During our “You Be the Moderator” project, in which Post readers submitted questions they would like to see candidates answer during a debate, one reader asked: “Cities such as New York and San Francisco have many of the best opportunities for finding high-paying jobs. Those same cities also have skyrocketing housing prices. Keeping in mind that many of the laws that determine housing prices, such as zoning laws or rent control, are enacted at the local level, what will you do to help make housing in these cities more affordable?”
Of all the policy issues that have been ignored in the current election cycle, housing may be one of the most surprising. The United States has simultaneously experienced a decline in homeownership and a sharp rise in rent prices over the past decade. This has put a squeeze on middle- and low-income people searching for affordable housing, especially in cities.
Hillary Clinton has proposed a $25 billion housing program to deal with the problem, and while Donald Trump hasn’t outlined a plan to address housing, he has expressed frustration over falling homeownership.
Is expanding subsidies and federal money the right approach to address unaffordable housing? What role should the next administration play in tackling local and state laws that restrict housing development and raise prices?
Edgar Olsen is a professor of economics and public policy at the University of Virginia.
The current system of low-income housing assistance is fertile ground for reform. The majority of housing assistance recipients are served by project-based programs whose cost is enormously excessive for the housing provided. But one major change would allow us to serve many more poor households without increasing public spending.
To serve the interests of taxpayers who want to help low-income families, Congress should shift the budget for low-income housing assistance away from supporting housing projects and toward helping tenants pay their rent. It should also eliminate subsidies for the construction of new housing projects. Phasing out housing projects to shore up the housing voucher program would ultimately free up the resources to provide housing assistance to millions of additional people.
Proponents of subsidizing the construction and operation of housing projects have launched a major lobbying effort to greatly expand the Low-Income Housing Tax Credit Program, one that has garnered support from influential lawmakers. They offer two main rationales: that it will help provide housing to people who are homeless and help low-income households that spend a high fraction of their income on housing. Neither objective justifies subsidizing the construction of housing projects.
Many poor households are not offered low-income housing assistance in the form of a voucher or a spot in a housing project, and many of these households spend high portions of their modest incomes on housing because they value more desirable neighborhoods, convenient locations and higher-quality homes more than other goods that must be sacrificed to live where they choose.
These households already have housing. We don’t need to build new housing for them. If we think that their housing is unaffordable, the cheapest solution is for the government to pay a part of the rent, and the housing voucher program — the system’s most cost-effective tool — does that. This program also ensures that its participants live in units that meet minimum standards.
Building new units is a much more expensive solution to the affordability problem. The best study of the Department of Housing and Urban Development’s largest program subsidizing the construction of privately owned housing projects indicated an excess taxpayer cost of at least 72 percent compared with housing vouchers that provide equally good housing at the same cost to tenants. Publicly owned housing projects have an even larger excess cost.
Furthermore, it is not necessary or desirable to construct new units to house the homeless. In the entire country, there are only about 600,000 homeless people on a single night and more than 3 million vacant units available for rent. All homeless people could be easily accommodated in vacant existing units, which would be much less expensive than building new units for them. The reason that people are homeless is not a shortage of units but lack of money to pay the rent for existing units.
A housing voucher would solve that problem. A major HUD-funded random assignment experiment called the Family Options Study compared the cost and effectiveness of housing vouchers and subsidized housing projects for serving the homeless. Subsidized housing projects were far less effective and more than twice as expensive.
People who want to provide housing assistance to more of the poorest households should support expansion of the housing voucher program rather than subsidizing the construction of additional housing projects.