Chapter 5 - The Effect of Minimum Rent Housing Allowances on Housing Consumption

Abstract

This chapter discusses the effect of Minimum Rent housing allowances on housing consumption. Based on an assumption that housing quantity and quality increase with a unit's rent, an alternative requirement—setting a minimum rent level—was tested in the Demand Experiment. Such a requirement is easy to administer because rent payments can be verified by rent receipts. Under the Minimum Rent alternatives that were tested in the experiment, households were required to live in units whose rent levels met or exceeded a certain minimum. Two levels of Minimum Rent were tested—70% and 90% of C*, where C* was the estimated cost of modest, existing, housing meeting the Minimum Standards requirement at each site. The two levels were referred to as Minimum Rent Low and Minimum Rent High. In comparison to Minimum Standards, the Minimum Rent High requirement induced larger expenditure changes for recipients as a whole and for households that met requirements only after enrollment. Even increases among households that already met requirements at enrollment were larger for Minimum Rent High than for Minimum Standards, although the difference was not significant. Expenditure effects for Minimum Rent Low households fell between those of Minimum Standards and Minimum Rent High. The findings of the analysis suggest that housing allowances affected recipients in two ways. The payment itself was sufficient to induce some increase in expenditures, as indicated in the response of the unconstrained households. The housing requirements led to additional housing changes, which varied according to the specific requirement used.