Housing Policy Impacts on Poverty and Inequality in Europe

Developed countries have addressed the challenge of improving low-income households' housing conditions through housing allowances and social housing. In this paper, we assess the effectiveness of these policies—individually and in combination—by comparing them to a counterfactual scenario without housing support. We examine 27 European countries using harmonized data from the EU-SILC dataset. We find that (1) cash housing benefits (housing allowances) are more cost-effective than in-kind housing benefits (social housing), and more effective at reducing poverty than inequality. This result holds even when accounting for a partial capture of cash housing benefits by landlords, as documented in several studies. (2) Some Nordic and Western countries—especially Finland—achieve an impressive reduction in both inequality and poverty (one-third) while spending as much as France and the UK. By contrast, France's mixed approach, combining both policies, appears to be the least cost-effective.