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The effect of subsidy on housing construction in various regions of Sweden

The effect of subsidy on housing construction in various regions of Sweden Purpose – The purpose of this paper is to explore the extent that interest subsidies have impacted on the total production of Swedish single‐ and multifamily houses. It also intends to examine whether tenure neutrality provision of interest subsidy that subsidy policy advocates was maintained. Design/methodology/approach – Using a multiple regression of two models, a balanced panel data from 1975 to 2006 that consist of various related construction cost variables of all regions of Sweden will be analyzed. Instrumental variable (IV) and seemingly unrelated regressions (SUR) will be utilized to examine the role of subsidy on housing production and tenure neutrality, respectively. Findings – The results seem to indicate that a general subsidy is expected to be ineffective since it may increase the existing stocks of a low demand region but not the housing stocks of big regions where the demand is high. Moreover, a targeted subsidy may change the balance between different types of housings since lower construction costs due to the subsidy could favor the development of certain profitable housing types. Originality/value – The paper tries to substantiate (empirically) the assertion that subsidy policies contributed both to the production of housing units in low demand regions and distortion of the preference of different tenures. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of European Real Estate Research Emerald Publishing

The effect of subsidy on housing construction in various regions of Sweden

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Publisher
Emerald Publishing
Copyright
Copyright © 2010 Emerald Group Publishing Limited. All rights reserved.
ISSN
1753-9269
DOI
10.1108/17539261011094731
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to explore the extent that interest subsidies have impacted on the total production of Swedish single‐ and multifamily houses. It also intends to examine whether tenure neutrality provision of interest subsidy that subsidy policy advocates was maintained. Design/methodology/approach – Using a multiple regression of two models, a balanced panel data from 1975 to 2006 that consist of various related construction cost variables of all regions of Sweden will be analyzed. Instrumental variable (IV) and seemingly unrelated regressions (SUR) will be utilized to examine the role of subsidy on housing production and tenure neutrality, respectively. Findings – The results seem to indicate that a general subsidy is expected to be ineffective since it may increase the existing stocks of a low demand region but not the housing stocks of big regions where the demand is high. Moreover, a targeted subsidy may change the balance between different types of housings since lower construction costs due to the subsidy could favor the development of certain profitable housing types. Originality/value – The paper tries to substantiate (empirically) the assertion that subsidy policies contributed both to the production of housing units in low demand regions and distortion of the preference of different tenures.

Journal

Journal of European Real Estate ResearchEmerald Publishing

Published: Oct 26, 2010

Keywords: Sweden; Housing; Construction industry; Government policy

References