Masters Thesis

Evaluating the potential impact of small area fair market rents in Kern County

The Housing Authority of the County of Kern administers a wide range of programs intended to serve the housing needs of low-income residents, however, this evaluation will focus on the Section 8 program in Bakersfield. Tenant-based Section 8 vouchers can be used wherever a landlord is willing to accept them, but the Fair Market Rent (FMR) of the metropolitan area limits the maximum voucher amount. The FMR takes the rents of the entire county into account, so in counties with rural areas such as Kern, the FMR can funnel program participants into lower-income areas. However, this method of determining FMRs is problematic for a few reasons. Rents can vary greatly from one neighborhood to another, so payment standards based on metro-wide FMRs are often too low to cover market rents in some more desirable neighborhoods. Research finds that the neighborhood in which one lives can affect the rate of teenage pregnancy, the likelihood of dropping out of school, school achievement, future employment prospects, exposure to environmental hazards, and criminal behavior. As an alternative to the 50th percentile program, HUD has developed Small Area Fair Market Rents (SAFMRs) to reflect rents in ZIP code-based areas with a goal to improve HCV tenant outcomes. SAFMRs have been shown to be a more direct approach to encouraging tenant moves to housing in lower poverty areas by increasing the subsidy available to support such moves. The Housing Authority of the County of Kern currently does not use SAFMRs. There are currently 3,156 households receiving vouchers and 93305 (45.2%) is the only zip code in Bakersfield reaches the threshold of “concentrated poverty. Out of the 2,802 HCV families living in Bakersfield, 272 of them live in 93305. However, there are three other Bakersfield zip codes that approach this threshold: 93301 (32.9%), 93304 (34.3%), and 93307 (33.2%). In sum, 272 HCV families live in “concentrated poverty,” and an additional 1,253 HCV families live in zip codes in which the poverty level is at least 32.9%; together this totals 1,525 out of the 2,802 total families in the HCV program. Thus, 9.7% of HCV families live in “concentrated poverty,” and 54.4% of HCV families live in zip codes in which the poverty level is over 30%. The SAFMR program is still new, and the sample data is still being analyzed, so it is difficult to project how it will fare if implemented in Kern County. However, early data from the Dallas SAFMR demonstration suggests that SAFMRs may be effective in reducing the concentration of vouchers in high-poverty zip codes. From 2010 to 2013, 44% of continuing voucher recipients moved units; this raised the average neighborhood quality index by 0.23 standard deviations. The vast majority of neighborhoods with a positive net entry of vouchers ranged from one standard deviation below the mean to 2.5 standard deviations above the mean. Also, even though the average voucher cost decreased, there was a slight increase in administrative costs, thus the SAFMR demonstration did not impact the Dallas housing authorities budget positively or negatively. Based on available data, and viewing it from a risk-reward perspective, there is a clear upside and minimal downside, and thus incorporating SAFMRs into the Housing Authority’s Section 8 program is recommended.

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