off the charts
POLICY INSIGHT
BEYOND THE NUMBERS

Solving Urgent Housing Problems Requires Pairing Investments in Housing Stock With Expansion of Housing Vouchers

Affordable housing is a key part of the nation’s economic infrastructure. Expanding its availability is an effective way to reduce poverty and homelessness and to help build a more equitable economy in which all children can reach their full potential, households can make ends meet, workers in low-paid jobs and those who need jobs can get ahead, and seniors and people with disabilities can live with dignity in their chosen communities. With this in mind, policymakers should include substantial affordable housing investments in the economic recovery legislation they will consider later this year.

Carefully designed investments in renovating and building affordable housing have an important role to play and they are too often left out of the discussion of infrastructure needs. In making such investments, policymakers should prioritize rehabilitation of the existing public housing stock — which provides affordable homes for nearly 1 million low-income households, mostly seniors and people with disabilities — and creation of new housing options for people experiencing homelessness. They should also provide substantial additional resources for affordable housing development through the Indian Housing Block Grant and National Housing Trust Fund.

But making only such supply-side investments will leave out many who need the most help. To address the nation’s largest and most urgent housing problems, it’s essential to make Housing Choice Vouchers available to many more low-income families. Here’s why:

  • Three-quarters of the renter households that struggle most with high housing costs (i.e., pay more than half their income for housing costs) have extremely low incomes, but capital subsidies to renovate or build housing alone generally do not produce housing with rents that are affordable to these renters. The ongoing costs of operating and maintaining rental properties — which capital subsidies generally don’t cover — typically far exceed the rents that extremely low-income households can afford to pay. (A national survey of about 2,500 properties found that per-unit operating costs, which don’t include capital expenditures or debt service, averaged about $520 per month. Extremely low-income renters can afford to pay only about $280 per month, on average.) To lower rents to a level that is affordable to the great majority of people who have the most urgent housing problems, capital subsidies must be paired with rental assistance, such as housing vouchers.
  • In most communities outside of coastal cities, housing supply is adequate — but rents are still out of reach for most people with extremely low incomes. In Houston and Indianapolis, for example, rental vacancy rates have been consistently high in recent years (around 10 percent), which suggests there is an abundant housing supply. Nevertheless, nearly 4 in 5 extremely low-income households in these metro areas pay more than half their income for rental costs, a severe burden (see the table in Appendix B in this report). In communities like these, capital investments can help improve housing quality or create housing that meets specialized needs that the private market does not, such as housing with on-site support services for low-income seniors or people with disabilities. But increasing supply will do little to help the broader population of poorer households who struggle to pay rent. In contrast, housing vouchers are highly effective in such communities at lowering rents to a level that poorer households can afford.

Housing vouchers help in other ways, too. A limitation of building affordable housing is that it necessarily constrains where low-income people can live, which has important implications for economic and racial equity (as do the two points cited above). A long history of discriminatory housing policies advanced at the federal, state, and local levels has contributed to the segregation of low-income people — especially Black families — into poorer communities with under-resourced schools and other disadvantages. It is critical that new housing investments do not reinforce these patterns. One way to avoid this is to prioritize areas for new affordable housing development that afford residents good opportunities and quality public services. But expanding housing vouchers can help, too. Because vouchers are portable, people can use them to rent units in neighborhoods of their choosing — they are not locked into a particular location. Indeed, Black children in families with incomes below the poverty line that have housing vouchers are twice as likely to live in low-poverty communities as other poor Black children. By expanding families’ housing options, vouchers help ensure people can choose to live in communities that best meet their needs.

Finally, because housing vouchers are more cost effective than new construction (see the research here and here), vouchers are a more effective investment in communities where the supply of quality housing is ample but rents remain too high for most low-income renters. (In communities with significant housing supply shortages, investments to both produce more rental housing and expand housing vouchers or other rental assistance are essential.)

To be sure, supply-side investments are important, as are efforts to lower regulatory barriers to rental housing development where necessary. When carefully designed, investments such as those outlined above can lower rents, improve residents’ living conditions and health outcomes, and reduce racial inequities in housing opportunities and housing quality. They also generate jobs and construction activity and can lower greenhouse-gas emissions by making developments more energy efficient.

But to make meaningful progress in addressing the nation’s most urgent housing problems, expanding housing vouchers should also be a high priority, and should be paired with any investments in new or rehabilitated housing.