SOCIAL HOUSING POLICY IN A SEGMENTED HOUSING MARKET: INDIRECT EFFECTS ON MARKETS AND ON INDIVIDUALS

Abstract

This paper analyzes the indirect effects of social housing policy (SHP) in a segmented housing market. A two-segment housing ladder model, in which equity determines upward mobility, is used to show how SHP measures targeting either housing supply or housing demand affect market developments and individual housing careers. In examining market developments, the paper considers house prices and housing supply. When analyzing housing careers, it highlights the ability of households indirectly exposed to SHP to move up the housing ladder. The segmented housing market model incorporates both multiplier effects, in line with the Balanced Budget Multiplier of Haavelmo (1945), and non-neutral price effects across segments. These features allow for novel insights into the indirect effects of SHP. By linking SHP to upward mobility in a housing ladder where households simultaneously act as buyers and sellers, the paper demonstrates the impact of SHP on the supply of existing homes, an important component of overall housing supply. Furthermore, the framework enables the identification of crowding-out effects across market segments. Both aspects represent novel contributions to the discussion of SHP. The paper also shows that SHP may generate negative indirect effects on the ability of households not directly benefiting from SHP measures to move up the housing ladder.

Data:
Received: 19 Sep 2019
Revised: 3 Nov 2019
Accepted: 6 Dec 2019
Published: 20 Dec 2019