Tenure Neutrality, a Financial-Economic Interpretation

This contribution evaluates ways to compare financially renting and owning in order to measure tenure neutrality. Tenure neutrality is defined as the situation in which the consumer is financially indifferent between owning and renting a dwelling. This paper discusses the possibilities of defining tenure neutrality via government spending on housing, household housing cash flows and household housing costs. The Dutch situation delivers the numerical examples. It is concluded that the user cost of housing would be the only concept with which tenure neutrality truly can be measured. But it appears that theory may be difficult to implement in housing policy. This may also be the main explanation why such little progress has been made in the past three decades. The conclusion is reached that the implementation of the concept of user cost in housing policy is a complex undertaking. More discussion and best case reports are needed about the implementation of user costs in order to better clarify the options and the effects on housing consumption. A good starting point would be, if user costs were monitored.

Keywords:

• Government Expenditure
• Housing Cash Flows
• Housing Costs
• Tax Expenditure
• Tenure Neutrality
• The Netherlands