DREAM HOUSES

September 2002
		Many residents of Burlington, Vermont who earn the median salary cannot afford to buy or rent a median-priced house or apartment -- and the disparity continues to grow with the housing market boom. What does this mean on a national level? Housing experts Wendell Cox and Susan Popkin answer your questions.

Forum introduction Why can't Section 8 funds contribute to down payments? Is there any racism involved? What has been the progress of any trends to revitalize older housing in and near cities? Would it be easier to build affordable housing in more outlying areas, such as beyond the suburbs? Pertinent statistics about substandard housing assessments done in Houston. Why is there such a disconnect between wages in a particular area and housing prices?     Online Special: How We Live

Mary Ann Tetreault of Newport, Vermont asks: I read in The New York Times about using Section 8 funds to support mortgages, and the article mentioned that Burlington is one of the cities that has this program. Why can't the program contribute more to the down payment? Why not have the new buyers use what they presently contribute to the down payment to set up a kind of escrow account to use if something happens and the house needs costly repairs, a major concern in the article? Dr. Susan Popkin responds: The Housing Choice Voucher (Section 8) program is primarily intended to help subsidize low-income renters. It is currently the largest housing assistance program in the nation; however, public housing and the voucher program together serve only about one-third of the households which qualify for assistance. Under the voucher program, the tenant pays 30 to 40 percent of their income for rent and the housing authority pays the rest. Generally, those who are lucky enough to receive a voucher (usually after years of waiting) must search for housing in the private market. They have to find a landlord who is willing to rent to them, accept the rent the housing authority deems fair, and be willing to permit the housing authority to conduct a housing quality inspection. When rental markets are loose, landlords are more willing to accept vouchers because most of the rent is guaranteed by the housing authority. However, when rental markets are tight, as in Burlington, landlords have little incentive to participate in the program because they can charge unsubsidized renters more. The program that allows vouchers to be used to subsidize down payments is relatively new and assists only a small number of households nationwide. Most voucher holders will not qualify for such assistance because of bad credit histories or lack of sufficient income to maintain a home. The most serious problem for very low-income households at the moment is the lack of affordable rental housing, not homeownership. Somewhat higher income households may benefit from the new homeownership program, but those most in need of assistance will not. Wendell Cox responds: There are no doubt good ways to improve upon the effectiveness of the nation's housing subsidy programs. But there is a more fundamental issue: that the development regulations (such as smart growth's exclusionary planning) being adopted by state and local governments are worsening the housing affordability crisis by artificially raising prices. This, in turn, increases housing subsidy costs and means that fewer households can be served (see our paper commissioned by the congressional Millennial Housing Commission, "Smart Growth and Housing Affordability," at http://www.mhc.gov/papers/coxsg.doc).