The effect of supply- and demand-side subsidies on low-income renters’ housing outcomes: evidence from South Korea

Abstract

In recent decades, there has been a global policy shift away from supply-side housing assistance towards demand-side cash subsidies. However, there has been insufficient empirical evidence on whether cash transfer has a critical advantage over the direct supply of subsidised housing in alleviating low-income renters’ immediate housing difficulties. This paper examines and compares the effects of supply- and demand-side housing subsidies on multidimensional housing problems among the lowest-income households in South Korea using longitudinal survey data. Our difference-in-differences analyses combined with propensity score matching demonstrate that public rental housing improves the recipients’ housing quality while it exacerbates housing cost burden and overcrowding. Meanwhile, the cash subsidy failed to enhance the recipients’ housing quality or lessen their housing cost burden, but it aggravated overcrowding. The study showed that different types of housing subsidies have different immediate housing outcomes, suggesting that the rationale for the ongoing global policy redirection towards demand-side subsidies needs to be reconsidered in the local context.