NCPA - National Center for Policy Analysis


March 16, 2005

The success of the 1996 welfare reform law could be extended to federal public housing programs, say NCPA analysts Joe Barnett and Todd Gabel. Public housing has many of the same defects as cash welfare and is almost three times as expensive.

In 2004, the U.S. Department of Housing and Urban Development (HUD) spent $45 billion on housing-related programs, primarily for low-income families, and roughly $1 trillion (in 2003 dollars) over the past 35 years.

Some 3 million families receive housing assistance. Approximately 60 percent receive Section 8 housing vouchers to lease private-market apartments that participate in the program.

Among the drawbacks of housing assistance:

  • Since far more families are eligible than can be served, waiting lists have developed, and waiting times can run more than a decade in larger cities.
  • Because recipients typically pay 30 percent of their monthly income for rent -- and rental payments rise with increased earnings -- housing assistance imposes an effective marginal tax on work of up to 30 percent
  • As a result, of the 55 percent of public housing families headed by able-bodied (nonelderly) individuals, 43 percent have no earned income, according to a 2000 study by the Millennial Housing Commission.
  • Furthermore, while families headed by an able-bodied (nonelderly) individual with children spend an average of about 5.6 years in public housing, similar families without children spend about 9.8 years.

Welfare reform demonstrated that putting conditions on benefits is an effective first step toward independence. Housing assistance reform has the potential to do even more, say Barnett and Gabel. For example, some local housing authorities are experimenting with time limits and flexible rent policies that allow recipients to earn more without penalties. And the Bush administration has proposed to block grant housing funds.

Source: Joe Barnett and Todd Gabel, "Public Housing Reform," Brief Analysis No. 507, March 16, 2005.

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