No Vacancy / PunkToad

May 3, 2016; National Public Radio, “Planet Money”

NPR’s Keith Romer asks a good question in a report detailing the travails of a low-wage worker living in Connecticut: “Why aren’t housing vouchers like food stamps?” When you are a low-wage worker and you lose a job, you apply for food stamps and get them.

By contrast, housing subsidies, which are most often delivered in the form of a housing choice voucher, are in such short supply that local housing authorities rarely open their waiting lists. When lists are opened, homeseekers are asked to apply for a lottery to get on the waiting list. In his story, Mr. Romer recounts how Ms. Shanay Manson seized the opportunity to apply when a local housing authority opened its waiting list. Mr. Romer notes that Ms. Manson has signed up for a housing choice voucher with four different housing authorities over the past six years.

Unlike food stamps, where you get help when you need it, housing vouchers are strictly rationed: “Shanay qualified for a voucher in all of those places. But unlike with food stamps or Medicaid, for housing, just qualifying isn’t enough. According to a Harvard study, among very low-income people, only about 1 in 4 actually get any kind of housing assistance.”

Are housing subsidies less important to family well-being than food subsidies? There are lots of studies to show that housing stability is a key factor in child wellbeing into adulthood. In “The Negative Effects of Instability on Child Development: A Research Synthesis,” authors Heather Sandstrom and Sandra Huerta note:

Although parents are primary in assuring their children’s well-being and healthy development, a broad range of government programs also play an important role, especially for children in low-income families. Safety net programs provide financial assistance to families in the form of cash payments or subsidized housing, childcare, or food, all of which help to alleviate the immediate effects of instability. But the programs might be able to do more to stabilize the situation for children, by considering whether any administrative practices inadvertently increase instability. Simplified reporting procedures, longer eligibility periods, and a single, centralized eligibility process for multiple programs are some potential strategies.

Do vouchers support communities? Just like food stamps, housing vouchers provide a guaranteed rent stream in the form of monthly subsidy payments. Other businesses can see increased sales because a voucher tenant’s share of the rent is capped at 30 percent of her household income. That leaves more money for food, medicine, clothing, and other necessities.

Rent subsidies also reduce the cost of local government by reducing the number of non-payment evictions and homeless services. Staying out of eviction court and homeless shelters improves school attendance and performance. Good attendance often provides a financial benefit to local schools from state funding formulas. Local government also saves money on code enforcement because the federally funded Public Housing Authorities (PHAs), not local governments, require landlords to meet basic health and safety requirements.

But won’t expanding access to vouchers be expensive? Not according to Romer:

According to a government study, expanding vouchers to every low-income person who qualified would cost about $40 billion a year. For comparison, that’s less than the government spends on food stamps. It’s also less than what is spent on a different federal housing subsidy. This one goes not to the poor, but almost exclusively to the wealthy and middle-class—the mortgage interest deduction.

Matthew Desmond, author of Evicted: Poverty and Profit in the American City, raised the same theme in his presentation to the National Low Income Housing Coalition in April.

As a strategy, connecting full funding for housing choice vouchers with reining in mortgage interest deductions (MID) leads policymakers to consider using federal tax reform as a vehicle for housing voucher reform. Practically everyone on Capitol Hill wants some form of tax reform. Current efforts suggest that there won’t be any opportunity before the presidential elections, but with interested parties on both sides, it is imaginable that a bargain to increase vouchers could be partnered with efforts to cap further restrict MID benefits for wealthier taxpayers.

Here’s an even better, though more utopian, idea: When a new administration and Congress take up tax reform next year, expand Earned Income Tax Credit (EITC) to include a housing subsidy. Creating a housing benefit as a part of EITC is not as farfetched as it might seem at first glance.

  • EITC is a Republican invention from the Nixon Administration; to draw an analogy, it was George W. Bush who tacked prescription drug coverage on to Medicare.
  • By moving housing subsidies to EITC, Congress could eliminate a chunk of federal administrative costs that is currently eaten up by the Housing Authorities. Dealing with PHAs is a major source of dissatisfaction for landlords and frustration for tenants.
  • Eliminating “vouchers” solves the problem of “source of income” discrimination.
  • Redefining “rental” subsidies to “housing” subsidies in the EITC opens the possibility that low-income households could become homebuyers. Expanding homeownership opportunities would also appeal to Republicans and would go some way to placating resistance from the real estate lobby.

There are some programmatic problems with making housing subsidy a part of EITC. One is that the currently overworked and underfunded IRS would need to send households a check every month, rather than once a year. Another problem is adjusting the level of subsidy to the local fair market rent for the community. Mathematics would be involved—but, hey, that’s why we have computers.—Spencer Wells