Education Vouchers: The Lessons from Housing

Tyler is concerned that a voucher system for education might end up looking like our health care market – “a crazy-quilt mix of bad incentives, high costs, and increasing levels of intervention.” But our health care system is not a voucher system – much more relevant is the existing voucher system for housing. Public housing has been a disaster in this country, low quality, dangerous and expensive (to the taxpayer). The Section 8 voucher and similar certificate programs have been far superior on all measures. What would you rather have – an apartment in a public housing project, costing the taxpayer $1000 a month, or a voucher worth $500 a month that you could spend on private housing?

The economic studies on the superiority of vouchers are unanimous. Here is Ed Olsen, one of the country’s leading researchers:

Five major studies have estimated both the cost per unit and the mean market rent of units provided by housing certificates and vouchers and important production programs, namely Public Housing, Section 236, and Section 8 New Construction.1 These studies are based on data from a wide variety of housing markets and for projects built in many different years. Three were multi-million dollar studies conducted for HUD by respected research firms during the Nixon, Ford, Carter, and Reagan administrations. They are unanimous in finding that housing certificates and vouchers provide equally desirable housing at a much lower total cost than any project-based assistance that has been studied, even though all of these studies are biased in favor of project-based assistance to some extent by the omission of certain indirect costs.

As with housing, the market for education would be very competitive so we would not see price rises due to monopoly problems (as Tyler fears might be the case). There has been a big debate about whether private schools result in better outcomes that public schools. Put aside this debate and focus on what is undeniable – private schools have achieved at least as good outcomes as have public schools but at about half the cost (similar to the cost savings of vouchers over public housing). Thus we are starving the most productive sector of the educational market and throwing money at the least productive sector. Prices might rise in a voucher market but only as a rational response to the lower price of quality in private schools.