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The bedroom tax

Gibbons, Stephen, Sánchez-Vidal, Maria and Silva, Olmo (2018) The bedroom tax. Regional Science and Urban Economics. ISSN 0166-0462

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Identification Number: 10.1016/j.regsciurbeco.2018.12.002

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 cost 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 using a strategy that compares the observed changes in behaviour of the treated households to those of a control group. The treatment and control groups are defined by the detail of the policy rules. We find that – as expected – the treated group loses housing benefits and overall income. Although the policy was not successful in encouraging residential moves (despite efforts to make mobility within the social sector easier), it did incentivise people who moved to downsize – suggesting some success in terms of one of the policy goals, namely reducing under-occupancy. The policy did not incentivise people to work more and we find no statistically significant effects on households’ food consumption or saving behaviour. The implication of our findings is that this type of policy has limited power to change housing consumption or employment in the short run. While it might reduce the costs of housing subsidies to the taxpayer, it does so by imposing a direct financial cost to social tenants unable or unwilling to downsize.

Item Type: Article
Official URL: https://www.sciencedirect.com/journal/regional-sci...
Additional Information: © 2018 Elsevier B.V.
Divisions: Geography & Environment
Centre for Economic Performance
Subjects: H Social Sciences > H Social Sciences (General)
H Social Sciences > HB Economic Theory
H Social Sciences > HC Economic History and Conditions
H Social Sciences > HJ Public Finance
H Social Sciences > HV Social pathology. Social and public welfare. Criminology
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
R - Urban, Rural, and Regional Economics > R2 - Household Analysis > R21 - Housing Demand
Sets: Departments > Geography and Environment
Research centres and groups > Centre for Economic Performance (CEP)
Date Deposited: 07 Jan 2019 14:40
Last Modified: 20 Nov 2019 05:52
Projects: ES/M010341/1
Funders: Economic & Social Research Council
URI: http://eprints.lse.ac.uk/id/eprint/91543

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