IDEAS home Printed from https://ideas.repec.org/a/spr/empeco/v44y2013i3p1497-1518.html
   My bibliography  Save this article

Is the housing allowance shifted to rental prices?

Author

Listed:
  • Matti Viren

Abstract

This paper deals with the incidence of housing subsidies, which we analyze using Finnish panel data. The main data set includes 50,000 households that received housing allowances during the period 2000–2008. In addition, we utilize repeated cross-sections of all Finnish households for 1989–2008, the annual sample exceeding 10,000. Estimation results suggest that a part of the subsidies will indeed go into rental prices. A conservative estimate of the size of the shift is one-third, but it is certainly possible that the number is as high as 50 %. On the other hand, the subsidy seems to have increased housing demand more than the subsidy-induced income effect would have implied, which is in accordance with the goals of the subsidy program. Our results seem to be consistent with other studies, which have also indicated relatively large rent effects. If this is indeed the case, we are advised to reconsider the need for reforming the system of housing subsidies, at least with respect to the share of costs that remains on households’ own accounts and the implicit indexation of the system. Copyright Springer-Verlag 2013

Suggested Citation

  • Matti Viren, 2013. "Is the housing allowance shifted to rental prices?," Empirical Economics, Springer, vol. 44(3), pages 1497-1518, June.
    • Handle: RePEc:spr:empeco:v:44:y:2013:i:3:p:1497-1518
    DOI: 10.1007/s00181-012-0589-x
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s00181-012-0589-x
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s00181-012-0589-x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Mark Bils & Peter J. Klenow, 2004. "Some Evidence on the Importance of Sticky Prices," Journal of Political Economy, University of Chicago Press, vol. 112(5), pages 947-985, October.
    2. le Blanc, David & Laferrere, Anne, 2001. "The Effect of Public Social Housing on Households' Consumption in France," Journal of Housing Economics, Elsevier, vol. 10(4), pages 429-455, December.
    3. Gibbons, Stephen & Manning, Alan, 2006. "The incidence of UK housing benefit: Evidence from the 1990s reforms," Journal of Public Economics, Elsevier, vol. 90(4-5), pages 799-822, May.
    4. Korkeamäki, Ossi & Uusitalo, Roope, 2006. "Employment effects of a payroll-tax cut - evidence from a regional tax exemption experiment," Working Paper Series 2006:10, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    5. Matti Virén, 2009. "Does the value-added tax shift to consumption prices?," Working Papers 250, Työn ja talouden tutkimus LABORE, The Labour Institute for Economic Research LABORE.
    6. Matti Viren, 2009. "Does the Value-Added Tax Shift to Consumption Prices?," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 3(2), pages 123-142, July.
    7. Lyytikäinen, Teemu, 2006. "Rent Control and Tenants' Welfare: The Effects of Deregulating Rental Markets in Finland," Discussion Papers 385, VATT Institute for Economic Research.
    8. Randal Verbrugge, 2008. "The Puzzling Divergence Of Rents And User Costs, 1980–2004," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 54(4), pages 671-699, December.
    9. Fack, Gabrielle, 2006. "Are housing benefit an effective way to redistribute income? Evidence from a natural experiment in France," Labour Economics, Elsevier, vol. 13(6), pages 747-771, December.
    10. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(1), pages 249-275.
    11. Susin, Scott, 2002. "Rent vouchers and the price of low-income housing," Journal of Public Economics, Elsevier, vol. 83(1), pages 109-152, January.
    12. Laferrere, Anne & Le Blanc, David, 2004. "How do housing allowances affect rents? An empirical analysis of the French case," Journal of Housing Economics, Elsevier, vol. 13(1), pages 36-67, March.
    13. Aki Kangasharju, 2010. "Housing Allowance and the Rent of Low‐income Households," Scandinavian Journal of Economics, Wiley Blackwell, vol. 112(3), pages 595-617, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gibbons, Stephen & Sanchez-Vidal, Maria & Silva, Olmo, 2020. "The bedroom tax," Regional Science and Urban Economics, Elsevier, vol. 82(C).
    2. Essi Eerola & Teemu Lyytikäinen, 2021. "Housing Allowance and Rents: Evidence from a Stepwise Subsidy Scheme," Scandinavian Journal of Economics, Wiley Blackwell, vol. 123(1), pages 84-109, January.
    3. Céline Grislain-Letrémy & Corentin Trevien, 2022. "The Long-Term Impact of Housing Subsidies on the Rental Sector: the French Example," Working papers 886, Banque de France.
    4. Sayag, Doron & Zussman, Noam, 2020. "Who benefits from rental assistance? Evidence from a natural experiment," Regional Science and Urban Economics, Elsevier, vol. 80(C).
    5. Hyslop, Dean R. & Rea, David, 2019. "Do housing allowances increase rents? Evidence from a discrete policy change," Journal of Housing Economics, Elsevier, vol. 46(C).
    6. Michal Rubaszek & Margarita Rubio, 2020. "Does the rental housing market stabilize the economy? A micro and macro perspective," Empirical Economics, Springer, vol. 59(1), pages 233-257, July.
    7. Brewer, Mike & Browne, James & Emmerson, Carl & Hood, Andrew & Joyce, Robert, 2019. "The curious incidence of rent subsidies: Evidence of heterogeneity from administrative data," Journal of Urban Economics, Elsevier, vol. 114(C).
    8. Huang, Donna & Ong, Rachel & Pawson, Hal & Singh, Ranjodh & Martin, Chris, 2020. "Demand-side assistance in Australia’s rental housing market: exploring reform options," SocArXiv w75yx, Center for Open Science.
    9. Dean Hyslop & David Maré, 2022. "The impact of the 2018 Families Package Accommodation Supplement area changes on housing outcomes," Working Papers 22_01, Motu Economic and Public Policy Research.
    10. Christophe André & Thomas Chalaux, 2018. "Building a typology of housing systems to inform policies in OECD and EU member States," Economie et Statistique / Economics and Statistics, Institut National de la Statistique et des Etudes Economiques (INSEE), issue 500-501-5, pages 13-36.
    11. Eerola, Essi & Lyytikäinen, Teemu & Saarimaa, Tuukka & Vanhapelto, Tuuli, 2022. "The Incidence of Housing Allowances: Quasi-Experimental Evidence," Working Papers 149, VATT Institute for Economic Research.
    12. Braakmann, Nils & McDonald, Stephen, 2020. "Housing subsidies and property prices: Evidence from England," Regional Science and Urban Economics, Elsevier, vol. 80(C).
    13. Doron Sayag & Noam Zussman, 2015. "The Distribution of Rental Assistance Between Tenants and Landlords:The Case of Students in Central Jerusalem," Bank of Israel Working Papers 2015.01, Bank of Israel.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:zbw:bofrdp:2011_011 is not listed on IDEAS
    2. Virén, Matti, 2011. "Does housing allowance feed through into rental prices?," Research Discussion Papers 11/2011, Bank of Finland.
    3. Virén, Matti, 2011. "Does housing allowance feed through into rental prices?," Bank of Finland Research Discussion Papers 11/2011, Bank of Finland.
    4. Essi Eerola & Teemu Lyytikäinen, 2021. "Housing Allowance and Rents: Evidence from a Stepwise Subsidy Scheme," Scandinavian Journal of Economics, Wiley Blackwell, vol. 123(1), pages 84-109, January.
    5. Hyslop, Dean R. & Rea, David, 2019. "Do housing allowances increase rents? Evidence from a discrete policy change," Journal of Housing Economics, Elsevier, vol. 46(C).
    6. Doron Sayag & Noam Zussman, 2015. "The Distribution of Rental Assistance Between Tenants and Landlords:The Case of Students in Central Jerusalem," Bank of Israel Working Papers 2015.01, Bank of Israel.
    7. Braakmann, Nils & McDonald, Stephen, 2020. "Housing subsidies and property prices: Evidence from England," Regional Science and Urban Economics, Elsevier, vol. 80(C).
    8. Corentin Trevien, 2016. "Four essays in empirical urban economics : evaluation of French regional policies [Quatre essais en économie urbaine empirique : évaluation de politiques d'aménagement du territoire]," SciencePo Working papers Main tel-03498772, HAL.
    9. Aki Kangasharju, 2010. "Housing Allowance and the Rent of Low‐income Households," Scandinavian Journal of Economics, Wiley Blackwell, vol. 112(3), pages 595-617, September.
    10. Corentin Trevien, 2016. "Four essays in empirical urban economics : evaluation of French regional policies [Quatre essais en économie urbaine empirique : évaluation de politiques d'aménagement du territoire]," SciencePo Working papers tel-03498772, HAL.
    11. Johannes Abeler & Felix Marklein, 2017. "Fungibility, Labels, and Consumption," Journal of the European Economic Association, European Economic Association, vol. 15(1), pages 99-127.
    12. Gibbons, Stephen & Sanchez-Vidal, Maria & Silva, Olmo, 2020. "The bedroom tax," Regional Science and Urban Economics, Elsevier, vol. 82(C).
    13. C. Grislain-Letrémy & C. Trevien, 2014. "The Impact of Housing Subsidies on the Rental Sector: the French Example," Documents de Travail de l'Insee - INSEE Working Papers g2014-08, Institut National de la Statistique et des Etudes Economiques.
    14. Brewer, Mike & Browne, James & Emmerson, Carl & Hood, Andrew & Joyce, Robert, 2019. "The curious incidence of rent subsidies: Evidence of heterogeneity from administrative data," Journal of Urban Economics, Elsevier, vol. 114(C).
    15. Michael D. Eriksen & Amanda Ross, 2015. "Housing Vouchers and the Price of Rental Housing," American Economic Journal: Economic Policy, American Economic Association, vol. 7(3), pages 154-176, August.
    16. Olsen, Edgar O. & Zabel, Jeffrey E., 2015. "US Housing Policy," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 887-986, Elsevier.
    17. Sayag, Doron & Zussman, Noam, 2020. "Who benefits from rental assistance? Evidence from a natural experiment," Regional Science and Urban Economics, Elsevier, vol. 80(C).
    18. Figari, Francesco & Hollan, Katarina & Matsaganis, Manos & Zolyomi, Eszter, 2019. "Recent changes in housing policies and their distributional impact across Europe," EUROMOD Working Papers EM12/19, EUROMOD at the Institute for Social and Economic Research.
    19. Eerola, Essi & Lyytikäinen, Teemu & Saarimaa, Tuukka & Vanhapelto, Tuuli, 2022. "The Incidence of Housing Allowances: Quasi-Experimental Evidence," Working Papers 149, VATT Institute for Economic Research.
    20. Huang, Donna & Ong, Rachel & Pawson, Hal & Singh, Ranjodh & Martin, Chris, 2020. "Demand-side assistance in Australia’s rental housing market: exploring reform options," SocArXiv w75yx, Center for Open Science.
    21. Raya, Josep Maria & Torres-Pruñonosa, Jose, 2022. "The importance of administrative data in the evaluation of the incidence of social housing allowance programmes," Evaluation and Program Planning, Elsevier, vol. 94(C).

    More about this item

    Keywords

    Housing market; Income transfers; Incidence; Housing allowance; H22; I38; R28;
    All these keywords.

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • R28 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Government Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:empeco:v:44:y:2013:i:3:p:1497-1518. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.