How a Boom in Market-Rate Housing Would Help Section 8 Tenants
The United States largely abandoned building new public (i.e., publicly-owned and operated) housing in the 1970s, replacing it with the Housing Choice Voucher program to provide low-income families with federally-funded rent subsidies for use in privately-owned buildings.
Colloquially known as “Section 8,” after the law that created it, the program works like this: tenants with Housing Choice Vouchers (HCVs) pay 30% of their income in rent, which is considered the threshold for affordability. The federal government then provides a voucher – a direct payment to the landlord – that covers the difference between the tenant’s payment and the market rate rent.In The Effect of Relaxing Local Housing Market Regulations on Federal Rental Assistance Programs, Kevin Corinth and Amelia Irvine look into the potential effects of zoning reform on the Housing Choice Voucher program, concluding that ten years of 90th-percentile housing production in Los Angeles would significantly lower market rate rents, which would allow many more families to access HCVs with the same budget.
Key Takeaways
- If Los Angeles had produced new housing at the same rate as pro-housing metro areas, market rate rents would fall by 18 percent.
- These reduced market rate rents would save the federal government $353 million in Housing Choice Voucher funds, enough to provide vouchers to 34,000 more Los Angeles families.
- The savings from lowering the market price of rent would significantly outweigh those from doubling the number of subsidized housing units produced with the low income housing tax credit.
While the Housing Choice Voucher program is great for low-income families who are able to secure a voucher—and find a landlord willing to take it—only about one fourth of eligible households actually have vouchers, because the program’s funding is limited.
Meanwhile, market rate rents in cities with housing shortages continue to climb, which means the program serves fewer people with the same funding every year.
Corinth and Irvine simulate the effect that legalizing homebuilding in supply-constrained cities would have on housing prices in Los Angeles by looking at housing production rates in other cities. They then model how ten years of construction would affect the housing supply.
They find that increasing annual housing production from Los Angeles’ 2010-2019 rate of 0.7% of current stock to 1.6%, in line with Salt Lake City, would increase the total owner-occupied housing stock by 6.2% and the rental housing stock by 13.6%.
They then use this supply effect to calculate the effect on market rate rents, estimating an 18% decline. Finally, they applied these effects to the Housing Choice Voucher program, estimating a $353 million savings that could be used to provide 34,000 more vouchers in Los Angeles.
Expanding outward from Los Angeles, Corinth and Irvine run the same simulation in 11 other cities, finding that increased housing production would dramatically reduce rents in many other cities—19% in New York, 18% in Boston—and allow many more families to access HCVs.