Our “Lake Wobegon” Public Housing Policy

Robert Rector

The government means-tested welfare system consists of dozens of programs, which provide cash, food, housing, medical care, and social services. Most lower-income families on welfare receive benefits from many of these programs. When these benefits are piggy-backed on top of each other the cost of the total benefit package can be quite large.

For example:

  • A single mother with two school-aged children who worked full-time at the federal minimum wage throughout the year would receive $13,853 in post-tax earnings. In most cases, however, this mother would also receive $7,260 in refundable tax credits and $4,623 in food stamp benefits, and her children would receive the equivalent of $1,506 in school lunch and school breakfast benefits.
  • In most states, the family would also be eligible for Medicaid, which would be valued at $10,005 per year. [1] The total value of post-tax earnings plus welfare benefits would come to $37,247, or more than twice the federal poverty level (FPL) for a family of three.
  • If Section 8 housing or other subsidized housing is added, the benefit stack becomes much higher. With housing added, the combined post-tax earnings and benefits, on average, are between $42,985 and $46,967 per year, depending on the size of the apartment. [2]

Like the overall trend in means-tested government programs, participation in public housing programs has increased over the past decade. More than 1 million more individuals received housing assistance in 2015 than received it in 2005.

Most low-income households do not receive housing assistance, however. Public housing benefits, provided through vouchers and rent subsidies, are rationed because of their very high cost. In 2015, approximately 9 million families with children had non-welfare cash incomes that were below 125 percent of the FPL. [3] Only one-fifth of these families received housing aid. [4]

Because public housing payment standards are closely linked to the median rent in each community, nearly half of the regular renters in each town and city are renting apartments or homes that cost less than the units provided to the low-income renters with government vouchers. The government seeks to ensure that everyone has housing that is equivalent to the median rental units in their city. This “Lake Wobegon” housing policy seeks to guarantee that everyone in America has housing that is at or “above average.”

Thus, rental payment standards can be very high. The Section 8 payment standard for a three-bedroom unit is around $24,000 per year in Los Angeles; $23,412 in Washington, D.C.; $26,566 in Oakland; and $29,040 in Stamford, Connecticut. [5] The taxpayer pays around 70 percent of these rental costs. [6]

Another problem with the public housing system is that it appears to discriminate heavily against married couples with children. Nine out of 10 families with children that receive housing benefits are headed by single parents. [7] Roughly one-quarter of poor and near-poor single mothers receive rent subsidies, compared to only 6 percent of married couples with children at similar income levels. [8] Even worse, public housing programs penalize marriage. If a low-income single mother marries the employed father of her children, she will lose most of her housing benefit.

While providing assistance to those who are in need is important, taxpayers should not be required to subsidize rents that they themselves could not afford. Furthermore, a system that penalizes marriage — one of the greatest protectors against poverty — stands in the way of self-sufficiency and well-being, which should be the ultimate goal of all welfare assistance.

Robert Rector is a Senior Research Fellow in the Institute for Family, Community, and Opportunity at The Heritage Foundation.


Next Up in the Poverty and Dependence Section:

Food Stamp Participation


Endnotes

1. This is the national average cost of Medicaid benefits for two children and one non-elderly, non-disabled adult.

2. The national average payment allowance under Section 8 for a two-bedroom unit in 2014 is estimated at $11,752. The national average payment allowance under Section 8 for a three-bedroom unit in 2014 is estimated at $15,644. These figures equal the national average fair market rent weighted by the number of Section 8 units in each relevant area. Calculated from U.S. Department of Housing and Urban Development, Office of Policy Development and Research, “Fair Market Rents” database, https://www.huduser.gov/portal/datasets/fmr.html (accessed May 28, 2016). The estimate in the text (the tenant’s rental payment based on earnings) has been deducted from the payment allowance.

3. U.S. Department of Commerce, U.S. Census Bureau, Current Population Survey, “Table POV27: Source of Income by Ratio of Poverty Threshold for Families and Unrelated Individuals: 2014 Families with Related Children Under 18 (13),” 
http://www.census.gov/hhes/www/cpstables/032015/pov/pov27_000.htm (accessed May 28, 2016).

4. Housing data taken from HUD database for all subsidized housing in 2015 (based on the 2010 Census). See U.S. Department of Housing and Urban Development, Office of Policy Development and Research, “Picture of Subsidized Households” database, https://www.huduser.gov/portal/datasets/picture/yearlydata.html (accessed May 28, 2016).

5. Ibid.

6. Ibid.

7. Ibid.

8. Some 1.6 million single-parent families received HUD rent subsidies in 2015; there were 5 million single-mother families below 125 percent of the FPL in 2014, It is likely that around a third of poor and near-poor single-mother families receive housing benefits. By contrast, only 190,000 families with children containing two or more adults received HUD rent aid in 2015; there were roughly 3 million married couples with children with money incomes below 125 percent of the FPL in 2014. See U.S. Department of Commerce, U.S. Census Bureau, Current Population Survey, “Table POV26: Program Participation Status of Household–Poverty Status of People: 2014,” http://www.census.gov/hhes/www/cpstables/032015/pov/pov26_002.htm (accessed May 28, 2016).



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