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May 1994

How does rental assistance influence spending behavior?

Robert Cage

Rental assistance results in more of a housing effect than a welfare effect; that is, those receiving assistance seek higher valued housing and keep the share of income spent on rent constant, rather than reduce their rent burdens and allocate money to other expenditures. This article provides a brief background and review of government intervention in housing markets, investigates the sociodemographic characteristics of those who were eligible and received assistance, and presents ordinary least square and TOBIT regression models to calculate income elasticities and "subsidy" elasticities for various expenditure categories.

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