Wednesday, February 09, 2011

The OECD on Housing and the Economy – arguments and evidence

Yesterday I stumbled on an OECD survey Housing and the Economy: Policies for Renovation. The report seemed to have been overlooked by the UK press apart from the Financial Times. Even Inside Housing appears to have overlooked it.

The report recommends reforms to financial sector oversight, taxation, land use policies, rental sector regulation and social housing provision. It argues that these changes will improve the functioning of the housing market and benefit the economy more generally. (The relevance of the report can be seen in US’s jobless recovery where negative equity is hindering the ability of America’s unemployed to move for work.)

As housing has been a casualty of the financial crisis and now the deficit reduction plan, it might have been expected that this objective, balanced and well-researched report might have been read by someone. Even if it had not been carefully studied, chunks could easily be copied and pasted to provide fodder for arguments on all sides.

Advocates of the Coalition’s housing benefit curbs could point to:

Where housing supply is constrained in the short run, however, part of the benefit of government rent allowances may shift from renters to landlords without necessarily enhancing housing availability for needy households. Indeed, there is some evidence that rent allowances are passed onto higher rents.

Opponents of the government’s moves to weaken security of tenure in social housing could signpost:

means-tested social housing systems may potentially reduce job seeking incentives amongst the unemployed, or discourage low-wage workers from seeking higher paid jobs if social housing is withdrawn or rents are increased as earned income grows.

Even abuse and manipulation of the report might have been better than being ignored.

The report is written to draw conclusions from across the OECD’s membership of advanced industrial countries. Inevitably this means that the report’s recommendations may not all be relevant to all 30 countries. Even where the recommendations such as looser land use policies, freer rental markets and more reliance on rent allowances than social housing may be appropriate, there are practical and distributional concerns. However, the study is worth reading with an open mind.

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