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Housing Subsidy Programs

Government housing subsidies generally take one of two forms that can be used separately or together: (1) supply-side subsidies that lower the cost of creating and maintaining new housing units so that they are affordable to low- or moderate-income households, or (2) demand-side subsidies that help low- or moderate-income households pay for units that they select in their local housing market.

The federal government is the largest source of funding for subsidized housing, with most housing subsidies going to help renters. (By contrast, most federal tax breaks for housing go to homeowners.) The principal categories of federal supply-side subsidies for rental housing are: (a) public housing; (b) privately-owned assisted housing; and (c) the Low-Income Housing Tax Credit.

Click here for information on government support for homeownership.

Public housing is housing provided by the government, usually through specially created local public housing agencies that build and/or own and operate affordable housing developments. While many people still associate public housing with large towering high-rise developments, the stereotypical large complexes have, for the most part, been demolished. Today, much of the public housing stock tends to be smaller-scale. Efforts are underway, through a federal program called HOPE VI, to redevelop public housing developments to improve physical conditions, serve a greater mix of incomes and provide services – job training, child care, and education – to help public housing residents achieve self-sufficiency. The federal government no longer funds the development of new public housing developments. As of 2009, there were approximately 1.1 million units of public housing. [1]

Privately-owned assisted housing serves families in similar economic circumstances as those in public housing, but is generally owned and administered by private owners, rather than public housing agencies. The largest program of this type is called Project-based Section 8. It is called project-based because the subsidies can only be used in specific housing units, in contrast with tenant-based Section 8 (described below), in which the subsidies travel with the family to homes of their choice. While the federal government is no longer funding the construction of new project-based Section 8 developments, some privately owned assisted housing programs, including Section 202 Supportive Housing for the Elderly and Section 811 Supporting Housing for Persons with Disabilities – are still actively funding new units. Since the inception of Section 202 Supportive Housing in 1959, the program has supported the creation of approximately 300,000 residential units. [2] Currently, the program produces an estimated 5,800 residential units each year with Section 202 funds. [3]

In both public housing and privately-owned assisted housing, assisted families pay about 30 percent of their income for housing and the government pays for the balance of their housing costs. In the third main federal supply-side subsidy program, however, the Low-Income Housing Tax Credit, families are expected to pay a flat rent irrespective of their incomes. The Low Income Housing Tax Credit is a federal tax credit administered by states that generates equity to support housing affordable to moderate income families. In part because of its rent structure, the Low Income Housing Tax Credit generally serves families with somewhat higher incomes than public housing or privately-owned assisted housing. The Low-Income Housing Tax Credit is the largest source of federal funding for the new construction and preservation of affordable rental housing in the United States. According to HUD, more than 1.6 million units of housing financed through the Low-Income Housing Tax Credit had been placed in service as of 2006. [4]

Housing Choice Vouchers (formerly known as Section 8 vouchers) are a demand-side strategy in which the residents, rather than the buildings, receive the subsidies. Families with vouchers locate units of their choice – generally in the private market – and use the voucher to make up the difference between what they can afford and the actual rent charged by private landlords. The voucher program is the single-largest federal housing subsidy program today. As of 2009, roughly 2 million families in the United States have housing vouchers. [5]

Increasingly, states and localities are using funds within their control – either federal funds that have been allocated to them or funds raised locally – to create housing subsidy programs of their own. Some of the programs look a lot like the federal housing programs, while others use a unique design. It is also common to combine federal housing programs with funds controlled by states or localities to meet "gaps" in funding or to allow developments to serve lower-income families than could otherwise be served by any one funding source alone. More information on state and local housing programs may be found in the Toolbox section of this site.

[1] 2012 Advocates' Guide to Housing and Community Development Policy -- chapter on Public Housing. [PDF] 2012. Washington, DC: National Low Income Housing Coalition.
[2] 2012 Advocates' Guide to Housing and Community Development Policy -- chapter on Section 202. 2012. [PDF]
Washington, DC: National Low Income Housing Coalition.
[3] Section 202 Supportive Housing for the Elderly. 2006. By Kim Bright. Washington, DC: AARP Public Policy Institute.
[4] HUD-USER Low-Income Housing Tax Credit Database. 2009. Washington, DC: U.S. Department of Housing and Urban Development.
[5] Policy Basics: The Housing Voucher Program. 2009. Washington, DC: Center on Budget and Policy Priorities.