Housing and Housing Policies in Western Europe

Abstract

Housing and Housing Policies in Western Europe

During the post-war period European governments have maintained extensive housing support programs. Two possible goals could account for the continuance of these programs: a) to increase the rate of growth of housing stock, b) to stabilize the construction industry. There seems to be little evidence that either of these goals have been achieved in the countries studied. In the main the study of both cross-section and time series evidence is limited to five countries - Denmark, Finland, France, Sweden, and the United Kingdom. For six other countries - Belgium, Italy, Netherlands, Norway, Switzerland and West Germany - the data permit either cross-section or times series analysis, but not both, and often provide fewer details. Growth rate and stability of housing investment in the post-war period were estimated for those countries for which sufficient data was available. Omission of the years before 1951 was necessary in order to minimize the effect of war related destruction which was highly variable between countries. As a measure of the magnitude of government housing programs, percentage of 'housing unassisted was chosen. Correlations of percentage housing unassisted to stability and growth are insignificant in cross-sections. These crude cross-section tests are supplemented by estimating a model of housing investment using pooled cross-section and time series data. Once again the magnitude of government subsidy does not have significant explanatory power. As the types of housing programs differ greatly between the countries studied, percentage housing unassisted may not be an accurate measure of size of housing subsidy. Therefore the housing investment model is also estimated using time series data for those countries for which there is adequate data. Here too, the results give little support to the continuance of current housing programs. The coefficients vary greatly between countries, but never is there the large significant positive coefficient on government aid that one might expect. Denmark provides a dramatic example where a curtailment of government programs coincides with a large increase in housing production. In most of the countries studied the governments support or supplement the mortgage market. However, attempts to increase housing production by lowering the cost of borrowing work only to the extent that borrowers are forced to purchase more housing. In Europe there exist many opportunities to use credit obtained by mortgaging real estate to purchase goods and services other than housing, or to buy equities. The most significant variables affecting housing investment seem to be income and quality of existing housing stock. Growth in housing production is brought about by increasing gross national product. Attempts by the governments to reallocate income in favor of housing are not noticeably successful