Économie et Statistique n° 381-382 - 2005Housing
Some economic effects of the no-interest loan
A model is estimated using data from INSEE's 1996 Housing survey and 1997 Assets survey to measure the effect of the no-interest loan (NIL) on housing demand (this estimate concerns the effect of the NIL before the recent change in January 2005 that extended it to the purchase of old housing). The findings show that the no-interest loan definitely boosted home ownership and that this effect concerned mainly the most modest households among the homeowners. Most of these households have purportedly stayed, in the absence of assistance, in the dwelling they occupy until such time as they build the savings necessary for a down payment. However, the NIL suffers from substantial windfall effects. A full 85% of beneficiaries in a given period are reported to have chosen to move to become homeowners regardless of the absence of the no-interest loan. The NIL does necessarily contribute to the general improvement in the quality of new housing put on the market. In the absence of an increase in housing prices induced by the introduction of the no-interest loan, the multiplier effect of the mechanism on investment in residential housing is also thought to be fairly small, at around 1.3.