Pa 874 session 13 housing policy 2
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PA 874: Session 13 – Housing Policy #2 Policy and Regulation Overview Basics Direct Subsidies Indirect Subsidies (Taxes) Housing Finance Regulations Efficiencies (Or Inefficiencies) Basics Federal Outlays – See Fig. 3.2 Assisted Units – See Fig. 3.3 Historical Trends in Support

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Pa 874 session 13 housing policy 2 l.jpg

PA 874: Session 13 – Housing Policy #2

Policy and Regulation

R. Green and S. Malpezzi

A Primer on U.S. Housing Markets and Policy


Overview l.jpg
Overview

  • Basics

  • Direct Subsidies

  • Indirect Subsidies (Taxes)

  • Housing Finance

  • Regulations

  • Efficiencies (Or Inefficiencies)

R. Green and S. Malpezzi

A Primer on U.S. Housing Markets and Policy


Basics l.jpg
Basics

  • Federal Outlays – See Fig. 3.2

  • Assisted Units – See Fig. 3.3

  • Historical Trends in Support

  • Direct Vs. Indirect Subsidy

R. Green and S. Malpezzi

A Primer on U.S. Housing Markets and Policy


Slide4 l.jpg

Figure 3.2

R. Green and S. Malpezzi

A Primer on U.S. Housing Markets and Policy


Cumulative number of federally assisted housing units 1955 1994 l.jpg
Cumulative Number of Federally Assisted Housing Units, 1955-1994

Source: Listokin (1990); 1994 estimate based on CBO data.

R. Green and S. Malpezzi

A Primer on U.S. Housing Markets and Policy


Direct subsidies l.jpg
Direct Subsidies 1955-1994

  • Public Housing – Declining Construction and Use

  • Rental – Supply Side Programs

    • Through Local Public Housing Authority (PHA)

    • Subsidized Rent First – Above Operating cost, then to 30% of Income

    • Section 202 – Handicapped and Elderly

    • Section 236 – Subsidized Developers - Interest

R. Green and S. Malpezzi

A Primer on U.S. Housing Markets and Policy


Direct subsidies cont l.jpg
Direct Subsidies (Cont.) 1955-1994

  • Section 8:

    • First 1974, Nixon – New Construction and Rehabilitation of Existing Stock

    • 50% of Median Income to Qualify

    • Subsidize Rent up to 75% of Fair Market Rent (FMR) – Subsidy=Difference 30% Tenant Income and FMR.

    • No Additional Money by Tenant

    • Use With Section 202 = Handicapped and Elderly

R. Green and S. Malpezzi

A Primer on U.S. Housing Markets and Policy


Direct subsidies cont8 l.jpg
Direct Subsidies (Cont.) 1955-1994

  • Existing Section 8

    • Similar but not restricted to new or rehabs

    • Part Supply, Part Demand

    • Through PHAs – Eligible, Inspections, Contract

    • Problems:

      • No Incentive to Charge Less than 75%, or Better

      • Tenants Rights Tough – Hard to Evict

      • “Take One, Take All” - Becomes “Section 8 Housing!”

R. Green and S. Malpezzi

A Primer on U.S. Housing Markets and Policy


Rental supply side l.jpg
Rental Supply Side 1955-1994

  • Vouchers

    • To Tenant

    • Tenants May Add Money

    • Still “Take One, Take All”

    • Restrictive Contracts and Tenants Rights

    • But Clearly More Efficient in Production and Consumption

R. Green and S. Malpezzi

A Primer on U.S. Housing Markets and Policy


Direct subsidies owner occupied l.jpg
Direct Subsidies – Owner Occupied 1955-1994

  • Section 235 – 1968-1973

    • Complex, but Basically Below Market Interest Loans to Developers and Occupants

    • Developers Amounts Tied to Costs

    • No Equity Required for Occupants

    • Incentives to: Over Price; Default (rates of 40%)

    • UGLY PROGRAM

R. Green and S. Malpezzi

A Primer on U.S. Housing Markets and Policy


Indirect tax subsidies l.jpg
Indirect – Tax Subsidies 1955-1994

  • Rental Income Property – To Developer

    • Keys:

      • Depreciation

      • Passive Loss Limits

  • Owner Occupied – To Homeowner

    • Keys:

      • Mortgage Interest

      • Taxes Paid

      • Home Equity

R. Green and S. Malpezzi

A Primer on U.S. Housing Markets and Policy


Housing finance highlights l.jpg
Housing Finance: Highlights 1955-1994

  • System from 1930s to 1981

    • It’s a Wonderful Life

    • Role of “Thrifts”

    • Collapse

    • 1981 Legislation

    • Mortgage Rates - Fig. 3.6

  • Current System (Fig 3.5)

    • Agencies (Fannie Mae; Freddie Mac)

    • Banks

R. Green and S. Malpezzi

A Primer on U.S. Housing Markets and Policy


Slide13 l.jpg

Figure 3.5 1955-1994

R. Green and S. Malpezzi

A Primer on U.S. Housing Markets and Policy


Slide14 l.jpg

Figure 3.6 1955-1994

R. Green and S. Malpezzi

A Primer on U.S. Housing Markets and Policy


Regulations l.jpg
Regulations 1955-1994

  • Rent Controlled: Heavily Studied For What?

  • Land Use: Not Studied, More Important

    • Exclusionary

    • Inclusionary

    • Residential/Commercial

    • Historical

R. Green and S. Malpezzi

A Primer on U.S. Housing Markets and Policy


Efficiencies or inefficiencies l.jpg
Efficiencies (Or Inefficiencies) 1955-1994

  • Production

  • Consumer

  • Administrative

  • Economics of Consumer Efficiency (Fig 3.7)

    • Demand Curve (As “Bits” of Housing Added)

    • Idea of Consumer Surplus

    • Effect of Subsidy

    • Trading Off Subsidy for Lost Consumer Surplus

R. Green and S. Malpezzi

A Primer on U.S. Housing Markets and Policy


Consumer s surplus i price control with too little housing l.jpg
Consumer’s Surplus I: Price Control with “Too Little” Housing

Price

per

Unit

of

Housing

Services

a

b

c

Pm

Pc

Demand

Qc

Qm

Q*

Quantity of Housing Services

R. Green and S. Malpezzi

A Primer on U.S. Housing Markets and Policy


Consumer s surplus ii price control with too much housing l.jpg
Consumer’s Surplus II: Price Control with “Too Much” Housing

Price

per

Unit

of

Housing

Services

Demand

a

b

c

d

Pm

e

f

g

h

Pc

i

j

k

l

m

Qm

Q*

Qc

Quantity of Housing Services

R. Green and S. Malpezzi

A Primer on U.S. Housing Markets and Policy


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