Impact of housing allowances on the private rental sector

Céline Grislain-Letrémy et Corentin Trevien, Division Marchés et entreprises, Insee

Housing allowances are paid to tenants subject to means testing. The aim is to limit the rent-to-revenue ratio, i.e. the share of resources that beneficiary households devote to housing expenditure, or to help these households get access to better-quality housing at a given rent-to-revenue ratio. In the latter case, the allowances result in higher demand from tenants. But if the housing supply does not adapt, then instead of helping the beneficiary households, these allowances may lead to a rise in rental prices.The amount of the allowance depends on the geographical area to which the dwelling belongs. A zoning of allowances divides the territory into three types of agglomeration. The zones were defined in 1978 and have changed very little since then. Zone I includes the Paris agglomeration. Zone II mainly groups together the agglomerations with more than 100,000 inhabitants. Zone III encompasses the rest of the territory. As the amount of the allowances is higher in zone II than zone III, it is possible to evaluate its impact on the rent level around this threshold of 100,000 inhabitants. This evaluation was performed using data from the "Rents and charges" survey; what emerges is that a higher level of housing allowances in zone II seems to have no effect on the quality of dwellings offered by private actors, or any impact on the number of dwellings offered. Therefore, the increase in allowances for the private rental sector mainly appears to have resulted in a rise in rent prices.

Insee Analyses
No 19
Paru le : 14/11/2014