The Effect of Housing Expenses and Subsidies on the Income Distribution in Flanders and the Netherlands

Abstract

This study explores the role of housing expenses and subsidies with respect to income distribution in Flanders (the northern part of Belgium) and the Netherlands in 2005–2006. It analyses income poverty and inequality by comparing equivalent disposable income before and after housing expenses with a relative poverty threshold and the Gini coefficient. Poverty and income inequality increase in both ‘countries’ when equivalent disposable income is corrected for housing expenses. Furthermore, the relative position of outright owners and social tenants regarding poverty improves. Housing subsidies play a (partly) different role in Flanders and the Netherlands. The implicit social rent subsidy in Flanders and the explicit housing allowance in the Netherlands serve the same goal; however, they both redistribute income relatively strongly in favour of low-income tenants. The tax relief system on the other hand increases income inequality in society, in both Flanders and the Netherlands, whereas our comparative analysis suggests that tax relief does not have a moderating effect on net housing expenses.

Keywords:

• After housing income
• Flanders
• housing
• income inequality
• income poverty
• the Netherlands

Notes

¹ The fiscal effect for the Netherlands is available as a variable in the database WoON from 2006. The fiscal effect was calculated for Flemish owner-occupiers on the basis of data from the 2005 Housing Survey. We applied the tax system that was operational until 2005.

² There are also other ways of defining housing subsidies (Haffner, 2003; Hancock & Munro, 1992; Hills, 1991). The key point is that a benchmark needs to be determined. Here, the benchmark is the expenses that a household needs to finance housing consumption. The subsidy is any direct or indirect cash flow that lowers these housing expenses.

³ Over 8000 non-weighted household members were interviewed and around 2000 respondents who rented rooms or lived in units.