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The Incidence of Rent Subsidies: Evidence on Rents, Housing Choices and Supply

Author

Listed:
  • Essi Eerola
  • Teemu Lyytikäinen
  • Tuukka Saarimaa
  • Tuuli Vanhapelto

Abstract

This paper asks whether, and under which circumstances, rent subsidies to low-income households increase rents. We utilize a reform in Finland that caused large quasi-random variation in housing allowances. We find that large increases in allowances for affected housing units had little or no effect on their rents relative to other units. Thus, the incidence of the reform was on allowance recipients. The reform led to only small changes in recipients' housing choices, and at most modest changes in rental supply. Rent subsidies can be effective even in supply-constrained contexts, if housing choices are unresponsive to the subsidy.

Suggested Citation

  • 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.
    • Handle: RePEc:ces:ceswps:_11478
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    More about this item

    Keywords

    housing allowance; rent subsidy; incidence; housing demand; housing supply;
    All these keywords.

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • R28 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Government Policy

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