People are using cash transfers like basic income to pay rent, and it shows just how badly a housing-crisis solution is needed

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JANUARY 22, 2024

An ‘Apartments for Rent’ sign hangs in front of a building on December 06, 2022 in Miami Beach, Florida. Joe Raedle/Getty Images

  • A growing number of Americans who qualify for government housing assistance aren’t getting it.
  • Experimental basic income programs and other temporary aid often go towards rent.
  • Researchers are experimenting with a basic income to replace housing vouchers and other rental aid.

Low-income Americans are struggling more than ever to afford housing. Homelessness has reached record highs. The US is short an estimated four million homes. And a growing number of people who are eligible for government housing assistance aren’t getting it.But unlike other government benefits like Medicaid and food stamps, housing aid doesn’t automatically go to those who need it. Just a fraction of those who qualify actually receive it. Those who’ve benefited from experimental basic income programs and temporary government assistance — like the expanded child-tax credit and pandemic emergency housing aid — often spend a large chunk of the cash on housing, including rent and utilities.

More than half the recipients of a pandemic cash aid program in Washington, DC, called THRIVE East of the River, spent “all or almost all” or “a lot” of the aid on housing, according to an Urban Institute report. Meanwhile, a universal basic income program in San Francisco that gave $500 a month to people experiencing homelessness found that more than a third used the money to secure permanent housing. And across 31 pilot basic income programs, recipients spent an average of about 9.2% of their payments on housing and utilities.

Further, the American Rescue Plan’s expanded child-tax credit — which gave parents up to $3,600 per child under six and $3,000 per child ages six to 17 — has helped families stay housed. Parents on the Supplemental Nutrition Assistance Program (SNAP) who also received the temporary expanded child tax credit were “more likely to think they would be able to stay in their current housing for the next 30 days; less likely to have been evicted; less likely to have slept in a shelter in the past 30 days,” according to a December 2021 study by Columbia University’s Center on Poverty and Social Policy.

Given the importance of maintaining a secure place to live, it’s unsurprising that recipients of basic income and similar cash transfers use a significant portion of it on housing. As Princeton sociologist Matt Desmond put it, “the rent eats first.”

“Rent gets prioritized among other spending, or you risk being homeless,” said Chris Herbert, managing director of the Harvard Joint Center for Housing Studies.

A new form of housing assistance

While building more housing will help make housing more affordable, real estate developers insist it’s the government that has to improve its efforts to house those who can’t afford market-rate homes.

“The biggest issue for all the cities, pretty much, in the world is affordability, but they shouldn’t expect that affordability is solved by the private economy,” Christian Ulbrich, CEO of the international real estate investment firm JLL, told Business Insider’s Matt Turner at the World Economic Forum in Davos in January. “That’s something the public sector has to solve.”

The amount that the federal government spends on its housing assistance programs, mainly Housing Choice Vouchers and public housing, is determined by Congress each year. And as rents and home prices have skyrocketed, governmental aid hasn’t come close to keeping up.

Government housing assistance for the poorest renters has dropped to the lowest levels in 25 years even as the number who need the aid has soared, according to an analysis by Harvard housing experts published in The New York Times in December. Almost two-thirds of tenants among the bottom 20% of earners spend more than half of their income on housing.

The assistance programs already in existence are going underutilized. Only a quarter of those eligible for a housing voucher receive one. And even when someone manages to score a voucher, about 40% aren’t able to find an eligible home with a landlord who will take a voucher.

“Housing support across America is very fractured and variable,” said Sean Kline, director of Stanford’s Basic Income Lab.

This has led researchers at the Department of Housing and Urban Development to propose piloting a direct cash transfer program for rent as an alternative to housing vouchers. Cash payments for housing, researchers say, have a slew of benefits, and cut the red tape and landlord discrimination associated with vouchers.

HUD’s proposal involves partnering with a philanthropic group, which would give voucher-eligible people cash every month to spend on rent. The cash transfers would be compared to those who receive vouchers in an attempt to determine which method is more successful in getting people into housing.

The Philadelphia Housing Development Corporation is already experimenting with such a program. The city’s so-called PHLHousing Plus program, which is being implemented in partnership with the University of Pennsylvania, is a guaranteed income program for 300 households who qualify for housing vouchers.

“The PHLHousing Plus program is really an opportunity to kind of increase, improve the evidence that we have, and really think about how we can offer flexible cash with a bit more dignity and self-determination for those who are receiving the benefit,” said Matthew Fowle, a post-doctoral fellow at UPenn’s Housing Initiative.

But Fowle and other supporters of basic income worry that the stigma around assorted kinds of government benefits will be the most significant obstacle to expanding cash transfer programs.

“I think that same thing is true, perhaps even more so, with cash — that people think the spending will be on things like cigarettes and alcohol and eating out, which people with a more paternalistic perspective don’t like,” Fowle said.

Kline argued Americans need to start “trusting that families know how to spend money better than any researcher could.”

Of course, helping low-income people afford the rent is just one part of the solution to the severe shortage of affordable housing. The US also needs to build more homes that the poorest can afford. Fully funding rental assistance programs without simultaneously boosting the housing supply could also be inflationary, pushing already sky-high rents even further up.

“We should be building housing that’s intended for people with lower incomes, to expand the supply, which could help relieve pressure on the market, and not just rely on demand-side subsidies,” Herbert said.


Courtesy: Business Insider