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In Denver’s brutal housing market, hitting the voucher lottery might not be enough

Program no match for “brutality of market forces” in metro area when rents have risen 17% in last year

DENVER, CO - Jan. 20 : ...
Nathan Sanzone-McDowell, 41, poses for a portrait in their room in The Renew Apartments on Stout St. in downtown Denver on Thursday, January 20, 2022. Sanzone-McDowell was awarded a Section 8 voucher to pay for rent through the Denver Housing Authority in 2019.

By: JOE RUBINO Posted at 6:00 AM, Jan 27, 2022

It was 12:01 a.m. when an annual ritual for some low-income Denverites began anew.

The Denver Housing Authority opened its lottery for Section 8 housing choice vouchers, the coveted federal benefit that can cover most or all of a lucky applicant’s rent.

For the next 48 hours in mid-September, 19,899 people filed online applications for vouchers, authority officials said. Based on budget projections for 2021, each of those applicants has a roughly 6% chance of having their applications pulled.

That’s just Step 1 in the long, fraught process for those hoping to find housing in Denver through one of the country’s cornerstone programs for housing low-income families and staving off homelessness.

In metro Denver, housing prices have been rising so fast for so long in the thin, mile-high air that even folks who earn well above the federal low-income standard can struggle to pay rent. Wages, meanwhile, have lagged far behind the cost of housing.

That only increases competition for places that should be within the reach of someone with a Section 8 voucher in hand. Last year, there were an average of 14 applicants for every vacant apartment in the Denver metro area, according to a recent study. It’s part of a cycle of exclusion.

“That is why you’ll hear stories about voucher participants waiting years, finally getting a voucher, and then not being able to use that voucher in time,” said Peter LiFari, who runs Maiker Housing Partners, the housing authority that serves Adams County. “The program has too many pitfalls for its intended purpose. It’s not equipped to compete with the brutality of our market forces.”

“The most stable housing I’ve had”

After being diagnosed with narcolepsy more than 15 years ago, Nathan Sanzone-McDowell’s spent years pinballing between homeless shelters, bedbug-infested apartments and other rocky housing situations in Denver.  Federal disability income and odd jobs only go so far.

“I have probably been homeless three times proper and, at various points, had different types of subsidized housing or precarious housing,” Sanzone-McDowell said, whose pronouns are they and them.

“At one point, I was living with a couple in a one-bedroom apartment in the living room and then another person moved in on the couch,” they said.

During Sanzone-McDowell’s most recent stint in city shelters in 2018, the 41-year-old applied for the Denver Housing Authority’s Section 8 lottery. It was at least the third effort to win a voucher through the drawing. In 2019, their name was one of 800 pulled from a 21,000 person lottery pool

In May of that year, Sanzone-McDowell moved into a one-bedroom apartment in a converted downtown office building with income-restricted units. Thanks to their voucher, Sanzone-McDowell is only paying $430 of their limited income toward rent each month.

“Receiving the voucher, winning the lottery, was an opportunity I couldn’t pass up. At that point, I was on every waitlist that I could get on,” Sanzone-McDowell said. “This is the highest-quality, most stable housing I have had since I became legally disabled. This unit at least doesn’t have infestation problems.”

Strikingly few people in Denver get so lucky.

DENVER, CO - Jan. 20 : ...
Nathan Sanzone-McDowell, 41, walks through the main entrance to The Renew Apartments on Stout St. in downtown Denver on Thursday, January 20, 2022.

Thousands enter lotteries, dozens find housing

The Denver Housing Authority has a cap of 8,030 vouchers for 2022, according to Loretta Owens, DHA’s housing choice voucher program director. Just shy of 95% of those vouchers are already being put to work keeping people housed.

Owens expects the authority will pull 1,200 names this year from the lottery held last fall. There is a tab on the DHA website homepage where hopeful applicants can keep an eye on results. 

“It’s true to its word. It’s very much a lottery because names are selected at random,” said Owens, who has been overseeing the program for DHA for eight years. “It is an opportunity, a chance to obtain housing assistance.”

DHA pulled 1,000 names for its lottery pool in 2021, according to authority officials. Of those, 344 had their applications processed, 214 received vouchers and, as of earlier this month, 77 applicants have found places to live and put their vouchers to use.

Another 110 awardees from that pool are still searching. They have a maximum of 120 days after receiving a voucher to put it to use or lose it. 

Knowing how hard it can be for some to obtain a voucher through its own program, DHA keeps a running list of other agencies and housing providers to refer people to, Owens said. The authority is also in the midst of an effort to build 1,300 more affordable housing units in the city.  That would be added on top of its existing portfolio of more than 12,000 subsidized units and vouchers.

Despite city and state laws adopted in recent years banning discrimination against renters who are using vouchers to pay and efforts to update the program to make it easier on landlords, runaway housing costs and a deep housing supply shortage mean the odds remain long. 

Brutal market forces

Multiple factors work against people who, when lucky enough to secure a voucher, can’t find a way to put it to use. The brutal market forces referenced by LiFari are high on the list. 

The U.S. Department of Housing and Urban Development (also known as HUD) funds housing choice vouchers and caps the maximum cost of a home or apartment a voucher holder can rent in a given market. For the Denver metro area, those caps in 2022 are set at $1,364 for a one-bedroom home, $1,659 for a two-bedroom and $2,226 for a three-bedroom. 

Housing authorities and other program administrators have wiggle room, LiFari noted. HUD signs off on rents up to 110% over its caps to meet market demands and administrators can pay even a bit more with special approval. But even that isn’t enough to get voucher holders into many places in metro Denver. 

Rental search engine company Apartment List released a market report for Denver earlier this month that showed the median cost to rent a one-bedroom home in the city in December was $1,470 a month. For a two-bedroom, the median cost is $1,800 a month. Those numbers are roughly 17% higher than at the same time in December 2020.

With those median rents, roughly half of all rental housing tracked by Apartment List in Denver in December was inaccessible to voucher holders.

Once people get into housing, the amount vouchers payout is flexible. As explained on the Colorado Department of Local Affairs covering the program, the vouchers are designed to ensure an individual or family is putting no more than 30% to 40% of their income to their rent, covering the difference. 

The payments can move up and down with a voucher holder’s needs to ensure they can stay in stable housing. If a household member loses a job and suddenly has no income, more money can be deployed to fill in the gap so long as the entity that handed out that voucher — whether that be DHA, Maiker Housing Partners or one of the 46 agencies that, as of 2021, was contracted with the state — has money in the budget to cover it. 

That flexibility has been a crutch of voucher holders during the pandemic, particularly the early months in 2020 when entire segments of the economy were shut down and tens of thousands of Coloradans lost their jobs or significant chunks of their income. But it put more distance between people on the outside of the program and the support they need.  

CARES Act support didn’t fund new vouchers in Denver

DHA, projecting a budget shortfall for its vouchers program in 2020, did not draw a single name from its lottery pool for that year. The list was 23,388 names long.

The authority was able to process income changes for existing voucher holders and keep all of them in stable housing, Owens said. Money from the emergency Coronavirus Aid, Relief, and Economic Security, or CARES Act, was a saving grace there. 

“The (housing choice voucher) program averted a funding shortage, which means we did not have to terminate participants from the program or take other drastic measures to reduce cost,” Owens said. 

On a statewide basis, the CARES Act provided $2 million in support to keep vouchers going last year, according to Katherine Helgerson, who heads Colorado’s office of rental assistance. 

Zooming out from the Mile High City, the needs don’t look any less severe. In 2020, HUD estimates were that 590,000 households in the state needed voucher support and qualified for the program because they made less than 50% of the medium income for their area, Helgerson said in an email. Just 62,000 vouchers were available. 

Neither state nor federal officials had a good handle on just how many people are sitting in lottery pools or on waitlists for vouchers. That was last measured via a HUD survey in 2012, according to Helgerson. Median rents in the state have risen 47% since then. 

HUD Secretary Marcia Fudge, exits the ...
HUD Secretary Marcia Fudge, exits the Gateway South building in the Denver Housing Authority development in Sun Valley during a tour on July 13, 2021, in Denver. Fudge, second from right in the group on the left, is joined by U.S. Congresswoman Diana DeGette, right, Mayor Michael Hancock, center, as well as DHA officials Ryan Tobin, left, chief real estate investment officer, and David Nisivoccia, executive director.

Voucher holders seeking more affordable options outside Denver

DHA allows voucher holders to “port out,” or rent in other communities. The authority doesn’t track reasons why, but as of this month, 604 of the authority’s active vouchers are being used outside city limits, according to Owens. The option does work both ways. DHA knows of 346 voucher holders that have chosen to move into Denver from elsewhere since January 2021, officials say, and 215 of those individuals and families have active leases in the city. 

In Adams County, Maiker Housing Partners asks anyone awarded a voucher to stay in the area for at least one year before crossing county borders. But LiFari said he sees a direct line of people leaving Denver and coming into Thornton, Westminster, Aurora and other areas. 

“And what they are finding is similarly really challenging rental markets,” LiFari said. “For every 10 folks we have welcomed into Adams County over the last 10 years, we are only building four housing units. We’re just not building.”

Porting out can have negative consequences beyond shuffling demand into other strained places.

The Center on Budget and Policy Priorities, a left-leaning think tank, released a fact sheet in June that said 72% of the roughly 124,600 people living in Colorado living in housing paid for in part through federal rental assistance were either seniors, children or people with disabilities. In Adams County, roughly half of all voucher holders are either seniors or people with disabilities, LiFari said.

Having to move out of a community because of runaway housing costs can be especially damaging for people in those situations.

Ann Selling, who oversees rental assistance programs for the Mental Health Center of Denver, sees affordable housing as foundational for people recovering from a mental health crisis.

Moving makes it “that much more difficult for them to stay connected to support systems; their mental health clinicians, their mental health provider,” she said. “Transportation is a big issue as they get farther and farther from medical providers and everything they have known to be their support.”

Sanzone-McDowell is grateful to have a voucher through DHA but has plenty of concerns about the program. The timeline crunch to find housing or lose the voucher led them to move into a place that was not their first choice, the prospect of moving while on a voucher seems almost impossible, and DHA employs “byzantine and paternalistic” rules for people in the program, Sanzone-McDowell said. Still, through the program, they were able to find a place to live in the downtown area where services are accessible on foot or by transit.

“There are certainly places that I looked at that were just not feasible because they were not walkable,” Sanzone-McDowell said.

DENVER, CO - Jan. 20 : ...
The Renew Apartments on Stout St., second building from right, in downtown Denver on Thursday, January 20, 2022.

Landlords can intentionally price themselves out

For the work lawmakers put into clamping down on landlord discrimination against people seeking to pay their rent through vouchers, runaway housing costs that can change from month to month create their own avenues for discrimination. 

LiFari and Denver City Councilwoman Robin Kniech both noted that any landlord that wanted to could price their unit beyond the reach of HUD’s fair market rents. There is nothing illegal about that. 

That has Kniech and other people zeroed in on the housing crisis looking at other avenues for relief.

“Vouchers are a tool that expands access to existing housing. They’re incredibly effective. But they can’t fight high rents on their own,” Kniech said. “We have to build new deed-restricted housing that has fixed rents.” 

Cathy Alderman, the spokeswoman and chief public policy officer for the Colorado Coalition for the Homeless, suggested that instead of fair market rents being set based on a metro-wide statistical area, they should be set on a market-by-market basis. Right now, HUD is factoring in rents from 10 counties into its fair market levels for the Denver-Aurora-Lakewood statistical area.

The simplest way to make Section 8 more effective would just be to fund the demand, LiFari said. On a national level, the program is only funded to help one out of every five households that qualify, he said. 

Even with all its flaws, the benefits of the program are obvious to people who interact with it regularly. It provides stability, particularly for families with children seeking to break the cycle of generational poverty. That outweighs any drawbacks for LiFari. 

“The market moves with brutal efficiency and it is not concerned nor equipped to address those Coloradans that struggle to compete,” he said. “So the voucher program is the best anti-poverty fighter we have.” 

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