The Incidence of Rent Subsidies: Evidence on Rents, Housing Choices and Supply

Essi Eerola, Teemu Lyytikäinen, Tuukka Saarimaa and Tuuli Vanhapelto

No 11478, CESifo Working Paper Series from CESifo

Abstract: This paper asks whether, and under which circumstances, rent subsidies to low-income households increase rents. We utilize a reform in Finland that caused large quasi-random variation in housing allowances. We find that large increases in allowances for affected housing units had little or no effect on their rents relative to other units. Thus, the incidence of the reform was on allowance recipients. The reform led to only small changes in recipients' housing choices, and at most modest changes in rental supply. Rent subsidies can be effective even in supply-constrained contexts, if housing choices are unresponsive to the subsidy.

Keywords: housing allowance; rent subsidy; incidence; housing demand; housing supply (search for similar items in EconPapers)
JEL-codes: H22 R28 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_11478

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