The Burden of Housing Costs and Consumer Credit in Europe: Preliminary Evidence of Differences in Perceptions Among Countries

Abstract

This paper studies differences and determinants of the housing costs and consumer credit burden perceived by households in six European countries, Italy, Germany, Ireland, France, Spain and the United Kingdom, by exploiting information contained in the 2005 EU-SILC database. Burden perception is very diversified among European households and two countries, Italy and Spain, seem to be seriously affected by housing costs and consumer credit outlays, showing a high degree of malaise with respect to the two components of their household budgets. The question we try to answer is whether European households are faced with different overall economic conditions and whether the diversity in perceptions possibly reflects different subjective perceptions and/or different attitudes towards expectations on their living standards and towards indebtedness at least in its short-term component. The econometric analysis consists of the estimation of two ordered-logit models on the pooling of the six countries, where the dependent variable is in turn the housing costs burden and the consumer credit burden, whose outcomes are “a heavy burden”, “somewhat a burden” and “not a burden”. Explicative variables are households socio-economic characteristics such as age, income, the quota of housing costs on income, education levels and household composition. Aggregate variables such as the Gini index and the unemployment rate are included to account for country-specific effects. We also examine overall economic conditions in each country, by analysing income distribution (via Lorenz curves, Gini and Atkinson indexes, and interdecile ratios) and poverty and welfare measures to understand whether subjective measures are consistent with real economic conditions within each country. There is evidence of less favourable an environment in Spain and partially in Italy, but the question is whether this evidence suffices to fully explain the discontent expressed in these two countries. Conclusions are not straightforward and the debate is open.