Housing Demand and Neighborhood Choice with Housing Vouchers

One goal of the U.S. housing voucher program, as an alternative to public housing subsidies, is to help participants gain access to decent neighborhoods. I find that in a typical implementation of the program, participants in the housing voucher program live in better neighborhoods than public housing residents, but in lower-quality neighborhoods compared to unsubsidized households eligible for the program. I propose and estimate a new model of residential choice and housing demand that respects different budget constraints induced by various housing policies. The model is used to study several possible rental assistance schemes. With respect to crime rates and public school quality, a rental rebate program and a requirement to live in low-poverty neighborhoods would be most effective at improving neighborhood selection. The former would significantly lower program costs, while the later would have to be offset with high levels of compensation including relocation assistance.