Plan for direct housing aid to needy may entice Reagan budget-cutters

An enticing experiment lies at Ronald Reagan's doorstep: Give poor Americans money directly to help rent or buy housing of their own choice. For seven years, the US Department of Housing and Urban development (HUD) tested the idea of housing "allowances" on 25,000 families in 12 cities. The idea was first proposed under Republican President Richard Nixon as a way to reduce the heavy hand of government.

With the results now coming in, some of the Reagan task force on cities recommend such a "voucher" system as a way to prune a fast-expanding federal housing program.

"If Reagan and Congress go to vouchers, they'll find if has many benefits," says David Garrison, head of HUD's research office under the outgoing Carter administration.

Under the housing vouchers program, those eligible receive cash transfers to pay for anything over 25 percent of a person's income that goes for housing. The housing must meet HUD standards and the amount of funds available is tied to prevailing housing costs.

Since 1974, HUD has paid banks or landlords directly under a program known as Section 8, a system that was to partially replace federal housing projects and aid inner-city rehabilitation.

For the GOP-controlled Senate and Reagan White House, full-scale expansion of the test voucher program could mean hard choices for conservative poliicymakers:

* Although a voucher program for housing is decidely cheaper and less cumbersome to run than most present housing programs -- the bulk of which involve constructing new housing -- in the past only half of eligible poor people have chosen to use them. This low level of participation is similar to other "voucher" programs, such as food stamps.

* Vouchers could replace much of the federal construction money now going to the private housing industry. Still, over the past seven years housing vouchers have failed to increase local housing stocks, although demand is increasing. Interest rates and other factors have had more impact.

* Voucher recipients have been found to use only about 30 percent of the voucher money on housing while spending the other 70 percent on either necessities or luxuries.

Despite these failings, vouchers were found not to inflate local rental and housing prices, a concern originally expressed seven years ago. They also reached hard-to-house poor people who were often missed by traditional housing programs. And since recipients can choose where they live, says urban economist Katherine Lyall of Johns Hopkins University, "vouchers help remove the stigma of living in public housing."

Under Presidents Carter and Ford, the Office of Management and Budget (OMB) advocated vouchers as a budget-cutting move, only to be opposed by HUD officials who pushed new construction instead. President- elect Reagan's incoming OMB director, David A. Stockman, is expected to seek large cuts in HUD's new construction program.

HUD also has resisted pressure to includehousing vouchers in general welfare after if was shown that recipients used the vouchers mainly for things other than housing. Also worrisome to HUD was that many potential low-income beneficiaries preferred housing below federal standards -- with stuck windows, missing stair railings, etc. -- rather than receive the vouchers.

In some cities, poor residents have a hard time even locating housing. "What good does it to do give an unwed mother a rent certificate if there are no apartments available?" Mr. Garrison asks.

The hardest issue facing the Reagan administration on the voucher proposal will be its possible expansion into an open-ended entitlement program, like other "uncontrollable" programs that draw on the US Treasury automtically. "If it's a budget buster, Then it won't fly," says Garrison. The only harness on escalating costs then would be to confine the funds to only the poorest of the poor.