Do Low-Income Housing Subsidies Increase Housing Consumption?

37 Pages Posted: 10 Jan 2002 Last revised: 15 May 2012

See all articles by Todd M. Sinai

Todd M. Sinai

University of Pennsylvania - The Wharton School; National Bureau of Economic Research (NBER)

Joel Waldfogel

University of Minnesota - Twin Cities - Carlson School of Management; National Bureau of Economic Research (NBER); University of Minnesota - Twin Cities - Department of Economics

Date Written: January 2002

Abstract

A necessary condition for justifying a policy such as publicly provided or subsidized low-income housing is that it has a real effect on recipients' outcomes. In this paper, we examine one aspect of the real effect of public or subsidized housing -- does it increase the housing stock? If subsidized housing raises the quantity of occupied housing per capita, either more people are finding housing or they are being housed less densely. On the other hand, if public or subsidized housing merely crowds out equivalent-quality low-income housing that otherwise would have been provided by the private sector, the housing policy may have little real effect on housing consumption. Using Census place-level data from the decennial census and from the Department of Housing and Urban Development, we ask whether places with more public and subsidized housing also have more total housing, after accounting for housing demand. We find that government-financed units raise the total number of units in a Census place, although on average three government-subsidized units displace two units that would otherwise have been provided by the private market. There is less crowd out in more populous markets, and more crowd out in places where there is less excess demand for public housing, as measured by the number of government-financed units per eligible person. Tenant-based housing programs, such as Section 8 Certificates and Vouchers, seem to be more effective than project-based programs at targeting subsidized housing units to people who otherwise would not have their own.

Suggested Citation

Sinai, Todd M. and Waldfogel, Joel, Do Low-Income Housing Subsidies Increase Housing Consumption? (January 2002). NBER Working Paper No. w8709. Available at SSRN: https://ssrn.com/abstract=296553

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Joel Waldfogel

University of Minnesota - Twin Cities - Carlson School of Management ( email )

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National Bureau of Economic Research (NBER)

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University of Minnesota - Twin Cities - Department of Economics ( email )

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