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Economic effects of upfront subsidies to ownership: The case of the Prêt à Taux Zéro in France

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  • Gobillon, Laurent
  • le Blanc, David

Abstract

This article analyses some effects of the French upfront subsidy to homeownership called Prêt à Taux Zéro (PTZ) introduced in 1996. The PTZ can be viewed as a downpayment subsidy to low and middle-income first-time buyers. The effects of the subsidy are modelled by simulating the introduction of the PTZ in an econometric model of mobility and tenure choice estimated on micro-data. Our results show that the PTZ significantly increases access to ownership by allowing some households to leave the rental sector sooner. However, the PTZ generates a large windfall effect. We estimate that 85% of the beneficiaries in a 4-year period would still have moved to own in the absence of the subsidy. As a consequence, the PTZ has a rather low multiplier effect, which we estimate at around 1.3. Our simulations also show that the PTZ may not help to improve the overall quality of new construction in France.

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  • Gobillon, Laurent & le Blanc, David, 2008. "Economic effects of upfront subsidies to ownership: The case of the Prêt à Taux Zéro in France," Journal of Housing Economics, Elsevier, vol. 17(1), pages 1-33, March.
    • Handle: RePEc:eee:jhouse:v:17:y:2008:i:1:p:1-33
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    3. Laurent Gobillon & Matthieu Solignac, 2020. "Homeownership of immigrants in France: selection effects related to international migration flows [A nation of immigrants: assimilation and economic outcomes in the age of mass migration]," Journal of Economic Geography, Oxford University Press, vol. 20(2), pages 355-396.
    4. Suntum, Ulrich van, 2009. "Housing, taxation and retirement provision," Journal of Housing Economics, Elsevier, vol. 18(3), pages 249-255, September.
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    6. Laurent Gobillon & Francois-Charles Wolff, 2011. "Housing and Location Choices of Retiring Households: Evidence from France," Urban Studies, Urban Studies Journal Limited, vol. 48(2), pages 331-347, February.
    7. Kunovac, Davor & Zilic, Ivan, 2022. "The effect of housing loan subsidies on affordability: Evidence from Croatia," Journal of Housing Economics, Elsevier, vol. 55(C).
    8. Sylvain Chareyron & Tidiane Ly & Yohann Trouvé-Sargison, 2021. "Ownership incentives and housing affordability: Evidence from France," Erudite Working Paper 2021-03, Erudite.
    9. Sophie Dantan & Nathalie Picard, 2016. "Effect Of Borrowing Constraints On Location Choice: Evidence From The Paris Region," Working Papers hal-01294215, HAL.
    10. Dietsch, Michel & Petey, Joël, 2015. "The credit-risk implications of home ownership promotion: The effects of public subsidies and adjustable-rate loans," Journal of Housing Economics, Elsevier, vol. 28(C), pages 103-120.
    11. Sophie Dantan & Nathalie Picard, 2019. "Borrowing constraints and location choice - Evidence from the Paris Region," THEMA Working Papers 2019-05, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.

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