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We use micro-economic analysis to determine the impact of personal housing allowances on tenant behavior and on the market.The minimum and maximum housing expenses defined in the schedule induce discontinuities in the demand function. As a result, the subsidy–initially earmarked for housing consumption – tends to become a general income subsidy. Turning to the market, we use contract theory to assess (1) potential discrimination by suppliers between benefit recipients and non-recipients, and (2) suppliers’ capture of the subsidy. This conceptualization makes it possible to explain certain market-segmentation phenomena and predict likely trends. It views the allowances in the context of housing-policy goals.