Vouchers versus Production Revisited

Policy makers who want to help house low-income families might either fund production of new units or supplement the payments families make for existing units. Conventional wisdom holds that pro-duction costs more, but it has been claimed that the long-term discounted costs of project-based and tenant-based housing assistance may not be very different. Using large databases for assisted tenants from the U.S. Department of Housing and Urban Devel-opment, we find that 15 to 20 years after construction, Section 8 New Construction/Substantial Reha-bilitation projects remained considerably more expensive than Section 8 certificates. The federal gov-ernment could not use construction subsidies to preempt rent inflation. Even in the most inflated markets, rents for units that developers wanted to build are higher than comparable certificate rents