The Scale and Impact of the Local Authority Rent Subsidy

Abstract

This paper examines the targeting of rent subsidies among local authority tenant households. Using microdata from the SILC survey over the period 2006 to 2015, the distributions of household rents and incomes are examined and the targeting of the local authority rental subsidy is assessed. Using propensity score matching, estimates are made of the impact of the rental subsidy on households and on the income distribution. The potential impacts on the income distribution of alternative rent subsidy mechanisms are assessed. The paper finds that the subsidisation of the rental costs paid by local authority tenants decreases income inequality, when housing costs are taken into account. Also evident is the poor targeting of rental subsidies; counter-factual scenarios in which local authority rental subsidies are directed to a greater degree towards lower income households are shown to reduce income inequality.