Reforming Housing Assistance
Federal housing assistance in the U.S. serves roughly 4.5 million households and 10 million people each year in the form of public housing; privately owned, subsidized housing; and tenant-based vouchers. While these programs decrease rent burden and lower the risk of homelessness for low-income recipients, only about one in four eligible households receive assistance, and federal spending on low-income housing policy has largely plateaued since 2000. Research on the efficacy of the current structure reveals several areas for improvement or experimentation.
NYU Furman Center Faculty Director Ingrid Gould Ellen, along with co-authors Robert Collinson and Jens Ludwig, recently published Reforming Housing Assistance in the Annals of the American Academy of Political and Social Science. In the article, the authors review current federal housing assistance policies and the research evidence supporting each policy. They subsequently identify and propose strategies to address three key challenges these programs face in meeting their stated objectives:
1. Divergent housing market needs. Rent burdens have increased in metropolitan areas all over the country, but the market conditions driving this increase vary by location. In coastal cities, housing supply has not kept up with demand, pushing up rental prices; in the heartland, wages have fallen without a corresponding drop in rents. Vacancy rates also vary substantially across regions. To be effective, government subsidies must respond to these differing needs, but the current national housing policy is one-size-fits-all.
Recommendation: The authors suggest transforming the Low Income Housing Tax Credit (LIHTC) into a stream of flexible funds that states and localities can tailor according to local needs. Alternatively, the authors propose allowing states to sell tax credits to each other, using the market to concentrate this supply-side intervention in areas where it is most needed.
2. Inequitable and poorly targeted subsidy structure. The current design doles out large subsidies to some eligible households while providing nothing to others. The use of waiting lists for distribution means that households that do receive assistance are not necessarily those most in need, and the significant lag between application for and receipt of assistance limits usefulness for households experiencing temporary income shock.
Recommendation: The authors propose exploring the impact of more modest or time-limited subsidies that serve a larger share of income-eligible households. As part of this, they suggest implementing a more targeted approach, including strategies responsive to the issue of income volatility that may be more effective at preventing evictions and homelessness.
3. Poor locational outcomes for assisted households. Public housing has tended to concentrate poor families in high-poverty, racially homogenous areas. In contrast, tenant-based vouchers - currently the largest form of assistance - are intended to provide households with more choice in where they live. In practice, however, factors such as landlord discrimination can make it difficult for voucher recipients to relocate to more resource-rich areas, and voucher holders still reside in highly disadvantaged neighborhoods.
Recommendation: To assist families in reaching high-opportunity areas, the authors outline the following suite of strategies:
- Prioritize families with young children on the voucher waitlist.
- Use Small Area Fair Market Rents to determine voucher payment standards.
- Include source of income as a protected class under federal law.
- Ease administrative burdens to encourage landlord participation in the voucher program, thereby increasing tenant choices.
- Expand mobility counseling and housing search assistance, especially for households with children living in high-poverty areas.
- Incentivize public housing authorities to achieve desired locational outcomes for tenants.
- Offer funding to local housing agencies to partner with real estate listing providers, thereby ensuring that tenants have more complete information about affordable units available in low-poverty communities.
In light of the upcoming presidential election in 2020, the authors also specifically consider two proposals put forth by presidential candidates: the HOME Act and the Rent Relief Act, which would create renter tax credits that would provide assistance to a broad swath of households. The authors offer the following suggestions for improvement:
- Limit renter eligibility using existing low-income housing eligibility guidelines.
- Use Small Area Fair Market Rents to calculate benefit amounts for families with children, since children stand to gain the most from exposure to low-poverty neighborhoods.
- Use expected instead of actual rents to determine benefit amounts. Maintaining recipients’ price-sensitivity will curb the effect on rental prices if the subsidy is significantly expanded, and will simplify administration.
- Ensure that incentives for states and local communities to increase affordable housing supply are tied to funding sources that higher-income, exclusionary communities actually use.
The authors conclude by acknowledging the importance of the existing assistance policies and calling on advocates and policymakers to explore ways to improve them further.