Housing Vouchers and Neighborhood Effects: Can Expanding Access to Opportunity Pay for Itself?

• In Event: Evaluating and Improving the Housing Choice Voucher Program

Abstract

This paper examines whether more generous housing subsidies that expand low-income households' access to high-opportunity neighborhoods can generate income gains that offset the projected rise in government costs. I study a rental voucher reform that adjusts subsidy ceilings to finer ZIP code-level rent variation, an approach criticized for increasing federal spending. This presumed trade-off, however, overlooks that income may be endogenous to location. I find that the reform resulted in a net decline in per-voucher federal spending. In high-rent areas, income gains from positive neighborhood effects partially offset higher rents, accounting for approximately one-third of the projected increase. In low-rent areas, reduced payment caps lower government spending, curb landlord overcharging and tenant over-housing, and induce labor market responses from voucher households who increase work effort to cover higher out-of-pocket rent burdens. These findings highlight real-time fiscal feedback mechanism between improved economic opportunity and the cost of programs that enable it, offering a novel insight for welfare program design: subsidies can be expanded more efficiently when beneficiary contributions scale with income. 

Author

• JoonYup Park, University of Hawaii
  Presenting Author