Sen. Cory Booker (D-NJ) officially entered the Democratic primary for president on Friday, shortly after Sen. Kamala Harris (D-CA) jumped in the ring. Both entrances are a big deal if you care about anti-poverty policy.
Earlier this week, I wrote a piece comparing five anti-poverty plans from a handful of potential 2020 Democratic candidates. The proposals all shared one remarkable feature: they’d put billions of dollars in the hands of poor and working-class Americans.
By far the biggest takeaway for me was that the rental subsidy bills from Harris and Booker — Harris’s Rent Relief Act and Booker’s HOME (Housing, Opportunity, Mobility, and Equity) Act — were especially well targeted at poor people. Indeed, even though they’re technically housing bills, these two plans appear to be the most effective at slashing poverty. The Rent Relief Act and HOME Act do the most to cut poverty per dollar out of all the plans I considered:
It’s worth digging a little deeper into why these two plans work so well to cut poverty — and what other factors we need to consider in assessing their effectiveness.
Part of the reason is that we’re using the Supplemental Poverty Measure (SPM) as our metric. SPM is a vastly more accurate metric than the Official Poverty Measure (OPM), which the Census Bureau produces alongside the SPM. Unlike the OPM, it takes into account the effects of big government programs like food stamps, Medicaid, and the Earned Income Tax Credit on poverty; the OPM by contrast makes it hard to see when government programs are reducing hardship.
At the same time, the SPM adjusts the poverty threshold for different areas based on how much housing costs. That makes some conceptual sense, but also means that rental subsidy bills like Booker’s and Harris’s might be particularly likely to cut poverty as measured by SPM compared to other, equally defensible metrics.
Rental subsidies might make rent more expensive
Just looking at the money the subsidies transfer isn’t enough, though.
Rent subsidies wouldn’t just make rent cheaper for beneficiaries. They’d change how landlords behave. And there’s a chance landlords would see a big rent-subsidy bill like one of these pass, and jack up rents in response to capture much or all of the subsidy. In cities where it’s hard to build more, the landlords can’t benefit by actually constructing new units — so instead they might just try to bilk tenants, as economists Robert Collinson and Peter Ganong predict would happen under a poorly designed rent subsidy plan in a recent study.
That effect might be avoidable. The argument that the subsidies wouldn’t jack up rent is basically that rent boosts aren’t different from any substantial cash payment to poor people, as rent is such a huge part of most poor households’ budgets. In other words, it may be a rental subsidy, but it’s no different than other cash transfers, so the effect shouldn’t be any different either. Indeed, a 2015 study by economists Michael Eriksen and Amanda Ross found little evidence that Section 8 housing vouchers in the US increase rents.
But Eriksen and Ross did find some effects in cities with constrained housing supply (think New York or San Francisco), and Section 8 vouchers are less generous than what Harris or Booker are proposing. Booker’s bill includes inducements to local governments to adopt laxer zoning rules, so fewer cities would have constrained housing supply, but Harris’s bill does not include that component.
What’s more, I suspect labeling the subsidy as “money for rent” matters in terms of how folks spend it — and how landlords respond. That’s a key difference between the Harris/Booker rent bills and, say, an increased child tax credit as proposed by Sens. Michael Bennet (D-CO) and Sherrod Brown (D-OH).
The other argument that rents wouldn’t rise is that Harris and Booker both give the rent subsidy in an annual lump sum, not monthly allowances that could easily translate into rent checks. So the money wouldn’t be spent on rent, and landlords couldn’t capture it. But … that’s a bad policy design! These plans should pay out monthly to make life easier for beneficiaries.
Finally, there’s a horizontal equity question. The HOME Act and Rent Relief Act both give way more to poor people living in high-cost cities like New York and San Francisco than to people living in, say, Houston or Arizona. That’s a good way to push more people to live in high-cost cities, but we should ask if that’s a policy goal we want to achieve.
All that said, the rent bills do something important: They establish a cash benefit for everyone that’s not tied to work or having kids. Two of the plans I look act — Harris’s LIFT Act and Sen. Sherrod Brown (D, OH) and Rep. Ro Khanna’s (D, CA) GAIN Act — are tied to work. The Bennet-Brown child allowance bill is, of course, limited to parents with kids.
But the HOME and Rent Relief Acts offer a basic benefit even to childless adults who can’t find work, or are disabled but denied Social Security Disability Insurance, or are elderly and are poor despite Social Security Old-Age Insurance and Supplemental Security Income. That’s a good thing.
My ideal anti-poverty policy would combine a small ($2,000-3,000) cash benefit for childless adults, a large ($4,000-5,000) per-child benefit, and a per-earner credit that replaces the EITC and the standard deduction (worth, say, 30 percent of your earnings up to the poverty line), all paid out biweekly. That would achieve something like what UMass economist Arindrajit Dube called an “Earned and Basic Income Tax Credit” or EBITC. It would subsidize wages but also provide a real floor for folks who can’t find work.
Poverty is a crucially important issue that often gets ignored in national politics. This time can and should be different.
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