A 2012 protest against Oak Park Apartments, which refused to rent to voucher holders Credit: Stacie Scott/Sun-Times Media

In June the Department of Housing and Urban Development proposed a sweeping change in how it calculates rent payments for Housing Choice Vouchers, aka Section 8. Now the Chicago Housing Authority is worried that the change might lead to a mass displacement of voucher holders who would see the value of their vouchers decrease. But fair housing advocates are more worried that HUD’s proposal could prevent voucher families from moving to better neighborhoods.

Normally, the value of Section 8 vouchers is determined by “fair market rent”—a calculation that averages rent prices in a given geographic area to determine the maximum amount the housing authority will pay for units ranging from studio apartments to single-family homes.

For the CHA, this geographic area encompasses the entire city—the Gold Coast and Englewood alike—so advocates have long argued that the area used to determine fair market rents in Chicago is too large. As a recent Reader investigation showed, this leads to vouchers valued less than the cost of rent in wealthier neighborhoods, and more than the market value of units in poorer neighborhoods. The latter problem, as WBEZ has reported, can lead to aggressive recruiting of voucher holders to the poorest, most segregated parts of town.

In Chicago, the current fair-market rent for a two-bedroom apartment is $1,176, which is less than what a renter would pay in a well-to-do area but more than a renter would pay in a poorer neighborhood.

HUD’s proposal would instead tie Section 8 rents to “small area fair market rent,” narrowing the geographic area used for voucher rent calculations down to zip codes.

The CHA is worried that adjusting rent calculations this way will cause a drop in voucher values for 74 percent of Chicago’s 46,000 voucher households (most of whom live in segregated, low-income parts of the south and west sides) and lead to a wave of evictions or landlords refusing to renew leases.

“CHA is very concerned that the implementation of [small-area fair-market rent] levels might cause further decline in weak markets in Chicago,” Kathryn Ludwig, the CHA’s chief housing choice voucher officer, writes in the agency’s official response to HUD’s proposal. “With the fear and uncertainty that [small-area fair-market rent] may bring lower rents from voucher holders, owners may be further discouraged from participating in the [voucher] program.”

Advocates say this fear is unfounded.

“It’s much ado about nothing,” says Sheryl Seiling, director of rent assistance at the Housing Authority of Cook County, which grants vouchers to 11,000 suburban households and started using rent calculations based on zip codes in 2013.

Seiling points out that a new federal law signed by President Obama in July protects families from seeing a decline in subsidies if they remain in a unit that was leased before zipcode-based standards were applied.

It’s not clear whether the CHA is aware of this new law, or fears that it may not be adequate protection. The agency declined to comment beyond Ludwig’s written response to HUD.

Seiling says that by implementing zip code-based rents, Cook County has made it easier for families to move from lower-income suburbs into higher-income areas with better schools, including Lansing and Hazel Crest. According to Seiling there has been a nearly 60 percent increase in voucher families in Mount Prospect, and a 20 percent increase in Streamwood.

“We would never ever want to go back to the old way of setting our payment standards,” Seiling says. “People still have to want to make a move, but without [zip code-based rent calculations] they wouldn’t even have the ability to do that.”

However, experts in Chicago say that calculating rents by zip codes will not improve voucher families’ chances of moving to better neighborhoods. And some think the new system might even hinder the CHA’s current mobility efforts.

“In denser areas like Chicago—where neighborhoods and rent levels change at a much smaller geography than zip codes—it wouldn’t be a good option to reduce segregation,” says Marisa Novara of the Metropolitan Planning Council, because one zip code can encompass drastically different real estate markets. The same problem we have now would persist, she argues, just on a smaller scale.

Novara and others are also concerned that switching from metropolitan-wide calculations to zip code-based ones might mean the CHA will no longer pay higher rents in opportunity areas.

Under a special agreement with HUD, CHA can pay up to one and a half times metro-wide rents for housing in higher-opportunity neighborhoods. Novara found that with this flexibility, the CHA can pay as much as $1,764 for a two-bedroom unit in a neighborhood like Lakeview, where the typical market rent for such a unit is around $1,880. With $1,764 guaranteed, a family is more likely to be able to bargain with a landlord than with the $1,280 that would be allowed under small-area-based payments for Lakeview’s zip code, 60657.

HUD’s proposal does not mention what would happen to its rent flexibility agreements with CHA and other housing authorities if the entire country switched to zip-code-based rent calculations.

Christine Klepper is the director of Housing Choice Partners, which helps voucher-holder families move to opportunity areas. While she also commends HUD for taking “a step in the right direction” on the issue, she says that in Chicago rent calculations should be narrowed down to census tracts. After all, she says, opportunity areas are already defined by census tracts.

“We’ve always used census tracts, because there are just so many submarkets within a zip code,” says Klepper, “and they all have different racial compositions and poverty levels.”

HUD is now in the process of reviewing all the feedback it has received on the proposal. The agency could decide on whether to implement the change before the end of the year.