Citation URL: http://www.urban.org/EdgarOOlsen

The United States’ current system of low-income housing assistance is biased against homeownership. This paper documents the bias and suggests reforms to eliminate it. The new policies would allow more low-income families to become homeowners by providing similar subsidies for renters and owners under the two largest programs for low-income housing, Section 8 and the Low-Income Housing Tax Credit. The reforms would not require additional spending, would improve the cost-effectiveness of the system of low-income housing assistance, and would avoid the two biggest mistakes in past attempts to subsidize homeownership: subsidizing the construction of new units and requiring intended beneficiaries to buy from selected sellers.

No asset is more important in expanding opportunity and hedging against economic uncertainty than owning a home. While homeownership may not be for everyone, strong disincentives are created by federal policies that subsidize poor families to rent but cut off these subsidies should they choose to buy. Meanwhile, federal tax incentives for homeownership only go to those households owing tax--and typically the higher their income and the more expensive their homes, the larger the tax subsidy. Ownership incentives need to change to correct this inequity and better promote homeownership among the poor.

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