Can landlords siphon housing allowances? New theory and evidence on housing allowance algorithms from a natural experiment

Abstract

This paper provides new evidence on the incidence and theoretical predictions of housing allowances. It offers a comprehensive reexamination of allowance algorithms, to shed light on their objectives and impacts, while also addressing empirical modelling considerations and identifying limitations in literature. Notably, it offers readers a comparative analysis by investigating US vouchers as a reference point. Theoretically, I find housing allowances are typically neither a price nor income equivalent. Housing allowance schemes,mostly being universal in functional form across countries, manifest as personal subsidies inverse to resources i.e., some benefit amount minus income deduction. I discover that New Zealand's Accommodation Supplement (AS) manifests as a negative income and wealth tax benefit which, over time, is regressive to rents and incomes. Empirically, I estimate the effects of an increase in costs and demand for the AS on rents exploiting a panel of housing markets geocoded using census tracts at Area Unit (AU) level. The rent model extends, using Geographically Weighted Panel Regression (GWR) to control for any time-variant neighborhood spillover effects on rents. Costing NZ$ 5.225 billion over 2006–2013, AS for renters was not demand deterministic and had no significant direct impact on the revenues of low-income landlords. An increase in subsidy demand coincides with possible overcrowding whereas has no impact on increasing rental supply or a move into renting.