Imagine an overwhelmingly regressive welfare program, taking money from low- and moderate- income individuals and disproportionately benefiting people with incomes over $100,000. This policy would allow the rich and upper-middle classes to consume more while leaving working-class and poverty-stricken citizens without the aid they desperately need. Imagine that this same policy allows for inefficient resource use and causes stress on urban infrastructure. Imagining a policy like this is difficult and almost unfathomable because most Americans, when they think of welfare, think of policies that help and aid the poor in order to give them a more level playing field. In the very least, Americans think of policies that aim to change poor peoples' behaviors. Even the most conservative pundit would find a welfare policy that is so obviously skewed to the wealthy to be strange. However, these seemingly contradictory principles are all embodied in one of the United States' most expensive welfare policies: federal housing policy.
Most people do not recognize the different policies that make America's approach to housing so strange. Either they see it as the free market at work, or they do not see it as welfare. This mindset is one of the most intriguing features of housing policy and the welfare state in general. America is very unique in that many of the policies of the welfare state are "submerged," or hidden from public view. These hidden policies maintain the illusion that the United States has a small welfare state, while still allowing for aid to flow from the government to targeted groups.
The United States also uses a myriad of policy tools to make up the welfare state, while other countries are more likely to use explicit means like cash transfers and direct national spending. Seeing the many policy tools, the question then becomes, why does the United States have this kind of housing policy? This is an interesting question, due to the ways in which US housing policy benefits citizens who do not need the assistance, and the ways in which the policy is so different than what is usually thought of as welfare. I argue that United States housing policy has been subject to increasing returns, and historical decisions have set the United States on a path that has been difficult to alter. This path has reinforced homeownership preference, broader American attitudes about the welfare state and the role of interest groups in preserving the status quo.
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