There are widespread reports of Section 8 voucher agencies undertaking various measures to conserve funding for Section 8 vouchers. Among other actions, agencies are limiting rent increases, not issuing any new solicitations for project-based vouchers, or pausing reissuance of vouchers upon turnover. So, what is the reality behind funding constraints in the Section 8 voucher program?
Let’s start with a fact that is well known in the affordable housing community, but bears repeating: The Section 8 voucher program and the project-based Section 8 program are separate programs. The Section 8 voucher program is administered by the Department of Housing and Urban Development’s (HUD’s) Office of Public and Indian Housing and includes funding for tenant-based and project-based vouchers. It is the largest program in the HUD budget. The project-based Section 8 program, sometimes called project-based rental assistance, is administered by HUD’s Office of Multifamily Housing. They are funded separately in the HUD budget and are governed by different program rules. The focus of this article is the Section 8 voucher program.
Since the vast majority of Section 8 vouchers are portable, the income they generate for a property is not typically included in underwriting. That does not mean that the income they generate is not essential to the financial health of many affordable housing developments. In addition, the use of project-based vouchers has grown in recent years, in part because of the Rental Assistance Demonstration program. Income from project-based voucher contracts is included in underwriting for transactions. It should be noted that HUD has issued specific instructions to Section 8 agencies that prioritize the funding of project-based vouchers over tenant-based vouchers.
As most people know, the federal government did not adopt a budget for fiscal 2025, the fiscal year which ended on Sept. 30. Instead, they adopted a full year continuing resolution, which continued funding levels from fiscal 2024. This is inherently a problem for the Section 8 voucher program, which has year-over-year cost increases due to rent growth. This was recognized as a problem at the time, so Congress authorized an “anomaly” that provided for an increase in funding over fiscal 2024 funding levels for the Section 8 voucher program.
The concern quickly arose that while the anomaly in funding was helpful, it may not have been enough to keep up with rent growth. In order to serve the same number of families, Section 8 agencies were going to have to look for ways to find savings in their programs. It is worth noting that not every Section 8 agency faces the same funding constraints; some have deeper reserves or, much more rarely, are not fully utilizing all of the funding provided annually by HUD.
This is not the first time that concerns regarding shortfalls in Section 8 voucher funding have arisen. The program is designed so that essentially all funding provided each year is utilized and agencies are tracked on utilization by HUD. HUD issues funding instructions to agencies each year, and HUD has also issued guidance around cost-saving measures to be utilized in the voucher program in case of shortfalls, going back as early as 2006. These include actions such as ensuring no more than reasonable rents are being paid, increasing the minimum tenant paid rent, stopping the issuance of new vouchers, or reducing subsidy standards or payment standards. The goal of these measures is to avoid the worst-case scenario of having to terminate assistance for a currently assisted household.
Unfortunately, the upheaval in the federal budget-making process does little to allay the concerns around Section 8 voucher funding for fiscal 2026, which started Oct. 1, with no federal budget enacted. HUD has reported that it has accessed the $4 billion in advanced appropriations for voucher funding (every year the appropriators provide advance funding for the next year precisely to deal with a continuing resolution situation). Generally, voucher funding should be sufficient well into late November should the shutdown last that long.
Prior to the shutdown, both the House and Senate had proposed funding levels for HUD for the 2026 fiscal year, including the Section 8 voucher program. The Senate version of the HUD budget was more generous than the House version, but it appears even if the Senate version were adopted funding would be constrained.
If developers are dealing with Section 8 agencies, they should be aware of these funding constraints and HUD’s specific instructions regarding appropriate measures to deal with shortfalls. If income from Section 8 vouchers is key to the fiscal health of their properties, they need to understand the reason for these constraints and let policymakers know why fully funding this program is so essential.