10(27)
2.3
Implications of size limit
Almost 65,000 couples with children and 60,000 single parents had their
housing allowance reduced because of the floor space limit introduced on 1
January 1997 (Swedish Housing Board, 2006). Half of these recipients lived
in rental apartments. The effect of the floor space limit on the total state
budget was to reduce expenditures by approximately SEK 672 million per
year and the average impact per affected household was to reduce the
housing allowance by approximately SEK 4600 per year. The dwelling size
constraint implied that, for households with more floor space than these
limits allow, the housing expenses eligible for housing allowance were
reduced according to Table 1. However, starting 1 November 1997, this
size limit was increased, and a minimum guaranteed level of eligible
housing expenses was implemented.
Table 1. Maximum living space (square meters).
Household size
Maximum living space
[square meters]
Minimum guaranteed
housing expense level
(from 1 November 1997)
[SEK/month]
Household with 1 child
80
3000
Household with 2 children
100
3300
Household with 3 children
120
3600
Household with 4 children
140
3900
Household with 5+ children
160
4200
Source:
National Social Insurance Agency
.
For households with more floor space than the limit allows, the eligible
housing expenses (
EHE
Size limit
) are calculated as:
HE =
household housing expenses (i.e., the rent paid by a renter)
[SEK/month],
rf =
floor space restriction according to Table 2 [square meters], and
f
= household real floor space [square meters].
The effect of the floor space limit will differ depending on the household’s
housing composition preference. The size limit affects the relative prices of
various housing attributes, such as floor space versus, for example, hou-
sing location and standard. If the recipients have a stronger preference for
location than for floor space, the restriction lets them substitute location for
space, an option that would theoretically allow them to avoid a housing
allowance cut. The impact of this size limit on recipient housing consump-
tion thus depends on the household’s preferences, which are unknown to
us.
This restriction, which has received surprisingly little attention, is
interesting since, together with the restriction based on the households’
actual housing expenditure, it implies a double restriction on housing
consumption and a change in the relative prices of housing attributes (e.g.,
of size versus location or standard).
), / (
f rf HE
EHE
limit
Size
