Master's Culminating Experience
Either private markets or publicly-subsidized programs can provide low-income housing. Federal programs such as the Section 8 low-income housing assistance program combines public funds with the existing private housing stock to provide housing for low-income families. Tenants, (or consumers) receive rent subsidies through either vouchers or rental certificates. The housing authority pays the voucher or rental certificate amount directly to the landlord each month.
Transaction costs, defined as the costs of negotiating, creating and enforcing contracts, determine in part the incentives for landlords to participate in government programs. Costs such as time, increased investment to maintain government housing quality standards, and the costs associated with the government bureaucracy of a rent subsidy program affect the willingness of landlords to participate in these programs. Understanding the impacts of transactions costs incurred through participation in housing programs is crucial for understanding and developing policies that can effectively utilize existing units in the private rental market to address social problems such as affordable housing and homelessness.
A case study of landlords in the Dayton Metropolitan Housing Authority's Section 8 program provides statistical analysis illustrating the role transactions costs play in determining private sector participation. The results suggest that the transactions costs involved with Section 8 program participation are not a significant deterrent. In particular, the guaranteed subsidized rent compensates landlords for the transactions costs associated with participating in the program.
McCarren, M. D.
(1993). Transactions, Costs, and the Supply of Low-Income Rental Housing: The Case of Section 8 Rental Certificates and Vouchers in Dayton, Ohio. .