Housing Assistance Leaky Bucket Efficiency Loss
Means-tested transfer programs suffer from efficiency losses when the cost to taxpayers exceeds the cash-equivalent value to recipients and creates secondary earnings reductions.
Picture this
Transferring money through a specific bucket (like housing vouchers) causes leaks along the way: part of the money is lost because recipients value in-kind housing less than cash, and another part is lost because recipients work less, reducing their total earnings.
What the evidence says
Voucher usage reduces recipient annual earnings by $1,316, representing approximately 19 percent of the $6,860 recipient subsidy value, alongside a direct $1,540 gap between government outlay ($8,400) and equivalent variation ($6,860).
- Who
- N = 42,358 working-age, able-bodied adults applying for housing vouchers; Chicago, Illinois.
- How
- Welfare economic accounting comparing annual government program expenditures ($8,400 per voucher) against recipient equivalent variation ($6,860) and administrative earnings losses.
What to do
Balance the in-kind target efficiency of housing subsidies against the 19 percent earnings loss leak when deciding between targeted housing vouchers and direct cash transfers like the EITC.
From the source
"But vouchers also have the unintended consequence of reducing annual earnings by around $1,316 among program participants, around 19 percent of the value of the subsidy to voucher recipients."
The Effects of Housing Assistance on Labor Supply: Evidence from a Voucher Lottery
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