Access and Affordability: Housing Allowances

Abstract

Housing allowances are subsidies tied to housing, which are paid either to consumers or directly to landlords or mortgage lenders on the consumer’s behalf. Hence, this policy instrument is focused on the demand-side of the housing market. The amount of subsidy to which eligible households are entitled is usually determined by their income, household composition, and – in the case of ex post housing allowances – their rent or mortgage payments. Housing allowances have become increasingly important housing policy instruments in recent decades, especially when supply-side subsidies to landlords have been cut back and rents deregulated. Housing allowances are often viewed as a more efficient use of resources than supply-side subsidies. However, concerns have been raised about the potential negative impact of housing allowances on recipients’ incentives to shop around for accommodation, to take up a job, or to increase their hours of work. Nevertheless, in the advanced welfare states, housing allowances seem likely to remain one of the most widely used housing policy instruments for the foreseeable future.