23(27)
5
Concluding remarks
T
he Swedish housing allowance system was dramatically reformed in
1996–1997. The main reason for this reform was to reduce the fiscal
expenditures, which it accomplished, together with creating a more strict
eligibility criterion than before. A constraint on dwelling size was
introduced, reducing the housing allowance for affected households. This
study investigated whether this decrease in allowance caused a lock-in
effect or, more precisely, whether this policy change induced recipients to
move into overcrowded conditions. To answer this question, this paper
exploits a quasi-experimental dimension of the imposed floor space limit by
applying the DD estimator. The estimation results suggest that the imposed
space limit yielded a statistically significant increase in moves into
overcrowded conditions for single-parent households living in rental
housing. This result persists after including covariates controlling for
household and housing market characteristics and duration dependence,
and after incorporating frailty (i.e., unobserved heterogeneities) into the
models.
In this paper, we define housing consumption as one of two states: not
crowded or overcrowded according to the third Swedish norm. This
represents a simplification, since adjustments can also be made within the
two states, and households can reduce their housing consumption without
ending up in overcrowded conditions. One way of handling this, which
would advance this analysis, would be to define competing housing
adjustments and then apply a competing risk model to the research
question.
The results of this study imply an effect of the dwelling size limit that runs
directly counter to one of the long-term stated goals of the housing
allowance system, namely, to induce households to move into better
housing, thereby increasing their housing consumption, and to prevent
families with children from living in overcrowded conditions. The lesson for
other housing benefit systems is that imposing a size limit on housing could
lead to a negative lock-in effect that housing allowance systems have been
criticized for creating.
