Housing Policy Impacts on Poverty and Inequality in Europe

Working Paper 2023-640

Abstract

Poor housing conditions are detrimental to household members’ health, schooling, and social interactions. Developed countries have responded to the challenge of improving housing for the poor using two main instruments: cash housing benefits and/or social housing. In this paper, we assess how effective they are in reducing households’ housing poverty and inequality by comparing them separately and combined, with a counterfactual situation with no housing policies, examining 27 European countries by using harmonized data from the EU-SILC. We find that (1) cash housing benefits are more effective than in-kind housing benefits (social housing) and more effective in reducing poverty than inequality. (2) Some countries, and especially Finland, achieve a higher reduction in inequality and poverty while spending only half of the UK. (3) Based on an econometric estimate, we show evidence that in almost all countries outright ownership is the most advantageous tenure status. (4) Inequality in housing expenses is comparable to that in consumption expenditure (excluding housing costs), which is, in turn, much higher than inequality in housing services (a difference of 10 Gini points on average).

Authors: Guillaume BERARD, Alain Trannoy.