JEFFREY KAYE: Inspectors from the Los Angeles City Housing Department recently made an unexpected discovery. As we accompanied them checking on rental units previously cited for safety problems, they came across a garage stuffed with junk. But it also seemed to be a home.
HOUSING INSPECTOR, Los Angeles City Housing Department: How are you doing, sir? There's someone in the garage. I don't know... how are you -- we're here with the Housing Department.
JEFFREY KAYE: The man inside denied that he was living there, but inspectors Jim Heiberg and Kenneth lam had their doubts.
HOUSING INSPECTOR, Los Angeles City Housing Department: He's living in there, but it's not really...
JEFFREY KAYE: This was an extreme example, but throughout the city, the shortage of affordable housing has resulted in tens of thousands of households crowded into cramped homes, often with unsafe construction, plumbing, and wiring.
INSTRUCTOR, Los Angeles City Housing Department: The voucher is the most important form in your packet.
JEFFREY KAYE: Some 44,000 more fortunate low-income LA residents receive housing subsidies in the form of vouchers. They benefit from a federal program of rental assistance known as Section 8.
In LA, Section 8 is run by the Los Angeles Housing Authority, the second largest such agency in the country.
STEVE RENHAN, Los Angeles City City Housing Authority: How many is that, about 34 since last week?
JEFFREY KAYE: The agency's Steve Renahan says Section 8 rental assistance changes peoples' lives.
STEVE RENHAN: What that means for the households is the difference between homelessness and having a decent home, the difference between severe overcrowding and having a decent home. For the elderly and people with disabilities, it's the difference between living with dignity and living in a very desperate situation.
SOCIAL WORKER, Los Angeles City Housing Department: The portion that you're going to be responsible for would be 30 percent of your monthly income.
JEFFREY KAYE: Section 8 guarantees recipients will spend no more than 30 percent of their income on rent. The program pays for the rest.
Congress funds only a limited number of vouchers, so not everyone eligible can get one. The housing voucher system is the federal government's largest housing assistance program. Since its inception 30 years ago, Section 8 has expanded steadily.
Today, nearly two million U.S. households receive vouchers in what this year is a $13 billion program.
The federal Department of Housing and Urban Development, HUD, oversees Section 8, which is administered by nearly 2,500 local agencies. HUD wants to overhaul section 8 so that the states run the program just as they do the welfare system.
HUD Assistant Secretary Michael Liu says the goal is to streamline the program.
MICHAEL LIU, Assistant Secretary, Department of Housing & Urban Development: The purpose of our proposal is to make the program more effective in getting the hard fought housing assisting dollar for rental programs to more people.
JEFFREY KAYE: But many advocates for low-income housing fear that in the name of efficiency, Section 8 will be cut back over time.
Under the current system, Congress ties funding to the number and cost of the vouchers used. But Barbara Sard, housing policy director of the Liberal Center on Budget and Policy Priorities, says the administration's proposal fails to commit to adequate funding.
BARBARA SARD, Center on Budget & Policy Priorities: The proposal gives zero assurance that the need will be met, it leaves it up to Congress to appropriate whatever amount of money Congress sees fit. And we must remember that this Congress has already decided that funding for the types of programs like housing vouchers, so-called "discretionary programs," must be reduced over the next 10 years by $168 billion.
MICHAEL LIU: I say that the programs that will be funded to the maximum extent possible are going to be those that are managed well and that can justify their existence, because of effectiveness and use of the dollars available to them.
JEFFREY KAYE: Concern about future funding stems from the fact that Section 8 doesn't come close to meeting the current need, which is increasing because rents are rising faster than wages. Nationwide, only about one in three low-income households eligible for rental assistance receives it.
In LA, 70,000 people are on a waiting list for vouchers.
SOCIAL WORKER, Los Angeles City Housing Department: Hold on to your papers and she'll be calling you in a couple of minutes, okay?
JEFFREY KAYE: It takes four years to get to the front of LA's line; other agencies have equally long waiting lists. But for tenants, getting a voucher is no guarantee of a better place to live.
Nationwide, last year, about 10 percent of vouchers issued weren't used. That's a billion dollars worth of rental assistance. Another reason, Liu says, that the program needs to change.
MICHAEL LIU: We have had years and years of actually recapturing dollars from vouchers which haven't been used.
JEFFREY KAYE: Many housing advocates say that not only has Congress worked to fix that problem, there are good reasons that housing vouchers may go unused.
For one thing, vouchers expire after six months, and finding a suitable place as well as a landlord who'll take a voucher can be difficult. Janean Hammond's voucher is about to expire.
JANEAN HAMMOND, LA resident: I've been looking for a place for the last past six months. I'm homeless, I sleep in my car.
JEFFREY KAYE: With your son? Is this your son?
JANEAN HAMMOND: My son and two other children. And I've been accepted in this Section 8 program, it's just that I'm having difficulty actually finding a place to live, and who will actually accept the Section 8 form.
JEFFREY KAYE: Marlene Canada has had similar difficulty. Not only has she had trouble finding a place that can accommodate her wheelchair, she's been unable to come up with the large deposit that most landlords require.
MARLENE CANADA, LA resident: You have to pay the deposits out of your pocket. So that's hard, too.
JEFFREY KAYE: To assist voucher holders, LA Housing Authority workers put together lists of possible rentals.
SPOKESPERSON, LA Housing Authority: And what I wanted to know is do you accept Section 8 in your building?
JEFFREY KAYE: Using classified ads and working the phones, employees try to match landlords and tenants.
SPOKESMAN, LA Housing Authority : I think you'll be able to see it at 4:00 this afternoon. Yeah. We'll just go from there.
WOMAN: All right.
JEFFREY KAYE: Counselors also work with Section 8 recipients.
SPOKESPERSON: Make sure you go out there in presentable attire, you know, if you're going to meet the owner.
JEFFREY KAYE: Another obstacle for would-be renters, with or without Section 8 assistance, is the shortage of affordable housing.
In LA, a minimum-wage earner must work more than 100 hours a week to afford what the government considers a fair market rent of $967 a month for a two-bedroom apartment.
So it's not uncommon to find a hazard like this, where a kitchen closet has been turned into a bedroom.
HOUSING INSPECTOR : If there was a fire that was in the kitchen, it's virtually impossible for a tenant to escape. So, this is basically what we call a fire trap if someone was in here sleeping.
JEFFREY KAYE: A quarter of a million renters, according to the city of LA, live in severely overcrowded homes -- like this apartment, where seven people live in two bedrooms in slum conditions.
FANNY MESA: There's no water. Sometimes we're taking a bath. And sometimes we're cooking in the kitchen and there's no water, and too much rats, cockroach, and all that.
JEFFREY KAYE: Getting rental assistance to those in need would be accomplished more efficiently if there were fewer housing agencies, according to the Bush administration. Consolidation of many of the 2,500 local agencies could result in substantial savings, says Liu.
MICHAEL LIU: We have a very inefficient delivery system, where over half of the housing agencies that deal with the program today handle fewer than 250 vouchers. About 890 agencies have fewer than 100 vouchers.
We certainly can find a better way.
JEFFREY KAYE: At the Center on Budget and Policy Priorities, Sard agrees there's room for reform. But she says a system of federal block grants to the states is the wrong way to go, since in the past, block grants for low- income people have often resulted in reduced funding when adjusted for inflation.
BARBARA SARD: A block grant funding structure will, in all likelihood, reduce the funding available to the program, and that will mean that the number of families receiving assistance will go down, and the amount of assistance they receive will also go down.
MICHAEL LIU: There shouldn't be the assumption that just because a program goes down in funding, that that necessarily means that that was something that is not justified.
We believe that we'll have much more efficiency built into this system, a much simpler program, where you have less errors, or loss of dollars, that we will have the resources that we need to serve those who we want to help.
JEFFREY KAYE: The Bush administration's plan to overhaul Section 8 is subject to approval by Congress, which is holding hearings on the proposal.