What impact does subsidised housing renovations have on the filtering process?

Abukar Warsame () and Mats Wilhelmsson
Additional contact information
Abukar Warsame: Department of Real Estate and Construction Management, Royal Institute of Technology, Postal: Teknikringen 10B, 100 44 Stockholm, Sweden

No 23/4, Working Paper Series from Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance

Abstract: Sweden has introduced a system of subsidising renovations of housing in the property market, which aims to modernise the building stock and improve energy efficiency. This study explores the extent to which the tax deduction for renovations (ROT) has contributed to the reduction of property depreciation and subsequent differences in single-family house prices in Swedish municipalities. The paper also investigates whether house price levels influence the desire to renovate and whether tax deductions incentivise renovation needs. Using unbalanced data from 2004 to 2020 at a municipal level regarding total subsidy amounts and housing prices, we will estimate a panel data model based on a traditional DiPasquale and Wheaton reduced-form model where house prices are dependent variable in one model and renovation amounts are the dependent variable in the other model. Other independent variables that will be used are, among others, income, demographics, and supply of single-family houses. The findings suggest that variations in the amount of tax reduction for renovations and the number of property owners receiving these subsidies in different municipalities have contributed to observable differences in house prices. The study concludes that government housing policies like subsidising renovations may interfere with a well-functioning housing market's expected filtering process. Therefore, it could have implications for policymakers looking to promote more equitable access to housing in Sweden.

Keywords: Housing; depreciation; renovation; maintenance; subsidy; price effect; filtering (search for similar items in EconPapers)
JEL-codes: H20 R30 R38 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2023-04-27
New Economics Papers: this item is included in nep-eur and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://kth.diva-portal.org/smash/record.jsf?pid=diva2:1753569 Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:kthrec:2023_004

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Working Paper Series from Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance Department of Real Estate and Construction Management, Royal Institute of Technology, Teknikringen 10B, 100 44 Stockholm, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Cecilia Hermansson ().