Support with housing costs across Europe: a distributional ......Support with housing costs across Europe: a distributional impact analysis | Figari, Hollan, Matsaganis, Zólyomi 7

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SupportwithhousingcostsacrossEurope:adistributionalimpactanalysis

FrancescoFigari(UniversitàdegliStudidell’Insubria)

KatarinaHollan(EuropeanCentreforSocialWelfarePolicyandResearch,Vienna)ManosMatsaganis(PolitecnicodiMilano)

EszterZólyomi(EuropeanCentreforSocialWelfarePolicyandResearch,Vienna)

DAStUWorkingPapers

n.01/2018(LPS.01)ISSN2281-6283

DAStU Working Papers – LPS Support with housing costs across Europe: a distributional impact analysis | Figari, Hollan, Matsaganis, Zólyomi

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Abstract

Thispaperaimstoexplorehowhousingallowancesandmortgageinteresttaxreliefhaveevolvedinrecentyears,againstthebackgroundoffallingdisposableincomesandrisinghousingcosts.TheanalysisfocusesonsevenEUcountries(Greece,Italy,Austria,Hungary,theNetherlands,SwedenandtheUK),coveringarangeofmarketdevelopmentsandpolicyresponses.Thefirstpartofthepaperprovidesanoverviewofhousingmarkettrendsovertheperiodfollowingthefinancialcrisisandexaminesrecentchangesinhousingpoliciesinthecountriesconcerned.Thenextpartdiscussesthemainfeaturesoftwospecifichousingpolicyinstruments,housingallowanceandmortgageinteresttaxrelief,alsoexploringrecentchangesthereandthemotivesbehindthese.Thelastpartestimatesthedistributionalimpactofhousingallowancesandmortgagetaxreliefin2016ascomparedwith2007usingtheEuropeantax-benefitmodelEUROMOD.Thepaperconcludeswithadiscussionoftheresultsandofthepolicyimplications.

Keywords

Welfare:housingandsocialservices

Theauthors

Francesco Figari ([email protected]) is Associate Professor of Public Finance at theUniversityofInsubria(Italy).HeholdsaMasterinPublicEconomicsfromtheUniversityofYorkandaPhD inEconomics from theUniversity of Essex.Hehas been involvedwith thedevelopment ofEUROMOD,theEU-widetax-benefitmodel,since2006.Hiscurrentresearchfocusesontheanalysisof the redistributive effects of public policies, the behavioural impacts of policy changes and thewelfareresiliencetotheeconomiccrisisacrossEurope.KatarinaHollan([email protected])isaresearcherattheEuropeanCentreforSocialWelfarePolicyandResearchinVienna.SheholdsBachelor'sandMaster'sdegreesinEconomics fromtheUniversityofVienna.Herresearchinterestsincludesocialandeconomicinequality,workrelations,microsimulation,andfeministeconomics.Manos Matsaganis ([email protected]) is Professor of Public Finance at thePolytechnicUniversityofMilan.HestudiedEconomicsat theAthensUniversityofEconomicsandBusiness,andHealthEconomicsattheUniversityofYorkandtheUniversityofBristol.Hehaswrittenonavarietyoftopicsincludinglabourtaxation,youthunemployment,healthcare,pensions,incomesupport,poverty,Europeansocialpolicy,taxevasionandothers.EszterZolyomi([email protected])isaresearcherattheEuropeanCentreforSocialWelfarePolicy and Research in Vienna. She has studied Sociology at La Trobe University, Melbourne(Australia),andComparativeLabourandOrganisationStudiesattheUniversityofAmsterdam.Hermainresearchdomainsincludecomparativeresearchinsocialinclusionandpoverty,especiallyofvulnerablegroups(i.e.migrants,olderpeople)andtheanalysisofsocialpoliciesandtheirimpactongenderandsocialinequalities.

Acknowledgements

Anearlierversionof thispaperwaspublishedasEuropeanCommissionSocialSituationMonitorResearchNote 10/2016.We thankMaria Vaalavou, Katarina Jaksic, TerryWard, and especiallyTeresio Poggio, for their comments and suggestions. The results presented here are based onEUROMODversionG4.0.EUROMODismaintained,developedandmanagedbytheInstituteforSocialandEconomicResearch(ISER)attheUniversityofEssex,incollaborationwithnationalteamsfromthe EU member states. We are indebted to Holly Sutherland and the many people who havecontributedtothedevelopmentofEUROMOD.TheprocessofextendingandupdatingEUROMODisfinancially supportedby theEuropeanUnionProgramme forEmploymentandSocial Innovation


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’Easi’(2014-2020).Weusemicrodatafromthe2008and2012EUStatisticsonIncomesandLivingConditions (EU-SILC)made available by Eurostat under contract EU-SILC/2013/59 (for Austria,Hungary, Netherlands and Sweden), the national 2008 and 2014 SILC data made available byrespectivenationalstatisticaloffices(forGreeceandItaly)andthe2008and2013FamilyResourcesSurvey(FRS),madeavailablebytheUKDepartmentofWorkandPensions(DWP)throughtheDataArchive.MaterialfromtheFRSisCrownCopyrightandisusedbypermission.Dataprovidersdonotbearanyresponsibilityfortheanalysisorinterpretationofthedatareportedhere.

LPS–LaboratoriodiPoliticheSocialihttp://www.lps.polimi.it/

Howtocitethisworkingpaper:FigariF.,HollanK.,MatsaganisM.,ZólyomiE.(2018)SupportwithhousingcostsacrossEurope:adistributionalimpactanalysis,inDAStUWorkingPaperSeries,n.01/2018(LPS.01).


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IntroductionGovernmentsusearangeofhousingpolicymeasurestopursuesocialpolicyobjectives,suchasassistance with housing costs to prevent material deprivation and, more broadly, access toaffordablehousing topromotesocial inclusion.However,policieshelping low-income familiesmeet theirhousingneedshave always co-existedwith verydifferentmeasures,whichbenefitindividuals and households higher up the income scale. The latter, whether intended or not,encourageandsupporthomeownership.Theresulting‘home-ownershipbias’(Ronald2008)haslongbeenevidentinmostthoughnotalladvancedindustrialisedcountries(Kemeny1981),andachievedsomeprominenceinthecontextof‘right-to-buy’schemeswhichtransferredownershipofsocialhousingunitstotheirtenants,asintheUKinthe1980s(ForrestandMurie1988).Morerecently,homeownershipasahousingpolicygoalwasgivenafurtherboostbythedevelopmentof ‘asset-basedwelfare’, at least up until the onset of the global financial crisis (Ronald et al.forthcoming). In thepost-crisis landscape,otherobjectives(reducingmortgagedebt, loweringfinancialrisksandrevivingtheconstructionsector)havereceivedincreasedattentionfrompolicymakers(ScanlonandElsinga2014),underliningthefactthathousingpoliciesextendwellbeyondtheprotectionoflow-incomehouseholds(SalvidelPeroetal.2016).Inthispaper,weaimtoexplore(i)howhousingpolicieshaveevolvedinrecentyears,againstthebackgroundoffallingdisposableincomesandrisinghousingcosts,and(ii)howrecentchangesintwohousingpolicyinstruments,namelymortgageinteresttaxreliefandhousingallowances,haveaffected the distribution of incomes in EU countries. In particular, it examines inmore detaildevelopments in seven EU Member States, Greece, Italy, Austria, Hungary, the Netherlands,SwedenandtheUK,whicharechosentobereasonablyrepresentativeofdevelopmentsovertheperiod.HousingmarkettrendsandrecenthousingpoliciesThesevencountriesconcernedhavehadvaryingexperienceregardinghousingmarket trendsduringandaftertheglobalfinancialcrisis.Anoverviewofthemaintrendsandcharacteristicsofhousingmarketsandpolicyresponsesisprovidedbelow.TrendsinhousepricesTheglobalfinancialcrisishadastrongimpactonthehousingmarketinallEuropeancountries.From2007housepricesdeclinedalmosteverywhere,butby2013themarkethadbottomedoutinmostMemberStatesandappearstoberecoveringsincethen.In2015,theannualincreaseinhousepricesinrealterms(i.e.relativetothegeneralrateofinflation)was12%inHungaryandSweden,5%intheUKandover3%inAustriaandtheNetherlands.InGreece,wherethehousingmarkethasbeeninrecessionsince2008,thepriceindexhascontinuedtofall(by4%in2015ascomparedwith12%in2012).HousepricevolatilityhasbeenmostlimitedinAustria:inthe2005-2015period,theannualhousepriceindexfluctuatedwithinanarrowrange(fromaround0%toaround5%).Figure1showsasnapshotofhousepricechangesoverthelast10yearsinthe7countriesexaminedhere.


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Figure1:Annualhousepriceindexinrealterms(rateofchange,2005-2015)

Note: Housepriceindexrelativetothegeneralconsumerpriceindex.Source:ECBStatistics.ChangesinhouseholddisposableincomeHouseholddisposableincomefellmostinthoseMemberStateshithardestbythecrisis.InGreeceandHungary,theaverageincomeofthoseinthebottomdecilefellby5%ormoreayearoverthe2008-2012period(OECD2015).IntheEUasawhole,growthinhouseholddisposableincomebecame positive again in2013, butwithmarkeddifferences between countries, andwith theexceptionofGreecewhichexperiencedaprotracteddeclineinincome(Figure2).HousingcostburdenandarrearsHousingcostsrepresentaconsiderableshareofdisposableincome[1].AsshowninTable1,thissharereaches42%inGreece,butisalsoquitelargeintheNetherlands(30%)andtheUK(25%).InAustria,Hungary,ItalyandSweden,housingcostsrelativetodisposableincomearebelowtheEU28average(22.5%).Asmightbeexpected,theburdenofhousingcostsisheavierforthosewithincomesbelow60%ofthemedian.

1Housingcostsrefertothemonthlycostsconnectedwiththehousehold’srighttoliveintheaccommodation.Itincludesthecostsofutilities(water,gas,electricity,heating),regularmaintenanceandrepairs,structuralinsurance,servicesandcharges,taxesonthedwelling,rentalpayments,mortgageinterestpayments(netofanytaxrelief)andgrossofhousingbenefits(Eurostat2017).


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Whenhousingcostsexceed40%ofdisposableincome,thisistermed‘overburden’.Clearly,thisisquitestraightforward in thecaseoflow-incomehouseholds. Incontrast,higherup the incomedistributiontheshareofhousingcostsinhouseholdincomeisarguablyaquestionofconsumerchoice. InGreece, that sharewas41%ofall households in2015.The relevant sharewasalsosignificantintheNetherlands(16%ofhouseholds)andtheUK(13%).‘Overburden’isespeciallyprevalentamongthepoor,theproportionofhouseholdsbelowtheat-risk-of-povertythresholdconcernedrangingfrombetween30%and35%inHungary,ItalyandAustria,toaround39-40%inSwedenandtheUK,56%intheNetherlands,andanastounding96%inGreece.Figure2:Householdnetdisposableincome(annualgrowthrate2005-2015)

Source:OECDNationalAccountsStatistics.


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Table1:Housingcostsoverburdenrateandarrears(%,2015) EL IT HU NL AT SE UKHousingcostsasashareofdisposableincome*

Income<60%ofmedian 76.5 35.2 35.5 51.6 39.5 45.0 47.5Income>60%ofmedian 33.3 12.9 19.1 26.6 15.0 17.4 20.6

All 42.2 17.2 21.5 29.5 18.4 21.3 24.9Housingcostoverburdenrate**


All 40.9 8.6 8.5 15.6 6.4 7.5 12.5Arrearsonutilitybills


All 42.0 12.6 19.4 2.7 3.5 2.7 7.0Arrearsonmortgageorrent


All 14.3 5.4 6.0 3.7 3.4 1.8 3.8Notes: *Weighted average of the distribution of housing costs in equivalised household disposable

income.**Housingcostsoverburdendenotesthepercentageofthepopulationlivinginhouseholdswherethe total housing costs (‘net’ of housing allowances) amount to over 40% of equivalisedhouseholddisposableincome(‘net’ofhousingallowances).

Source: EurostatEU-SILC.Theshareofhouseholdswitharrearsonutilitybillsandonmortgageorrentfollowsasimilarpattern:itisconsiderablylargeramonglow-incomehouseholdsinallcountries,andishigherinGreecethanintheothersixcountries,withHungaryalsostandingoutintermsofarrearsonutilitybills.MortgagedebtburdenandfinancialvulnerabilityResultsfromtheHouseholdFinanceandConsumptionSurvey(HFCS),notavailableforSwedenandtheUK,showthatthepercentageofhouseholdsreportingmortgagedebt–alargepartofwhichistiedtothehouseholdmainresidence–hasdeclinedbetween2009and2015(Table2).The Netherlands stands out with a high share of households holding mortgage debt (42%),followedbyHungarywhereone inevery fivehouseholds is reportedtohaveamortgage.Thelowest values are recorded in Greece (13%)and Italy (10%). There is less country variationregardingmortgagedebtpaymentsrelative togrosshousehold income.Theratioranges from14%to18%infourofthefivecountries,Austriabeingtheoutlierwithanotablylowerfigureofbelow7%.


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Table2:Indicatorsofmortgagedebtburden(%) EL IT HU NL AT

2009 2014 2011 2015 2014 2010 2015 2011 2015Householdswithmortgagedebt1 17.5 13.3 10.8 10.1 20.1 44.7 42.0 18.4 16.7

Mortgagedebtservice-incomeratio2 16.4 18.2 15.5 15.8 16.9 14.2 14.0 4.6 6.7

Loan-to-valueratio3 31.6 42.7 30.0 37.9 40.0 52.5 60.2 18.7 24.8Notes: 1 Mortgage debt includes mortgages collateralised on household's main residence and

mortgagescollateralisedonotherrealestatepropertyownedbythehousehold.2Themortgagedebtservicetoincomeratioistheratioofthemonthlymortgagedebtpaymentstogrosshouseholdincome(1/12oftheannualtotal),calculatedforhouseholdswithmortgagedebt.3 The loan to value ratio for households havingmortgage debt collateralised on theirmainresidence.Itiscalculatedastheratioofthehousehold'smortgagescollateralisedonhousehold'smainresidencetothecurrentreportedvalueofthehousehold'smainresidence.

Source: EuropeanCentralBank,HouseholdFinanceandConsumptionSurvey(HFCS),wave1and2.Theloantovalueratio(LTV)indicatorshowsthesizeofthemortgagerelativetothevalueoftheproperty(forhouseholdswithmortgagedebtontheirmainresidence).Particularlyhighloan-to-valueratioscanbeobservedintheNetherlands(60%),althoughthesearealsoconsiderableinGreece,HungaryandItaly(38-43%),whiletheyareratherlowinAustria(around25%).HousingmarketcharacteristicsandpolicychangesAustria.IncomparisontomanyotherEUcountries,thehousingmarketinAustriashowsanearlyequalsplitbetweenhomeownershipandrentalhousing. In2015,49%ofhouseholds lived inowned dwellings and 42% in rented ones, while 9% were either living for free or in anaccommodationprovidedbyemployers.Thesubsidizedrentalhousingsectorislarge(exceptinsomeruralareas,whererentalmarkets ingeneralaresmaller),withhousingassociationsandmunicipalitiessupplyingdwellingsatcost-rents (Mundt2017).Nevertheless,withrisingrentsoverthelastdecade–especiallyinlargercities–accesstoaffordablehousinghasbecomedifficultforlow-incomehouseholds(DawidandHeitzmann2015,Baumgartner2013).TheNetherlands. Similarly toAustria, theDutchhousingmarket is characterisedby ahighlysubsidisedandregulatedsocialhousingsector,definedascomprisinghomeswherethemonthlyrent issetbelowthatprevailing inliberalised tenancyagreements(Government.nl2016).Therentalsectoraccountsfor43%ofhomes,thelargemajorityofwhichbelongtotheregulatedrentalsector(CapitalValue2016).Only10%oftherentalhousingstockisprivate.Housingassociations,whichownaround75%ofallrentalhomes,areresponsibleformanagingsocialhousing.Owner-occupiedhousing,whichconcernsaround57%ofallhomes,hasriseninimportanceduringthelastcoupleofdecades,thankstoashiftinpublicpoliciesinfavourofhomeownership.Mortgagefinancingschemes,inparticularthewidelyaccessibleandgenerousmortgageinteresttaxrelief,has played a crucial role in driving this development (Vandevyvere and Zenthöfer 2012).Increasinghousepricesduringthe1980sand1990s,coupledwithhighandrisingloan-to-valueratios(LTV)andlowrepaymentrates,resultedinoneofthehighestlevelsofgrosshouseholddebtintheEU.Duetothefallinpropertypricessince2007,around30%ofDutchhomeownerswerein ‘negative equity trap’, i.e. leftwith an outstandingmortgage higher than the value of theirproperty.To reducehousingdebtand limit over-investment inhousing, theDutch authoritiesdecidedtosetanLTVcapof106%from2012,tobegraduallyreducedto100%by2018,while


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taxrelieffornewmortgagesbecamelessgenerous(MinistryofEconomicAffairs2015).ThenewHousing Act that came into force on 1 July 2015has also led to a number of changes in theregulatedrentalmarket.Theoverallaimsaretoincreaseaffordabilityofsocialhousingforthelowestincomegroupsandimprovethefunctioningofthesocialrentalsector.Specificmeasuresincludetheclearseparationbetween‘servicesofgeneraleconomicinterest’(SGEI)andnon-SGEIactivitiesofhousingassociations.Theprimaryfocusisonprovidingaffordableandgoodqualityhousingtopeoplewithlimitedfinancialmeans,andallocatingsocialhousingto95%ofthosewhoqualifyforhousingbenefit,whilekeepingrentsbelowacertainlimit(MinistryofEconomicAffairs2015).Itremainstobeseenifthepoliciesadoptedwillmeetthegoalssetoutinthelegislation.Sweden.ThedistinctionbetweensocialhousingandtheprivaterentalsectorisblurredinSweden(Bååth2015).Municipalhousingcompanies,whichownabouthalfof therentalsector,aimtoprovidehousingforall regardlessof income; therefore, incomethresholdsdonotapply in theallocationofmunicipaldwellings.Moreover,rentsintheprivateandpublicsector[2]aremoreorlessthesameduetotheso-calledutilityvalueprinciple[3].Theweightoftherentalsectorasawholehasdeclinedas a result of the increased liberalisation andderegulationof thehousingmarket,adevelopmentthathasclearlyfavouredhomeownership,nowaround70%(HolmqvistandTurner2014).Housingpricesroserapidlyinthepastsixorsoyears,sohousingcostshavebecomeincreasinglyburdensome,especiallyforrenters.Atthesametime,alargeshareofhomeownersfacehighmortgageindebtedness.In2010,theFinanceAuthorityrespondedwithsettingacaponnewmortgagesat85%ofthemarketvalueoftheproperty(SverigesRiksbank2015).Italy.TheItalianhousingmarketishistoricallybasedonhomeownership,whichreached72.9%in2015.Thestrongpreferenceforhomeownershipwasfuelledbyastrictrentcontrollegislationpassedin1978,whichsubsequentlyledtothecollapseoftherentalmarketinthe1990s(BaldiniandPoggio2012,2014;Eurostat2016).Whiledisposableincomesincreasedonlymarginally,Italywitnessedarapidincreaseinhousepricesandrentsbetween1998and2007(BaldiniandPoggio2012,2014).Intheyearsfollowingthefinancialcrisis,creditinstitutestightenedlendingrules,whichledtoanincreaseinthedemandforrentalhousing.Affordability,however,remainsoutofreach for many low-income households, as house prices and rents remain high and publicprovision of housing very limited (Bianchi2014).The situation is particularly problematic inmetropolitan areas (Pittini et al. 2015). The increase of evictions of private tenants [4] is anindirectexampleoftheseverelackofaffordablerentalhousinginItaly(Ministeriodell’Interno2016).Thesepressureshavemadegovernmentinterventionnecessary[5].Toeasethestrainonhouseholdswithoutstandingmortgages,thegovernmentpasseda“HousingPlan”in2009,whichallowedsuspensionofmortgagepaymentsfor12monthsincaseofunemployment,reductionofworkinghours,seriousillnessordeath(Marino2014).Thisplanexpiredin2013.Ingeneral,thesituationof Italy’shousingandmortgagemarkethas improvedslightly in2015(latestreviewavailable)comparedtoearlieryears(Marino2016).Afterlargedropsinhousingtransactions–thelargestbetween2011and2012,whentransactionsdecreasedby26%–2015hasseenaslightincreaseof7.5%compared to2014(Marino2014).Thosepurchasedwithamortgageroseby2InSweden,therearefourdifferenttypesoftenures:dwellingswithrightoftenancy,condominiums,dwellingsincooperativehousingsocietiesandcooperativerentaldwellings(Bååth2015).3Accordingtotheutilityvalueprinciple,rentsshouldbesetbyreferencetosimilartenanciesinthegivenarea(Bååth2015).4BaldiniandPoggio(2012)explainthatendofleaseevictionswereamajorconcernforpublicinterventionpriorto1998,andhadan impacton socialhousingallocation(priority toevictedhouseholds). Incontrast, until the recentrecognition of involuntary arrears (morosità incolpevole), households evicted because of arrears were consideredineligibleforsocialhousinginmanyItalianregions.5Additionaldriversincreasingdemandforaffordablerentalhousingaredemographicchange(especiallyageingandmigration)anddecreasinghouseholdsize(TosiandCremaschi2001,Bianchi2014).


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19.5% in 2015 (Marino 2016), reflecting an increasingly favourable lending environment.However,intermsofeffectivenessinsocialinclusionthesepolicymeasureshavehadonlylimitedsuccessdue todifferent levelsofcoordination(national, regionalandmunicipal)atwhich themeasuresareadministered(BaldiniandPoggio2012,2014).Withsocialhousingplayingaminorrole, housing allowances and tax credits for renters are the main (but mutually exclusive)instrumentsforthegovernmenttosupportlow-andmedium-incometenants.Hungary,likeotherCEEcountries,hasahighhomeownershiprate(82%in2016),aconsequenceofthewidespreadprivatisationprocessduringthe1990s.Conversely,thesocialrentalsectorisvirtuallynon-existent,accountingforonly3%oftheentirehousingstock(Hegedűs2011).Homeownershipwasfuelledfurtherbygenerousmortgagesubsidiesandeasyaccesstocheapforeigncurrencydenominatedloans(mostlyinSwissFrancs).Attheonsetofthefinancialcrisis,Hungarywasalreadyinadirefinancialstateandclosetoeconomicrecession.Forthosewithmortgagesdenominatedinforeigncurrency,thedevaluationofthenationalcurrencyresultedinadrasticincreaseinthecostofmortgagepayments.Coupledwithadecreaseinhouseholdincomes,thisled toan increase inarrearsand foreclosures.Probably themost importantrecentregulatorychange concerning themortgagemarket in Hungary was the conversion of foreign currencydenominatedloanstonationalcurrencyin2015(EMF2016).Thesameyear,anewloansubsidyprogramme(CSOK)waslaunchedfortheconstructionandpurchaseofneworexistinghousingforyoungfamilieswithchildren(orcommittedtohavingchildren).Theprogrammeissettorununtil2020.Thenumberofapplicantsisestimatedtobebetween20and30thousandinthenexttwotothreeyears(EuropeanConstructionSectorObservatory2016).For2016,thegovernmentallocatedHUF40billion(EUR129million) for thishousingprogramme.Meanwhile, themainmeans-testedhousingbenefitforlow-incomehouseholdswasabolishedin2015.In2014,around400,000recipientsreceivedthebenefit,atafiscalcostofHUF19.5billion(aboutEUR63million)(CSO2015).The UK housing sector was severely affected by the global financial crisis, which had vastimplicationsfortheavailabilityandaffordabilityofhomesacrosstenures,fromowneroccupiedhousingtotherentalsector,privateandsocial.Successivegovernmentsintroducedlegislationtoaddressthesituationofrentalandpropertymarkets(Schwartz2011).Objectivesvaried.Between2008andearly2010,thefocuswasonstabilisingthesafetynetbysecuringthedevelopmentofsocialhousing.Forexample,governmentgrantstohousingassociationswereincreased(intheUK,thesenon-profitorganizationsarethemainprovidersofsocialhousing,togetherwithlocalcouncils).From2010onwards,thegoalofreducinggovernmentdebtbecameparamount,whichledtospendingcutsaffectingsocialbenefitsandotherprogrammesrelatedtohousingprovisionoraffordability(Schwartz2011).Nevertheless,with1.8%ofGDPspentonhousingallowances,theUKstillrankshighestamongOECDcountries(SalvidelPeroetal.2016).Overtime,therehavebeenanumberofmeasurestoeaseaccesstohousingforlow-andmiddle-incomehouseholds,mostlytosupportaccesstohomeownership,butalsotorentalhousing.Forhomeownership,theseinclude:HelptoBuy(consistingofequityloans,mortgageguarantee,andindividualsavingsaccount (ISA) government top-ups), FirstBuy (another equity loan programme), NewBuy(anotherformofmortgageguarantee),orsharedownership(fromhousingassociations).Tenantsontheotherhandareeligibleforhousingbenefit,alsocalledLocalHousingAllowanceforprivatesectortenants(Shelter2016).However,since2013housingbenefithasbeenphasedout,tobeamalgamatedintoUniversalCredit,togetherwithothermeans-testedbenefits[6].Nevertheless,6UniversalCreditwillreplacethefollowingsixmeans-testedbenefits:income-basedJobseeker’sAllowance,housingbenefit,WorkingTaxCredit,ChildTaxCredit,income-relatedEmploymentandSupportAllowance,andIncomeSupport(GOV.UK2016c).Itwaspilotedin2013andisnowavailableacrossGreatBritainfornewapplicants.Forpeoplealreadyclaiminganyofthesixbenefitsagradualtransitionphaseuntil2021isenvisaged(Timmins2016).


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peoplecurrentlyreceivinghousingbenefitwillonlygraduallybeshiftedtoUniversalcredituntil2021(Timmins2016).Inaddition,benefitcapswereintroducedin2013,whichlimittheamountofbenefitapersoncanreceive(GOV.UK2016d).HousingallowanceandmortgageinteresttaxreliefGovernmentsemployavarietyofhousingpolicyinstruments.Arecentreviewlistedasmanyas16 such instruments, falling under four categories: home-ownership subsidies, housingallowances,socialrentalhousing,rentsupportandregulation(SalvidelPeroetal.2016).Thispartofthepaperfocusesontwobroadmeasures:housingallowances,whichareusuallytargetedatlow-incomehouseholdslivinginrentedaccommodation,andmortgageinteresttaxrelief,whichtends to favour better-off home owners (Matsaganis and Flevotomou 2007).We examine therelative priority attached to these two different policy objectives, assistance to low-incomehouseholdsandsupportofhomeownership.HousingallowanceHousing allowances are usually means-tested, serving the purpose of helping low-incomehouseholdsmeethousingcosts.Inmostcountries,theyaredesignedtosupporttenants,althoughinsomecountrieseligibilityisextendedtohomeownerstoo,providedtheymeettheincomeandother conditions. The main characteristics of the housing allowance systems covered in thissectionareprovidedinTable3below.MoredetailedinformationoneligibilityrulesandotherparameterscanbefoundintheAppendix.Table3:Maincharacteristicsofhousingallowanceschemes

Name Housingsector Targetgroup Dependenton

Governmentexpenditureas%ofGDP

Greece Rentsubsidy RentPrivatesectoremployees,pensioners

Income 0.07(2009)

Italy Rentsupplement Rent Lowand

mediumincomeIncomeand

rent 0.02(2015)

HungaryHome

maintenancesupport

All Lowincome Income 0.06(2014)

Netherlands Rentbenefit Rent Lowincome Incomeandrent 0.4(2013)

Austria Housingbenefit Rent Lowincome Incomeand

rent 0.1(2014)

Sweden Housingallowance All

Familieswithchildren,youth,pensioners

Income 0.4(2012)

UK Housingbenefit Rent Lowincome Incomeand

rent 1.8(2015/16)

Sources:Austria:Mundt(2017);BMF(2015). Greece:OECD(2008,2013).

Hungary:MinistryofHumanCapacities(2014);CentralStatisticalOffice(2015).Italy:WOBI2016(fortheProvinceofBozen/Bolzano);BaldiniandPoggio2012,Istat(2015).Netherlands:Government.nl2016;Belastingdienst2016;CentralBureauforStatistics2014.Sweden:SwedishSocialInsuranceAgency(Försakringskässan)2016.StatisticsSweden2012.UK:GOV.UK2016e;SalvidelPeroetal2016.


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Austria. With a relatively high share of 28-31% of GDP spent on social protection, housingbenefits play a limited role in Austria. Instead, supply-side grants for provision of affordablehousingareofgreaterimportance.SocialhousinginAustriaisavailableforbothlow-andmiddle-income households, while means-tested housing benefits exclusively support those with lowincomes. Housing benefits, however, do not aim at securing a minimum income of recipienthouseholds.Fouroutofnineregionshavethereforeadoptedaminimumincomethresholdasaneligibility condition (i.e. housingbenefit is only available to thosewhoare employedorwereemployedinthenearpast),todistinguishhousingbenefitfurtherfromminimumincomeschemes(Mundt 2017). Housing allowance in Austria is managed at the regional level. Nine differentregionalschemesexist,withdifferencesineligibilityconditionsandamountsdistributed.Housingallowance is generally calculated applying the housing gap formula (see also Table A1 inAppendix), by subtracting reasonable housing expenses from housing costs [7] (Turner andElsinga2005;HaffnerandBoelhouwer2006;Mundt2017).Applicablehousingcostsgenerallycoverrentsandbuildingcharges,butarecappedatacertainlimit,whichdiffersacrossthenineregions.Thedefinitionofreasonablehousingexpensesalsovariesbetweenregions,butisusuallysetataround25%ofhouseholdincome(Mundt2017).Otherfactorstakenintoconsiderationarehouseholdsize,householdcompositionandhouseholdincome,whencomputingtherespectivefactors.SimilartothesituationinotherEUcountries,housingcostsinAustriahavebeenrisingmore strongly than income levels especially over the past two decades. As a result, regionalspending on housing benefit has been rising since the 2000s. In response to fiscal pressures,eligibilitycriteriaweretightenedafterthefinancialcrisis(seeTable4).Thisledtothecurrentcontradictorysituationofspendinglessonhousingallowances–andaggravatingthesituationforthosemostinneed–justwhenhousingcostsareincreasingmorestrongly(MundtandAmann2015a).Sweden.HousingallowanceisacentralcomponentofhousingpolicyinSweden.In2012,totalhousingallowanceexpenditureamountedtoSEK14.6billionoraround0.4%ofGDP(StatisticsSweden2012).Housingallowanceiscomprisedofthreeseparateschemes:(1)housingallowancefor families and children and for young people aged between 18 and 28 years, (2) housingsupplementforpensioners,and(3)housingsupplementforpeoplereceivingadisabilitypension(called sicknessor activity compensation).These benefits canbe granted tohouseholdsof alltenures, providedthey are registered andpermanently residing in thedwelling forwhich theallowanceisappliedfor,andmeetconditionsforincomeandhousingcosts(seeTableA6)[8].Thehousingallowanceistargetedatthosewithlowincome,inparticularsingleparenthouseholds,whilethehousingsupplementforpensionersprovidesanimportantsafetynetforolderpeoplewith low pensions. Partly due to tightened rule changes, the number of housing allowancerecipientshasdeclinedduring the2000s,although it startedrisingagainafter2011(SwedishSocialInsuranceAgency2016).In2015,55%ofallhousingallowancewaspaidtohouseholdswithwomenasthesolebreadwinner(SwedishSocialInsuranceAgency2016).Womenarealsothepredominantrecipientsofthehousingsupplementforpensioners.In2015,itwasannouncedthat75%oftheallocatedfundsforimprovingthissupplementwouldgotowomen(GovernmentOfficesofSweden2015).Thelevelofthehousingallowancedependsonincomeandcapital,thenumberofpersonsinthehousehold,thesizeofthedwellingandhousingcosts.Thelatterincludesrents,cooperativeorassociationfees,monthlyhousingexpensessuchasheatingcosts,andinthecaseofhomeownersalsomortgagepayments.Thehousingallowanceiscalculatedandpaidonthebasisoftheapplicant’sownestimatedincome,andisadjustedretrospectivelyaftertheyearly7Thehousingbenefitthereforecovershousingcostsexceedingthosehousingexpenseswhicharespecifiedasbeing“reasonable”andwhichhouseholdsareexpectedtopaythemselves.8Eligibiltyforthehousingsupplementforpensionersdependstheindividual’sincomeandcapital,andhousingcosts.Further,thepersonmustdrawafullpensionandbeolderthan65.


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incometaxassessmentiscarriedout.Theannualincomeceilingabovewhichtheallowanceisreducedusedtobechangedperiodicallytoaccountfortheeffectofinflation,butsince1996ithasbeenfixedatthesamelevel(Chen2006).TheNetherlands.Rentbenefit(huurtoeslag)isthemostimportantsubsidyavailabletotenantsthroughoutthewholerentalsectorintheNetherlands.Itprovidesassistancewithrentstobothprivateandsocialtenants,providedtheymeettheincomecriteria,whichvaryacrosshouseholdtypes(seeTableA5).Thelevelofthebenefitincreaseswithrentuptoaceiling,currentlysetatEUR710permonthfortenantsintheregulatedrentalsector(thisisbelowthecorrespondingrent limitof theprivatesector) (Government.nl2016).Themaximumrent isdeterminedbyapointsystem(HousingValuationScheme)rating thequalityand facilitiesof theproperty(e.g.dwelling size, type of heating, surrounding area) (Belastingdienst 2016). Tenants also benefitfrom caps in rent increases, set each year by the government and linked to inflation. Thegovernmenthasintroducedanumberofchangesinrecentyearswithimportantconsequencesfortherentalsector(MinistryofEconomicAffairs2015).Asof2013,landlordscanincreasetheregulatedrentatahigherratethaninflation(thelawestablishesamaximumincreasedependingon the incomeof the tenant).Low-incomehouseholdsare tobecompensated for the increasethroughtherentbenefit;ifthetenant’sincomedropsaftertheincome-basedincreaseheorsheisgrantedarentreductionsoastoensurethatsocialhousingremainsaffordable.Theexpectationisthat,bybringingrentsmoreinlinewithincome,moreaffluenttenantswillmoveintotheprivaterental market. Another recent measure in effect from 2015 is aimed at making the housingvaluationschememoremarket-based:25%ofthemaximumrentshouldbedeterminedbythe“attractivenessoftheproperty”,inparticularthelocationofthedwelling(MinistryofEconomicAffairs2015:13).Italy.AssistancewithhousingcostsinItalyisprovidedintheformofarentsupplement(SussidioCasaorContributoalcanonedilocazioneeperlespeseaccessorieafter2013).Thisisgrantedtolow-andmedium-incomehouseholdswithregisteredcontracts,whereineithercasehouseholdshave topayatleast14%or24%of therentthemselves(seeTableA4). In2013, theprevioushousingallowanceschemewascombinedwiththesubsidyforutilitycharges(Heiss2013).Thehousing allowance is administered at the municipal level and depends on the local budgetallocatedtotherentsupplement.Insomeregionsthismightleadtotherentsupplementbeingtransmittedonavoucherlikebasis,especiallyifthebudgetisloworthenumberofapplicationshigh.Inthiscase,regionsmighttransferafixedamountorlimitthegroupofbeneficiariestothosewithhigherneeds(BaldiniandPoggio2012).Further,thereisataxcreditavailableforprivatesector tenants. These two policies – housing allowance and rental tax credit – are, however,mutuallyexclusive forrenters.The taxcredit isthesameacrossall regionsand isavailable toprivate sector tenants with annual incomes below €30,987 (Baldini and Poggio 2012). Theamountreceiveddependsonthetypeofcontract:forcontrolledcontractsthecreditis€495.80for incomes below €15,493.71 and €247.90 for incomes between €15,493-30,987; for freecontracts it is€300and€150respectively(Cerianietal.2016).Tenantshave toapply for themeans-tested allowance, justifying their eligibility with low income or ISE/ISEE levels [9].Responsibleauthoritieswillthenproveeligibilityandrankpeopleaccordingtotheirneeds.Therelatively lengthyprocess this involvesresults in longwaitingperiods for theallowance tobeactuallydistributed.AsBaldiniandPoggio(2012)explain: “The timingof existingprocedures

9ISE(Indicatoredellasituazioneeconomica)measuresthefinancialsituationoffamiliestoassesseligibilityformeans-testedsocialbenefits.Inadditiontoincomes,alsorealandfinancialassetsaretakenintoaccount.ISEE(Indicatoredellasituazione economica equivalente) is theequivalised ISE according to an equivalence scale. In the case of housingallowancebothmeasuresareused(ER.GO2015).


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leadstohousingallowancesbeingtransferredtobeneficiariesaminimumof1-2yearsafterthelatterhavepaidtherentsthebenefitrelatesto.”Hungary.Thehomemaintenancesupport,introducedin1993andterminatedin2015,usedtobeanimportantsupplementarysocialassistancebenefitinHungary,helpingpersonsinneedwiththeregularexpensesoftheirhousing(Albert2009,2015)[10].Until2011,apersonwaseligibleformeans-testedhomemaintenancesupport if thehouseholdpercapitamonthly incomewasbelow150%of theminimumold agepension(HUF28,500/EUR92) andotherhousing costsexceeded20%oftotalhouseholdincome.In2011,eligibilityruleschangedsothatapersoncouldreceivethebenefitifheorshelivedinahouseholdwheremonthlyincomewasbelow250%oftheminimum old age pension, and householdmembers hadno property (Ministry ofHumanCapacities 2014) [11]. Although coverage was relatively high – the benefit was paid to 412thousandrecipientsin2014,representingabout5.0%ofthetotaladultpopulation–themonthlyamountwaslow(CSO2015).TheminimumamountoftheallowancewasaroundEUR8,althoughlocal governments could specify a higher sum. Moreover, the level of the minimum old agepension,whichmostsocialprovisionsinHungaryaretiedto,hasnotchangedsince2008(Albert2015).Expenditureonhomemaintenancesupportwas0.06%ofGDPin2014(CSO2015).Since2015,compensationforhousing-relatedexpenses,alongwithtwoothersocialassistancebenefits,may be granted under a new benefit scheme called “settlement support by local authorities”(MinistryofHumanCapacities2015).Themonthlyamountandthecriteriaforthisprovisionareregulatedlocally(onlyanupperlimitwasprescribedinthelaw,equaltotheminimumoldagepension).Intermsoffinancing,municipalitieshavetocovertheexpensesfromtheirlocalbudgetsandincasetheyareunabletogeneratethenecessaryfundstheycanapplyforfundingfromthecentralgovernment.Sofar,littleisknownabouttheadequacy,coverageandtake-upofthisbenefitscheme.Theonly study availableon the subject found thatassistancewithhousing costshasbecome more limited, more unevenly and unfairly distributed (Mózer 2016). While thegovernment’sintentiontoaddressthehighlyfragmentedsocialassistancesystembyintroducingthis broader benefit scheme could be considered a positive development, the discretionarycriteriaonwhichtheprovisionsarebased,particularlythelackofaminimumlimitsettosuchprovisions,seemproblematic.Greece. The rent subsidy in Greece suffered a similar fate to that of the Hungarian housingsupport. It was suspended in 2010 and finally abolished in 2012, when Workers HousingOrganisation(OEK),theagencyresponsibleforitsprovision,ceasedtoexist(Matsaganis2013,Konistis2014).Asthesocialrentalsectorisalmostnon-existentinGreece,rentsubsidyplayedasubstantialroleinGreekhousingpolicy:itwasbasicallytheonlybenefitavailabletotenantstoassistwith theirhousing costs.While low-income families andother vulnerable social groupswerethemaintargetpopulation,thefactthatthebenefitwasprovidedonacontributorybasisexcludedthosemostinneed(Matsaganis2013).In2015,arentbenefittohomeownersonbehalfoftheirtenants(worth€160permonthforacouplewithtwochildren)wasintroducedaspartoftheso-calledHumanitarianCrisisBilladoptedbytheGreekParliament.Thenewrentbenefitiscurrentlyprovidedtoaround30thousandpeople.

10Priorto2004,theprovisionofthehomemaintenancesupportwasdependentonlocalgovernmentdecision.In2004,thenormativehomemaintenancesupportwasintroduced.Thiswasprovidedbylocalauthorities,however90%ofthetotalamountwasreimbursedfromthecentralbudget(Szívósetal2011).11Monthlyhouseholdincomeperconsumerunitwascalculatedbydividingtotalmonthlyincomeofthehouseholdbytotalsumoftheconsumerunitsofthehousehold.Recipientsofdebtmanagementserviceswerealsoeligibletoclaimhomemaintenancesupport.


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TheUK.HousingbenefitisoneofthemainsocialassistancebenefitsintheUK,bothintermsofgovernmentspendingandamountofclaimants(ONSDigital2016,GOV.UK2016aand2016b).Eligibilityforclaiminghousingbenefitisbasedonlow-incomeandsavingsbelow£16,000.Themaximumamountahousehold can receive is cappedanddependson locationandhouseholdcomposition.In2013,anadditional ‘bedroomtax’or ‘under-occupancycharge’wasintroducedthatledtoareductioninhousingbenefitby14-25%dependingonthenumberofsparebedrooms.AspecialfeatureoftheBritishsocialsecuritysystemisthatapartfromthehousingbenefitthereisnootherformofcontributiontohousingcostsincludedaspartofsocialassistance(Stephens2005;Stephensetal.2002).Table4:Overviewofrecentchangesinhousingallowanceschemes

Greece2010:RentsubsidyprovidedbyWorkers’HousingOrganization(OEK)suspended.2012:RentsubsidyterminatedandWorkers’HousingOrganizationabolished.2015:Rentbenefitintroduced.

Italy2013:Housingallowanceispaidunderadifferentschemecalled“Contributoalcanonedilocazioneeperlespeseaccessorie”whichuniteshousingallowancewithassistanceforutilitycharges.

Austria After2008:Eligibilitycriteriaforgrantingthehousingbenefitaretightened.

Hungary

2011:Themonthlyincomelimitforthehomemaintenancesupportincreasedfrom150%to250%oftheminimumoldagepension.2011:Previouslynormativelyrungaspriceandheatingsubsidiestransferredintothehomemaintenancesupportscheme.2015:Normativehomemaintenancesupportabolishedandasettlementsupportintroducedinstead(conditionsforthisnewsupportareregulatedbylocalauthorities).

Netherlands2015:Suitabilitystandardintroducedintheregulatedrentalsector(socialhousingcorporationsmustallocatehousingto95%ofhouseholdswhoqualifyforhousingallowanceandchargearentthatdoesnotexceedthecaplimit).

Sweden

2102:AnamountofSEK170perpersonwasaddedtothehousingsupplementforpensioners.2015:Housingsupplementforpensionersisincreasedcovering95%ofhousingcosts(previously93%).

UnitedKingdom

2011:LocalHousingAllowance(LHA)ratescappedandthebasisforsettingtherateschangedfromthemedian(50th)tothe30thpercentileoflocalrents(onlyappliestoprivaterentalsector).2013:Reducingtheamountofthehousingbenefitforunder-occupyingtenantsofworking-age;theso-called“bedroom-tax”(onlyappliestothesocialhousingsector).2013:Introducingabenefitcapforworkingagehouseholds;thetotalamountofhousingbenefitahouseholdcanreceiveiscappedatthenationalaverageearnings(£500perweekforacoupleorfamilyand£350perweekforasinglepersonwithnochildren).2013:Housingbenefittobephasedoutandincorporatedalongwithothermeans-testedwelfarebenefitsintoasingleprogramme,UniversalCredit.

Sources: Austria:Mundt(2017).Greece:Matsaganis(2013).Hungary:Mózer(2016);Albert(2015).Italy:Heiss(2013).Netherlands:MinistryofEconomicAffairs(2015).Sweden:GovernmentOfficesofSweden(2015).UK:Shelter2016b;GOV.UK2016d.


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MortgageinteresttaxreliefMosttaxcreditschemesonmortgageinteresttendtohavearegressiveimpact,withlargerreliefsfor high-income households, who can afford houses at higher prices (European Commission2015a).Moreover,mortgage interest tax credits can result inmacroeconomic instability as itincentiviseshouseholdstoacquirehigherlevelsofmortgagedebtrelativelytotheirincomethantheywouldotherwisedo(EuropeanCommission2015a).Mortgageinteresttaxreliefmayoperateastaxallowance(reducingtaxableincome),ortaxcredit(reducingtheamountoftaxdue).Thevalueoftaxrelieftoanytaxpayermaybecapped.Ofthesevencountries,mortgageinteresttaxreliefiscurrentlyavailableinfour:Italy,Austria,theNetherlandsandSweden(seeTable5).InAustria,averylimiteddeductionofinterestpaymentsforhousingcreditsisavailable.InHungary,notaxreliefonmortgageinterestisgranted,butsubsidisedloansforthepurchaseorconstructionofhousingareavailable,mostly for first-timebuyers(EMF2016).Greeceuntil2013hada taxrelief granted as a tax credit, while in the UK it was abolished already in 2000 (EuropeanCommission2015b;MatsaganisandFlevotomou2007).Italy.Thefavourabletaxtreatmentofowner-occupierswithoutstandingmortgagesreflectsthehighimportanceofhome-ownership.Imputedrent(renditacatastale)isaddedtothetotaltaxableincomeusedtoassesseligibilityfortaxcredits,butiseffectivelytax-free,asataxallowanceofthesameamountisavailable.Householdswhofinancetheconstructionoracquisitionoftheirmainresidencewithamortgageloanareeligibleforataxcreditontheirinterestpayments.Thistaxcredit amounts to 19% of interest payments and the maximum yearly deductible amount is€4.000(whichisequivalenttoataxcreditof€760;EuropeanCommission2015b).TheItalianmortgageinteresttaxcreditisalsooneofthemostgenerousintheEU,precededonlybyafewcountriessuchastheNetherlandswhereparticularlygenerousprovisionsareinplace.TheNetherlands.Themortgageinteresttaxreliefschemeallowshomeownerstofullydeductinterest payments on mortgage loans from their taxable income. Given the relatively highmarginalincometaxrate,higherincomehouseholdsespeciallybenefitfromthis(VandevyvereandZenthöfer2012).Inaddition,thereisnocapitalgainstaxintheNetherlandsandwhileitisoneofthefewcountrieswithataxonimputedrentitisrelativelylow.Formortgagesonprimaryresidence,theinterestisincome-deductibleforamaximumperiodof30years.Asaconsequence,repaying mortgages is often deferred until maturity pushing up mortgage debt and makinghouseholds vulnerable in case of income shocks [12]. Besides influencing the number ofhouseholdswithmortgagedebtandtheamountofmortgagedebttakenupbyhouseholds,thistax relief policy has also important implications for public finances. Forgone revenues frommortgage interest tax relief alone amount to around2% of GDP (Vandevyvere andZenthöfer2012).Despiteearliereffortstomakeitmorerestrictive,mortgageinteresttaxreliefremainsasubstantial featureof theDutch housingmarket [13]. The twomost recent legislative changesconcern the eligibility for mortgage interest deductibility and the gradual decrease of themaximumdeductiblerate.Since2013,newmortgagedebthastobepaidbackinanannuityorlinearformover30yearsinordertoqualifyforthetaxdeductionandfortheNationalMortgageGuarantee(NHG)(EuropeanCommission2015b).Startingfrom2014,themaximumdeductibletaxrateisbeingreducedfrom52%(thehighestincometaxbracket)to38%,byhalfapercentagepointoveraperiodof28years.Atthesametime,thegovernmentalsotookstepstolowerthe

12Households’vulnerabilitytosuddenchangesinmortgageinterestratesismitigatedbythefactthatthemajorityofmortgageloansaretakenwithaninterestratefixedforaperiodoffiveyearsormore.(OxleyandHaffner,2010).In2015,68%ofnewmortgageshadafixedtermlongerthanfiveyears(EMF,2016).13Forinstance,in2000interestdeductibilitywaslimitedto30years(VandevyvereandZenthöfer2012).


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regulatoryceilingfortheloan-to-value(LTV)ratio.From2013itisbeinggraduallyreducedfrom106%to100%in2018(asof2015itstoodat103%).Sweden.Interestpaymentsformortgagescanbedeductedfromthebaseforcapitalincometax.Sincealargeshareofhouseholdshavelittleornocapitalincomesandthereforecannotmakeafulldeduction,a taxcreditcanbeobtainedatarateof30%as longas itdoesnotexceedSEK100,000(EuropeanCommission2015b).Forthepartabovethislimit,onereceivesataxreductionatarateof21%.Thesizeofthemortgageinterestdeductionhasbasicallyremainedunchangedsince the1991tax reform (SverigesRiksbank2015).To limit increases inmortgagedebt andrelated financial risks for households, an LTV limit ormortgage capwas introduced in 2010wherebynewmortgagesshouldnotexceed85%ofthemarketvalueofthehousingconcerned.Austria.Mortgageinteresttaxreliefisavailable,butverylimitedinscopeandbeingphasedoutuntil 2020 (Wieser andMundt2014; ArbeiterkammerOberösterreich 2017). Onlymortgagessigned before end of 2015 are eligible. This tax deduction is granted for expenditures onacquisition of housing or housing renovations together with other so called extraordinaryexpenses(suchasexpensesforvoluntarypersonalinsurance,churchcontributionsordonations).Themaximumapplicableamountis€2,920,butonlyonefourth,i.e.€730,isthensubtractedfromthepersonalincometaxbase(SchneiderandWagner2015;ArbeiterkammerOberösterreich).Table5:Rulesonmortgageinteresttaxreliefandrecentchanges

Greece

2007:Mortgageinterestsrelatedtoprincipalhomefullydeductiblefromtaxableincomeforloanstakenoutbefore2002(onaproratabasisforhousesexceeding120m2forloanstakenoutfrom2000).Forloanstakenoutfrom2003thetaxreliefisprovidedasataxcreditataflatrateof20%formortgagesuptoEUR200,000andhousingunitsupto120m2(taxcreditonaproratabasisforhousingexceeding120m2).2011:Taxcreditisreducedfrom20%to10%ofinterestrepayments.2013:Mortgagetaxreliefisabolished.

Italy

Interestonmortgageloansforbuildingorbuyingaprincipalresidenceissubjecttoataxcreditequalto19%,uptoamaximuminterestpaymentofEUR4,000.2008:increaseofthetaxcreditrelatedtomortgageloanintereststoathresholdofEUR4,000(previouslysetatEUR3,615).

Austria

Verylimitedandonlyavailableformortgagessignedbeforeendof2015.Themaximumdeductibleamountis€730peryear.Buildingcostsincludingmortgageinterestpaymentsmaybededucted.2016:extraordinaryexpenditures(whichincludemortgageinterestpayments)arenolongereligiblefortaxdeductions.Interestpaymentsformortgagessignedbefore31.12.2015canbedeductedundertheoldschemeuntil2020.

Netherlands

Mortgageinterestpaymentsarefullydeductibleunderthepersonalincometaxsystem.2013:changeinentitlementtomortgageinteresttaxrelieffornewloans(linkedtotheconditionthatthemortgageloanmustbefullyrepaidafter30yearsandatleastonanannuitybasis).2014:mortgageinterestdeductibilityonnewloansisbeinggraduallyreducedby0.5%pointeveryyearfrom52%untilitreaches38%in2041(onlyappliestohomeownerseligibleformaximumhomemortgagetaxreliefinthehighestincometaxbracket).

Sweden

Mortgageinterestisdeductibleagainstcapitalincome.Incasecapitalincomeisnotsufficienttoallowafulldeduction,themortgageinterestisdeductedatarateof30%againstincometaxuptoamaximumofSEK100,000(aroundEUR10,000).Abovethislimit,therateoftaxreductionis21%.2010:loan-to-value(LTV)capsonnewmortgagesintroduced(aloancollateralisedonahomemaynotexceed85%ofthemarketvalueofthehome).

Sources:EuropeanCommission2013,2015b;CerianiandGigliarano2010;SverigesRiksbank2015.


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DistributionalimpactofhousingallowancesandmortgagetaxreliefInthispartofthepaper,weestimatethedistributionaleffectsofmortgageinteresttaxreliefandhousingallowancesin2016ascomparedwith2007(theonsetoftheglobalfinancialcrisis)usingEUROMOD,theEU-widemicrosimulationmodel(SutherlandandFigari2013).TheEuropeantax-benefitmodelEUROMODEUROMODhasauniquedesignwithinwhichthedifferentcountry-specifictax-benefitsystemsaremodelledinacommonconceptualandtechnicalframework,withtheaimtomaximisecross-country comparability. It also serves as themain or only national model in a number of EUmemberstates.EUROMODsimulates(non-contributory)cashbenefitentitlementsandpersonaltaxandsocialinsurancecontribution(SIC)liabilitiesonthebasisofthetax-benefitrulesinplaceand information on original and replacement incomes as well as socio-demographiccharacteristicsfromtheunderlyingsurveydata.Themodelcapturesafullrangeofinstitutionalfeaturesofthetaxandbenefitsystems.Theseincludedetailedincomedefinitions(relevantforassessing eligibility for income- ormeans-tested benefits), precise characterisations of familyunits, thresholds, floors, ceilings, tax components and relevant tax rates as well as specificeligibilityrules,claw-backratesor incomedisregardsused incomputingbenefitentitlements.Becauseofthislevelofdetail,itispossibletoobtainanassessmentofthetaxburdenandcashbenefitentitlements,andofhowthesevarywithincomeandfamilycharacteristics[14].Thebasesimulationsrefertotax-benefitpoliciesatthemid-point(30thJune)ofeachyear.Annualpolicy changes for each country are summarised in EUROMOD Country Reports, along withtechnicalnotesandvalidationresults.EUROMODhasbeenvalidatedagainstnationaladministrativestatisticsontaxrevenuescollected,aswellassocialbenefitspaidtohouseholds[15].Theversionofthemodelusedinthispaperisbasedoninformationonpersonalandhouseholdcharacteristics,includingmarketincomes,fromthemicrodata of EU-SILC 2008and 2012 (2014 in the case of Greece and Italy), or itsmoredetailednationalversionwhereavailable[16].Monetaryvalueshavebeenupdatedtothepolicyyearsusingrelevantupratingindices.ThetwohousingpoliciesassessedIn2007,mortgageinteresttaxreliefpoliciesexistedin5ofthe7countriesexaminedinthispaper.IntheNetherlandsthetaxrelieftooktheformofataxallowance(reducingtaxableincome),inItalyandSwedentaxpayerscouldbenefitfromataxcredit(reducingtheamountoftaxdue),whileinGreecetaxpayerswereentitledtoeitherataxallowanceorataxcreditdependingontheyearwhentheloanwastaken.InAustria,itisavailableinaverylimitedformandbeingphasedoutuntil2020.InGreecethetaxreliefwasabolishedin2013.Consequently,therewere4countriesleftwithsomesortofmortgageinteresttaxreliefpoliciesin2016:Italy,Austria,theNetherlandsandSweden;howevertheAustrianmortgageinteresttaxreliefisnotsimulatedinEUROMOD(seeTable6).

14Atthesametime,duetolackofdetailedinformationintheunderlyingdata,EUROMODsimulationsmightnotbeabletocapturealldetailsembeddedinnationaltaxlegislationandtheydonotincludeexpenditureonsocialhousing.15SeeEUROMODCountryReportsathttps://www.euromod.ac.uk/using-euromod/country-reports.16Notethatthemicro-datausedfortheUKcomefromtheFamilyResourceSurveyratherthanEU-SILC.


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Table6:MortgageinteresttaxreliefinEUROMOD 2007 2016

Taxallowance Taxcredit Taxallowance TaxcreditGreece Yes Yes No NoItaly No Yes No YesHungary No No No NoNetherlands Yes No Yes NoAustria No No No NoSweden No Yes No YesUK No No No NoBroadly-definedhousing allowanceswerepresent inall seven countries in2007.Givenpolicycharacteristics and data availability, EUROMOD simulates housing allowances in 4 of the 7countries (Hungary, the Netherlands, Sweden and the UK) applying the policy rules on theunderlyingdataset.Intheremainingthreecountries(Greece,ItalyandAustria)valuesofhousingallowancesaretakendirectlyfromthedataasreportedinthesurveybecauseitisnotpossibletosimulatethem,inmostofthecasesduetorulesappliedatlocallevel/orbasedonmeanstestsnotavailableinEUROMOD.Duetopolicychangesoccurringovertheperiod,in2016wesimulateanewrentallowanceinGreece, while in Hungary, as explained above, the previously existing (nation-wide) housingallowance was abolished in 2015, replaced by a (local) discretionary scheme that cannot besimulatedinEUROMODnorasyetimputedfromthedata(seeTable7).Table7:HousingallowancesinEUROMOD 2007 2016

Simulated Imputed Simulated ImputedGreece No Yes Yes YesItaly No Yes No YesHungary Yes No No NoNetherlands Yes No Yes NoAustria No Yes No YesSweden Yes No Yes NoUK Yes No Yes NoWhatisthesalienceofthetwohousingpoliciesassessedhere?Howmuchdifferencedotheymaketo family incomes? Figure 3 below shows that the amount of tax due saved because of theavailabilityofmortgageinteresttaxreliefasaproportionoftotalhouseholddisposableincomewas2.2%intheNetherlands,justover1.0%inSweden,and0.2%inItaly.Comparedto2007,theweightofmortgageinteresttaxreliefinfamilyincomeshadslightlyincreasedintheNetherlandsandSweden, and slightlydecreased in Italy. (The 2007mortgage interest tax relief inGreeceaccountedforabout0.2%oftotalhouseholddisposableincome.)Ontheotherhand,asseeninFigure 4, housing allowances contributed approximately 2.5% of total household disposableincomeintheUK,0.8%inSwedenandtheNetherlands,0.2%inAustria,andbelow0.05%inItalyandGreecein2016.Relativeto2007,thescopeofhousingallowanceswasroughlyunchangedinmost of the seven countries examinedhere,with the exceptionof Swedenwhere it hadbeensignificantlynarrowed.(Hungarywasofcourseanotherexception:the2007housingallowance,notavailablein2016,madeupabout0.4%oftotalhouseholddisposableincome.)


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Figure3:Incomeshareofmortgageinteresttaxrelief(2007vs.2016)

Figure4:Incomeshareofhousingallowances(2007vs.2016)

ResultsofdistributionalanalysisIn order to estimate the effects of the two policies in 2007 and 2016, we run a number ofsimulationsforeachyear,foreachpolicy,andforeachcountry(40simulationsinall)[17].Eachsimulation compares the baseline income distribution (i.e. as in place, with both housingallowancesandmortgageinteresttaxrelief, ifavailable)withacounterfactualdistribution(i.e.withmortgage interest tax relief but no housing allowance – and, respectively, with housingallowancebutnomortgageinteresttaxrelief,ifavailable).Weassess thedistributional impact of housingallowances andmortgage interest tax relief intermsofpoverty(relativetoathresholdfixedat60%ofmedianequivalisedhouseholddisposableincomes in thebaseline) and inequality (as capturedbyboth theGini index and the S80/S20incomeshareratio).Ourestimatesoftheimpactofthesetwopoliciesonpoverty(relativetoathresholdkeptconstantasinthebaseline)arepresentedinTable8below.Thefigurescanbeinterpretedasfirst-ordereffectsofahypotheticalabolitionofthetwopolicies,basedontheassumptionofnoshiftstoanew equilibrium in housing markets (e.g. affecting rents or housing prices) nor behaviouralresponses(e.g.intermsofchangesinthelaboursupplyofbeneficiaries).17Notethat,asseeninTable3,notallpolicieswereavailableinallcountriesinbothyears.


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AsseeninTable8,theimpactofhousingallowancesonpovertycanbedescribedasstrong(over3 percentage point reduction in poverty rates) in the UK and Sweden (in 2007), ratherconsiderable(between1and2.5percentagepointreductioninpovertyrates)intheNetherlands,Hungary (in 2007) and Sweden (in 2016), and relatively weak (below 0.5 percentage pointreduction inpoverty rates) inAustria and, especially, inGreece and Italy. Looking at changesbetween the two timepoints considered, the anti-povertyperformanceof housingallowancesimprovedintheUK,declinedinSwedenand(fromaverylowbase)inGreece,andremainedmoreorlessunchangedintheNetherlands,AustriaandItaly.Asfortheimpactofmortgageinteresttaxrelief onpoverty, it turnsout (as expected) tobemuch less significant.Thepercentagepointreductioninpovertyratesfallsjustshortof0.9intheNetherlandsand0.3inSweden(upfrom0.4and0.2respectivelyin2007).Table8:Povertyeffectsofhousingallowancesandmortgageinteresttaxrelief Housingallowances Mortgageinteresttaxrelief

2007 2016 2007 2016Greece -0.13 -0.04 0.00 n.a.Italy -0.06 -0.07 -0.09 -0.03Hungary -1.55 n.a. n.a. n.a.Netherlands -2.33 -2.21 -0.42 -0.88Austria -0.46 -0.43 n.a. n.a.Sweden -3.64 -1.59 -0.21 -0.29UK -4.59 -5.47 n.a. n.a.Note:Figuresaredifferencesinat-risk-of-povertyrates(at60%ofmedianincomes),comparingthebaselinewithacounterfactualincomedistributionwithoutthepolicybeingassessed,andkeepingthepovertythresholdconstantasinthebaseline.Source:EUROMODversionG4.0.Theimpactofhousingallowancesandmortgageinteresttaxreliefoninequality,estimatedusingEUROMOD,isshowninTable9.Onceagain,ourestimatesarefirst-ordereffectsofahypotheticalabolitionofthetwopolicies,assumingnobehaviouralresponsesnorchangesaffectingclearingpricesinhousingmarkets.Inequalityismeasuredhereusingtwodifferentindicators:TheGiniindex(whichismoresensitivetochangesaffectingthemiddleoftheincomedistribution),andtheS80/S20incomeshareratio(byconstructionmoresensitivetochangesaffectingthetopandthebottomoftheincomedistribution).The finding that immediately stands out as we inspect Table 9 is that the two policies haveopposite effects on the distribution of incomes: housing allowances reduce inequality, whilemortgageinteresttaxrelieftendstoincreaseit.Otherwise,themagnitudeoftheeffectsappearstobeafunctionofthesizeoftheschemeassessed(anditsdesign).Specifically,housingbenefitintheUK, the largesthousingallowance inoursample, reduced inequalitymore thanequivalentschemesdidintheothersixcountries–andthisistrueirrespectiveoftheinequalitymeasureused.TheSwedish andDutchhousing allowancescamenext in termsof inequality reduction,followedby the2007Hungarianscheme,while theAustrian,Greekand Italianschemeshadamorenegligibleimpact(thoughstillreducinginequality,albeitveryslightly).Asfarasmortgageinteresttaxreliefisconcerned,ofthethreecountrieswhereitwasavailable(fourin2007),itsregressive,inequality-increasingimpactwasgreatestintheNetherlands,smallinSwedenandinGreece(in2007),andinsignificantinItaly[18].Comparingourtwopointsintime,theinequality-

18AsBaldiniandPoggio(2014)havepointedout,approximately20%ofItalianhouseholdsownhomestheyinherited(orweregiventothem).Inspiteoftherecentexpansionofthemortgagemarket,aboutonethirdofhomepurchasesare still not mortgage-backed, typically supported by family savings and wealth, and intergenerational transfers.


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reducing impactofhousingallowances inSwedenseemedtogrowweaker in2016relative to2007.Thepicturewasmoreinconclusivewhentheothercountrieswereexamined:intheUKandthe Netherlands, this was only the case in terms of the S80/S20 ratio, while the Gini indexsuggestedastrongerimpactin2016thanin2007;inAustria,thereversewastrue.Similarly,theinequality-increasing impactofmortgage interest taxrelief in theNetherlandsappeared tobesomewhat softer in2016 than in2007when looking at the S80/S20 ratio.Otherwise, resultshardlychanged.Table9:Inequalityeffectsofhousingallowancesandmortgageinteresttaxrelief

A. Gini Housingallowances Mortgageinteresttaxrelief2007 2016 2007 2016

Greece -0.001 -0.001 0.001 n.a.Italy 0.000 0.000 0.000 0.000Hungary -0.005 n.a. n.a. n.a.Netherlands -0.006 -0.007 0.006 0.006Austria -0.002 -0.002 n.a. n.a.Sweden -0.011 -0.009 0.001 0.001UK -0.019 -0.021 n.a. n.a.

B. S80/S20 Housingallowances Mortgageinteresttaxrelief2007 2016 2007 2016

Greece -0.04 -0.04 0.02 n.a.Italy -1.01 -0.01 0.00 0.00Hungary -0.14 n.a. n.a. n.a.Netherlands -0.20 -0.19 0.13 0.12Austria -0.05 -0.06 n.a. n.a.Sweden -0.33 -0.30 0.02 0.02UK -0.87 -0.82 n.a. n.a.Note:FiguresaredifferencesinthevaluesoftheGiniindexandtheS80/S20ratio,comparingthebaselinewithacounterfactualincomedistributionwithoutthepolicybeingassessed.Source:EUROMODversionG4.0.WepresentmoredetailedresultsintheAppendix.FiguresA.1-A.7showtheincomeshareofeachpolicyandthedistributionofspendinginvolved,byincomedecile,ineachcountry.Thisanalysisreveals how the resources transferred by the two policies in each country are distributed tohouseholdsatdifferentpointsoftheincomescale.Notethatsuchdistributionofresourcesmayeitherresultfromdesignfeaturesofthepolicyconcerned(e.g.asaresultofincometestsexplicitlyaimed at targeting housing benefits), or from the characteristics of recipients (e.g. as aconsequenceof the fact thatbetter-off households aremore likely tobe eligible formortgageinteresttaxrelief).On the whole, housing allowances appeared to be rather narrowly targeted at low-incomehouseholds. Itcanbeshownthat inSweden92%ofallhousingbenefitavailable in2016wastransferred to thepoorest20%of thepopulation.The correspondingproportion in theothercountrieswas81%inGreece,68%inAustria,and62%intheNetherlands.InItalyandtheUK,thepoorestquintilereceivedamere26%and35%respectivelyofallhousingbenefitavailable.In2007,theproportionoftotalspendingdirectedtothepoorest20%ofthepopulationhadbeenlowerinallcountries:spectacularlyinGreece(30%),significantlysoinAustria(53%)andItaly(15%), slightly lower in Sweden (87%)and theUK (30%),while itwas slightlyhigher in the

Moreover,giftsandbequestsareeffectivelynottaxed,whilemarkettransactionsare.Inthissense,mortgageshaveextendedaccesstohousingtothoseborntolessthanwealthyfamilies.


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Netherlands(65%)relativeto2016.(InHungary88%ofallhousingbenefitavailablein2007waspaidtothepoorest20%ofthepopulation.)Onthecontrary,mortgageinteresttaxreliefseemedtobedisproportionallycapturedbybetter-offhouseholds. In2016, theproportionof total taxrevenueforegonebecauseofmortgageinteresttaxreliefthatwasreceivedbytherichest20%ofthepopulationrangedfrom58%intheNetherlandsto40%inSwedenand37%inItaly.In2007,theequivalentproportionhadbeen61%,39%and33%respectively(andalso61%inGreece).ConclusionInthispaperwehavereviewedrecentchangesintwohousingpolicyinstruments,namelyhousingallowances and mortgage interest tax relief, and have estimated their distributional impact.Although mortgage interest tax relief has been phased out or abolished in many Europeancountries, it isstillavailable in fourofthesevencountriesreviewed.Thispolicy instrument isparticularlygenerousandwidelyusedintheNetherlands.ItsimpactontheDutchhousingmarketremainssubstantialdespiterecentlyimplementedchangestomakeitmorerestrictive.ResultsfrommicrosimulationanalysisusingEUROMODshowthatithasalargeregressive, inequality-increasingimpact(althoughcomparedto2007,theeffectseemstobesomewhatweakerin2016).The impact of mortgage interest tax relief was small in Sweden and Greece (in 2007), andinsignificantinItalyintermsofincreasinginequality.In contrast, housing allowance is shown to have a considerable inequality-reducing effect inSweden,theUK,theNetherlandsandHungary(in2007).Changesbetweenthetwopointsintimeindicate that this effecthas increased in all four countries in2016.Corresponding figures forAustriasuggestafairlyweakanddecreasingimpact,whilenosignificantchangecanbeobservedinthecasesofItalyandGreece.Asregardstheanti-povertyperformanceofhousingallowance,microsimulationanalysisusingEUROMODconfirmstheimportantsafety-netroleattributedtothisbenefitand its relativelywide coverage in Sweden, theUK, and, toa lesser extent, in theNetherlandsandHungary (in2007).Theobservedweak impact inAustriahintsat the ratherlimitedrolehousingbenefittendstoplaythere,whereasinItalyandGreecetheverylowpoverty-reducingimpactcouldbeexplainedbythelowbenefitamountandthesmallsizeofthepopulationgrouptargetedbythebenefit.Intermsoftargeting,Swedenstandsoutwith92%ofallhousingbenefitreceivedbythepoorest20%ofthepopulationin2016.Thecorrespondingfiguresrangefrom81%inGreece,between68%and63%inAustriaandtheNetherlands,toamarkedlylowpercentageintheUKandItaly(26%and35%respectively).Incomparison,mortgageinteresttaxrelief isshowntostrongly favourhigher incomehouseholds.This isespecially thecase in theNetherlandsandGreece(in2007),wheremorethan50%oftotaltaxrevenueforegoneduetothispolicywenttotherichest20%ofthepopulationin2016(inSwedenandItalyitwasaround40%).Whilehousingallowancesandmortgageinteresttaxreliefarethemostsignificantofallhousingpolicy instruments (in terms of number of member states having them in place, number ofhouseholdsreceivingthem,andfiscalcosts), theyarebynomeanstheonlysuch instruments.Therefore,animportantcaveatisthatthetwopoliciesassessedhereshouldideallybeviewedinthecontextofotherhousingpolicies.Forinstance,mortgageinteresttaxreliefshouldbetterbeanalysedintandemwithimputedrenttaxation,andhousingallowanceswithsocialhousing.Inpractice,imputedrenttaxationisrelativelyrare(theNetherlandsandDenmarkareexceptionsratherthantherule),whiletheincomeadvantageimplicit intheprovisionofsocialhousingatbelow-marketrentisdifficult(thoughnotimpossible)toanalyse.Afurthercaveatconcernstheissueofcapitalisation,i.e.theextenttowhichtaxadvantagesarealreadyreflectedinhouseprices.Underfullcapitalisation,changesinmortgageinteresttaxreliefare exactlymatchedby changes inhouseprices. Improving the generosityof tax relief causes


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mortgagedemandtoincrease,leadingtoincreasesinhousingdemand,causinghousepricestorise.Conversely,reducing(orabolishing)mortgageinteresttaxreliefwouldsimplycausehousepricestofall.Inotherwords,underfullcapitalisationmortgageinteresttaxreliefhasnoneofitsintendedeffects: itmakeshousingnomoreaffordabletonewbuyers,butmerelyamountstoapuretransferfromthepublicpursetodevelopers,landowners,andpreviousownersofhousesonsale.Economictheorysuggeststhatforfullcapitalisationtooccurthesupplyofhousingwouldhavetobeentirelyinelastic.Empiricalevidenceonthisisrathermixed.Bergeretal.(2000)concludedthatinterestsubsidiesinSwedenarefullycapitalisedintohouseprices.BrounenandNeuteboom(2008)estimatedthatalmost75%ofthefiscalsubsidyassociatedwithmortgageinteresttaxreliefintheNetherlandsisreflectedinhouseprices.Saarima(2010)foundasimilarresponseonthepartofhigh-incomehouseholdsinFinland.Otherstudieshavefoundthattherelevanteffectismorelimited.JappelliandPistaferri(2007)concludedthattaxconsiderationsdidnotaffectthedemandformortgagedebtpaymentsinItaly.BourassaandGrigsby(2000)citedestimatesthatput the rate of capitalisation in the USAat around 14%. Swank et al. (2002) estimated priceelasticities of new housing supply in six countries; they found that these were lower in theNetherlands(0.30),theUK(0.45)andDenmark(0.66),andhigherinFrance(1.09),theUS(1.30)andGermany(2.40).Highelasticitiesofsupplysuggestthatthemaineffectoftaxadvantagesistoincreasehousingconsumptioninquantitativeterms.Conversely,priceelasticitiesofsupplyclosetozeroimplythatthedegreeofcapitalisationtendsto100%,asaresultofwhichtaxadvantagesfailtorenderowner-occupiedhousingmoreaffordable.Capitalisationmayalsobepresentinthecaseofhousingallowances.TherecentOECDreportcitedabove(SalvidelPeroetal.2016,p.47)reviewsevidencefromFinland(Kangasharuju2010,Viren2011), France (Fack 2006, LaFerrère and Le Blanc 2004), the United Kingdom (Gibbons andManning2006),and theUnitedStates(Susin2002), that landlordscaptureasizeableshareofhousingallowancesbyraisingrents,varyingfromaround16%intheUnitedStatesto50%intheUnitedKingdomand78%inFrance.Housingallowancesmaydriveuprentsbyincreasinghousingdemandinamarketwithlimitedsupply,byencouragingrecipientstoconsumemorehousing,byencouraginglandlordstoraiserentswhentheyknowthattenantsreceivehousingallowances,andbycreatingtheconditionsforcollusionbetweenlandlordsandtenantssettlingforahigherrentandsharingtheimplicitsubsidy.Havingsaidthat,ourfindingsconfirmthathousingallowancesaregenerallytargetedatlower-incomehouseholds,whiletheoppositeseemstobethecasewithmortgageinteresttaxrelief.Inviewofthelatter,recentpolicytrendsaimingtorestrictthescopeofmortgageinteresttaxrelief(e.g.intheNetherlands),ortoabolishitaltogether(e.g.inGreece,inIreland,andlessrecentlyinGermany,FranceandtheUK)–eventhoughmainlydrivenbyotherconcerns(suchastocontainfiscalcostsandreducemortgagedebtandvolatilityinhousingmarkets)–havetheextraeffectofsofteningitsregressiveedge.


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AppendixTableA1:HousingallowanceschemeinAustriaName: Housingbenefit(Wohnbeihilfe)Numberofrecipients: 4.7%ofAustrianhouseholdsin2014Governmentexpenditure: 0.1%ofGDP(2014)

Eligibility:Differentacrossthenineregions.Fouroftheregionsrequiresomesortofminimalincome,topreventsubstitutionbetweensocialsecurityandhousingpolicies.

Amountpaid:

Housinggapformula:HB=Applicablehousingcosts-reasonablehousingexpensesOnaverage,acrossregions,theamountreceivedperhouseholdvariesbetween€110and€220.

Caps:

Applicablehousingcostsareoftencapped(differbyregion,householdsizeandsizeofdwelling)anddefinitionsofreasonablehousingexpensesalsodifferbyregions.Additionally,therearehousingbenefitcapsinsomeregions.

Withdrawalrate: VariesacrossregionsSource:Mundt2017;BMF2015.


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TableA2:HousingallowanceschemeinGreeceName: RentsubsidyadministeredbytheWorkersHousingAssociation(OEK),

(suspendedin2010andabolishedin2012).Numberofrecipients: 105,200householdsin2009Governmentexpenditure: €167millionor0.07%ofGDP(2009)

Eligibility:

Astherentsubsidyfunctionedasacontributorybenefit,beneficiarieshadtoworkwithinsuranceforaspecificperiodtobeeligiblefortherentsubsidy.Further,theyormembersoftheirhouseholdcouldnotownahouseorhaveotherassets.ForretiredrecipientsofOEK,theonlyprerequisitewasofbeingapensioner.

Caps:

Limitonannualincomein2009:-EUR12,000forsingleorcouplewithoutchildren-EUR14,000with1child-EUR16,000with2children-EUR18,000with3children-EUR20,000with4children

Amountpaid:

Theamountoftherentsubsidydependedonthefamilycomposition.In2009,themonthlyrentsubsidyamountedto-EUR115forsingleorcouplewithoutchildren-EUR140with1child-EUR165with2children-EUR215with3ormorechildren.

Source:OECD2008,2013;Konistis2014;LeventiandMatsaganis2016.


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TableA3:HousingallowanceschemeinHungary

Name:

Homemaintenancesupport(Lakásfenntartásitámogatás),abolishedasasinglebenefitin2015.HousingcostcompensationisnowprovidedaspartofanewbenefitschemecalledSettlementsupport(Településitámogatás)

Numberofrecipients: In2014,thesupportwaspaidto412,416recipients.Governmentexpenditure: HUF19.5billionor0.06%ofGDP(2014)

Eligibility:

Until2011apersonwaseligibleformeans-testedhomemaintenancesupportifheorshelivedinahouseholdwhosepercapitamonthlyincomedidnotexceed150%oftheminimumoldagepensionandthehomerunningexpensesexceeded20%oftotalmonthlyincomeofthehousehold.From2011until2015apersonwaseligibleformeans-testedsupportifheorshelivedinahousehold,whoseperconsumerunitmonthlyincomedidnotexceed250%oftheminimumoldagepensionandhouseholdmembershadnoproperty.From2015onwards,homemaintenancesupportcanbeprovidedaspartoftheSettlementsupport,whichisregulatedbylocalgovernments.Eligibilityrulesaresetbylocalgovernmentsandvaryacrossmunicipalities.

Amountpaid:

Until2015,theamountofthehomemaintenancesupportwasdeterminedbytheperconsumerunitmonthlyhouseholdincomewhichwascalculatedbydividingtotalmonthlyincomeofthehouseholdbytotalsumoftheconsumerunitsofthehousehold.TheminimumamountofthehomemaintenancesupportwassetatHUF2,500(EUR8).AsforthenewSettlementsupport,thelawonlysetanupperlimitonsuchaprovision,whichistheminimumoldagepension(HUF28,500/EUR92amonth)*.

Note:*Therewasnochangeintheminimumoldagepensionsince2008whenitwassetatHUF28,500.Source:MinistryofHumanCapacities2014,2015;CentralStatisticalOffice2015.


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TableA4:HousingallowanceschemeinItalyName: "SussidioCasa(IPES)",after2013"Contributoalcanonedilocazioneeper

lespeseaccessorie"Numberofrecipients: N.A.Governmentexpenditure: 384millioneuroor0.02%ofGDP(2015)

Eligibility:

Twogroupsareeligible:-householdswithincomesorISE/ISEE-levelsbelowtwicetheminimumstatepension(pensioneminima)-householdswhoareeligibleforsocialhousing(definedonsocialandeconomicneed)Onlyhouseholdswithregisteredrentcontractscanapply.

Amountpaid:

-Theoreticalbasis:Supplement=Rent-x*Income-Maximumamount€500permonth-Inreality,theamountpaiddependsonthefundsavailable-Theallowanceispaidonamonthlybasisfor12months,theapplicationhastoberenewedthereafter

Applicationprocess:

Tenantshavetoapplyfortheallowance,justifyingtheireligibilitywithlowincomeorISE/ISEElevels.Responsibleauthoritieswillthenproveeligibility.

Source:WOBI2016(fortheProvinceofBozen/Bolzano);BaldiniandPoggio2012;Istat(2015).


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TableA5:HousingallowanceschemeintheNetherlandsName: Rentallowance(huurtoeslag)Numberofrecipients: 1.26millionhouseholdsor16.8%ofDutchhouseholds(2013)Governmentexpenditure: EUR2.4billionrepresenting0.4%ofGDP(2013)

Eligibility:Eligibilityfortherentallowancedependsonage,householdcomposition,therentalpriceandthecombinedincomesofthehousehold.Onlytenantscanreceivethebenefit.

Caps:

Fortenantsintheregulatedrentalsector(i.e.socialhousingtenants),therentissubjecttoaceiling(EUR710in2016).Forbothsocialandprivatetenants(i.e.thoseintheunregulatedrentalsector),incomecriteriahavetobemet.In2016,theseweresetforsinglehouseholdsasfollows:- monthlyrentneedstobebetweenEUR231and409(forthoseaged18-23)and710(forthoseaged23ormore)- annualincomecannotexceedEUR22,100- capital(savingsorinvestments)maxEUR24,437.Forcouplehouseholds:- monthlyrentneedstobebetweenEUR231and409(710ifaged18-23andlivingwithachildorwithapartnerolderthan23;andifbothareolderthan23)- annualcombinedincomecannotexceedEUR30,000- capital(savingsorinvestments)maxEUR24,437.

Amountpaid:Themaximumrentisdeterminedusingapointsystemthattakesintoaccountthequalityofthedwelling(sizeandfacilities)andthesurroundingarea(availabilityofpublictransport,schools,shopsetc.).

Applicationprocess:

Afterapplication,anotificationissentiftheapplicantisentitledtoabenefitand,ifso,theamountofthebenefit.Thebenefitispaidinadvanceafteraprocessingperiodthattakesaround8weeks.Thefinalamountiscalculatedaftertheendoftheyearwhentaxpaymentisassessed.Thefinalcalculationshowstheadvancepaymentsreceivedandtheamountthatshouldhavebeenreceived.Iftheadvancepaymentsaretoolow,theremainingamountispaidintotheapplicant’saccountinalumpsum.Iftheadvancepaymentsreceivedaretoohigh,theexcessamounthastobepaidback.

Source:Government.nl2016;Belastingdienst2016;CentralBureauforStatistics(CBS)2014.


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TableA6:HousingallowanceschemeinSwedenName: Housingallowance(bostadsbigrag)*forfamilieswithchildrenandfor

youngpeople(agedbetween18and28)withoutchildren.

Numberofrecipients: 186,058households,ofwhich150,563arehouseholdswithchildrenand35,519arehouseholdswithoutchildren(December2015)

Governmentexpenditure: SEK4.9billionor0.12%ofGDP(2015)

Eligibility:

Tenants,co-operativeandtenant-ownedhousingresidents,aswellashomeowners,areeligiblefortheallowance.HousingallowanceforfamilieswithchildrenispaidforthosewhopaymorethanSEK1,400permonthfortheirhousing,andforyoungpeopleifitismorethanSEK1,800permonth.Theallowanceissubjecttoindividualmeanstesting(forfamilieswithchildren,theapplicant’sorthecohabitingpartner’sincomecannotexceedSEK436,000peryear,foryoungpeoplelivingaloneSEK86,700andiflivingwithapartnerSEK103,720).

Amountpaid:

Theamountreceivedisdeterminedby:- applicants’income(includingincomefromearnings,capital,business,incomesupporti.e.socialassistance,andeducationandstudentgrants)

- housingexpenses(rents,associationfees,mortgagepayments,monthlyoperatingcostsforhousingincludingheatingcosts)

- sizeofthehome- householdcomposition(i.e.livingaloneorwithapartner,numberofdependentchildrenlivingathome).In2015,themaximumhousingallowancethatcouldbereceivedpermonthforfamilieswithchildrenwas:

- SEK3,400for1child- SEK4,200for2children- SEK5,200for3ormorechildrenForyounghouseholds(aged18-28years)withoutchildren,themaximumamountwasSEK1,300permonth.

Deductions:

Theamountoftheallowanceisreducediftheannualincomeexceedsacertainlimit.In2015,thislimitwassetasfollows:

- formarriedcouplesorcohabiteeswithchildren:SEK58,500foreachpartner

- forsingleparents:SEK117,000- foryoungpeoplelivingalone:SEK41,000- foryoungchildlesscouples:SEK58,000.

Applicationprocess:

Housingallowancecanbepaidforatmost12consecutivemonths.Applicantsneedtoestimatehowmuchtheywillearnduringthecalendaryearappliedfor.Preliminaryhousingallowanceiscalculatedandpaidonthebasisofthisinformation(usuallywithin30days)**.Oncetaxhasbeenassessedfortheyear,thefinalallowanceisestablishedretrospectively.Dependingontheincomereportedatapplication,lowerorhigherthantheactualincome,recipientsmightreceivemoreallowanceorhavetopaybackmoney.

Source:SwedishSocialInsuranceAgency(Försakringskässan)2016.StatisticsSweden2012.Notes:*Thereisalsoahousingsupplement(bostadstillägg),whichisavailableforpensionersanddisabilitybenefitrecipients,however,informationprovidedinthetableonlyconsidersthehousingallowanceforfamiliesandyoungpeople.**TheapplicantisnotentitledtohousingallowanceifthecalculatedamountislessthanSEK100permonth.


36

TableA7:HousingallowanceschemeintheUK

Name:

HousingBenefit(forsocialtenants,i.e.localcouncilsorhousingassociations)orLocalHousingallowance(forprivatetenantswhosignedacontractafter1stApril2016;itwillbeapplicablein2018)

Numberofrecipients: 4,682,532households(averageJan-Aug2016)

Governmentexpenditure: £24,244millionpounds(2015/2016)Thisrepresents14.2%oftotalbenefitspendingand1.8%ofGDP

Eligibility:

Apersoniseligibleif:-payingrent-receivinglowincomeorclaimingbenefits-savingsbelow£16,000

Caps:

Limittototalamountofbenefitsapersonaged16-64canreceive,introducedin2013;OutsideGreaterLondon:£384.62perweekforcoupleswithorwithoutchildren,andsingleparents;and£257.69perweekforsingleadultsInsideGreaterLondon:£442.31perweekforcoupleswithorwithoutchildren,andsingleparents;and£296.35perweekforsingleadults

Amountpaid:

Amountdependson:-your‘eligible’rent*-ifyouhaveaspareroom-yourhouseholdincome-includingbenefits,pensionsandsavings(over£6,000),and-yourcircumstances,e.g.ageofpeopleinthehouse,orwhethersomeonehasadisability.PrivatetenantsareeligibleforLocalHousingAllowanceandtheamountreceiveddependsonthelocationoftheirhome,thehouseholdsize,income(includingbenefits,pensionsandsavings(over£6,000))andtheircircumstances.Dependingontheamountofbedroomstheyareeligiblefortheygetthefollowingamounts:-1bedroom:upto£260.64-2bedrooms:upto£302.33-3bedrooms:upto£354.46-4bedrooms:upto£417.02

Deductions:

Theamountreceivedmaybereducedifrecipienthouseholdhasa'spare'bedroom.This"under-occupancycharge"or"bedroom-tax"deducts-14%ofthe‘eligiblerent’for1sparebedroom,and-25%ofthe‘eligiblerent’for2ormoresparebedrooms.

Withdrawalrate: 65%forincomeaboveapplicableamountSource:GOV.UK2016b,2016e,2016d,2016f;Shelter2016b,2016c;SalvidelPeroetal2016.Notes:*Eligiblerentistheperceivedreasonablerentforasuitablepropertyinagivenarea.Itincludesservicecharges(e.g.forliftmaintenanceoracommunallaundry),butexcludesenergycosts.


37

FigureA.1:IncomeshareanddistributionofspendinginGreece


38

FigureA.2:IncomeshareanddistributionofspendinginItaly


39

FigureA.3:IncomeshareanddistributionofspendinginHungary


40

FigureA.4:IncomeshareanddistributionofspendingintheNetherlands


41

FigureA.5:IncomeshareanddistributionofspendinginAustria


42

FigureA.6:IncomeshareanddistributionofspendinginSweden


43

FigureA.7:IncomeshareanddistributionofspendingintheUK

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