Funding for a linchpin federal housing subsidy program has grown threefold in Hawaiʻi over the past 20 years, but the number of households it serves has increased by a much smaller amount.

That’s the finding of a new study of the federal housing choice voucher program — commonly referred to as Section 8 — that blames a familiar villain for the disparity between increased funding and actual impact: the stateʻs extremely costly housing market.

While federal funding for the program has grown 70% since 2003, to about $170 million, the number of households who get the vouchers has grown only by 20%, from 10,000 to 12,000, according to the report from the Economic Research Organization at the University of Hawaii, or UHERO.

The “disconnect exposes a fiscal trap,” wrote the reportʻs author, UH economist Joon Yun Park.

“All of the increase in the federal funding is just absorbed by rising rents rather than helping more families,” Park said in an interview.

Over 20 years, the median gross rent for units rented by people using vouchers went from $870 to $1,860, the report said, while the average subsidy per household grew from $560 to $1,400 per month.

Worse, the recent growth in the number of voucher holders is temporary. Emergency vouchers created in 2021 as a relief measure  during the Covid-19 pandemic expire when recipients leave the program and once they are exhausted — by about 2030, Park said — the program will be roughly the same size as it was 20 years ago.

Program Works But For Fewer Than It Could

The Section 8 program — federally funded but managed by county and state housing agencies — provides vouchers to low-income residents who use them to rent from private landlords. Recipients typically pay 30% of their income toward rent and the voucher covers the rest. The program is the governmentʻs largest tenant rental subsidy program. 

Park said the program works, just not for as many people as it could — helping one in 15 renters in Hawaiʻi. 

“The goal of the voucher program is to help low-income families to live in an affordable home without being rent burdened and in a safe and sanitary environment,” he said. “I do find that it does its intended job because it reduces rent burdens significantly for these voucher households.”

But an array of external factors creates structural problems for the program, constraining it from reaching more households. Currently, Park estimates, one in five income-eligible Hawaiʻi residents has a voucher, compared to one in four nationwide.

High rents are central to the problem. But other things also work to prevent qualified new households from receiving vouchers, Park said.

For one, as the stateʻs population ages — residents 65 and older rose to 21% by 2024 — so does the portion of the population that receives vouchers. The share of voucher households with an elderly member has more than doubled over the last two decades, the report said.

And as voucher holders get older, and rely on Social Security and in more rare cases pensions, they are less likely to earn enough to afford to move on from the program and make room for new recipients.

The other key factor is the economic status of voucher holders: They are the stateʻs poorest residents and they are poorer than they were 20 years ago, the report said.

In 2024, the median income of a household that had a housing voucher was $17,300. And of all households that get vouchers, 78% — or slightly more than 9,000 — earned less than 30% of the areaʻs median income of $100,400. Adjusted for inflation, the median income for voucher recipients in 2003 was $19,100.

The poorer a household, the harder it is for them to earn enough to leave the program and the more it costs to cover their rent, Park said.

The fewer people who leave the program, the longer the waitlist for a voucher, and the harder it is to get on the waitlist.

For example, the report noted, Honolulu received 11,000 applications over five days in 2023 and selected just 3,000 through a lottery. Its next opening did not occur until nearly two and a half years later.

The Hawaii Public Housing Authority, which administers about 2,700 vouchers, kept its waiting list closed for ten years before reopening in 2016 and then didnʻt open it again for another four years, the report said.

More Housing, Upward Mobility

Park suggested two chief avenues to increase the programʻs reach.

First, he said, would be to bring down rents by increasing the supply of housing in Hawaiʻi. 

“Making the market rents more affordable is really the key to improving this program,” Park said. 

He said that data on housing growth on Oʻahu supports that thesis.

Before 2021, rents for both single-family homes and townhomes and apartments “moved in parallel and barely moved at all,” the report said. Since then, however, rents for houses and townhomes rose 42% in three years, while rents in multifamily buildings rose by about half that.

That took place over a period when Honolulu added to its stock of multifamily housing with both market-rate and affordable units, which may have slowed the growth of rents. That, in turn, might have reduced how much the government had to pay out in subsidies per tenant.

Park also pointed to a so-called filtering process identified by UHERO colleagues. Creating more housing increases the supply of affordable units, a critical factor in strengthening the voucher program.

“As new housing enters the market, it initiates a chain of residential moves that eventually frees up older yet more affordable housing stock for voucher holders,” the report said.

“Making the market rents more affordable is really the key to improving this program.”

Joon Yup Park, UHERO economist

The report also recommends taking steps to help voucher recipients move out of the program, perhaps through training and education that could help people increase their income, contribute more toward their rent and, eventually, free up the vouchers for others to use.

There is a barrier to that approach, though, Park said — the so-called “benefit cliff” when increased earnings leads to reduced eligibility for benefits.

In the voucher program, for every extra dollar someone earns, an additional 30 cents must be applied to rent. Because increased income can also result in cuts to benefits such as SNAP and Medicaid, a household may be left financially worse off as they earn more, the report said. 

The report suggests considering structural incentives such as programs that allow voucher recipients to direct increases in income to savings accounts for a period of time rather than toward paying more rent. Once the program is completed, the household would keep the savings instead of being penalized for working more or getting a raise.

“I don’t really know what the best way to promote upward economic mobility is but we really need to think about how to effectively promote (it) for these folks so they can graduate the program … and open up vouchers for other eligible families on the waitlist,” Park said.