It is intuitively obvious that adding near-cash equivalents to cash income reduces the poverty rate. Housing subsidies are no exception. Revising the current valuation of housing subsidies by using a more plausible model generally reduces the poverty rate more than using the current model which uses 1985 data updated with CPI rent indices. This occurs for both 1993 and 1995 income.

On the face of it, the new model has greater appeal on several counts: 1) its specification is more consistent with those factors that the real estate market uses for appraising real estate, 2) it incorporates differences among different housing markets, and 3) it values subsidies at the household level rather than using a more limited 36 cell matrix (i.e. 3 X 3 X 4) for all subsidized units. The model meshes with HUD expenditures and known differences-- that is, it is somewhat below the HUD expenditure and the FMR estimate.