Exploring ‘Housing Asset-based Welfare’. Can the UK be Held Up as an Example for Europe?

Abstract

In the UK, homeownership has become increasingly important as a financial asset used for welfare needs, particularly during old age. It has been suggested that other European countries will follow the example of the UK. Traditionally, homeownership has been regarded positively because of the low housing expenses associated with outright ownership and the financial benefit of having a nest-egg that can be released, if needed, by selling. New mortgage equity release products reduce liquidity constraints and are regarded as promising in the context of changing welfare states. This research focuses on household strategies. It finds that housing assets play a role in households' financial planning in all countries within the study, particularly where welfare levels are low or decreasing. Homeownership was used in the traditional way in all countries, but it is only in the UK that households have adopted mortgage equity release products to cash in their housing equity for welfare needs.

Keywords:

• Homeownership
• housing equity
• asset-based welfare
• security
• cross-country comparison

Acknowledgements

The authors wish to thank their research partners within the OSIS project and the support of the European Union for its funding of the project which has served as an inspiration for this paper. OSIS—Origins of Security and Insecurity: the interplay of housing systems with jobs, household structures, finance and social security—is a pan-European study with research partners drawn from nine member states and is funded under the framework six programme (CIT2-CT-2003-506007). Finally, the authors would like to thank the reviewers of this paper for their very helpful comments.

Notes

¹ By searching for ‘housing-asset-based welfare’ on Google Scholar, and exploring the origins of the first 20 hits, ten are from the UK, nine from the US and one from Australia.

² Origins of security and insecurity: the interplay of housing systems with jobs, household structures, finance and social security (OSIS).

³ Belgium, Finland, Germany, Hungary, the Netherlands, Portugal, Sweden and the UK.

⁴ Although in theory the mortgage tax deduction encourages households to enter homeownership and thus accumulate assets, the practical outcome is that households retain higher debts. The more debt they retain, the larger the tax deduction they are eligible for.

⁵ For a clear explanation of Kemeny's different rental systems see also Hoekstra (2009).

⁶ Subletting was another strategy that was applied by homeowning respondents. This is left out of the paper because the focus is on ‘housing equity’ and subletting is not regarded as directly related to that.