Evaluating housing policies from an income‐distribution perspective—The case of Sweden

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Abstract
One purpose of this article is to examine under what conditions the impact of housing policies on the distribution of income becomes a major focus of interest. First we review various arguments in favour of tying transfers to specific types of consumption, and outline the historical development of Swedish housing policies in this light. We find that the interest in the impact of housing subsidies on the distribution of income stems from the 1970s when the housing supply became more adequate. We argue that the Swedish housing allowance system is of special interest in connection with income distribution considerations. The system's impact on the income distribution is evaluated here with the help of a microsimulation model. It is shown to be quite efficient in the sense that it consistently benefits households with a low “equivalent” income, i.e. a low income in relation to needs. We also find that the new housing allowance system has a crucial impact on the distributional outcome of the 1991 tax‐benefit reform, a major reform package in Sweden which includes large cuts in housing subsidies.