At one point, project-based subsidies, such as the Section 8, New Construction Program, were HUD's main housing policy tool. Nevertheless, the legacy of past construction programs remains. Some old public housing projects, built with little insulation and now with outmoded heating, plumbing, and electrical systems, are enormously expensive to maintain. With no resources available for new construction, they must pour money into existing units, some of which clearly are not economical to maintain, or else be responsible for a decline in the number of housing units available in their city. Some economists have called for the transformation of public housing subsidies into household-based subsidies.
Housing authorities are inefficient providers of housing.
We can eliminate this inefficiency and immediately empower all public housing tenants by using this money to offer them housing vouchers that can be used for renting or owning and for living in private or public housing. Of course, the poorest households will get much larger vouchers, and eligible households with the highest incomes, smaller vouchers. This will eliminate the monopoly power of public housing authorities with respect to tenants. At present, if a tenant leaves public housing, she loses her subsidy. Under the proposed scheme, housing authorities will be forced to compete with the private sector for tenants, albeit with the considerable advantage of having been given their projects.