ABSTRACT
This chapter reviews the economic inefficiency and political palpability of present and past programs, and recommends using housing allowances to house the poor in existing stock and subsidizing middle income families into new housing to fulfill the nation's production goal. The present federal housing approach is impaled on the horns of interlocking political and economic dilemmas. New housing for the poor must be of sufficient quality to serve a market for at least the life of the mortgage. Federal housing policy is thus a classic instance of the art of muddling through. The federal government guarantees the full cost of the principal and interest on the bonds. The exemption of the bonds from local income taxation results in a revenue loss at the local level. Moreover, the projects are exempt from local real estate taxation. Attempts have also been made to channel the location of the housing so as to limit environmental amenity.
