NCPA - National Center for Policy Analysis


October 7, 2005

Many people displaced by Hurricanes Katrina and Rita are faced with the challenge of finding new housing with few resources and a lack of steady income, at least for now. The federal government spends billions of dollars a year on housing assistance and programs to provide low-cost housing for the poor, however, attempts to house homeless evacuees by expanding these programs would be a big mistake. Specifically, it would drive up demand for all low-income housing without increasing supply. The result: a large government expense with no reduction in need, say Joe Barnett, director of publications and Pamela Villarreal, a research associate with the National Center for Policy Analysis.

A better approach is the NCPA's concept of "enterprise" programs, say Barnett and Villarreal:

  • The idea is similar to "enterprise zones," where economically distressed areas are exempted from uneconomic regulations; enterprise programs, however, would not be confined to a geographical area.
  • On the supply side, a producer/seller/entrepreneur qualifies to participate in an enterprise program by providing housing opportunities to poor and distressed families.
  • On the demand side, the program would give low-income families access to non-traditional housing markets with funds currently tied up in government provision.

The private sector has been a powerful and effective provider of affordable housing, and Katrina evacuees would likely benefit from a market-driven approach with a wider variety of choices, including non-traditional housing, sweat equity programs and enterprise programs, says Barnett and Villarreal.

Housing considerations for hurricane evacuees should take into account long-term prospects for housing, not just government-dependent quick fixes. Manufactured homes, sweat equity mortgages, and SROs can increase the housing supply, but local zoning laws often restrict non-traditional housing. The federal government could require states to accommodate enterprise programs in return for reimbursement of hurricane-related expenditures, say Barnett and Villarreal.

Source: Joe Barnett and Pamela Villarreal, "Housing for Hurricane Victims," National Center for Policy Analysis, Brief Analysis No. 533, October 6, 2005.

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