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Expanding Federal Housing Subsidies to Moderate-Income Households Would Waste Scarce Funds


In the current issue of Cityscape, a journal of the Department of Housing and Urban Development, CBPP’s Barbara Sard argues that except in special circumstances, middle-income households (those with incomes between 80 and 120 percent of local median income) shouldn’t be eligible for limited federal rental subsidies, as these households have substantially less need than their low-income counterparts.

“Instead,” she writes in an essay,

we should target scarce public funds to families who most need help affording a decent, stable home in a neighborhood that provides opportunities for them to thrive. That is not only fair but also smart public policy, because those are the investments that pay social dividends in the long run.

Sard also notes a common misunderstanding about eligibility for federal rental assistance that may spur different opinions on this issue. Rather than using flat eligibility levels across the country, as some assume, federal policy pegs eligibility for rental subsidies to incomes in particular metropolitan areas or non-metropolitan counties. As a result, nearly 90 percent of households with incomes between $35,000 and $50,000 that pay more than half their incomes for rent are considered “low-income” and are eligible for federal rent subsidies. Unfortunately, most of them — like most other low-income people with severe rent burdens — can’t get the assistance they need due to limited funds. Indeed, 3 in 4 households eligible for federal rental assistance don’t receive it.

In this issue of Cityscape, Sard and three others debate the question of whether middle-class families should be eligible for housing subsidies. All four agree that public support for middle-income households that aren’t now eligible for federal assistance — including through housing tax expenditures — shouldn’t come at low-income households’ expense. Meeting this goal could require raising additional revenue through closing other tax loopholes, including possibly scaling back the mortgage interest deduction.