Economic Study Executive Summary

 

As one of the nation’s largest sources of affordable housing, public housing represents a significant investment on the part of the federal government: over $6 billion in federal appropriations in Fiscal Year 2006.  The program plays a central role in the country’s approach to addressing affordable housing needs.  Today, public housing is home to 2.6 million people, including seniors, people with disabilities and low wage earners.

Federal monies spent on the operation and maintenance of public housing clearly impact both public housing residents and local communities surrounding public housing sites. These impacts have rarely been studied and have never been comprehensively quantified.

This study is the first to develop a framework for making quantitative estimates of the economic benefit of public housing investment and is intended to inform the wide-ranging debate about the role of the federal government funding in providing affordable housing. 

Our study finds—as detailed below—that public housing generates a wide range of tangible economic benefits within local communities—in addition to its role as an affordable housing provider.  Continued and enhanced investment to maintain this affordable housing resource will therefore directly support local economies as well as public housing residents.

Summary of Findings

Public housing sustains low-wage workers and supports local industry.

 

• Average wages in some high-growth industries, such as accommodation and food service, are too low for workers to afford market rate housing costs.

 

• Public housing provides an annual effective rent subsidy of $5,964 (relative to the bottom quartile market rents) to each of more than 1.2 million households.

• Since wages comprise the main source of income for almost half of the non-elderly, non-disabled households in public housing, this rent subsidy provides indirect support to high-growth industries.

 Public housing expenditures contribute to local economies.

• Direct spending by public housing authorities on capital improvements, maintenance and operations is approximately $8.1 billion a year.

• This spending generates another $8.2 billion in indirect and induced economic activity in the PHAs’ regional economies.

• The public housing rent subsidies help low-income workers obtain jobs and stay in otherwise unaffordable markets, thereby providing an indirect subsidy to local employers.

Public housing constitutes an economic and social asset that cannot be created or sustained by the private market.

• Replacing a typical public housing unit would cost $133,360, including land costs; excluding land costs, the replacement cost is $121,000 per unit.

• Factoring in related land costs, it would take approximately $162 billion to replace the existing 1.2 million units of existing public housing; excluding land, it would cost $145 billion.

• The value of the existing public housing stock—maintained as affordable housing—to a private investor is considerably less than the aggregate replacement cost of the units; this difference indicates that the private market could not provide such housing services without significant subsidy.

• The annual capital investment necessary to maintain the existing public housing stock is $4.8 billion.

Conclusions


Our study concludes with these general points: 

First, public housing property has intrinsic economic value which will depreciate over time without capital investment.

Second, capital and operating expenditures associated with public housing spillover into regional economies, driving indirect and induced economic activity that nearly equals the effects of direct spending.

Third, the level of subsidy that would be necessary for the private market to provide equivalent housing is demonstrated by the difference between the current investment value of public housing and its replacement value. Without significant subsidy, the private market could not provide and maintain these housing services.