Section 8

From Franklin Roosevelt to Lyndon Johnson, Harry Truman to Bill Clinton, American presidents and their housing administrators have cut the ribbons on new versions of subsidized housing projects. Their theory has been consistent: private markets fail to provide housing for people with low incomes, and thus government subsidies are needed to fill the gap. Even presidents such as Richard Nixon and George W. Bush, who did not promote the construction of new public housing, accepted the idea that housing markets fail the poor and backed housing vouchers for rent in private dwellings.

Since the 1930s, the federal government has funded one expensive approach to low-income housing after another—without seeming to notice that the new approaches were made necessary less by market failure than by the failure of past public policies. Public housing projects erected to replace slums soon became "severely distressed," in the phrase used by one congressional study. Housing vouchers meant to end "concentrated poverty" instead moved it around. The low income housing tax credit program provides large subsidies to developers and few, if any, benefits to low-income families.

President Obama has said that his administration will end programs that have failed. Let's hope that the administration takes a fresh look at housing programs and recognizes the distortions and damage they have created. They have failed not because of poor architecture or design, nor minor management problems, but because of much more fundamental factors. Federal housing programs distort markets in ways that undermine neighborhoods, they encourage dependency, and they do not create incentives for long-term maintenance and improvements. They also rest on the false premise that the private sector cannot provide housing for those of modest means.

Federal housing subsidies have also been expensive to taxpayers. In 2009, the federal government will spend about $25 billion on rental aid for low-income...