Housing Allowances as Income Support: Comparing European Welfare Regimes

Abstract

Most studies of housing allowances focus on their role in housing policy. In contrast, this paper examines housing allowances from an income support perspective. It utilises a modified version of Esping-Andersen's welfare regime typology to examine the income support role of means-tested housing allowances in the EU-15. Using secondary analysis of the 2007 EU-SILC dataset, it examines the prevalence, generosity, degree of targeting and impact on disposable incomes of housing allowances. It demonstrates that they vary both within and between welfare regimes. It also shows that housing allowances are not simply a liberal policy instrument, but are employed extensively within social democratic and conservative welfare regimes; and that they are not only focused on the poorest households. Hence, income-related, housing allowances do not fit the stereotype of means-tested benefits portrayed by Esping-Andersen (1990). Finally, the paper shows that housing allowances have a significant impact upon disposable incomes (after housing costs) and as such have an important income support function.

Key Words:

• Housing allowances
• housing benefit
• income support
• affordability
• welfare regimes

Acknowledgements

The authors are grateful to Eurostat (the Statistical Office of the European Union) for permission to use the EU-SILC data. We should also like to thank Professor Jo Neale and the anonymous referees for their helpful comments on an earlier draft of this paper. Responsibility for the content of the article rests solely with the authors.

Notes

1. Housing allowances are defined here as means-tested income transfers tied to housing that are paid to consumers. They are tied in the sense that either (1) the amount to which the claimant is entitled is related in some way to the cost of housing or (2) claimants may use the allowance only to pay for housing (Kemp, 2012). As well as housing allowance schemes, help with housing expenditures may also be provided implicitly or explicitly within social security benefits (Kemp, 1997, 2007a) and as a tax relief within the income tax system (Hills, 1991). The focus of this paper is on income-related “housing allowance schemes” as a distinct policy instrument.

2. Esping-Andersen (1990) also ignored both education and health (Bambra, 2005; Kasza, 2002).

3. An important exception is Doling's (1999) decommodification index for housing, which explicitly draws on Esping-Andersen's work. See also the recent work on housing in the welfare state by Fahey and Norris (2010, 2011).

4. Social housing in liberal welfare regimes (Australia, Britain, Canada, Ireland, New Zealand and the USA) is targeted on the poor and needy. Meanwhile, in Denmark, Sweden, France and the Netherlands, social housing accommodates a much broader social spectrum and is not confined to the poor (Stephens et al., 2003; Stephens et al., 2010).

5. See OECD (2012).

6. Ferragina and Seeleib-Kaiser (2011) demonstrated that, in welfare state modelling exercises, the Netherlands is most commonly allocated to the “Christian-democratic” group (an alternative term for Esping-Andersen's “conservative” type). Of the models they identified, 11 placed the Netherlands in this group and only three in the social-democratic group.

7. Rent-to-income ratios have also received much attention in the literature on housing affordability (e.g. Hulchanski, 1995; Whitehead, 1991).

8. Stephens et al. (2010) focus on the percentage of the poor in receipt of housing allowances. Because the prevalence of poverty varies cross-nationally, we prefer here to examine income quintiles. However, a good case can be made for either approach (cf. Stephens & van Steen, 2011).

9. Reserved for the Poor is the title of Deacon and Bradshaw's (1983) book on means-tested benefits. In Austria and Belgium the proportion of tenants receiving housing allowances is low because neither country has a national mandatory scheme. In Germany, it is low because of the low take-up of housing allowances (Wohngeld), the high level of its earnings-related social insurance benefits and the fact that social assistance payments (Arbeitslosengeld II and Sozialhilfe) include help with housing costs (Kofner, 2007; Stephens et al., 2010).

10. We have calculated rent-to-income ratios as rent (gross and net of housing allowances) as a percentage of disposable income. An alternative would be to calculate them as gross rent as a percentage of disposable income (including and excluding housing allowances). We have taken the former approach because it is more widely used in the literature. It could be argued that the latter approach might be more appropriate for an analysis of housing allowances as a form of income support. However, our key measure of housing allowances as a form of income support is residual after-housing-costs income.

11. This effect will be mitigated, at least to some extent, where housing allowance recipients move to more expensive accommodation than they would otherwise occupy. Most housing allowance schemes include measures to discourage “over-occupation” of accommodation (cf. Hills, 1991; Kemp, 1997, 2007a; Stephens, 2005; Turner & Elsinga, 2005).

12. In their six-country study, Stephens et al. (2010) found considerable variation in housing allowance assistance. However, as their results are based on “individuals living in households” rather than on “households”, they are not strictly comparable with the findings presented here.

13. The percentage of recipients in the bottom two quintiles taken together is very highly correlated with the percentage of recipients in the bottom income quintile (Phi = 0.93; sig. = .000).

14. As noted in the text, these figures take no account of behavioural impacts of housing allowances (on which see Haffner & Boelhouwer, 2006).

15. The effect of housing allowance generosity on rent-to-income ratios and on residual incomes are highly correlated with each other (Phi = −0.93; sig. = .000). That is to say, there is a statistically significant relationship between the reduction in rent-to-income ratios and the increase in residual incomes that are accounted for by housing allowances.