Using the Housing We Have

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This paper is a response to New Safety Net Paper 1, "Making Work Pay Enough: A Decent Standard of Living for Working Families" by Gregory Acs and Margery Austin Turner.

The success of welfare reform has shifted many policy analysts’ attention to providing incentives for former welfare recipients to remain in the labor force that they have recently joined. Toward that end, Gregory Acs and Margery Austin Turner want to ensure that working pays more than welfare. Acs and Turner offer proposals to assist low-income workers generally, and also specific proposals to provide them with housing assistance. My comments focus on the housing proposals. Acs and Turner recommend expanding the supply of modest housing through construction subsidies, with additional subsidies in high-cost areas, and a new, large household-based housing subsidy. I think these subsidies, while certainly well intentioned and carefully designed, are somewhat unnecessary and counterproductive.

The presumption underlying the construction subsidies is a purported shortage of affordable rental housing. In fact, we do not need to expand the supply of such housing. For most of this decade, the vacancy rate for rental housing has been at historic high levels—consistently over 9 percent since 2002, higher than it has been in the past 50 years, which is as far back as the data go. The traditional dividing line between a “tight” and a “loose” housing market is about 6 percent. The latest published rate, for the first quarter of 2008, is 10.1 percent, representing about 4.1 million houses and apartments, down modestly from the peak of 10.4 percent in 2004, but still very high even after a year of problems and foreclosures in the subprime home mortgage market. The vacancy rate is high for units that are affordable as well as higher-cost units, except for the very small fraction that rent for less than $300 a month (about 4 percent of the inventory). It is high for every size unit, from efficiencies to those with seven or eight rooms; it is high for every structure type, from single-family homes to units to large apartment buildings. Considering that most lower-income workers, like most lower-income households generally, are already living in decent housing, it is hard to see this situation as a shortage.

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