This video discusses the economics of using housing vouchers as a form of social assistance. A number of countries use housing vouchers to help families obtain housing or move into housing in better neighborhoods. The United States, for example, uses a program called Section 8 that provides vouchers to low-income families. The use of a voucher program causes the demand curve for housing to shift to the right, which increases the equilibrium quantity of housing and also the relative price of housing.
Some might object to the increased price of housing, and one criticism of vouchers is that they encourage landlords to charge higher rent (since they know the government will be paying a large portion of the rent). One justification for the voucher program, however, is the argument that there is a market failure in the market for housing. This market failure occurs because access to affordable housing generates a positive externality. When deciding whether to obtain housing, families only take into consideration their marginal private benefit. The marginal social benefit of a family having access to housing, however, is higher than the private benefit enjoyed by the family. This is because families with stable housing are more likely to be productive and less likely to experience negative social outcomes. For example, their children will be more likely to graduate from high school and less likely to engage in crime, since the family is not couchsurfing or living in homeless shelters. Thus, there is a positive externality; the free market is not providing the socially efficient level of housing. The solution to a positive externality is to provide a subsidy for housing, which increases the quantity of housing to the socially efficient level. This is the intention of a housing voucher; it is essentially a subsidy for housing.
To watch a video that explains what a positive externality is, click here: https://youtu.be/8RwHJzNYsD8
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it's worth noting that a land-value tax would reabsorb the rent increase caused by the housing vouchers, reducing the social cost.
If the old rent price is $700/month and vouchers increases it to $900/month what looks like will happen is those people who could afford $700/month rent but not $900 also need section 8 vouchers. Since the section 8 vouchers are based on the fair market rent and the price of the rent continues to go up, as more vouchers are issued then rent prices keep spiraling upwards. In fact, those who were issued the section 8 voucher to pay 30% of a $700/month rent may need additional voucher money to pay 30% of $900/month rent. I think increasing the supply of housing is better. Maybe something along the lines of limiting rental tax deductions to one rental per taxpayer return or something like that to reduce the incentive to own multiple rentals. Those extra homes get sold and bought by apartment dwellers who move out of their apartments which lowers the demand for apartments. Apartment rent prices should go down as a result. You can still have section 8 vouchers and all the benefits of them but hopefully without the spiraling upward rent prices.
BTW, your videos are easy to understand which is great.
Done it…13/11/20 – 15/11/20
finished all you lecture thank
s for the revise
I really like your videos. You are helpful!