Are the Outcomes of Low-Income Housing Programs Consistent with their Rationales?

Abstract

Traditional rationales for low-income housing assistance imply that a housing program is not successful unless it induces recipients to occupy better housing than they would choose if given equally costly cash grants. The general assumptions of economic theory do not imply that current housing programs would lead to that outcome. The few existing studies of this matter are dated and ignore the cost-ineffectiveness of project-based housing assistance. The purpose of this paper is to determine the extent to which different housing programs are consistent with traditional rationales. Based on data from the 2013 American Housing Survey and evidence on the cost-effectiveness of different types of housing assistance, the results indicate that public housing tenants had lower aggregate housing consumption than they would have chosen with equally costly cash grants and most public housing tenants and a substantial minority of recipients of each other type of housing assistance occupied worse housing than they would have chosen with this alternative policy. Indeed, about half of public housing tenants, a third of occupants of HUD-subsidized privately owned projects, and more than a fifth of recipients of the hodgepodge of other programs of project-based housing assistance occupied worse housing and consumed less of other goods and services with their housing assistance than with equally costly cash grants. Of the programs considered, tenant-based housing vouchers induced a larger fraction of recipients to occupy better housing relative to an equally costly cash transfer and provided the greatest increase in the market value of total consumption relative to taxpayer costs than any of the forms of project-based housing assistance. In fact, vouchers outperform project-based assistance across all metrics used in this study.