AgdaPkt 2016-04-11 Closed and Joint SA PFA

Browse Search

affordable market-rate housing. Nonetheless, under any circumstances it is likely this approach would require ongoing annual funding at least in the low tens of billions of dollars. Expanding Housing Vouchers Also Would Be Expensive. Housing vouchers would be similarly expensive. According to American Community Survey data, around 2.5 million low-income households in California spend more than 30 percent of their income on rent. These households’ rents exceed 30 percent of their incomes by $625 each month on average, meaning they would require an annual subsidy of around $7,500. This suggests that providing housing vouchers to all of these households would cost around $20 billion annually. By similar logic, a less generous program that covered rent costs exceeding 50 percent of household income would cost around $10 billion annually. There is, however, good reason to believe the cost of expanding voucher programs would be significantly higher than these simple estimates suggest. As we discuss in the next section, a major increase in the number of voucher recipients likely would cause rents to rise. Higher rent costs, in turn, would increase the amount government would need to pay on behalf of low-income renters. This effect is difficult to quantify but probably would add several billion to tens of billions of dollars to the annual cost of a major expansion of vouchers. Existing Housing Shortage Poses Problems for Some Programs Many housing programs—vouchers, rent control, and inclusionary housing—attempt to make housing more affordable without increasing the overall supply of housing. This approach does very little to address the underlying cause of California’s high housing costs: a housing shortage. Any approach that does not address the state’s housing shortage faces the following problems. Housing Shortage Has Downsides Not Addressed by Existing Housing Programs. High housing costs are not the only downside of the state’s housing shortage. As we discussed in detail in California’s High Housing Costs, California’s housing shortage denies many households the opportunity to live in the state and contribute to the state’s economy. This, in turn, reduces the state’s economic productivity. The state’s housing shortage also makes many Californians—not only low-income residents—more likely to commute longer distances, live in overcrowded housing, and delay or forgo homeownership. Housing programs such as vouchers, rent control, and inclusionary housing that do not add to the state’s housing stock do little to address these issues. Scarcity of Housing Undermines Housing Vouchers. California’s tight housing markets pose several challenges for housing voucher programs which can limit their effectiveness. In competitive housing markets, landlords often are reluctant to rent to housing voucher recipients. Landlords may not be interested in navigating program requirements or may perceive voucher recipients to be less reliable tenants. One nationwide study conducted in 2001 found that only two-thirds of voucher recipients in competitive housing markets were able to secure housing. This issue likely would be amplified if the number of voucher recipients competing for housing were increased significantly. In addition, some research suggests that expanding housing vouchers in competitive housing markets results in rent increases, which either offset benefits to voucher holders or increase government costs for the program. One study looking at an unusually large increase in the federal allotment of housing vouchers in the early 2000s found that each 10 percent increase in vouchers in tight housing markets increased monthly rents by an average of $18 (about 2 percent). This suggests that extending vouchers to all of California’s low-income www.lao.ca.gov Legislative Analyst’s Office 5 AN LAO BRIEF 8.A - Page 13