Targeted affordable housing subsidies in Flanders: evaluating equity using equivalence scales

Abstract

In Flanders – the northern region of Belgium – various targeted housing subsidies exist, aimed at improving affordability for low income households. For these subsidies, the income limits differ according to household type, in order to adjust for different consumption needs. In this article, we will show how equivalence scales can be applied to evaluate the horizontal equity – in terms of household composition – of targeted affordability instruments. We compute the ‘implicit’ equivalence scale of each instrument and compare them with well-known equivalence scales (the modified OECD and square root scale). Using the 2013 Flemish Housing Survey, the size and composition of the target group for the main targeted housing subsidies is calculated, both for the implicit (currently used) and commonly applied equivalence scales. A comparison with the results of the well-known scales shows that the currently applied implicit equivalence scale generally favours lone parents, whereas in the case of housing allowances couples are disadvantaged compared to single people. As regards the housing allowance, the entitled share belonging to the second income quintile rose strongly when the OECD or square root scales were used. Applying these scales would therefore improve some equity aspects of the subsidies.