Alternative Housing Choice Voucher Subsidies Produce Varying Results

How would alternative low-income housing subsidies affect the choices and well-being of housing choice voucher recipients? Judy Geyer examined this question in the Journal of Urban Economics by developing a model that predicts how voucher recipients make housing and neighborhood choices and simulating the effects of various voucher reforms. To build her model, Geyer compared households that were receiving vouchers and living in Pittsburgh, Pennsylvania, in 2006 and nonvoucher households living in the city and earning less than $35,000 in 2000. For the households in the sample, the author considers household and neighborhood (or census tract) characteristics, such as crime rates, school quality, racial composition, and housing prices to estimate her model. Geyer’s model allows her to simulate household choice under alternative policies, specifically comparing how each policy change would affect housing consumption, neighborhood, and program cost relative to the current housing voucher policy. She considers four possible reforms: a larger voucher subsidy; subsidy amounts that are determined by census-tract housing prices, not metropolitan area prices; subsidies that vary proportionally for the market rate rent of individual units; and a stipulation that voucher recipients must live in neighborhoods with a poverty rate below 30 percent. The author’s model reveals that policy affects the residential choices of voucher recipients.

Key findings

• Basing vouchers on neighborhood selection instead of metropolitan area selection would most successfully increase the number of voucher recipients choosing to live in low-poverty neighborhoods. This alternative would increase the cost of the program 14.0 percent.
• Partial rebates for housing costs is almost as successful in leading voucher recipients to low-poverty neighborhoods, and it would decrease program costs 8.2 percent.
• Requiring voucher recipients to live in low-poverty neighborhoods would lead to compensation demands equivalent to 39.0 percent of all voucher costs under the current policy.