Housing Allowances and Economic Efficiency

Abstract

Housing allowances aim to make rental housing affordable for the recipients. Whether affordability for tenants is achieved in an economically efficient way is the question that is discussed in this essay. Three aspects of efficiency are focused on: disincentives to work, over-consumption of housing and horizontal inefficiency. These topics are tackled through a discussion that focuses mainly on the principles, but also on some of the outcomes, of the means-tested housing allowance systems in six Western countries: Belgium, Germany, the Netherlands, the United Kingdom, the United States and Sweden. Conclusions concern the apparent unimportance of the poverty trap or the unemployment trap specifically for rental housing, the concept of notional rent used to tackle over-consumption, and the frequent existence of some form of horizontal inefficiency. Copyright (c) 2006 The Author. Journal Compilation (c) 2006 Joint Editors and Blackwell Publishing Ltd..

Housing Policy Towards the Rental Sector in Italy: A Distributive Assessment

“…Recipients of housing-related transfers are in fact about 10 per cent of all tenants in Germany and more than 30 per cent in the Netherlands and Sweden; housing benefits cover about one quarter of the tenants in the UK private market (Haffner & Boelhouwer, 2006). In Italy, this marginal housing support via transfers goes hand in hand with the limited role of social housing already discussed.…”

“…In the debate on the pros and the cons of the demand-side housing policy instruments versus the supply-side ones, two issues are particularly relevant: the targeting to those more in need, and the ability to deal with changes over time of economic and housing conditions (Adams, 1990;Haffner & Boelhouwer, 2006). While supply-side policies are considered to have largely contributed to the improvement of housing conditions, they are also accused of subsidising bricks-and-mortar, instead of households: except perhaps when a social housing dwelling is originally allocated, there is no guarantee that this form of support is optimally allocated to those most in need, as social and economic circumstances vary along the life span.…”

“…Given the limitations deriving from rather underdeveloped policy instruments and due to relatively poor available data, we have been unable to discuss the potential problem of persistence in welfare dependence and hence the risk of creating poverty/unemployment traps through housing allowances, that is a much debated issue (see, for instance, Haffner & Boelhouwer, 2006;Priemus & Kemp, 2004). We could only discuss short-term persistence in some of the cities considered.…”

Housing Vouchers, Benefits and Allowances (VBAs): Comparing Rental Tools in the US, England and the Netherlands

“…At first glance, the US rental vouchers seem to utterly differ from rental benefits in Britain and allowances in the Netherlands (Haffner & Boelhouwer, 2006). However, Steuerle and Twombly (2002) define vouchers as 'subsidies that grant limited purchasing power to an individual to choose among restricted sets of goods and services ' (p. 447).…”

“…In other words, VBAs may serve the dual purpose of housing as well as income support policies. Fifth, VBAs use actual or notional rent as one of their key bases for estimating support (Haffner & Boelhouwer, 2006). A 'notional rent' is a sum placed into accounts as rent whereby an organisation owns the building it is occupying and, therefore, does not actually pay a rent (Wall, 1973).…”