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 studies the impact of Small Area Fair Market Rents (SAFMR), a major reform to the voucher program that adjusts rent ceilings to a finer ZIP-code level variation, on voucher households' neighborhood and economic outcomes, and their interaction with the fiscal and non-fiscal components of program operation. Using a difference-in-differences design, I find that SAFMR improved voucher holders' relocation to higher-rent, lower-poverty neighborhoods. These effects were especially pronounced in metropolitan areas with high levels of residential segregation. Consistent with the neighborhood effects literature, relocation to high-opportunity neighborhoods increased household income and rent contributions, leading to declines in federal spending per voucher. However, the reform did not expand program reach. Long-run evidence from the first SAFMR adopter shows that federal per-unit costs eventually rose as the number of subsidized households in high-rent areas outweighed the income-driven savings, resulting in a contraction in the number of households served. These findings highlight a key trade-off: while SAFMR generates fiscal efficiencies in the short run, its long-term financial sustainability remains uncertain under a fixed program budget.

Author

• JoonYup Park, University of Hawaii
  Presenting Author