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Do housing allowances increase rents? Evidence from a discrete policy change

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  • Hyslop, Dean R.
  • Rea, David

Abstract

This paper exploits a natural experiment created by a 2005 policy change to New Zealand's Accommodation Supplement (AS) to examine the extent to which an increase in housing subsidies increased rent. The policy change created a new AS-zone around central Auckland, with higher subsidy maxima for residents within the zone. Using administrative data on AS recipients on either side of the new zone boundary, we estimate that average support was $6.80 per week higher inside than outside the boundary in the second year after the policy change, and about one-third ($2.44) passed through to higher rent. The impacts were concentrated among families with children and, consistent with the policy changes, among higher quantiles of the rent distribution. The results imply the marginal propensity to spend on housing is about 0.35, and the elasticity of housing expenditure with respect to income is about 0.55.

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  • 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).
    • Handle: RePEc:eee:jhouse:v:46:y:2019:i:c:s1051137718302602
    DOI: 10.1016/j.jhe.2019.101657
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    Cited by:

    1. Essi Eerola & Teemu Lyytikäinen & Tuukka Saarimaa & Tuuli Vanhapelto, 2024. "The Incidence of Rent Subsidies: Evidence on Rents, Housing Choices and Supply," CESifo Working Paper Series 11478, CESifo.
    2. 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).
    3. 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.
    4. 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.
    5. 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.
    6. 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.
    7. Ron Kneebone & Margarita Wilkins, 2021. "Local Conditions and the Prevalence of Homelessness in Canada," SPP Research Papers, The School of Public Policy, University of Calgary, vol. 14(28), October.

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    More about this item

    Keywords

    Accommodation Supplement; Housing subsidy; Rents;
    All these keywords.

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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