Finally, The Left Is Coming Around On Cash For Rent

Over the last decade, when talking about housing subsidies, I have often pointed out that the most efficient way to subsidize people short on cash for rent is to (gasp!) give them cash. Almost always, the subject is changed, avoided, or the argument is made that cash subsidies don’t create “permanent” affordable housing. I counter with the argument that families are worried about paying rent on the first of the next month, and a permanent solution will take years; cash solves the problem right now. It appears the left-leaning Urban Institute has finally come around to my way of thinking. In a post titled, “Direct Cash Transfers Can Deliver Housing Assistance More Efficiently and Equitably,” the Housing Matters Initiative makes the case for cash. It’s worth taking a closer look at their reasoning.

First, I would point out that for some time now I’ve been making the case that efficiency is compassionate when it comes to housing policy and subsidy. Part of what I mean by efficiency is getting subsidies where they’re needed most quickly. What I learned in research over the last decade is that building housing is very complicated and expensive. This is especially true of subsidized non-profit housing which, in many cities, is ringing in at $500,000 per unit and taking years to build. Too often, also, housing cost burden, the amount of money a household is pays over the normative 30% of monthly income ends up becoming the number of units needed in a community. This shouldn’t be the case. What ends up happening is a call for unrealistic numbers of subsidized units and thus, a call for taxing housing or other things to fuel construction.

This is what led me to call for just buying down the cost burden instead with cash. Back in 2016 I urged newly appointed Secretary of Housing and Urban Development (HUD) Ben Carson to pilot a program that would do exactly this. I also pointed out that based on the numbers at the time, a cash subsidy could save as much as $287,000 over ten years.

Most important, this help would come quickly, helping the family get out from under an expenditure of cash that now can be used for other necessities. This kind of help would make the families whole budget go further, perhaps paying off debt and even saving money for future emergencies. Yet, this idea has, until now, been roundly rejected by non-profit housing supporters and those on the left who argue that we need permeant solutions, and idea that has eclipsed the immediate need, the high costs of building and operating housing, and ignoring the idea that if we made good housing policy now – like deregulating its production – we’d need less subsidized housing in the future.

So, does the Urban Institute agree with me?

Their post rightly points out that direct cash transfers (DCT) are not uncommon, many of them happening during the pandemic. And the post argues, as do I, that “DCT programs are a good fit to improve housing stability because they reduce access and utilization barriers to increase efficiency and equity in programs.” Then they point out an important litany of upsides to cash. Cash can (I’m quoting below),

• Reach people typically excluded from federally funded programs;
• Reduce application barriers;
• Reach those with the greatest need; and
• Give recipients much-needed flexibility.

Amen. These are all points I have made. That is satisfying. But more importantly, the next time I get push back from someone on the left or a non-profit advocate about cash being better, I can point to the Urban Institute’s post. “Hey, it’s not my idea! The Urban Institute said it.”

And how do we accomplish this? The Urban Institute makes these points on implementation (again, I’m quoting here).

• Leverage federal funding and private interest;
• Design programs targeted to specific community needs; and
• Address benefit cliffs

These are all good points. The first one refers to using existing program funds like Temporary Assistance for Needy Families (TANF). But the Urban Institute doesn’t go far enough here. Everything from vouchers to Low Income Housing Tax Credits (LIHTHT
C) should be put on the table as possible candidates for conversion to cash. If the Urban Institute believes what it says, they should push for this consideration. And certainly, programs have to fit the need, but that’s the great thing about cash: it works everywhere for everyone! And as far as the cliff when assistance might end, if we took all the money from all the levels of government and philanthropy and converted it mostly to DCT, it’s likely there would never be a cliff or we would have lots to time to plan for it.

I agree with the Urban Institute when it suggests that evolution of cash transfers is critical; It is perhaps the single most important element outside of just doing it. When I have recommended to cities to implement a pilot, I am clear that if there isn’t careful selection of evaluation criteria and methodical tracking, the opportunity to learn from failures and successes will be lost, and it will be easy to pull the plug on getting money directly into people’s hands. Remember, politicians, bureaucracies, and organizations like programs and process because it keeps them all in business; simply getting cash to people would mean less power for institutions that currently have it, especially non-profit housing developers and LIHTC lawyers and accountants.

Finally, it wouldn’t be a left-leaning post if it didn’t mention race. The final word in the post, is a shot at “the consequences of allowing racist and classist ideologies to inform program design.” I’m not sure what the post is referring to here. But there is good news. If cash assistance is given to families based on quantitative need, there is much less room for the biased project design suggested. It won’t exist because the straightest line for housing assistance is from its source to the recipient, avoiding organizational chutes and ladders that eat up the money but also build in bias including racism.