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The bedroom tax

Gibbons, Stephen, Sánchez-Vidal, Maria and Silva, Olmo (2018) The bedroom tax. CEP Discussion Papers (CEPDP1537). Centre for Economic Performance, London School of Economics and Political Science, London, UK.

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Abstract

Housing subsidies for low income households are a central pillar of many welfare systems, but an expensive one. This paper investigates the consequences of an unusual policy aimed at reducing the burden of these subsidies by rationing tenants’ use of space. Specifically, we study a policy introduced by the UK Government in 2013 which substantially cut housing benefits for tenants deemed to have a ‘spare’ bedroom – based on specific criteria related to household composition. Our study is the first to evaluate the impacts of the policy on its target group considering a range of outcomes. To do so, we use a difference-in-difference methodology that compares the observed behaviour of the treated households relative to a control group determined from the details of the policy rules. We find that – as expected – the treated group experienced losses to housing benefit and overall income. Although the policy was not successful in encouraging residential moves, it did incentivise people who moved to downsize – suggesting some success in terms of one of the policy goals, namely reducing ‘underoccupancy’ in the long run. We find no statistically significant effects on households’ food consumption, savings or employment outcomes, despite the associated income reductions. Finally, we find some evidence of a reduction in self-reported satisfaction though this effect is not precisely estimated.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk/
Additional Information: © 2018 The Authors
Divisions: Centre for Economic Performance
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HN Social history and conditions. Social problems. Social reform
J Political Science > JC Political theory
JEL classification: H - Public Economics > H2 - Taxation, Subsidies, and Revenue
H - Public Economics > H5 - National Government Expenditures and Related Policies > H55 - Social Security and Public Pensions
R - Urban, Rural, and Regional Economics > R2 - Household Analysis > R21 - Housing Demand
Sets: Research centres and groups > Centre for Economic Performance (CEP)
Date Deposited: 26 Jun 2018 15:20
Last Modified: 20 Feb 2019 04:07
Funders: Economic and Social Research Council
URI: http://eprints.lse.ac.uk/id/eprint/88688

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