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Housing Allowance and the Rent of Low-income Households

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  • Kangasharju, Aki

Abstract

This paper analyses the effect of a housing allowance programme on the rent paid by assisted low-income households. The data consist of some 12,000 rental households in the free market and municipal sectors during 1994–2003. The effect of the scheme is estimated using the programme reform of 2002 as an instrument. The reform increased the allowance of the already assisted households to various degrees depending on the location, size and age of housing, but had little effect on the eligibility for allowance. Results suggest that in the private sector an additional one euro of allowance increases the rent of claimants by 60–70 cents. The effect is zero in the municipal sector, due to the way rents are set. JEL: H24, R21

Suggested Citation

  • Kangasharju, Aki, 2008. "Housing Allowance and the Rent of Low-income Households," Discussion Papers 458, VATT Institute for Economic Research.
  • Handle: RePEc:fer:dpaper:458
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    File URL: https://www.doria.fi/handle/10024/148448
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    References listed on IDEAS

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    1. 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.
    2. Joseph G. Altonji & Todd E. Elder & Christopher R. Taber, 2005. "Selection on Observed and Unobserved Variables: Assessing the Effectiveness of Catholic Schools," Journal of Political Economy, University of Chicago Press, vol. 113(1), pages 151-184, February.
    3. Malpezzi, Stephen & Vandell, Kerry, 2002. "Does the low-income housing tax credit increase the supply of housing?," Journal of Housing Economics, Elsevier, vol. 11(4), pages 360-380, December.
    4. Berger, Tommy, et al, 2000. "The Capitalization of Interest Subsidies: Evidence from Sweden," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(2), pages 199-217, May.
    5. DiPasquale, Denise, 1999. "Why Don't We Know More about Housing Supply?," The Journal of Real Estate Finance and Economics, Springer, vol. 18(1), pages 9-23, January.
    6. Sinai, Todd & Waldfogel, Joel, 2005. "Do low-income housing subsidies increase the occupied housing stock?," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 2137-2164, December.
    7. 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.
    8. Susin, Scott, 2002. "Rent vouchers and the price of low-income housing," Journal of Public Economics, Elsevier, vol. 83(1), pages 109-152, January.
    9. 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.
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    Cited by:

    1. Van Ommeren, Jos & Koopman, Marnix, 2011. "Public housing and the value of apartment quality to households," Regional Science and Urban Economics, Elsevier, vol. 41(3), pages 207-213, May.
    2. Essi Eerola & Teemu Lyytikäinen, 2017. "Housing Allowance and Rents: Evidence from a Stepwise Subsidy Scheme," SERC Discussion Papers 0220, Spatial Economics Research Centre, LSE.
    3. Virén, Matti, 2011. "Does housing allowance feed through into rental prices?," Research Discussion Papers 11/2011, Bank of Finland.
    4. Stephen Gibbons & Olmo Silva & Maria Sánchez-Vidal, 2018. "The Bedroom Tax," CEP Discussion Papers dp1537, Centre for Economic Performance, LSE.
    5. Matti Viren, 2013. "Is the housing allowance shifted to rental prices?," Empirical Economics, Springer, vol. 44(3), pages 1497-1518, June.

    More about this item

    Keywords

    Housing allowance; Rental housing; Price of housing; Social security; Sosiaaliturva; Effectiveness of public services; Julkisten palvelujen vaikuttavuus;

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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