The Effect of Housing Subsidies on Housing Costs in Finland - A Methodology study


This thesis is a literature and methodology survey discussing and analyzing Finnish studies on the effect of housing subsidies on rent. The purpose of this thesis is to achieve a basic understanding of housing subsidies’ effect on rents, i.e. the incidence of housing subsidies and the methods with which the subject has been researched. The main studies discussed are by Lyytikäinen and Eerola (2019), Viren (2013) and Kangasharju (2010). I will also discuss some highly cited foreign studies for reference. Housing subsidies are the second largest income transfer in Finland, so it is very important to study the incidence of the subsidies. The purpose of the housing subsidies is to help low-income households with their housing costs by reducing their effective rents. If the subsidies raise rent level compared to a situation without the subsidies, then government resources are not correctly allocated. Currently there are relatively few studies on the subject. This is due to the complexity of subsidy programs and that they differ greatly between countries. The conclusion presented in this paper is that there is no clear consensus on housing subsidies’ effect on rents and that recent studies have yielded different results. More studies should thus be performed to gain better understanding of the allocation of government resources

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