+ Economic well-being and distributional effects of housing-related policies in 3 EU countries Virginia Maestri AIAS – University of Amsterdam 2 nd Microsimulation.

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Presentation transcript:

+ Economic well-being and distributional effects of housing-related policies in 3 EU countries Virginia Maestri AIAS – University of Amsterdam 2 nd Microsimulation research workshop Bucharest, October 2012

+ Introduction and motivation Increasing importance of housing (wealth, spending) Role of policy (favorable tax treatment of housing) Cross-country differences in housing policies and tenure structure The different aims of housing-related policies: re-pricing, tax revenues, redistribution V. Maestri, AIAS-UvA - Economic well-being and housing-related policies in 3 EU countries

+ Aim of the paper Extend the existing literature by considering a comprehensive set of housing policies together with imputed rent Impact of each housing-related policies on inequality and poverty Impact of housing-related policies on different tenure and age groups V. Maestri, AIAS-UvA - Economic well-being and housing-related policies in 3 EU countries

+ Data and methodology Input data Euromod 3+: 2006 EE-SILC & IT-SILC, 2003 UK FRS (IR and paid property taxes) Benefit incidence approach Distinction between market and social imputed rent Quantile (extended) income share at each step, inequality and poverty, by age and tenure groups Original market income (A1) Original market income plus private imputed rent (A2) Income net of taxes and benefits, excluding those housing-related (B1) Income net of taxes and benefits, excluding those housing-related plus private imputed rent (B2) B2 plus mortgage interests deductions (C) C plus other housing-related deductions (D) D minus property tax (E) E plus deduction for property tax (F) F plus housing benefits (G) G plus social imputed rent (H) V. Maestri, AIAS-UvA - Economic well-being and housing-related policies in 3 EU countries

+ Overview of housing policies & IR V. Maestri, AIAS-UvA - Economic well-being and housing-related policies in 3 EU countries

+ Results - Estonia IR reduces inequality by 15-10% and poverty by 17-22% and the redistributive power of taxes Limited effect of mortgage relief, Land tax and social IR Small redistributive effect of housing benefits and on poverty and inequality V. Maestri, AIAS-UvA - Economic well-being and housing-related policies in 3 EU countries

+ Results - IT IR reduces inequality by 8-2%, slightly poverty and the redistributive power of taxes No effect of mortgage and other reliefs, property tax and housing benefits (small) Property tax slightly increases the poverty rate V. Maestri, AIAS-UvA - Economic well-being and housing-related policies in 3 EU countries

+ Results – UK IR reduces inequality by 5-4%, poverty by <1% but not the poverty reduction power of taxes The Council tax is regressive, even after the deduction but this reduces poverty Housing benefits and social IR reduce inequality and considerably poverty (-40%), but reranking V. Maestri, AIAS-UvA - Economic well-being and housing-related policies in 3 EU countries

+ Results by tenure group Within > between inequality Winners: outright owners in IT, & free tenants in EE, & social tenants in UK Losers: owners with mortgage in UK and EE, private tenants in IT and EE V. Maestri, AIAS-UvA - Economic well-being and housing-related policies in 3 EU countries

+ Results by age group Within > between inequality Winners: over 60 year-old Losers: under 40 in EE, in UK, both age groups in IT V. Maestri, AIAS-UvA - Economic well-being and housing-related policies in 3 EU countries

+ Comparative assessment of HP Housing-related policies are the most effective in reducing inequality in EE (-11%) and poverty in UK (-56%), small effect in IT Housing policies are a more important tool for reducing inequality (-7%) and poverty (-46%) than imputed rent only in the UK (fig) V. Maestri, AIAS-UvA - Economic well-being and housing-related policies in 3 EU countries

+ Conclusions Housing polices are relevant for reducing inequality and poverty in UK, poverty in EE, not relevant in IT Common features: the design of property taxes is not progressive, inequality is higher within than between tenure categories, housing- related policies follow a life-cycle redistributive pattern The redistributive effect of housing policies mirrors the the size of public expenditure on housing The importance of the non-progressive effect of property taxes reflects the relative importance of property taxes in total tax revenues Limitation of analysis: static, no capital gains & transaction taxes Policy debate on housing taxation V. Maestri, AIAS-UvA - Economic well-being and housing-related policies in 3 EU countries