁸ Because of those more restrictive criteria, the law requires the Social Security Administration to reexamine within one year the eligibility of all children now receiving benefits.

As with welfare, fleeing felons, probation and parole violators and people who have fraudulently sought assistance from more than one state are disqualified from receiving SSI and food stamps.³⁹ Individuals sanctioned for not meeting responsibilities under the welfare program or any other means-tested public assistance program may also be disqualified for food stamps or have their food stamps reduced.⁴⁰ They also are not allowed to have their food stamps increased if they lose income or other benefits as a sanction.⁴¹

Unemployed individuals who are fit for employment, who have no children, and who are between the ages of 17 and 51 may not receive food stamps for more than three months every three years.⁴² Minor parents who live with their own parents no longer will be eligible to be treated as a separate household for purposes of establishing eligibility for and amount of food stamps.⁴³ All parents must cooperate in the establishment of paternity and the enforcement of child support obligations if they wish to receive food stamps. Parents not current on their own child support obligations are disqualified from food stamps.⁴⁴

Earned income of students between 17 and 21, which previously was exempt, will now be counted in calculating food stamp benefits.⁴⁵ The cap on the standard deduction for excessive housing expenses, which had been scheduled to be lifted, will now be retained.⁴⁶

These changes in the SSI and food stamp programs mean that more individuals will have less money available to pay for their housing expenses, either because their cash income drops or more of their income will be needed for other expenses, like food.

The Impact of These Changes

When people are hit with these losses of income and other benefits, there will be even more cases where they are forced to move out owing large rent bills, and where they are evicted because they cannot pay the rent, where they become homeless because they cannot get another landlord to rent to them.

Impact on People Without Housing Assistance

What people in this situation will need, other than a decent welfare system, is an effective program that can provide housing assistance. Yet what they will encounter is exactly the opposite. Our housing assistance system is in tatters. Already, more than half the people on welfare need housing assistance but do not get it. By the government's own admission, the federal housing programs assist less than half the people who have the worst case housing needs, i.e., those who pay more than 50 percent of their incomes for rent or live in substandard housing, or both.⁴⁷ The very poorest applicants are now being barred from the programs because they cannot pay the $25 minimum rent, which the PHAs are allowed to raise to $50.⁴⁸ PHAs are given new power to direct the limited housing resources they have to moderate-income applicants instead of to the poor, and they are fighting for even more freedom to do that.⁴⁹

The Congress is cutting funding for the housing programs, limiting public housing operating subsidies to 90-95 percent of what is needed, slashing funds for modernizing public housing, eliminating all funding that could be used to house more families than now can be housed now, and in fact reducing the funding for outstanding tenant-based assistance through attrition and delay of re-use of terminated certificates and vouchers. At the same time, HUD has embarked on the demolition of nearly 10 percent of the public housing stock — 100,000 units — and is encouraging the withdrawal of other public housing and privately owned, HUD-assisted housing from the subsidy programs.

The result will be that poor people who are not already participating in the federal housing assistance programs will find it almost impossible to get into them in the future when their welfare assistance shrinks. The waiting lists will be too long. They will not qualify for preferences to improve their position on those lists and they may even be skipped over by others with higher incomes or jobs. Very little housing assistance will become available through turnover and probably none though incremental appropriations to enable people to move off the lists.

The Impact on Those Receiving Housing Assistance

People who are already receiving housing assistance will be in better shape, but not without problems. If their incomes are cut because of across-the-board reductions in welfare grant levels, they will be entitled to rent reductions to reflect their lower income. If they lose welfare assistance or SSI because of the eligibility limits created by the new welfare law or by states exercising their new powers, they will again be entitled to rent reductions because of the reduced income. Even if they lose income because of the imposition of sanctions in a welfare program or SSI, they still will be entitled to a reduction in rent. The only program where a sanction imposed in welfare benefits may be carried over into another program is food stamps.⁵⁰ There is not a comparable provision stating that a loss of income caused by a welfare sanction cannot result in an increase in housing subsidies or a rent reduction. The only provision linking housing to welfare sanctions is the one that makes the commission of fraud in the welfare program grounds for terminating a person's housing subsidy or evicting them from public or assisted housing.⁵¹ If there is no fraud, the imposition of a sanction on a welfare recipient is not a ground for penalizing the person on the housing side.⁵²

Rent reductions in these cases will help, but they will not completely make up for the loss of the welfare or SSI income. Rent is only 30 percent of income, so the rent reduction offsets only 30 percent of the income loss. If a sanction or a new eligibility restriction leads to a loss of food stamps, there will not be any rent reduction at all, because food stamps are not considered in setting rent.⁵³ The loss of food stamps, however, will reduce the tenant's ability to pay rent, because some of the cash available for that purpose will now have to go toward buying food.

Many families facing these terrible financial straits because of a reduction in welfare or other benefits are likely soon to face eviction. Thirty percent of a greatly reduced welfare grant is too much to pay for rent when the cash that is left has to cover other essentials, like food. For example, 30 percent of $500 is $150, leaving $350 for other essentials; but 30 percent of $200 is $60, and leaves only $140 for those same essentials. If a family has also lost food stamps, its situation will be even more dire because more of the $140 will have to go for food. The cash that such families have to pay the rent will also be called upon to pay for essentials that the $140 cannot be stretched to cover. When there is no money for rent on the first, eviction follows.

Families that lose all of their cash income because of ineligibility or sanctions will even more quickly face eviction because of the minimum rent Congress imposed this year. That minimum is now set at $25 but may be raised by PHAs to $50. It used to be that families who lost all their income would be entitled to have their rents reduced to zero, so at least they would not be evicted. Now, their rent cannot be reduced below $25. The only way to avoid eviction would be for the PHA or HUD to waive the $25, but that can be done only for three months. If the family cannot get a waiver or the three months run out, it will be evicted.

The Impact on the Housing Industry and the Housing Programs

The reduction or loss of welfare income will have consequences not only for the families but also for landlords and housing agencies. More landlord and PHA administrative time will have to be spent adjusting rents and subsidy levels, collecting rent from even poorer tenants, trying to help them through their financial difficulties, and securing evictions and terminating subsidies. Lower tenant incomes and lower rents will increase the demand for housing subsidies. In many situations, existing contracts will oblige the federal government to pay the increased subsidies without any further approval from Congress. For example, multi-year project-based Section 8 contracts and certificate and voucher Annual Contributions Contracts (ACCs) require HUD to pay the difference between the contract rent and 30 percent of the tenant's adjusted income, no matter how low it goes. The only cap is the total budget authority that was approved for the full life of the contract when it was first executed. Until that budget authority cap is reached, outlays will grow without additional appropriations.

In other cases, appropriations will be necessary to cover the additional subsidy needs. For example, when Section 8 contracts and ACCs reach their budget authority limit, amendments will be needed to continue to subsidize the tenants already participating in the programs. Those amendments will require congressional appropriations. Congress most likely will appropriate the funds to cover those amendments, but it will look for other places to cut outlays over which it has control. For example, in Fiscal Year 1996, Congress required PHAs to delay re-use of certificates and vouchers that became available when participating families left the program for any reason.⁵⁴ That reduced the Section 8 money HUD had to lay out under current Section 8 ACCs, but also increased the time people on the waiting list had to wait before securing assistance.

Another situation where the demand for additional subsidies will have a significant impact involves public housing. As public housing tenants' incomes fall because of all of these changes in the welfare programs, the demand for operating subsidies will increase. Public housing operating subsidies are appropriated on a yearly basis, so the PHAs have no guarantee that Congress will make up the income they lose when tenants' rents drop.⁵⁵ Each year HUD, the PHAs and the tenants have to pressure Congress to appropriate the funds that PHAs need. Public housing operating subsidies were protected against cuts in the Fiscal Year 1995 rescission, were cut less than 4 percent in FY 1996, and are likely to be increased, in nominal dollars, a small amount in FY 1997. However, when inflation is considered, there is an increasing gap between what Congress appropriates and what PHAs need for operating subsidies. The price for keeping that gap from growing even wider has been cuts in public housing modernization funds. When the impact of welfare reductions hits, it will be very difficult to secure increases in operating subsidy appropriations from Congress to offset 100 percent of the lost PHA income.

Faced with that constraint, PHAs and their trade associations already are taking steps to save themselves and will take even more in the future. To enable them to rent to higher income applicants, they have gotten rid of federal preferences and the ban against skipping over applicants with lower incomes.⁵⁶ They have secured authority to take applicants with earned income before opening the doors to applicants who have only welfare income.⁵⁷ They are seeking authority not to rent to applicants with incomes beneath roughly $10,000 per year until 60 percent of their tenants have incomes above that level, which they estimate will take at least five years.⁵⁸ The minimum rent will enable them to put the poorest tenants out on the street and replace them with higher income applicants. If they can get the Brooke Amendment repealed, they will be able to set flat rents that will be too high for even more tenants who also can be evicted and replaced. Finally, they are trying to demolish their worst projects, in which no one other than the poorest of the poor will live, to avoid losing money on them. Keeping them open to ensure the very poor a place to live is not part of the plan.

Additional Changes to the Housing Laws and Other Direct Effects Upon Housing

Another change that most likely will not have much impact is the provision authorizing the eviction of public housing and Section 8 tenants who are fleeing prosecution or incarceration for a felony charge or who have violated parole or probation.⁶⁰ Maybe some fleeing felons manage to hide out long enough to work their way to the top of public housing and Section 8 waiting lists, but they are probably few and far between. If they are there, however, another provision will make it easier to find them. Under it, whenever a police officer shows up at a project officially asking for the address, Social Security number and picture of any tenant who is fleeing prosecution or violating parole or probation, the PHA will have to provide the information.⁶¹

The provisions relating to fraud in means-tested public assistance programs will probably have a greater impact. They provide that when a person loses income in one program because of fraud, the persons benefits under other programs may not be increased as a result of the income loss.⁶² Public housing and Section 8 are included in the definition of means-tested program, but Rent Supplements, Section 236 RAP and RHS programs are not.⁶³ Tenants participating in the included housing programs who loose welfare payments because of fraud will not be entitled to a decrease in their rents to offset the loss of income. Similarly, if a person is evicted from public housing or loses Section 8 because of fraud, they apparently will not qualify for an increase in food stamps, even though their housing costs would otherwise entitle them to an excess shelter cost deduction in the food stamp program.

Some participants in the housing programs will be affected by the changes regarding treatment of housing subsidies as income for other programs. One section in the bill specifically repeals a provision that had excluded from the income of food stamp recipients any housing assistance paid to third parties on behalf of residents of transitional housing for homeless people.⁶⁴ That repeal most likely will mean that some such payments now will be treated as income in calculating food stamps. However, the payments will have to be made by a state or local government in lieu of regular welfare or general assistance and they cannot be made by a state or local housing authority or the federal government.⁶⁵ Thus it is not too clear what will be covered, but if payments to welfare motel owners are covered, then many people will lose food stamps.

Another provision repeals a statute that was enacted in 1983 to correct a problem that some public housing tenants who paid their own utilities were encountering in Washington state.⁶⁶ These tenants' welfare grants were so low and their utility obligations so high that they owed no rent to their PHA. The state treated them as if they had no shelter obligation and excluded the shelter component from their welfare grants. In contrast, public housing tenants whose utilities were included in rent got the full welfare grant. The 1983 amendment obliged the welfare department to treat the tenants' utility payments as shelter payments and thus to provide tenants who paid their own utilities the same welfare grants as those who did not. The repeal of that provision opens up the possibility that states exercising their new discretion in designing welfare programs will provide lower grants to assisted housing tenants who pay no rent because all their share goes to the utility company.

That, of course, may be the least of the problems that assisted housing tenants have with the new welfare programs. Historically there always has been a battle between welfare departments and HSS and PHAs and HUD over who should pay for the housing costs of welfare recipients. HHS and the welfare departments would like to pay as little as possible for the rent of welfare recipients living in HUD-assisted housing. HUD has always tried to prevent the housing subsidies it pays for welfare recipients from being any higher than those paid for other tenants. In most states there has been a truce for public housing since 1974, when the welfare rent statute was enacted,⁶⁷ and the same has been true since 1981 for Section 8, when that provision was extended to all HUD's rental programs.⁶⁸ There have been some skirmishes on the fringes, for example, with ratably reduced welfare grants.⁶⁹ In addition, welfare departments have had the power to count housing subsidies as income to the extent that their value duplicated the housing components of welfare grants, but few have done so, probably because of the complexities of that statute.⁷⁰

Now, however, everything may be opened up again. The statute granting welfare departments authority to count housing subsidies as income, and the limits imposed on that authority, have been repealed.⁷¹ Most of the federal restrictions on how a welfare department can design its program have been lifted. Flat grants are no longer encouraged. Cash grants are not even necessary now. Contracting with charitable, religious and private organizations for services is allowed, as is the provision of vouchers which recipients can redeem with such organizations.⁷² It is quite possible that welfare departments may decide to provide smaller grants or reduced vouchers to tenants who are in public or assisted housing in comparison with tenants who are renting without subsidies on the private market.

Even if the state welfare departments do not go that far, the changes they make may create havoc with the rent formulas for the housing assistance programs that for the most part are based upon the family's cash income, either gross or adjusted. The housing statutes provide no direction on how vouchers or in-kind assistance should be treated. The one exception is the welfare rent provisions of the housing statutes. Under those provisions, assisted tenants who receive welfare grants that include a shelter component adjusted in accordance with actual housing costs must pay rent equal to that shelter component.⁷³ Possibly that provision would be read as requiring that the rent of a tenant who receives a housing voucher from a welfare department be set at the level of such a voucher.

Looking at it the other way, one beneficial provision of the Act is Section 404(h) which authorizes working welfare recipients to put some of their earnings into individual development accounts (IDAs). One of the purposes for which IDAs may be used is the purchase of a home. More importantly, funds placed in an IDA, including matching funds deposited by nonprofits or governments, and interest on those funds, cannot be counted as income when a person's rent is calculated under any federal housing assistance program.⁷⁴

With the enactment of this welfare legislation, we are at a crossroads. We can make changes in the housing programs so that they will assist large numbers of people in making a successful transition to work. We can expand the housing programs so that those who fail will at least not be evicted from their homes, even if the rest of their safety net has been torn apart. Or we can turn the housing assistance programs the other way, changing them as the welfare program was changed, so that they serve only those who have succeeded, not those who fail. As a nation, the choice is ours to make.

1. H.R. 3734, Pub. L. No. 104-193, 110 Stat. 2105, 104th Cong., 2d Sess. (Aug. 22, 1996). In this article, unless otherwise noted, section references will be to the Public Law version of the Act.
2. See New Welfare Law's Effect on Immigrants, elsewhere in this issue.
3. 42 U.S.C.A. § 1437a(a)(2) (West Supp. 1996).
4. Pub. L. No. 104-99, § 402(c), 110 Stat. 26, 41 (Jan. 26, 1996).
5. Id. § 404, 110 Stat. 44.
6. § 116(c).
7. Section 409(a)(7) of the Social Security Act (SSA), as rewritten by Section 103 of the Welfare Act. The changes to Title IV of the Social Security Act made by Section 103 are cited hereinafter as sections of the SSA.
8. SSA § 404(d).
9. 42 U.S.C.A. § 1397 (West Supp. 1996).
10. § 104.
11. SSA § 403.
12. SSA § 408(a)(7).
13. SSA § 408(a)(7)(F).
14. Supra note 2.
15. §§ 401 and 411.
16. §§ 403 and 421.
17. SSA §§ 408(a)(4) and (5).
18. SSA § 408(a)(10).
19. SSA § 408(a)(9).
20. SSA § 408(a)(8).
21. SSA § 401(b).
22. SSA § 402(a)(1)(B)(ii).
23. SSA § 402(a)(1)(B)(iii).
24. SSA § 402(a)(1)(A)(ii).
25. SSA § 407(d).
26. SSA § 407(b)(5).
27. SSA § 407(e)(2).
28. SSA § 407(e).
29. SSA § 407(a).
30. SSA § 402(a)(1)(B)(iv).
31. SSA § 404(i).
32. SSA § 404(j).
33. SSA § 408(a)(2).
34. SSA § 408(a)(10).
35. SSA § 408(b).
36. SSA §§ 401 and 402(a).
37. SSA § 402(b).
38. § 211.
39. §§ 202 and 821.
40. § 819.
41. § 829.
42. § 824.
43. § 803.
44. § 823.
45. § 807.
46. 7 U.S.C.A. § 2014(a)(7), as amended by § 809(a).
47. See HUD, Rental Housing Assistance at a Crossroads: A Report to Congress on Worst Case Housing Needs (Mar. 1996) (available from HUD's Office of Policy Development and Research, Washington, DC 20410-6000, for $5.00). A brief summary of this report appeared at 26 HOUS. L. BULL. 68 (May 1996).
48. Pub. L. No. 104-99, § 402, 110 Stat. 26, 40 (Jan. 26, 1996).
49. Id. § 402(d).
50. § 819.
51. § 911.
52. A provision in the housing authorization bill now being negotiated by a conference committee considering H.R. 2406 and S.1260 does contain language that would withhold rent decreases from assisted tenants who lose income because of a welfare sanction. S.1260, § 106(b) (Aug. 30, 1996, draft).
53. 7 U.S.C.A. § 2017(b) (West Supp. 1996).
54. Pub. L. No. 104-99, § 403(c), 110 Stat. 26, 44 (Jan. 26, 1996).
55. 42 U.S.C.A. § 1437g (West 1994).
56. Pub. L. No. 104-99, § 402(d), 110 Stat. 26, 41 (Jan. 26, 1996).
57. 24 C.F.R. § 960.205(a) (1996).
58. Council of Large Public Housing Authorities, Targeting on New Admissions Impedes Goal of Broad Range of Incomes in Public Housing (July 26, 1996).
59. Supra note 2.
60. See § 903(a), amending 42 U.S.C.A. §§ 1437d(l) and 1437f(d)(1)(B).
61. § 903(b).
62. § 911(a).
63. § 911(b).
64. § 811.
65. Id.
66. § 110(d) repealing § 221 of Pub. L. No. 98-181, 97 Stat. 1153, 1188 (1983), 42 U.S.C.A. § 602 note (West 1991).
67. 42 U.S.C. § 1437(a), as rewritten by Pub. L. No. 93-383, § 201(a), 88 Stat. 654 (1974).
68. Pub. L. No. 97-35, § 322, 95 Stat. 400 (1981).
69. See, e.g., White v. Pierce, 834 F.2d 725 (9th Cir. 1987).
70. 42 U.S.C.A. § 602(a)(7)(C)(ii) (West 1991).
71. § 103(a)(1).
72. § 104(a)(1).
73. 42 U.S.C.A. § 1437a(a)(1)(C) (West 1994).
74. § 404(h)(4).