Rethinking the Welfare State: The prospects for ... - e-Library

Low-income housing 69
The principal, and simplest, argument in favour of a voucher approach to low-income
housing is its cost efficiency By creating a viable demand market for low-income
housing, it is argued, developers can be induced to build facilities and compete for the
voucher dollars of low-income families, driving down rents and increasing quality.
Where a robust “information market” exists, the reputation of various housing
developments will strengthen incentives for quality service provision, and drive
inadequate or inefficient suppliers out of the market. Moreover, privatization divests the
government of the responsibility for maintaining facilities, as well as for the capital costs
associated with construction, and provides a stimulus for the private sector in the
construction, building maintenance and financial industries.
Consumer choice is particularly relevant in the case of housing, as place of residence
often determines access to schools, job markets and community services. Instead of
concentrating low-income families in particular neighbourhoods by requiring them to
reside in public housing projects, vouchers give them greater mobility. If low-income
households increasingly elect to leave certain neighbourhoods or housing clusters, these
projects will eventually fail. Indeed, the mobility of voucher recipients may create
incentives on the part of landlords to better maintain their buildings, aware that
consumers always retain the option of “taking their business elsewhere.” How significant
this option is, however, essentially depends on how affordable housing is distributed;
there is always the possibility that public housing ghettoes will simply “switch over” into
private housing slums. The evidence that vouchers increase dispersion is equivocal.
According to Peterson:
Although there is some clustering of voucher families in practice, voucher
tenants are considerably more dispersed geographically than are
households living in subsidized housing projects, and are considerably
less likely to live in neighborhoods with high poverty rates or
homogeneous racial profiles. 80
As recently as 2000, however, many commentators on the aforementioned Gautreaux
litigation continue to claim that even after Chicago adopted housing vouchers, lowincome
households “remain in [racially] segregated areas, simply moving from
government owned to privately owned housing.” 81
Such considerations notwithstanding, it is at least plausible that by expanding the
demand market, vouchers may be able to stimulate new construction and enlarge the
affordable housing stock. As with supply-side subsidies, however, the constraining factor
is market supply elasticity, a factor which can have a dramatic effect on the consequences
of vouchering for low-income households. Suppose that vouchers are adopted in a
jurisdiction where the average low-income rent is $300/mo., and eligible families find
they can now afford $400/mo. for housing. There are two possibilities. In an elastic
market, suppliers in the $400/mo. range will proliferate. In an inelastic market, however,
the number of suppliers will not increase commensurately. As a result, demand will
increase without a commensurate increase in supply, and rents will be driven up. Such a
demand-side subsidy would be little more than a de facto supply-side subsidy to
landlords of $100/mo., with no clear incentive to improve quality or quantity of
affordable housing.