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

Low-income housing 71
operating costs, and thus they do not abandon the building. Increased rents
would then raise profits, but do nothing to increase entry. […]
[Restrictive policies and standards:] Local policies may also restrict the
creation of low-income housing, reducing the elasticity of supply.
Examples include habitability laws, building codes, and zoning
restrictions like minimum lot sizes and bans on the conversion of single
family housing into multiple occupancy units. 86
These conclusions suggest that voucher programs need to be accompanied by regulatory
changes intended to increase supply-side elasticity and allow the supply market to
respond to demand-side changes in ways other than simply increasing rents. Ironically,
Susin’s last remark is that “construction subsidies may do more to improve the housing
conditions of the poor” 87 in light of supply-market inelasticities, while Malpezzi and
Vandell’s article 88 considers supply-side subsidies less effective for precisely the same
reason.
One possibility, however, which Susin fails to consider is the explanation that, while
vouchers which only increase rental spending power among low-income households by a
small amount act to bid up rents, larger or more widely available vouchers may be able to
stimulate the entry of new suppliers. According to this theory, it is the valuation of and
eligibility for vouchers, and not the basic design of the instrument itself, which needs to
be reconsidered. Indeed, according to Mayo, 89 a dollar of spending on social housing
produces 37 cents of housing, while the same dollar would have produced 85 to 90 cents
of housing with allowances, primarily due to the cost advantage of providing low-income
housing through filtering, rather than new construction.
In any event, the Susin and Malpezzi-Vandell studies vindicate the view that housing
subsidies depend greatly on the market in which they are intended to operate, and that the
particular modalities of a given voucher program need to take factors like supply-side
elasticity into careful consideration. Inelastic supply markets mitigate the consumer
choice advantage of vouchers and certainly do nothing to increase competition on the
supply-side. By reinstituting complex government regulation and oversight to resolve
elasticity problems through central planning, however, highly interventionist voucher
schemes may actually restore much of the administrative gridlock they are intended to
alleviate. Clearly, the balance between the state’s tendency to overregulate and the
problems of an open market is, in the case of housing vouchers, quite precarious.
Tax-and-transfer policies
As discussed in Chapter 2, where vouchers exhibit a high degree of cash equivalency,
they will be considered de facto cash grants. The logic is reversible: where cash grants
are tied in such a way that a fixed portion will effectively be allocated to a particular
prescribed use, that portion should be considered a de facto voucher. Most modern
welfare states already provide indirect housing assistance in the form of welfare benefits,
a large portion of which is assumed to be allocated to lodgings. In fact, since many
jurisdictions require recipients to find suitable housing before they become eligible for
benefits, a portion of welfare benefits can be thought of as a cash transfer ear-marked for
spending on housing, making such tied benefits into de facto housing vouchers. This is