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Are Section 8 Housing Subsidies Too High?

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  • Edgar O. Olson

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  • Amy Crews Cutts

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Abstract

The Section 8 Existing Housing Program, currently the largest housing program administered by HUD, provides subsidies to low-income families living in privately-owned rental units of their own choosing. Under current rules and budgets, funds have not been sufficient to serve all eligible families willing to participate in the program, and public housing agencies have not limited assistance to the poorest eligible families. Instead, they serve many families above the poverty line while denying assistance to the majority of those below it. A simple proposal for targeting more assistance to the poorest families and eliminating the horizontal inequity resulting from offering assistance to some, but not all, families with the same characteristics is to decrease the subsidy at each income level by the same amount. One objection to this proposal is that the poorest eligible families would not be able to find units meeting the program’s space and quality standards if subsidies were lower. This paper finds that the program’s subsidy to the poorest eligible families greatly exceeds the minimum rent of units meeting the program’s standards. It also shows that the most common objections to reducing subsidy levels under the program are inconsistent with existing evidence.

Suggested Citation

  • Edgar O. Olson & Amy Crews Cutts, 2001. "Are Section 8 Housing Subsidies Too High?," Virginia Economics Online Papers 355, University of Virginia, Department of Economics.
  • Handle: RePEc:vir:virpap:355
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    References listed on IDEAS

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    1. Edgar O. Olsen, 2000. "The Cost-Effectiveness of Alternative Methods of Delivering Housing Subsidies," Virginia Economics Online Papers 351, University of Virginia, Department of Economics.
    2. Edgar O. Olsen, 2003. "Housing Programs for Low-Income Households," NBER Chapters,in: Means-Tested Transfer Programs in the United States, pages 365-442 National Bureau of Economic Research, Inc.
    3. C. Peter Rydell, 1980. "Supply Response to the Housing Allowance Program," International Regional Science Review, , vol. 5(2), pages 119-138, August.
    4. Susin, Scott, 2002. "Rent vouchers and the price of low-income housing," Journal of Public Economics, Elsevier, vol. 83(1), pages 109-152, January.
    5. Stephen Malpezzi & Gregory H. Chun & Richard K. Green, 1998. "New Place-to-Place Housing Price Indexes for U.S. Metropolitan Areas, and Their Determinants," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 26(2), pages 235-274.
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    Cited by:

    1. Lee, Chul-In, 2007. "Does provision of public rental housing crowd out private housing investment? A panel VAR approach," Journal of Housing Economics, Elsevier, vol. 16(1), pages 1-20, March.
    2. Edgar O. Olsen, 2003. "Housing Programs for Low-Income Households," NBER Chapters,in: Means-Tested Transfer Programs in the United States, pages 365-442 National Bureau of Economic Research, Inc.
    3. Laferrere, Anne & Le Blanc, David, 2004. "How do housing allowances affect rents? An empirical analysis of the French case," Journal of Housing Economics, Elsevier, vol. 13(1), pages 36-67, March.
    4. Gary Painter, 1999. "Low-Income Housing Assistance: Its Impact on Labor Force and Housing Program Participation," Working Paper 8667, USC Lusk Center for Real Estate.
    5. Le Blanc, David, 2005. "Economic evaluation of housing subsidy systems: a methodology with application to Morocco," Policy Research Working Paper Series 3529, The World Bank.

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