Page 1

 
1 
           I. HOUSING ALLOWANCES AND SUBSIDIES: AN OVERVIEW 
Introduction 
     Since the Housing Act of 1949 the United States has set as a goal 
the provision of "decent housing and a suitable living environment"
for 
all of its citizens. Attempts to implement this goal on a practical 
level have been many and diverse. The programs can in general be broken 
into two groups: (I) supply side subsidies, and (2) demand side sub- 
sidies. While these two approaches have the same basic goal they differ 
in their theoretical background and implementation method. Prior to ex- 
amining them in greater detail, an explanation of the concept of a sub- 
sidy may be helpful. 
     A subsidy is a negative tax; it lowers the price to a recipient 
of an economic good and thus changes output, according to supply and 
demand elasticities. Subsidies differ from cash welfare payments in 
that they imply a specific directionality, i.e., food stamps, rent 
vouchers, or medicare. Cash payments, on the other hand, can be used 
at the recipient's discretion. 
The Theory of Supply Side Subsidies 
     The dominant approach in the past, supply side subsidies seek to im-
prove housing by increasing the stock of new or high quality dwelling 
units as directly as possible. This typically takes the form of in- 
centives to the private sector to stimulate new housing, or outright 
development by the public sector of such housing. In either case the 
ultimate target is the low income family that typically resides in sub- 
standard or dilapidated housing. 
      This type of assistance is designed to help low income groups 
acquire adequate housing in one of two ways. First, public housing is 
made available directly to this target group at a reduced rent. With