The economics of social housing : implications for welfare, consumption, and labor market composition

Abstract

This dissertation consists of two parts. The first part considers social housing from a microeconomic perspective and looks at the self-selection into social housing, as well as at how this influences consumption patterns, household mobility within and from the social housing sector, and the wage rates workers earn. The second part is macroeconomic in nature and considers the joint effect of housing and labor market price rigidities on local skill composition. Also, it is investigated whether social housing influences the skill composition of the local labor force. Chapter three studies consumption patterns of homeowners and tenants in social housing: The last group spends less on housing and more on basic goods, recreation and alcohol and tobacco. Also, evidence for consumption differences between restricted and unrestricted tenants of social housing is found. Restricted tenants spend less on housing and more on recreation, although the size of the effect is limited. No evidence is found that the level of consumption is affected by house prices. Chapter four considers the effect of rent control benefits on moving within and from the social housing sector. Estimation results are based on a unique household panel dataset for the years 2006 through 2008 that has been constructed from administrative records provided by Statistics Netherlands. Results indicate that the effect of rent control benefits on household mobility is large for transitions within the social housing sector, whereas it is limited for transitions from the social housing sector. These results suggest that rent control has a limited effect on the demand for owner-occupied housing. Chapter five tests whether the wage rate is affected by housing tenure type using a large panel for the years 2006 through 2008 based on administrative records. The analysis reveils that conditioning on worker skill is very important: Without controlling for the sorting mechanism of low-skilled workers into social housing one would conclude that homeowners earn 25 percent higher wages compared to tenants of social housing. In contrast, if one controls for sorting according to skill, there is no evidence that homeowners or tenants living in social housing earn different wages compared to tenants of private housing. The model in chapter six shows that the effect of housing market and labor market price rigidities on local skill composition is skill-specific. In general, both housing market price rigidities and labor market price rigidities have an amplified effect on city composition after a shock to the productivity of high-skilled labor. However, rent control housing vouchers mitigate the effect of nominal wage rigidities if the productivity of low-skilled workers changes. About one third of the Dutch housing stock is rent-controlled. As these houses are mainly allocated to low-skilled workers, rent-controlled housing might reduce the share of high-skilled workers. Chapter seven finds evidence for such a negative relationship, although the size of the effect is modest. A ten percentage point increase of the rent-controlled housing stock is found, ceteris paribus, to reduce the percentage of high-skilled workers in a region with 1.5 percentage points.