Public Housing Units vs. Housing Vouchers: Accessibility, Local Public Goods, and Welfare

Abstract

We develop a general equilibrium model of residential choice and study the effects of two housing aid policies, public housing units and housing vouchers. Land is differentiated by both residential accessibility and local public goods, and the provision levels of local public goods are determined by property tax revenues and neighborhood compositions. Households differ in their incomes and preferences for local public goods. Housing aid policies are financed by general income taxes. We discuss how the location of public housing units is a fundamental policy variable, in addition to the numbers and sizes of units, and argue that vouchers not only cause less distortion for social welfare compared to public housing, but may also improve overall welfare.

Keywords: housing policy, welfare, residential location choice, local public goods, endogenous sorting

JEL Classification: H40, D60, H82, R13