U.S. homeowners and renters need stronger safety nets than existing social insurance programs provide to prevent housing insecurity during economic downturns, according to a new paper based on a study by Wharton real estate professor Benjamin Keys and co-authors at the University of Notre Dame and New York University.
In their paper “Bolstering the Housing Safety Net: The Promise of Automatic Stabilizers,” the authors propose policy reforms that could help people stay in their homes during times of economic distress and support affordable housing construction and rehabilitation. Those reforms would complement and fill gaps in existing social insurance programs.
The authors have designed their proposals to incorporate three features: automatic mechanisms that respond to triggers such as increased joblessness; flexibility to adjust the degree of assistance to granular variations in local unemployment trends; and counter-cyclicality, where the size of programs expand or contract in sync with economic cycles and the degree of hardships households face.
“Many elements of existing safety nets are incomplete or insufficient to prevent people from facing housing instability like eviction or foreclosure,” says Keys. “Programs for unemployment insurance and food and nutrition programs correspond very sharply to downturns because of the eligibility rules; when more people are eligible, more people qualify for those benefits. We don’t have that same flexibility and counter-cyclicality built in the system for housing-related assistance.”
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