Another Look at the Economics of Demand‐Side Versus Supply‐Side Strategies in Low‐Income Housing

This paper presents evidence of the relative efficiency of a particular variant of demand‐side housing strategy vis‐a‐vis the supply‐side Section 8 New Construction program. The model is cast explicitly in terms of theory of consumer behavior, allowing the estimation of price subsidy rates under the demand‐side strategy, that would yield the same welfare improvement as the Section 8 program. The results indicate that neither the latter strategy nor the former clearly dominates in terms of traditional goals of low‐income housing policy. The increases in housing consumption induced by the demand‐side strategy, while less than those from the supply‐side strategy, are significant, and are accompanied by substantial reductions in housing affordability problems (rent burdens). It is shown that anywhere from .63 to 2.16 additional households could have been served for each household served under the Section 8 program, with the demand‐side strategy, at no additional cost to the taxpayer.