Housing Subsidies Affect Income Inequality

Positive Impact of Vouchers Outweighs
Negative Impact of MID

Urban InstituteA study from the Urban Institute, Housing Tax and Transfer Programs Decrease Inequality, finds that direct housing subsidies for low income families reduce income inequality, while tax deductions for home-ownership increase income inequality.

The positive impact of direct housing subsidies outweighs the negative impact of the mortgage interest (MID) and real estate tax deductions on income inequality, and researchers suggest that additional investment in housing subsidies for the lowest income households can have a broad impact on reducing inequality.

A household in the top 10% of the income distribution has about 9.4 times as much income as a household in the bottom 10%. This income ratio between the highest and lowest earners declines to 8.6 when housing subsidies for low income families, such as public housing and vouchers, are considered part of a household’s income.

Tax deductions for homeowners have the opposite effect on inequality. When mortgage interest deduction and real estate tax deductions are considered along with direct housing subsidies, the ratio is 8.8.

The study uses data from the 2013 Current Population Survey (CPS), which the federal government uses for its official measures of income, poverty, and inequality.

Click here for the study.