A recent article in Housing Policy Debate, “The Effects on Consumption Patterns of Replacing Housing Programs with Cash Grants,” compares the benefits of different types of housing assistance for low-income families. The authors find that nearly a third of households in assisted housing programs would have more money to spend on non-housing essentials and housing costs with direct cash payments that cost taxpayers the same amount. They suggest that increased adoption of cash assistance programs would reduce landlord discrimination and increase flexibility for low-income renters.
The researchers used data from the 2013 American Housing Survey, providing information about housing quality, household characteristics, and spending patterns for a sampled 60,000 assisted households. HUD’s administrative records were used to compute subsidy amounts and program costs, which were used to estimate the total cost to taxpayers. These data were also used to calculate administrative costs and inefficiencies associated with each assistance program compared to cash assistance. The authors assumed cash assistance programs would be able to spend 50% less on administration than the housing voucher program. They categorized housing programs into four types: vouchers, public housing, privately-owned subsidized housing, and LIHTC or other programs. They used this information to predict how households in these programs would spend money on housing and other needs if they received cash assistance instead.
Housing voucher recipients would spend about 15% more on housing, but 12% less on other needs, than if they received cash assistance. Public housing residents would spend 4% more on housing and have 41% more for other expenses with cash assistance. Recipients in the other two types of programs would spend 4% less on housing and 13% to 30% more on other goods with cash. About 92% of all households receiving housing subsidies would have more money for non-housing needs with cash assistance. Across all housing program recipients, receiving cash assistance would increase spending roughly 20% on non-housing goods, like food, healthcare, and other essentials.
The study found these patterns held true across family types, though some households saw bigger potential effects on their ability to afford non-housing needs than others. Individuals with disabilities and single mothers would particularly benefit from switching to cash assistance, with 26% more money being available for non-housing expenses. The authors estimated that the non-voucher programs cost between 34% and 100% more than the cost of rent, due to the cost-ineffectiveness of housing production and administration. This is money that could instead go directly to families under a cash assistance approach.
The researchers conclude that giving cash assistance directly to low-income renters may be more effective than most current housing programs at helping families meet their needs. Acknowledging the housing quality improvement offered by vouchers, they argue low voucher success rates outweigh this benefit. They support HUD’s recommendations for local governments and non-profits to consider experimenting with cash assistance to measure the effects for low-income families. However, cash assistance could in theory have an inflationary impact on rents, which could reduce the efficiency gains of cash assistance and lead to rent increases for non-recipients. Realizing the benefits of conversion to cash assistance would likely also depend on potential inflationary impacts, program structure, and whether administrative cost savings are passed on to tenants rather than taxpayers.
Read the article at: https://bit.ly/4agAJuj