Housing Vouchers, Labor Supply and Household Formation: A Structural Approach

Abstract

Policymakers and researchers continuously debate the optimal structure and scope of
the U.S. Housing Voucher Program. The current program features an inverse relation
between subsidies and recipients’ income, a high degree of rationing, and a limited
scope of voucher usage. This paper studies the effect of the Housing Voucher Program
on low-income household behavior and welfare. Using several household datasets, I
specify and estimate a lifecycle model that characterizes the effects of housing vouchers.
Then I examine how a set of policy reforms affect household labor supply, marriage,
homeownership, and well-being. Compared to the current program, a proposed reform
that provides every recipient household with the same amount of subsidy increases
female labor supply by 6% and leads to lower household welfare. Policies that offer
a lower subsidy to a larger population tend to decrease labor supply, homeownership,
and marriage, but improve overall welfare. Allowing recipients to use vouchers to buy
homes promotes homeownership by 7%, marriage by 4%, and improves welfare.

Keywords: housing vouchers, labor supply, marriage, homeownership, welfare