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Rent Vouchers and the Price of Low-Income Housing

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  • Susin, Scott
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    Abstract

    Since the early 1980s, low-income housing subsidies have increasingly shifted towards vouchers which allow recipients to rent in the private market. By 1993, vouchers subsidized as many households as lived in traditional housing projects, although most low-income households did not receive any subsidies. This study investigates whether this policy has raised rents for unsubsidized poor households, as many analysts predicted when the program was conceived. The main finding is that low-income households in metropolitan areas with more vouchers have experienced faster rent increases than those where vouchers are less abundant. In the 90 biggest metropolitan areas, vouchers have raised rents by 16 percent on average, a large effect consistent with a low supply elasticity in the low quality rental housing market. Considered as a transfer program, this result implies that vouchers have caused a $8.2 billion increase in the total rent paid by low-income non-recipients, while only providing a subsidy of $5.8 billion to recipients, resulting in a net loss of $2.4 billion to low-income households.

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    Paper provided by Berkeley Program on Housing and Urban Policy in its series Berkeley Program on Housing and Urban Policy, Working Paper Series with number qt67d5x29s.

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    Date of creation: 01 May 1999
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    Handle: RePEc:cdl:bphupl:qt67d5x29s

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    1. DiPasquale, Denise, 1999. "Why Don't We Know More about Housing Supply?," The Journal of Real Estate Finance and Economics, Springer, vol. 18(1), pages 9-23, January.
    2. Harvey S. Rosen, 1981. "Housing Behavior and the Experimental Housing Allowance Program: What Have We Learned?," NBER Working Papers 0657, National Bureau of Economic Research, Inc.
    3. Olsen, Edgar O., 1987. "The demand and supply of housing service: A critical survey of the empirical literature," Handbook of Regional and Urban Economics, in: E. S. Mills (ed.), Handbook of Regional and Urban Economics, edition 1, volume 2, chapter 25, pages 989-1022 Elsevier.
    4. Goetzmann, William N & Spiegel, Matthew, 1997. "A Spatial Model of Housing Returns and Neighborhood Substitutability," The Journal of Real Estate Finance and Economics, Springer, vol. 14(1-2), pages 11-31, Jan.-Marc.
    5. Weicher, John C. & Thibodeau, Thomas G., 1988. "Filtering and housing markets: An empirical analysis," Journal of Urban Economics, Elsevier, vol. 23(1), pages 21-40, January.
    6. Griliches, Zvi, 1986. "Economic data issues," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 3, chapter 25, pages 1465-1514 Elsevier.
    7. Henry O. Pollakowski & Michael A. Stegman & William Rohe, 1991. "Rates of Return on Housing of Low-and Moderate-Income Owners," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 19(3), pages 417-425.
    8. Somerville, C Tsuriel, 1999. "Residential Construction Costs and the Supply of New Housing: Endogeneity and Bias in Construction Cost Indexes," The Journal of Real Estate Finance and Economics, Springer, vol. 18(1), pages 43-62, January.
    9. Schnare, Ann B. & Struyk, Raymond J., 1976. "Segmentation in urban housing markets," Journal of Urban Economics, Elsevier, vol. 3(2), pages 146-166, April.
    10. Rothenberg, Jerome & Galster, George C. & Butler, Richard V. & Pitkin, John R., 1991. "The Maze of Urban Housing Markets," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226729510, August.
    11. Hanushek, Eric A & Quigley, John M, 1980. "What Is the Price Elasticity of Housing Demand?," The Review of Economics and Statistics, MIT Press, vol. 62(3), pages 449-54, August.
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    Cited by:
    1. Quigley, John M., 2002. "A Decent Home: Housing Policy in Perspective," Berkeley Program on Housing and Urban Policy, Working Paper Series qt8f57x42q, Berkeley Program on Housing and Urban Policy.

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