Can Landlords Siphon Housing Transfers? New Theory and Evidence on Housing Allowance Algorithms from a Natural Experiment

This paper provides new evidence on the incidence and theoretical predictions of housing allowances. In general, the housing allowance algorithm is universal across countries in its structure and functional form i.e., benefit minus deduction. I estimate, using administrative data, the effects of a plausibly exogenous increase in both, cost, and demand for housing allowances on rents exploiting a panel of housing markets geocoded using census tracts. The rent model extends to incorporate spatial interactions using Geographically Weighted Panel Regressions (GWR) to control for any time-variant neighbourhood spillover effects on rents. Theoretically, void of any price signals for recipients, I show the subsidy algorithm in New Zealand functions as a negative income and wealth tax benefit (regressive to future rents/incomes). Being an entitlement structured as a personal subsidy inverse to resources, empirical findings show that greater subsidy demand over time coincides with less punitive rent growth across rent markets. Costing NZ$ 5.225 billion for renters over 2006-2013, the subsidy had no significant direct impact on the revenues of low-income landlords