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The rent reform demonstration: Early effects on employment and housing subsidies (Riccio & Deitch, 2019)

Absence of conflict of interest.  

Citation

Riccio, J., & Deitch, V. (2019). The rent reform demonstration: Early effects on employment and housing subsidies. U.S. Department of Housing and Urban Development, Office of Policy Development and Research. https://www.huduser.gov/portal/publications/RentReform-EarlyEffects.html [Lexington, KY]

Highlights

  • The study's objective was to examine the impact of the Rent Reform Demonstration on earnings and employment among families served by the Public Housing Authority (PHA) in Lexington, Kentucky. The authors also investigated similar research questions for three other PHAs as separate contrasts and conducted a pooled analysis across all four sites, the profiles of which are available here: 

  • The study was a randomized controlled trial that used PHA administrative data and wage records to compare families receiving housing choice vouchers who were subject to the new Rent Reform Demonstration rules to a comparison group subject to the existing rent rules of their PHA. 

  • In Lexington, KY, the study found that new rent policy group had significantly higher earnings in Quarter 8, and were significantly more likely to remain in the HCV program after 30 months than the existing rent rules group. The study found no statistically significant effects of the new rent policy on employment.  

  • The quality of causal evidence presented in this report is high because it was based on a well-implemented randomized controlled trial. This means we are confident that the estimated effects are attributable to the Rent Reform Demonstration, and not to other factors. 

Intervention Examined

Rent Reform Demonstration

Features of the Intervention

The federal Housing Choice Voucher program that provides rental subsidies to low-income families has been criticized for having a disincentive to work (due to policies that increase rent prices as family income rises) and for requiring substantial administrative costs and effort to implement. In 2015, the U.S. Department of Housing and Urban Development (HUD) launched the Rent Reform Demonstration to design and evaluate an alternative rent-subsidy policy for housing choice voucher recipients. 

In Lexington, the new Rent Reform Demonstration policy updated three main areas of the subsidy program: (1) how total tenant payments and subsidies are calculated, (2) recertification time periods, and (3) safeguards for families. First, the policy simplified how the total tenant payment (TTP) is calculated by basing it on gross income over the past 12 months (rather than adjusted income), ignoring income earned from total family assets less than $25,000, and linking utility allowances to voucher amounts. A $150 minimum total tenant payment designed to mirror a typical landlord-tenant relationships was also implemented prior to when the demonstration began and continued to apply as part of the new rent policy. Second, annual income recertifications were replaced with a triennial recertification to ensure that that earnings gains do not increase TTP for at least two years. Finally, the new policy included additional safeguards for families. For example, the revised policy included a 6-month grace period to allow families to temporarily reduce their TTP after the triennial recertification if their current or expected income was lower than their income over the prior 12 months and allowed for the family to apply annually for interim recertifications when their income dropped by more than 10 percent. Additionally, the new policy included a revised hardship policy that allowed TTP reductions under specific conditions (e.g., when facing eviction).  

Features of the Study

The study was a randomized control trial designed to evaluate the effects of the Rent Reform Demonstration on earnings and employment for the Lexington-Fayette Urban County Housing Authority in Lexington, KY. The authors used a statistical model to compare the outcomes of the treatment and control group members based on PHA administrative records and wage records obtained through the National Directory of New Hires. 

The Lexington PHA study sample included 979 households who were not elderly or disabled (as defined by HUD), were currently receiving housing choice vouchers, and were scheduled for recertification. 486 households were randomly assigned to the treatment group and were subject to the new rent policy for the duration of the demonstration. 493 households were assigned to the control group and were subject to the existing rent policies in place at the Lexington Housing Authority. Heads of households were predominately female (97 percent), Black/African-American (81 percent), and 37 years old on average.

Findings

Employment 

  • The study suggested a positive relationship between the Rent Reform Demonstration on ever being employed, being employed in all quarters, and average quarterly employment, but these relationships were not statistically significant. 

Earnings and Wages 

  • The study found that the new rent policy group had significantly higher total earnings ($353 more) in the eighth quarter after random assignment. However, total earnings in Year 1 (Quarters 3-6), Year 2 (Quarters 7-10), Years 1 and 2 combined (Quarters 3-10), and all other individual quarters were not significantly different across the groups. 

Public Benefits Receipt  

  • The study found that significantly more families in the new rent policy group remained in the HCV program than the comparison group (5.1 percent more). 

  • The study did not find any statistically significant effects of the Rent Reform Demonstration on the length of time a household received a housing subsidy.  

Considerations for Interpreting the Findings

Although the study was a well-implemented randomized controlled trial, there are a few factors that should be considered when interpreting the findings. 

The study authors estimated multiple related impacts on outcomes related to Employment, Earnings, and Public Benefits Receipt. Performing multiple statistical tests on related outcomes makes it more likely that some impacts will be found statistically significant purely by chance and not because they reflect program effectiveness. The authors did not perform statistical adjustments to account for the multiple tests, so the number of statistically significant findings in these domains is likely to be overstated. 

Lexington had already introduced a $150 minimum TTP before the demonstration began, with few exemptions permitted. The authors noted that because Lexington continued the policy for both the new rent policy and existing rent policy group, findings only reflect the other features of the new rent rules and not any possible effects of a minimum TTP. 

For the purposes of this report, the authors defined the follow-up period as “the period that begins in the month after the month in which the family’s new TTP was expected to take effect” and not from random assignment. A family’s new TTP effective date typically occurred 4 to 6 months after random assignment (in Quarter 3). Thus, Year 1 is defined as Quarters 3-6 after random assignment, and Year 2 is defined as Quarters 7-10 after random assignment. 

Causal Evidence Rating

The quality of causal evidence presented in this report is high because it was based on a well-implemented randomized controlled trial. This means we are confident that the estimated effects are attributable to the Rent Reform Demonstration, and not to other factors. 

Additional Sources

Riccio, J., Verma, N. & Deitch, V. (2019). The Rent Reform Demonstration: Interim Findings on Implementation, Work, and Other Outcomes. U.S. Department of Housing and Urban Development, Office of Policy Development and Research. https://www.huduser.gov/portal/publications/RentReform-InterimFindings.html Riccio, J., Verma, N., and Deitch, V. (2017). Reducing Work Disincentives in the Housing Choice Voucher Program: Rent Reform Demonstration Baseline Report. US Department of Housing and Urban Development.

Reviewed by CLEAR

January 2023