Enhancing the Affordability of Rental Housing in the U.S. : Demand-Side Subsidy or Supply-Side Subsidy?

Abstract

The purpose of this paper is to assist policy makers in their decisions as regards housing assistance by examining which alternative (demand-side such as rent certificate and housing vouchers, supply-side subsidy such as public housing, or rent control) is more effective in enhancing rental housing affordability. The arguments on the price effects of three alternatives are empirically examined using data on 39 metropolitan areas from American Housing Survey. Multiple regression analysis is the principal means of analysis. The results of the empirical tests show that the supply-side subsidy is most important to enhance housing affordability of rental housing through decreasing the overall rent level, while demand-side subsidy does not have a significant relationship with rent level and rent control turns out not working for decreasing rent level. These findings imply that as far as affordability problem is concerned, the governments preference on the demand-side subsidy as the scheme of public housing assistance since Nixon Administration should be reexamined, and the supply-side subsidy should be reemphasized.