Understanding the Impact of Housing Assistance – Part II
- shreyatandon0209
- Jul 20, 2021
- 7 min read
Updated: Aug 11, 2021
Does housing assistance help its intended beneficiaries? Like many policy questions in economics, the answer seems to be “it depends”. Studies exploring various kinds of housing programs implemented around the world indicate that the long-term effects of housing assistance vary depending on the nature of the housing intervention, distance from initial place of residence or city center, whether households were already receiving some form of housing assistance, the gender of the beneficiary, and even the age at which they move.
I decided to explore this literature to understand which outcomes might be affected by the Samurdhi housing lottery, and in which direction these outcomes might be expected to change. In this post, I will discuss some of the evidence on two major interventions that enhance housing security: housing vouchers that recipients can use to pay all or part of their rent and government-constructed housing projects. The Samurdhi housing lottery awards a large sum of money to assist beneficiaries in building their own houses. Since the program is characterized by a large one-time transfer and the flexibility of choosing where to live, the setting shares similarities with both public housing allotment lotteries and housing vouchers.
Housing Vouchers
Several cities across the United States issue housing vouchers using a lottery system. These interventions have been the subject of much research in the field. Ludwig et al. (2013) and Chetty et al. (2016) both study the impacts of the Moving to Opportunity program mentioned in my previous post. 4,600 low-income families living in public housing located in some of the most disadvantaged urban neighborhoods across America were offered the opportunity to move to private housing in areas which were much less distressed. Families were randomly assigned to one of three groups: a group that was offered a voucher that could only be used to rent in low-poverty neighborhoods (experimental group), a group which was offered a standard Section 8 housing voucher to cover private market rent (Section 8 Group), and a control group.
Ludwig et al. (2013) show that ten to fifteen years after winning the voucher adults have improved mental and physical health, measured using a variety of indicators. However, winning a voucher had no impact on adults’ economic self-sufficiency (measured using an index combining indicators of being employed, not being enrolled in TANF, earnings). Finally, they found the treatment had no effect on children’s math or reading scores and found positive effects on mental and physical health for girls but not boys.
On the other hand, Chetty et al. (2016) focuses on the long-term effects of MTO on children whose parents won housing vouchers. They find that moving to a low-poverty neighborhood when young (below 13 years) increases college attendance and earnings and reduces single parenthood rates. However, moving as an adolescent has slightly negative effects, possibly due to disruption. Unlike previous work on MTO, they find no difference in treatment effects by gender or race. Although the housing vouchers did not significantly boost earnings of the recipients themselves, these large improvements in children’s economic success highlight the importance of considering intergenerational effects when evaluating a policy intervention.
Interestingly, those children whose families received the simple Section 8 vouchers (which were not tied to moving to a place with low poverty rates) ended up with outcomes between the experimental group and the control group, even though families with Section 8 vouchers were free to make exactly the same moves as those in the experimental group. This suggests that actively encouraging families to move to lower-poverty neighborhoods by counselling or restricting their choice set increases the impact of housing vouchers on children’s long-term economic outcomes. Bergman et al. (2020) find evidence to this effect: housing voucher recipients in Seattle and King County who received customized search assistance, landlord engagement, and short-term financial assistance, were more likely to move to higher mobility areas. Another important lesson from this body of work is that affordable housing policies are likely to be more effective in reducing residential segregation and enhancing upward mobility if they include services which reduce the barriers to housing search.
MTO enabled people to move from public housing to subsidized private market rentals, in other words the “treatment” was a change in the nature of the housing assistance received. Instead, we may be interested in understanding the treatment effect of expanding the set of people receiving housing assistance. Moreover, the MTO experiment did not directly affect beneficiaries’ incomes because the eligibility criteria for public housing and vouchers were similar. To get at these questions, Jacob and Ludwig (2012) examine a randomized lottery awarding housing vouchers to low-income households in Chicago, focusing on voucher applicants living in private housing when they applied. Since the vouchers studied by Jacob and Ludwig were means-tested, participation in the program raised marginal tax rates for beneficiaries as each additional dollar earned would reduce the amount of rent covered by the voucher. Most voucher applicants were low-income African American women. They find that housing voucher use reduced labor force participation and quarterly earnings among able-bodied, working-age adults and increased take-up of welfare programs (Temporary Assistance for Needy Families (TANF)). Finally, they found no effect on the presence of affluent/employed neighbors who could provide useful job references or be otherwise supportive of work. Considering the evidence from Bergman et al. (2020), perhaps individuals would have chosen to move to higher-mobility areas if barriers to housing search had been reduced.
The Jacob and Ludwig study also found that the reduction in labor supply was larger for female household heads than males. This contributes to the growing body of evidence on the heterogenous treatment effects of housing programs by gender, but the mechanism behind this heterogeneity is less clear. These differential treatment effects are particularly evident in the literature on public housing construction projects.
Public Housing Projects
Picarelli (2020) and Franklin (2020) study the impacts of a public housing lottery in South Africa, finding divergent results on treatment effects for women. Picarelli finds a large drop in hours worked two to four years after receiving housing in the lottery, especially for women. Housing was constructed at the periphery of the city, resulting in long commute times, which could explain reduction in labor supply. Since women in developing countries tend to use fewer forms of public transport due to safety concerns, their labor supply may be more responsive to changes in distance from work.
Households living in slums close to newly constructed housing projects were first in line to get a house. Franklin (2020) leverages this fact to identify the treatment effect of the program on households that only moved slightly further from their original place of residence. The study finds significant positive effects on household earnings, driven by increased earnings for women who were already working before they won a house. Families moved from informal to formal housing after winning the housing lottery, and gained improved access to electricity, running water, and time-saving home appliances, allowing women to shift time away from domestic chores and towards increasing their hours of work.
The results from the South African housing program indicate that distance from prior place of residence or from the city center can significantly influence the response of women’s labor supply to housing transfers. Barnhardt et al. (2017) find further evidence supporting this theory in the context of a lottery under which female slum dwellers received subsidized housing constructed on outskirts of Ahmedabad, a major Indian city. Fourteen years after the intervention, tenure security, family income, and human capital were no higher among lottery winners than those who did not receive a house. Lottery winners also reported being isolated from family and caste networks, and reduced access to informal insurance. Distance from city center seems to have been a major factor influencing take-up and program exit, even though the new housing units were of much higher quality and in safer, cleaner locations than the slums where lottery applicants lived. One-third of lottery winners never relocated and one-third eventually moved out of public housing. This result is particularly surprising, as these women worked in the beedi-rolling industry and typically worked from home. Therefore, in addition to commuting costs, the social and network costs of re-location should be kept in mind when deciding where to place these expensive government housing projects and performing cost-benefit analyses.
In conclusion, housing assistance has the potential to enhance health, economic outcomes, and intergenerational mobility, provided it is implemented in a certain way. The flexibility of choosing where to live offered under the housing voucher system seems more desirable than re-location of low-income households to housing projects constructed at the periphery of cities. Additionally, affordable housing programs that require recipients to move to low-poverty areas or reduce barriers to housing search are likely to be more effective at enhancing social mobility. Finally, housing assistance which greatly enhances commuting costs or disrupts social networks that women may rely on to find work or for childcare tend to reduce female labor supply or push women towards home-based work. While such affordable housing policies may bring us closer to housing security, mitigating steps must be taken to prevent further widening of gender gaps in the workforce.
The Samurdhi housing lottery combines many of the desirable features of the housing interventions discussed in this post. It is an unconditional one-time transfer allowing households to choose where to build or purchase a house, and it does not seem to be the case that lottery winners automatically lose eligibility for other Samurdhi benefits. Since the program does not seem to alter the effective marginal tax rate faced by lottery winners, it is unlikely to distort incentives to work. Program beneficiaries simultaneously enjoy the no-strings-attached nature of a government housing transfer and the flexibility of housing vouchers. It remains to be seen whether the features which seem to be desirable in housing assistance programs implemented elsewhere, have proven to be welfare-enhancing in Sri Lanka. I look forward to learning more as the project evolves!
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