Housing Allowance Research Articles

HOME PURCHASE IN CHINA - A case study of Guangzhou from in-kind allocation to cash subsidy

In China, promotion of home purchase has since 1979 been one of the major housing policies. Guangzhou is in the vanguard of housing reform. In 1997 the Guangzhou government announced an innovative housing initiative - the Housing Allowance Scheme (HAS). To enhance home ownership, this scheme endeavours to eliminate completely the existing welfare 'in-kind' allocation system. Civil servants appointed after 30 September 1997 no longer receive state housing. Instead they are provided monthly housing allowances 'in cash'. This paper examines the feasibility of the HAS against its objective of 'home purchase'. It reviews welfare housing development in Guangzhou in the context of policy development, housing need, and housing investment and provision. It then gives a systematic account of the key features of the HAS in Guangzhou and discusses its possible shortcomings as well as offering recommendations. The concluding section gives further suggestions for policy change.

Housing Allowances in the US under Section 8 and in Other Countries: A Canadian Perspective

Housing allowances are provided in the US by the federal government under Section 8 of the 1974 Housing and Community Development Act. This paper compares the design of Section 8 certificates and vouchers with that of Canadian housing allowances and with aspects of design in many other developed nations. Distinguishing elements of Section 8 are discussed: its minimum standards condition, its use of a three-way contract in which both the government housing agency and the tenant pays a private landlord, its availability to only a limited number of eligibles, the absence of a percentage-of-rent element in its formulas and the low required contribution of its recipients. It is argued on the basis of an array of diverse evidence that these characteristics lead to perverse housing consumption effects, stigma, rent inflation and unnecessary restrictions on recipient choice. The paper also addresses the standard objections to dropping the minimum standards condition and to incorporating a percentage-of-rent element in the formula.

Rent Subsidies in the USA and Housing Allowances in The Netherlands: Worlds Apart

Rent Subsidies in the USA and Housing Allowances in The Netherlands: Worlds Apart

A nest or a golden cage?

Household arrangements and human capital investment decisions of young Italians with a high school diploma are analysed. A model of the choices of residing with parents or forming a new family, jointly with those of investing in either work experience, or further education, or stopping investment is estimated. The results show that family background has a major impact on the decision to study, housing costs induce co‐residence, and unemployment increases the probability of studying. Education policies subsidising university studies on a merit ground would thus reduce income inequality, housing allowances would favour marriage, and labour policies would have the side‐effect of decreasing university dropouts.

The Role and Design of Income‐Related Housing Allowances

Income‐related housing allowance schemes have become a long‐term feature of social policy in the advanced welfare states. They are not without disadvantages, however, and a number of countries have recently introduced significant reforms of their systems. The aim of this paper is to examine some key features of, and recent developments in, housing allowance programmes in seven countries. It addresses five main questions: why have income‐related housing allowances become so important, what role do they play, what are the essential features of such schemes, how do they tackle concerns about moral hazard, and what are the pressures facing them?

The housing allowance scheme in Guangzhou

Promotion of home purchase has been one of the major housing policies in China since 1979 and Guangzhou is one of the pioneers in formulating and establishing new housing policies. In 1997, the Guangzhou government announced an innovative housing initiative: the “Housing Allowance Scheme” (HAS). This scheme attempts to eliminate completely the welfare in-kind housing system by ceasing direct housing allocation. Civil servants appointed after 30 September 1997 would no longer receive housing from the State. Instead they were provided monthly housing allowances in cash. This paper is the outcome of a research project, funded by University Grant, to examine the feasibility of this new “Home Allowance Scheme” in achieving its objective of “Home Purchase” in Guangzhou. It first reviews welfare housing reform in the reformist city and examines the “Housing Allowance Scheme” against its objective of “Home Purchase”. More importantly, it highlights the inherent problems facing the government: such as lack of finance in both housing production and consumption. Finally, the concluding section gives suggestions for accomplishing the objective of “Home Purchase”.

Randomised studies of income supplementation: a lost opportunity to assess health outcomes.

BACKGROUND: Despite the wealth of evidence linking low income to ill health, there is little information from randomised studies on how much and how quickly these risks can be reversed...

Needs-based Targeting without Knowing Household Incomes: How Would it Work in Russia?

Proxy means tests are often suggested for use in countries where tighter targeting of benefits of social programmes are desired but verification of household incomes is difficult. This paper reports on simulations of the use of two types of proxy means test in determining eligibility for Russia's housing allowance programme and the payments which eligible households would receive. Based on 1995 and 1996 survey data, tests are reported for three cities: Vladimir, Moscow and Gorodetz. The results consistently show that the proxy procedures introduce substantial errors into who is admitted to the programme. Most disturbing is the large share of eligible households who would be denied benefits using the first proxy (predicted income used for eligibility determination)—10-30 per cent. The average benefit loss for the poorest quintile of households falsely denied benefits is equivalent to about 20 per cent of their incomes. Under the alternative procedure based on demographic characteristics, errors are smaller than under the first procedure for pensioners and large families but much greater for lone mothers. But even for the first two groups, undercoverage runs at about 15 per cent. On balance, these results suggest that very great caution should be used in proposing proxy income tests of the type analysed here in the countries of the former Soviet bloc for means-tested programmes in general.

Social Housing Finance in Europe: Trends and Opportunities

The central topic of this contribution is the financing of the social rented sector in seven countries in western Europe: the Netherlands, Belgium, Denmark, Germany, Great Britain, France and Sweden. Since 1975, the macro housing quota has increased in all seven countries, but most of all in the Netherlands. Property subsidies have been reduced; housing allowances have become more important. The differences in size of the social rented sector remain large. Private finance has mostly replaced public loans, with the exception of Germany where interest-free government loans cover part of the finance needed. In most countries, guarantees for capital market loans exist, Great Britain being the exception. In the near future, changes in social housing finance may be expected as a result of European monetary integration. The euro will (for the time being) not be introduced in Denmark, Great Britain and Sweden. The costs of capital may decline when social housing finance becomes more internationalised.

Employment, welfare support and income distribution in east Germany

This survey seeks to sketch how the income level and income equality both among social groups in the new Länder, and also in relation to the position in west Germany, have evolved as a consequence of the deep restructuring since 1990, as well as a result of the welfare systems put in place by the treaties establishing unification. The paper surveys the macroeconomic evolution and the attendant deep changes in the labour market, focusing in particular on the level of wage catchup with the west and on differentials by firm size, occupation and branch. It addresses initiatives to attack unemployment in the east and assesses the welfare safety net in the form of unemployment benefits and social assistance, as well as the pension system instituted. The relatively favourable pension provision and the broad coverage of the social benefit system have ensured that the deep economic restructuring has not led to widespread poverty, even if there is a pervasive feeling of insecurity. The effectiveness of the housing allowance system in moderating the impact of rent rises is also discussed. The paper finally addresses the question of income distribution in this rapid transition to the market, and shows that ‘income poverty’ has been contained to a level broadly equivalent to that of west Germany.

Tyranny of inappropriate policies

Abstract The housing strategies adopted by urban households in a situation of housing shortage in a particular city will often reflect the peculiar circumstances of that city. This paper investigates one strategy – sharing of dwelling units – adopted by some middle/low income households in Abuja, Nigeria's new capital, in a situation of rapidly increasing population, high cost of living and inadequate housing provision. It is found that a combination of factors – the inability of most Abuja residents to secure residential accommodation from the dominant but limited public sector supply, cultural factors, the housing allowance policy of government and the fact that many relocatees to Abuja do not bring their families – have made a good number of households favourably disposed towards sharing, an option which keeps the amount spent on housing low but which, in most cases, completely excludes personal comfort. It is recommended that, since standard estimates of affordability often provide little guidance to policy makers, the appropriate strategy in search of sustainable solutions would be to make available a range of housing packages from which households in Abuja will choose, and to make adjustments to regulatory regimes so as not to constrain the production of housing.

Housing situation and housing policy in east Germany

This paper assesses the poor physical state and supply of housing in east Germany at the time of unification and discusses the fundamental transformation of the eastern state‐controlled housing regime to the western, heavily regulated market system. It discusses in detail the inherited problems of physical fabric, housing organisation debt and disputed ownership title. The housing policy regime instituted granted very favourable tax reliefs to investors in real estate, and so created the construction boom, which kick‐started the east German economy. It also instituted a phased adjustment of the extremely low east German rents to the western system and level, with the express objective of attracting investment to modernise the run‐down stock. As the counterpart to the partial alleviation of the inherited debts of the housing associations, privatisation targets were set for rented property, but the Zwischenerwerber model has had to be instituted given the limited interest in the east in owner‐occupation of older apartments and Plattenbau dwellings. The effect of housing allowances in moderating very large rent rises is assessed. Finally, the paper speculates on the potential impact in the east of the housing policy changes planned under the Kohl government in 1997/98.

Canadian Housing Allowances inside and outside the Welfare System

The aim of this paper is to demonstrate that the design of housing allowances of the sort used in Ontario is badly flawed, while classic rent and income conditioned (RIC) housing allowances, for people who are not on welfare, have a good design. RICs pay a percentage of the difference between actual rent (up to a maximum) and affordable rent, while allowances pay actual rent up to a maximum. The paper focuses on Manitoba and Ontario. Evidence suggests that 1989 Ontario changes, including increasing the subsidy at the margin to 100 percent of rent from 80 percent, increased average allowances much more than 25 percent. Further evidence suggests that in Ontario allowances either increased housing consumption or welfare landlords exerted monopoly power to inflate rents. Evidence indicates the Manitoba RIC did not have these effects. The paper argues that not differentiating between Toronto and the rest of Ontario results in major inequities.

Improving or Endangering Housing Policies? Recent Changes in the Dutch Housing Allowance Scheme

Improving or Endangering Housing Policies? Recent Changes in the Dutch Housing Allowance Scheme

Monitoring Russia's Experience with Housing Allowances

The implementation of housing allowances is an integral part of Russia's programme of systematic rent increases on state and municipal rental units which began in 1994. Because housing allowances constitute the country's first income-tested programme, its performance transcends the housing sector. Rents are being increased in steps to cover full operating costs by the beginning of the next century. The first increases were modest in real terms, and a housing allowance programme was to be operational in each city when rents rose. This paper reports the results of an initial assessment of the programme in two cities. The assessment focuses on the extent to which income-eligible households know about the programme, their participation rates and their experience in becoming recipients. Survey results show quite low but increasing participation rates and knowledge about the programme. While both are in part explainable by the low average benefit levels at this stage in the programme of rent increases, they also clearly call for greater effort by local and national administrations to inform the population.

Countering Urban Disinvestment through Community-Building Initiatives

Since 1933 housing and community development legislation has been directed at halting the physical deterioration of U.S. cities. Help has come from federally subsidized public housing, the Federal Housing Administration (FHA), urban renewal grants, Model Cities programs, revenue sharing, community development revenue sharing, and housing allowances. More recently, cities have received federal money through tax breaks and direct grants: Urban Development Action Grants of the 1970s, the enterprise zones of the 1980s, the empowerment zones of the 1990s, and the urban revitalization demonstration public housing grants of the 1990s. This article reviews policy approaches to and legislation for community revitalization and discusses how early federal policies contributed to the segregation and isolation of poor neighborhoods. The article describes how new community-based programs and proposed federal initiatives are building on the accumulated expertise of the past 25 years. These initiatives pose challenges for research, policy, and community-level programs by creating policies and programs that transcend people-place dichotomies and recognizing the need for comprehensive community-building strategies. Urban Disinvestment Disinvestment is a series of progressive steps by which area lending institutions extricate themselves from neighborhoods they expect to deteriorate. Among the principal tactics is redlining, thus termed because more blatant disinvestment practice involves drawing red lines around target neighborhoods on area maps. Redlining may consist of outright refusal to accept mortgage or home-improvement loan applications, or it may involve a number of more subtle actions: awarding mortgage loans on inordinately short terms with high down payment requirements, refusing to lend on properties older than a prescribed number of years, stalling on appraisals to discourage potential borrowers, underappraising, refusing to lend in amounts below a fixed minimum figure, and charging inordinately high closing costs. As a policy, disinvestment is defended on the grounds that investment in high-risk areas is equivalent to mismanagement of depositors' funds and is ultimately counterproductive, both for the depositor and for the lending institution. In practice, however, redlining is less a protective action against unnecessary financial risk than a self-fulfilling prophecy of decline for specific neighborhoods. First, the decision to redline is based on a subjective assessment of the likely effects of the race or ethnicity of potential buyers, the age of the housing stock, and the potential for financial loss in a given community. Second, the assessment of decline is often made before evidence of actual decline and without reference to such factors as residents' credit ratings, the current condition of the housing stock regardless of age, and the viability of the community as a whole (including the ability to attract new buyers and the solvency of its businesses) (Naparstek & Cincotta, 1976). Consequently, redlining can undermine healthy communities. And because the immediate result of the decision to redline is the withdrawal of monies required to maintain that community's health, disinvestment ensures that decline will, in fact, occur. Local depositors living in a redlined area find that their savings, instead of being converted to mortgage and home improvement loans for local use, are directed to other, less risky areas, usually new suburban developments. Thus, the residents of redlined neighborhoods are doubly victimized, by the banks' ensuring their neighborhoods' gradual decline and by being deprived of the rightful use of their own savings. Bound inextricably to governing credit policies and to the fiscal well-being of urban centers, redlining has destructive long- and short-term consequences, both for inner-city residents and their communities (Galster, 1996; LaCouer-Little, 1996). …

Taxes and allowances in a dynamic equilibrium model of urban housing with a size—quality hierarchy

The paper investigates the effects of an income tax, a property tax, and a housing allowance in the Chicago Prototype Housing Market Model (CPHMM), a dynamic, perfect foresight simulation model of the housing market with a size—quality hierarchy and with multiple household groups. The income tax discriminates against housing conversions with large nonfinancial costs, since these are not deductible. In a perfectly competitive housing market, each housing policy in isolation is distortionary. However, the excess burden of a pair of jointly implemented policies may be less than that for one of the policies in isolation. For some realistic parameter values, a housing allowance aimed at improving the average housing quality consumed by the poor improves efficiency by offsetting part of the deadweight losses of the taxes. The allowance benefits both consumers and landlords in the targeted submarkets, but it hurts landlords on the average by inducing substitution from the non-targeted towards the targeted submarkets.

Social Housing Versus Housing Allowances: Choosing Between Two Forms of Housing Subsidy at the Local Level

Abstract Analysis of the policy choice between social housing and housing allowances has been obscured by the older housing policy debate between proponents of supply subsidies and proponents of demand subsidies. Social housing uses capital grants both to reduce monthly housing costs to below-market rates and to take existing or newly constructed housing out of the market, so that ownership is nonprofit and use is allocated according to need rather than ability to pay. Housing allowances, on the other hand, enable poor tenants to pay market rents for housing. During the past 15 years, even as housing allowances became the dominant mode of Federal assistance, social housing programs grew at the local level. Comparison of model social housing and housing allowance programs by the number of people helped over time, effects on economic integration, and program stability suggests that the choice between these programs depends primarily on alternative expectations for the future. The most active local constitue...

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This study investigated whether an imposed dwelling size constraint in the Swedish housing allowance system induced recipients to move into smaller apartments and overcrowded conditions, i.e., an unintended consequence of a housing policy shift. To address this matter, this paper exploits a quasi-experimental dimension of the imposed dwelling size limit by applying the difference-in-difference estimator. Data for this study were extracted from the Swedish National Insurance Board’s database on housing allowance recipients, which comprises data previously unavailable for research. The estimation results suggest that this policy shift induced single-parent households living in rental housing to decrease their consumption of interior space, yielding a statistically significant increase in moves into overcrowded conditions, an effect that is even greater for single parents with one child than for those with two or more children. This effect runs directly counter to two long-term stated goals of the Swedish housing allowance system: (1) to induce households to move into better housing, thereby increasing their housing consumption, and (2) to prevent families with children from living in overcrowded conditions.

A housing allowance for the UK? Preconditions for an income‐related housing subsidy

Abstract This paper complements the policy focus of Kemp (1994) who addresses the options for housing benefit reform in the UK. By using as general a framework as possible to consider the basic choices, it is apparent that a move to an ex ante form of allowance, can, under most circumstances, be considered to be beneficial—provided that complementary policies evolve alongside changes to personal housing subsidies. It is also clear that levels of support, the degree of progressivity and of targeting cannot be fully answered with theorising by economists. There are fundamental issues concerning just at what level adequate social security provision should be in a modern economy. Personal housing subsidies are vital to low‐income housing consumption and are the core of the UK's housing finance system. It is all the more important, therefore, that the vast resources spent on housing allowances are on schemes which are generally considered efficient and fair.