The Ralph and Goldy Lewis Center for Regional Policy Studies

In California over 120,000 affordable housing units have expiring Section 8 rent subsidy contracts and, consequently, are at risk of conversion to market rate housing. Upon contract expirations, if property owners prepay their mortgages, they can choose to continue in or withdraw from the affordable housing program. Considering contracts that expired from May 31, 1997 to January 1, 1999 in California, this report empirically examines the characteristics of renewal (continuation) versus opt-out (discontinuation) projects and explores where vouchered-out families from two properties in Sacramento County found replacement housing. The evidence indicates that opt-out projects are more likely in racially and economically integrated neighborhoods, while renewing projects are in segregated neighborhoods. The evidence also suggests that owners have a stronger tendency to renew when tenants are senior. This points to a particular problem caused by expiring contracts: young families living in integrated neighborhoods, who particularly benefit from schools and job opportunities, are most likely to have their homes converted to market rate housing by voluntary owner opt-outs. The small sample of Sacramento movers suggests that households may move to less racially and economically integrated neighborhoods with their vouchers, and larger families fare worse than do moving families overall. However, the number of units lost to voluntary owner opt-outs will likely be small. The evidence suggests that without targeted government intervention, many families dislocated by opt-outs are likely to move to economically and racially segregated neighborhoods.