Do Social Housing Programs Increase Poverty? An Empirical Analysis of Shelter Induced Poverty in...

Do Social Housing Programs Increase Poverty? An Empirical Analysis of Shelter Induced Poverty in Latin America

October 2010

OVE/WP-05/10

Electronic version: http://www.iadb.org/ove/DefaultNoCache.aspx?Action=WUCPublications@ImpactEvaluations Inter-American Development Bank Washington, D.C.

Office of Evaluation and Oversight, OVE Do Social Housing Programs Increase Poverty? An Empirical Analysis of Shelter Induced Poverty in Latin America

Inder J. Ruprah*

* The author is from the Office of Evaluation and Oversight of the Inter-American Development Bank.

The author thanks Nadin Medellin, Camilo Pecha, Pavel Luengas, Maria Francisca Henriquez, Paulina Sepulveda, and Luis Marcano for their inputs. The findings and interpretations of the author do not necessarily represent the views of the Inter-American Development Bank. The usual disclaimer applies. Correspondence to: Inder J. Ruprah, email: [email protected]; Office of Evaluation and Oversight, Inter-American Development Bank, 1300 New York Avenue, NW, Washington, D.C. 20577

ABSTRACT

In this paper we estimate the size of shelter induced poverty by housing tenure in Latin America and determine whether public housing programs of the ABC type (programs that require savings, provide vouchers and with the residual financed through a public or privately provided mortgage for a given valued program house) increase or decrease shelter induced poverty. Shelter induced poverty describes the situation where a household, after paying for housing (rent or mortgage plus utilities, property taxes and house maintenance), cannot afford the minimum poverty basket of non-housing goods. We find that shelter induced indigence and poverty is substantial. It varies across countries and more so according to the housing tenure. Housing programs, as currently designed, generally would further increase indigence and poverty rates. These findings suggest housing should be considered in poverty analysis and used as a mechanism in poverty reduction strategies. The findings also suggest that housing programs should use shelter induced poverty as a means to prioritise applicants for housing program but need to increase the size of the existing housing vouchers to avoid further increasing shelter induced poverty, particularly if targeted to the poor.

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INTRODUCTION

The general objective of this paper is to quantify shelter-induced poverty in Latin American countries1. The specific objective of this paper is to determine whether public housing programs of the ABC type result in shelter induced poverty. As far as we are aware there is no systematic study on shelter-induced poverty in Latin America or on the shelter induced poverty effects of social housing programs. In this paper we attempt to fill this lacuna.

ABC is from the Spanish acronym for savings voucher and mortgage and is a public housing program that requires households to have savings, provide a voucher and require a mortgage for a given program specified priced house. These programs are the typical housing programs in Latin America, and are directed at increasing owner-occupancy rates in contrast to the rent subsidy programs typically found in OECD countries. The underlying assumption is that increased assets of lower income families would set in place a chain of events such that families would exit poverty. However, a poorly designed social housing program could have the unintended effect of exacerbating poverty.

Poverty is a multidimensional problem characterized by inadequate income. Countries have therefore multiple anti-poverty programs including a set of social assistance and income support programs. However, housing is often an overlooked factor in considering the cause of poverty and/or interactions with other poverty programs. Shelter induced poverty provides a first approximation to such an interaction. Housing is the single largest expenditure in a household budget, and where housing costs could crowd out other necessities and exacerbate an already inadequate income. Shelter induced poverty describes the situation where a household, after paying for housing (rent or mortgage plus utilities, property taxes and house maintenance), cannot afford the minimum poverty basket of non-housing goods (see Stone, 1990, 1993 and Kutty, 2005).

The concept is policy relevant for at least three reasons. First, it suggests that traditional measures of poverty may understate the degree of poverty hence the size of the challenge facing concerned policy makers. Second, the information could be useful in prioritizing who should receive housing assistance. Third, it is useful in designing and/or evaluating public housing programs that attempt simultaneously to target the poor but that also attempt to follow the popular ABC design (savings, voucher and mortgage). This program design may push the near poor to fall into poverty and the moderately poor to fall into extreme poverty. If so the shelter induced poverty concept can be used to calculate the required size of the voucher to prevent this from occurring.

1 The countries studied are Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, Mexico, Nicaragua, Panama, and Peru.

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The article is structured as follows. In Section II we briefly review the data sources and research strategy. In the following section we present estimations of the shelter induced moderate poverty and indigence rates. In section IV we present calculations of the program induced increases in shelter induced poverty rates and in the subsequent section estimates of the required voucher value to avoid increasing shelter induced poverty. We end with a discussion of our findings.

RESEARCH STRATEGY AND DATA

Research Strategy

The research strategy follows three steps. First, we calculate shelter induced poverty using absolute poverty measures. Indigence and moderate poverty rates are estimated using each country’s official poverty line. Shelter induced poverty are estimated for four housing tenure categories: owners (not paying), (ii) owners (paying a mortgage); (iii) renting; and (iv) others. Second, we estimate, given the shelter induced poverty figures whether the social housing programs increase or not shelter induced poverty. Third, we estimate the required housing voucher size to avoid program induced poverty and compare it to the actual voucher’s value. Before discussing the empirical values we first briefly discuss the theoretical concepts used and their interrelations.

Theoretical Concepts

Current expenditure in housing is defined as the sum of mortgage payments (M) or rent (R), and housing expenditure, (E): .2 Disposable income ( ) after housing expenditure is: . The incidence and depth of poverty is measured by the Foster-Greer-Thorbecke measures: ∑ . Where N is number of households (H), z is the poverty line, (α) is the aversion parameter (=0 poverty incidence, =1 poverty income gap).

To estimate shelter induced poverty we calculate PIV) as: , where ∑ and .

For social housing induced poverty the following underlies our calculations. Given the shelter induced poverty then the program induced poverty can be

calculated as: , where ∑ y

2 We specify both M and R in the equation although one falls to zero depending upon tenure.

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, where PMT is mortgage payment in an ABC program. Where the monthly payment of a program mortgage, 1

To determine the required voucher size to avoid increasing indigence and moderate poverty the method used to estimate the required housing voucher the following calculations were made. The voucher size has to meet the following condition:PIV 0, which is equivalent toFGT FGT 0. The program design has to ensure that housing expenditure in the program is: M R PMT then ( 1 δ VV B r 1 M R . Resolving for B we

obtain: B 1 δ VV M R

Using the above the following two overall theoretical cases can be distinguished. (i) households not paying for their accommodation (i.e. are owners (totally paid for) and others); and (ii) households paying for their accommodation. Within these categories voucher size will also vary.

For those households not paying accommodation there are three theoretical cases: (i) households below the poverty line for whom the voucher has to be equal to the price of the house B 1 δ VV where Y ; (ii) Households above, but just so, the poverty line where the voucher is less than the price of the house and proportional to it: B 1 δ VV Y Z where Y Z & (YZ PMT; the down payment (savings) and the second term on the RHS is present value of the household’s excess of income above the poverty line; (iii) and zero when household income is above the poverty line and payment of the mortgage it remains above the poverty lineB 0 when Y Z PMT.

For households paying for accommodation there also three cases: (i) the household’s disposable income after housing expenditure is below the poverty line the voucher is equal to the price of the house minus the down payment minus the present value of existing housing expenditure. B 1 δ VVM R where Yd ; (ii) For non shelter induced poor

households and where household’s current housing expenditure is less than mortgage payment the voucher equals house price minus deposit minus the present value of housing expenditure and income excess of the poverty line B 1 δ VV M R Y where Yd Z & M R PMT; and (iii) non shelter induced households currently spending more than the mortgage payment the voucher is zero. B 0 , where Yd Z

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& M R PMT. In the next section we discuss the empirical counterparts of the concepts discussed previously.

Data and Operational Concepts

The data used in this article comes from household surveys and administrative data.3 In Table 1 are summarized the key features of the household surveys. As can be seen from the Table the full information set is not available for all the expenditure components for all the countries. Therefore for the missing values of mortgage payments, rent, or housing maintenance and other housing expenditure (utilities, taxes, fuels etc.,) the average by income deciles estimated separately for different housing tenure was used from the countries where the information is available.

3 Administrative data was obtained from information contained in the programs web pages. See for Chile (http://www.minvu.cl/); Colombia (http://www.minambiente.gov.co/); Costa Rica (http://www.banhvi.fi.cr/); Peru (http://www.vivienda.gob.pe/); Panama (http://www.mivi.gob.pa/); Nicaragua (http://www.invur.gob.ni/); Ecuador (http://www.miduvi.gov.ec/); DR (http://www.invi.gob.do/).

Country(year)

Chile (2006) CASEN HS 268,873 NA Yes NA NA

Colombia (2008) ECH LSMS 22949 Yes Yes Yes

Utilities (water, electricity, sanitation). taxes, garbage, fuels,

Costa Rica (2007) EHPM HS 12,361 Yes Yes No NA

Dominican Republic (2004) ENCOVE LSMS 37,817 NA Yes Yes NA

Ecuador (2006) ECV LSMS 5,801 Yes Yes NAUtilities (water, electricity); fuels

Nicaragua (2005) EMNV HS 6,898 Yes Yes Yes

Utilities (water, electricity); garbage; fuels

Panamá (2008) ENV LSMS 6363 NA Yes YesUtilities (water, electricity); Garbage

Perú (2007) ENAHO HS 22,204 Yes Yes NAUtilities (water, electricity); Garbage

Source: Author based on household surveys

Table 1 Data Sources and Characteristics

Name TypeSize (# of households)

Mortgage (M) Rent (R)

Maintenance expenditure

Other Housing Expenditure

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We use four tenure categories: owners (paid) owners (paying); renters, and others.4 In Table 2 below is shown the distribution of tenure by category and by country. For practically all the countries the biggest housing tenure category is owned (not paying), followed by renting, and others. However, potential beneficiaries of housing programs are those that are in housing shortage.5 The incidence of housing shortage by tenure is given in Table 2.A. Although the smallest share is “other” tenure these households are all practically living in inadequate housing. However, the second largest tenure category for housing shortage is across all countries owned (not paying) followed by households paying rent.

Table 2A

Structure of Housing Tenure (%)

Table 2.B

Housing Shortage by Tenure (%)


The level of poverty hence shelter induced poverty depends critically on the definition of moderate poverty and indigence. Poverty measures in Latin America are typically based on the country’s household surveys. However, in the

4 The concept “others” incorporates the following; provided by parents, by work, and squatted. 5 Housing shortage is defined as the sum, after discounting any intersection set, of quantitative and qualitative housing shortage. Quantitative shortage is the number of households that have to double or more up with other households and or live in a non-upgradeable slum house. Qualitative shortage is defined as the number of households that live in inadequate conditions (quality of walls, ceilings, roofs, overcrowding, and access to utilities) but where their existing abodes can be upgraded towards a minimum acceptable level. See Ruprah (2010 .a).

CountryOwned

(totally paid)Owned

(paying) Rent Others

Chile 55.6 13.6 15.9 14.9Colombia 44.9 6.1 31.6 17.5Costa Rica 63.7 9.1 17.7 9.5Dominican Re 57.9 2.1 26.5 13.5Ecuador 63.0 2.7 18.1 16.2Mexico 66.4 4.5 14.6 14.5Nicaragua 76.4 0.7 3.4 19.5Panamá 63.5 11.8 13.7 10.1Perú 68.3 0.8 9.1 16.5

CountryOwned

(totally paid)Owned

(paying) Rent Others

Chile 14.1 1.8 10.2 100.0Colombia 27.0 9.8 27.3 85.5Costa Rica 8.9 2.7 7.8 100.0Dominican Re 49.0 15.6 45.8 100.0Ecuador 42.0 30.4 32.2 100.0Mexico 25.1 2.8 15.3 100.0Nicaragua 74.9 69.1 64.4 100.0Panamá 35.8 11.2 31.2 100.0Perú 62.5 30.5 49.7 100.0

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literature on poverty, despite a common primary data source, the figures on the level of indigence and moderate poverty differ considerably as the indigence and moderate poverty lines adopted and inclusion and exclusion of the components of income and the treatment of non-monetary income differ. The most common figures on poverty in Latin America typically use either the World Bank’s definitions of US$1.08 and US$2.15 per day, or ECLAC’s definition which defines indigence as insufficient income to buy a minimally nutritious basket of food that varies by country and where the moderate poverty line is set at twice this rate for urban areas and 1.75 times for rural areas.

In the choice between extreme poverty or moderate poverty line in calculating shelter induced poverty it is important to note Damián and Boltvinik’s (2006) comment on ECLAC’s definition but applicable to each country’s absolute poverty line:

“To purchase the Normative Food Basket (NFB), households with income equal to the extreme poverty line (EPL) would have to spend 100 percent of their earnings on raw food, but they would find it impossible to consume it since the NFB does not include the requirements for its preparation and consumption (gas, pans, utensils, plates, a table, detergents, etc.). This definition of extreme poverty reduces human beings to an animal state, eating raw food on the floor with their hands.”

We use both the extreme and moderate poverty line of each country, where the former suffers from Damián and Boltvinik’s (2006) criticism. In the Table 3 is shown the relation between urban-rural and the location in the income centile of both indigence and moderate poverty lines.

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ESTIMATES OF HOUSING-INDUCED POVERTY AND INDIGENCE

In this section we present the estimations of extreme and moderate poverty and their values once shelter expenditure is discounted from their income. The calculations are made separately for the four housing tenure categories.

Shelter induced indigence and moderate poverty is significant for all the countries for all tenure categories. In Chart 1 and 2 are shown, at the country level, the indigence and moderate poverty levels before and after taking into consideration housing expenditure. The indigence rate increases by 4.1 percentage points and poverty by 5.2 percentage points. The largest increase of indigence is in Colombia and poverty in Costa Rica.

Year

Urban to Rural

Poverty

Urban Poverty to

Urban Indigence

Poverty in Income Centile

Indigence in Income Centile

Chile 2006 148% 200% 8 20

Colombia 2008 150% 239% 28 60

Costa Rica 2007 128% 218% 12 32

Dpominican Republic 2004 181% 290% 16 56

Ecuador 2006 100% 177% 12 32

Mexico 2006 135% 200% 16 48

Nicaragua 2005 100% 190% 16 40

Panama 2008 100% 176% 28 48

Peru 2005 144% 206% 32 60Source: Author based on household surveys

Table 3Description of Poverty Lines

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Chart 1

Indigence and Shelter Induced Indigence (%)

Chart 2

Poverty and Shelter Induced Poverty (%)

Source: Author using households surveys Source: Author using households surveys

However, the increase in indigence and poverty differs between different housing tenure. In Table 4 below is shown the size of shelter induced poverty by country and by housing tenure. On average, the level of indigence (poverty) increases, in percentage points terms, by 2.5 (3.2), 9.3 (13), 8.5 (11.0), and 2.7 (3.1) for owners (paid), owners (paying); enters, and others respectively. Thus the largest percentage increases are, in almost all countries, for owners (paying) and renters.

Table 4

Shelter Induced Indigence and Moderate Poverty by Housing Tenure

‐ 5.0 10.0 15.0 20.0 25.0 30.0 35.0

Chile

Colombia

Costa Rica

Dominican Republic

Ecuador

Mexico

Nicaragua

Panama

Peru

Housing‐Induced Indigence

Indigence, Actual Housing Induced Indigence

‐ 10.0 20.0 30.0 40.0 50.0 60.0 70.0

Chile

Colombia

Costa Rica

Dominican Republic

Ecuador

Mexico

Nicaragua

Panama

Peru

Housing‐Induced Poverty

Poverty, actual Housing Induced Poverty

Owners (paid)Indigence,

Actual

Housing Induced

IndigencePoverty, actual

Housing Induced Poverty

Chile 4.4 1.6 16.2 3.8 Colombia 24.0 3.1 54.4 3.6 Costa Rica 6.2 2.4 26.2 3.9 Dominican Repub 10.5 2.4 40.3 3.2 Ecuador 10.0 2.0 32.5 2.3 Mexico 14.1 3.2 41.5 4.2 Nicaragua 13.1 3.2 37.0 4.2 Panama 31.0 2.2 52.1 2.3 Peru 34.0 2.5 59.8 1.2 Average 16.4 2.5 40.0 3.2

Owners (paying)Indigence,

Actual

Housing Induced

IndigencePoverty, actual


Chile 1.6 4.6 7.4 13.0 Colombia 10.9 14.7 36.4 13.6 Costa Rica 2.2 8.4 12.9 14.5 Dominican Repub 4.6 9.6 16.7 6.8 Ecuador 5.4 11.2 20.7 12.1 Mexico 2.2 6.6 17.2 17.9 Nicaragua 17.9 18.8 33.4 19.3 Panama 8.1 10.2 21.5 15.7 Peru 7.2 - 57.2 3.8 Average 6.7 9.3 24.8 13.0

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Table 4

Shelter Induced Indigence and Moderate Poverty by Housing Tenure


HOUSING PROGRAM INDUCED POVERTY

In this section we estimate the degree that public housing programs would increase the size of shelter induced poverty. To determine whether a housing program’s design is such that it increases shelter induced poverty we take the program’s design and simulate what if the program was applied to the existing households in housing shortage, i.e. households living in inadequate housing.

The results of the simulation at the country level are given in Charts 4 and 5. On average housing programs would further increase shelter induced indigence and poverty by 6.2 and 4.2 percentage points respectively.

Chart 3

Housing Program induced Indigence (%)

Chart 4

Housing Program Induced Poverty (%)

Source: Author based on household surveys Source: Author based on household surveys

RentersIndigence,

Actual

Housing Induced

IndigencePoverty,

actual



OtherIndigence,

Actual

Housing Induced

IndigencePoverty,

actual



‐ 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0

Chile

Colombia

Costa Rica

Dominican Republic

Ecuador

Mexico

Nicaragua

Panama

Peru

Housing‐program‐Induced Indigence

Indigence, After hosuing exp Housing after housing exp

‐ 10.0 20.0 30.0 40.0 50.0 60.0 70.0

Chile

Colombia

Costa Rica

Dominican Republic

Ecuador

Mexico

Nicaragua

Panama

Peru

Housing‐program‐Induced Poverty

Poverty, actual Housing Induced Poverty

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However, the increased level of indigence and poverty depends on the existing tenure of potential program beneficiaries. In Table 5 is shown program induced poverty by tenure and country of the potential beneficiaries of the program.6 Indigence (poverty) increases, on average, by 6.2 (3.9); 1.8 (0.9); 3.0 (2.4); 13.3 (10.7) percentage points for households that are owners (paid), owners (paying), renters, and others respectively.

Table 5

Program Design Effect on Shelter Induced Moderate Poverty by Housing Tenure


THE ADEQUACY OF HOUSING VOUCHERS

One policy solution to avoid shelter induced poverty is to increase the size of the voucher for given saving and house price. In this section we present the estimates of the required value of vouchers to prevent households falling into shelter induced poverty both extreme and moderate poverty for households in housing

6 Actual potential beneficiaries are less. Eligibility requirements for housing programs often include an upper income cut off point and give priority to certain vulnerable groups (female headed households, households with children, households with disabled members etc. See Ruprah 2010.b

Indigence after

Housing Exp.

Housing Program Induced

IndigencePoverty after Housing Exp.

Housing Program Induced Poverty

Chile 6.0 0.5 20.0 0.7Colombia 27.1 5.8 58.0 2.4Costa Rica 8.6 1.4 30.2 0.9Dpominican Republic 12.8 7.3 43.6 5.0Ecuador 12.0 13.3 34.8 8.5Mexico 17.4 3.1 45.7 1.2Nicaragua 16.3 12.4 41.2 9.2Panama 33.2 2.9 54.4 1.9Peru 36.5 9.1 60.9 4.9Average 18.9 6.2 43.2 3.9

Indigence after

Housing Exp

Housing Induced

Indigence

Poverty after

Housing Exp


Chile 6.1 (0.2) 20.5 (0.2)Colombia 25.6 0.6 50.0 0.2Costa Rica 10.6 (0.1) 27.5 0.2Dpominican Republic 14.1 1.0 23.5 1.1Ecuador 16.6 8.8 32.7 3.2Mexico 8.8 0.2 35.0 0.2Nicaragua 36.7 5.6 52.7 2.9Panama 18.3 0.6 37.2 1.0Peru 7.2 - 61.1 -Average 16.0 1.8 37.8 1.0

Indigence after

Housing Exp

Housing Induced

Indigence

Poverty after

Housing Exp


Chile 6.5 (0.3) 19.7 0.8Colombia 32.6 3.9 62.3 1.9Costa Rica 13.5 0.0 35.7 (0.1)Dpominican Republic 19.6 2.9 52.4 2.8Ecuador 8.3 6.0 31.1 4.0Mexico 20.9 0.6 50.5 0.3Nicaragua 11.0 11.4 28.8 12.8Panama 23.7 (0.5) 39.6 (0.6)Peru 20.1 3.1 50.8 1.0Average 17.4 3.0 41.2 2.5

Indigence after

Housing Exp

Housing Induced

IndigencePoverty after Housing Exp


Chile 8.6 2.4 26.1 3.7Colombia 36.3 22.1 70.5 11.2Costa Rica 17.6 16.7 50.9 10.1Dpominican Republic 13.6 12.0 42.1 9.7Ecuador 12.3 21.9 37.4 19.4Mexico 17.3 10.9 54.5 7.0Nicaragua 18.0 17.6 43.4 16.0Panama 31.2 5.8 58.2 7.8Peru 25.7 10.8 53.1 11.6Average 20.1 13.4 48.5 10.7

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shortage separated by housing tenure. The required values are compared with the values of actual vouchers.

In Table 6 is shown the actual maximum voucher and the average required voucher to prevent housing induced indigence and poverty, and the required percentage increase with respect to the actual maximum voucher. On average, the existing size of the voucher would have to be increased by 304% and 374% relative to the average existing voucher to avoid program increasing shelter induced indigence and poverty.

Table 6

Actual and Required Voucher to Avoid Program Induced Poverty

Source: Author based on household surveys and administrative data of the programs

However, averages may be misleading given the inequality in income and shelter induced poverty’s dependence of housing tenure. A voucher size tapering off with increasing income may be better if administratively feasible. In Chart 5, shown by country, is the actual and desired size of the voucher separated by income centile and by existing tenure plus the size of the existing voucher. The Chart reveals that not only that existing vouchers have to be increased but shows that the vouchers size should be related to the income and the existing housing tenure of applicants.

US$ % US$ %Chile 14,822 10,376 70% 13,826 93%Colombia 2,925 17,140 586% 21,831 746%Costa Rica 11,179 9,057 81% 13,098 117%Dominican Republic 1,186 3,453 291% 5,263 444%Ecuador 3,600 7,103 197% 10,062 280%Mexico 2,913 7,609 261% 8,624 296%Nicaragua 1,850 3,989 216% 4,746 257%Panama 2,000 16,832 842% 17,985 899%Peru 3,913 7,420 190% 9,158 234%Average 4,932 9,220 304% 11,621 374%

ActualRequired for PovertyRequired for Indigence

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Chart 5

Required Housing Voucher to Avoid Increasing Indigence and Moderate Poverty

0

5,000

10,000

15,000

20,000

25,000

4 12 20 28 36 44 52 60 68 76 84 92 100

US$

Income percentile

Chile: Indigence

Owner

Owner payingRenter

0

5,000

10,000

15,000

20,000

25,000

4 12 20 28 36 44 52 60 68 76 84 92 100

US$

Income percentile

Chile: Poverty

Owner

Owner payingRenter

0

5,000

10,000

15,000

20,000

25,000

30,000

4 12 20 28 36 44 52 60 68 76 84 92 100

US$

Percentile

Colombia:Indigence

Owner

Owner payingRenter

Others

0

5,000

10,000

15,000

20,000

25,000

30,000

4 12 20 28 36 44 52 60 68 76 84 92 100

US$

Percentile

Colombia: Poverty

Owner

Owner paying

Renter

Others

Max‐ Voucher

Min‐ Voucher

0

5,000

10,000

15,000

20,000

25,000

4 12 20 28 36 44 52 60 68 76 84 92 100

US$

Percentile

Costa Rica: IndigenceOwner

Owner paying

Renter

0

5,000

10,000

15,000

20,000

25,000

4 12 20 28 36 44 52 60 68 76 84 92 100

US$

Percentile

Costs Rica: Poverty Owner

Owner payingRenter

Others

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

4 12 20 28 36 44 52 60 68 76 84 92 100

US$

Percentile

Dominican Republic: Indigence

Owner

Owner payingRenter

Others

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

4 12 20 28 36 44 52 60 68 76 84 92 100

US$

Percentile

Dominican Republic: Poverty

Owner

Owner payingRenter

Others

14

Chart 5 (Cont.)

Required Housing Voucher to Avoid Increasing Indigence and Moderate Poverty

Source: Author based on household surveys and administrative data of the programs

Both the shelter induced poverty calculations and the estimations of the required size of vouchers of this paper could be questioned. After all one reason advanced for providing subsidized housing is that the consequent increased asset of the beneficiary would set in place a chain of events such that families would exit poverty. The potential chain of events include increased access to credit in the formal market, increased household labour supply, reduced job search time etc., i.e. increased household income ( see Dietz and Haurin, 2003 for a review). Such

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

4 12 20 28 36 44 52 60 68 76 84 92 100

US$

Percentile

Ecuador: Indigence

Owner

Owner payingRenter

Others

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

4 12 20 28 36 44 52 60 68 76 84 92 100

US$

Percentile

Ecuador: Poverty

Owner

Owner payingRenter

Others

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

4 12 20 28 36 44 52 60 68 76 84 92 100

US$

Percentile

Nicaragua: Indigence

Owner

Owner payingRenter

Others

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

4 12 20 28 36 44 52 60 68 76 84 92 100

US$

Percentile

Nicaragua: Poverty

Owner

Owner payingRenter

Others

0

2,000

4,000

6,000

8,000

10,000

12,000

4 12 20 28 36 44 52 60 68 76 84 92 100

US$

Income percentile

Peru: Indigence

Owner

Owner payingRenter

Others

0

2,000

4,000

6,000

8,000

10,000

12,000

4 12 20 28 36 44 52 60 68 76 84 92 100

US$

Income percentile

Peru: PovertyOwner

Owner paying

Renter

Others

Max‐ Voucher

Min‐Voucher

15

events are not taken into account in this paper. However, Ruprah (2010.c) using propensity score matching estimates for programs in Chile, Colombia, Ecuador, Costa Rica, Peru, Panama, Nicaragua, Ecuador, and the Dominican Republic found no such effects. This result supports the policy interpretation regarding redesigning the size of the voucher.

DISCUSSION

The concept shelter induced poverty describes the situation where a household, after paying for housing (rent or mortgage plus utilities, property taxes and house maintenance), cannot afford the minimum poverty basket of non-housing goods.

The theoretical possibility is shown in this paper to be empirically significant in Latin America. Indigence and moderate poverty rates increase substantially once housing expenditure is taken into account. However, it varies across countries and more so according to the housing tenure. Housing programs, as currently designed, generally would further increase indigence and poverty rates.

In general, these findings suggest that housing should be considered in poverty analysis and as a mechanism in poverty reduction strategies. Specifically regarding housing programs the findings suggest that programs should use shelter induced poverty as a means to prioritise applicants for housing program and they should increase the size of the existing housing vouchers to avoid further increasing shelter induced poverty, particularly if the programs are targeted to lower income families.

REFERENCES

Damián, A. and J. Boltvinik (2006). “A Table to Eat on,” in E. Hershberg and F. Rosen (eds.), Latin America after Neoliberalism, New Press.

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