Transaction Trends - Social housing tenants wholly spend lower housing costs
We study the effects of lower housing costs on expenditures by examining the income-dependent rent reduction of 2023. The income-dependent rent reduction is partly offset by a lower housing allowance, and the remaining portion is fully consumed. The net rent reduction thus directly contributes to higher household consumption and is not used to build financial buffers. Our analysis also highlights significant challenges in implementing targeted income-dependent rent policies.
Matthijs Korevaar
Associate Professor of Finance (Erasmus)
Introduction
For most households, housing costs are their largest expense, particularly for low-income households in rental properties. For this reason, the government recently decided to freeze social rents for two years while temporarily increasing the housing allowance. However, the precise effects of changes in housing costs on tenants are not yet well-documented. When housing costs change, people may adjust their consumption and/or their financial buffers. The extent to which this occurs is an empirical question.
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