As part of his annual budget proposal, President Donald Trump is asking Congress to cut funding for the federal Section 8 rental assistance program by 40 percent. iStock photo

Potential cuts to federal Section 8 vouchers could put landlords in an uncomfortable position and hurt housing production.

President Donald Trump’s budget proposal currently making its way through Congress would see a 40 percent reduction in funding to federal rental housing assistance, commonly known as the Section 8 program. This federal program provides rental assistance to low-income families, helping them afford to rent a home.

The proposed cuts are estimated to have a $800 million impact across the state of Massachusetts.

In a statement to Banker & Tradesman, Massachusetts Housing Secretary Ed Augustus called the proposed cuts “devastating” because the state doesn’t have the money to step and backfill the cuts. Soaring rents statewide are already squeezing the separate $253 million Massachusetts Rental Voucher Program.

“Rental vouchers and public housing programs are essential housing resources that allow seniors on a fixed income, people with disabilities, and other residents afford safe and stable housing,” he said. “These cuts will only make housing even more expensive in Massachusetts and across the nation.”

Up to 40K Families Impacted

Local housing authorities and nonprofits are reportedly not issuing new vouchers when families start earning enough they don’t need the help.

But the cuts could mean renters with existing vouchers could see that assistance taken away.

Boston Housing Authority CEO Kenzie Bok estimated that the BHA alone could potentially have to terminate 8,000 vouchers. Up to 40,000 families in Massachusetts could become homeless due to cuts, she said.

Even though it’s not clear that the proposed cuts will make it through Congress – Trump has urged both the House and Senate to pass the measure before their July 4 recess – some housing authorities have already stopped issuing new vouchers thanks the cloud hanging over them.

“They’re trying to save money so that they can afford to continue paying rent on behalf of their existing voucher holders,” said Andrew Mikula, a senior fellow on housing at the Pioneer Institute in Boston. “That’s really tough, because rents are probably going to continue to keep going up for the foreseeable future. So if the feds pull this funding, you could see a lot of local housing authorities have some serious budget shortfalls. Many already do.”

1 in 10 Mass. Renters Get Aid

But tenants aren’t the only demographic who would be affected. Landlords are now left wondering if a source of income that some rely on could disappear.

“There are lots of landlords all over the country who have signed contracts” with tenants who use Section 8 vouchers, MassLandlords Executive Director Douglas Quattrochi said. “The government’s a party to the contract, and we are owed our rental assistance.”

A 2022 study estimated that about 585,000 Massachusetts families qualified for rental assistance based on their incomes, but only about 250,000 received any support including Section 8 vouchers, state housing vouchers or units in public housing or subsidized affordable units. Around 1 in 10 Massachusetts renters get Section 8 help, Quattrochi estimated.

Quattrochi added that landlords could be forced to take on “riskier applicants” with less-stable finances if the cuts were to go through.

Typically, Section 8 tenants are more stable, and turn over less than tenants without rental assistance, Mikula said, making them desirable for landlords despite the added paperwork that comes with the Section 8 program.

Some housing authorities might opt to try and stretch their remaining housing assistance money further, he said, by placing harsher caps on how much they’re willing to subsidize rents. That could then force some renters to move, or push a landlord to evict them – even if they’ve been a valuable, long-term tenant.

“I think a lot of landlords who take on tenants with vouchers really like the predictability and stability of it, but all that goes into question when local housing authorities are forced to kind of ration payments in this way,” Mikula said. “That’s going to be really tough because there’s going to be a lot more turnover in an environment where it’s already really difficult for people to find new housing.”

While tenants would likely feel the worst of it, the potential for landlords to struggle to pay their own mortgages following the proposed cuts is very real.

“My first thought on seeing this proposal was that whoever made it was not aware of the deep and extensive spiraling effects that this would have,” the BHA’s Bok said, “Fundamentally, it would undercut the money that is paying mortgages across our city and region and in the country. Whether that’s an individual landlord’s mortgage that they’re counting on their Section 8 tenants’ rent to help pay, or mortgages on large properties that may have been developed with underwriting based on the Section 8 project-based vouchers.”

Project-based vouchers are designed to subsidize rents at specific developments, instead of traveling with individual renters.

Sam Minton

Boston Requires Section 8 Units

In addition to affecting existing landlords, the development of new rental housing could face further challenges if cuts to the Section 8 were to go into effect, Bok said.

The cuts would impact traditional affordable housing units, but could also harm market-rate projects. The city of Boston’s affordable housing rules, for example, require 3 percent of a project’s units be set aside for Section 8 voucher-holders on top of the required 17 percent affordable housing component.

“As the largest housing authority in the region, we frequently make awards for project-based vouchers to support new developments,” Bok said. “We’re directly aware of how vital those awards are for getting bank financing, construction lending, in place. Even though Section 8 vouchers don’t pay the same at the absolute top of the market in any given place, the security and regularity of Section 8-based income is something that really reassures a lot of banks and financial institutions.”

Additionally, as costs continue to rise, Miklula noted that all households won’t be able to afford market-rate housing.

“Unlike policies like inclusionary zoning or rent control, rent vouchers aren’t really interfering with the incentive that landlords and developers have to provide rental housing in the first place,” he said.

Bok urged the financial and real estate communities to lobby against the cuts.

“I think this is an important time for bankers, developers, landlords, everyone who is involved in the housing construction ecosystem to make their voices heard on the importance of [the] Section 8 program specifically,” Bok said. “I think it’s a really important time for people not to assume that someone else is making that point in Washington.”