Ohio economists divided on housing subsidy in conflict between House and Senate

As the Ohio legislature debates whether to provide subsidies to developers to build low-income housing, a panel of economists is divided on whether that will significantly lower rents.

The lack of affordable housing is an acute problem in the Buckeye State. The Columbus Dispatch earlier this month reported that a full-time worker would have to earn at least $19.09 an hour to afford a modest, two-bedroom apartment. But only three of the state’s 10 most common occupations pay that much, the article said.

General operations managers, registered nurses and tractor-trailer drivers make more than that, but fast-food workers, stocker/order fillers, cashier, retail salespeople, laborer/freight movers, customer service representatives, and assemblers/fabricators do not, the story said.

And many people who can’t afford homes don’t have them. There are more than 10,000 homeless people in Ohio on any given night and another 114,000 are “doubled up and living in poverty,” according to Shelterhouse, a Cincinnati agency that serves people without secure housing. Nearly 270,000 Ohioans — or more than 2% of the state’s population — spend more than 30% of their income on rent, the group said, making them vulnerable to become homeless.

To address the problem, the Ohio House of Representatives passed a biennial budget with $500 million in tax credits for developers of low-income housing. The state Senate, however, axed the funding in its version of the spending plan and a compromise is yet to be struck.

Economic and public policy firm Scioto Analysis surveyed 19 Ohio economists about whether they believed the subsidy would “significantly lower housing prices for low-income renters.” Responses were decidedly mixed, with 11 agreeing that it would, five disagreeing and three saying they were uncertain.

In the comment section on the survey, Jonathan Andreas of Bluffton University wrote that tax credits incentivizing more construction of affordable housing would increase supply and thus reduce rents.

“Housing costs (particularly for starter homes) are higher now than they have been historically because of a supply problem,” he wrote. “America just isn’t making housing as fast as in the past, and this is especially true for affordable housing. I doubt (tax credits are) the most cost-effective way to increase the supply of housing, but the best way is often politically infeasible and this should increase the supply of housing.”

Some other economists were more wary.

Charles Kroncke of Mount St. Joseph University disagreed that the credits would reduce rents. He explained they would do so “only if government mandates specific rental prices. Even then, I would expect developers to have a preference for market priced developments.”

Curtis Reynolds of Kent State University said he was uncertain how effective the credits would be.

“An increased supply of affordable housing would lower rents, but how much of a tax credit would be required and whether that is the best use of resources is less clear,” he said.