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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 Lena Borg, Abukar Warsame & Mats Wihelmsson Building and Real Estate Economics KTH ERES2009, Stockholm June 24-26. Introduction:.

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

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  1. The effect of subsidy on housing construction in various regions of Sweden Lena Borg, AbukarWarsame & Mats WihelmssonBuilding and Real Estate EconomicsKTH ERES2009, Stockholm June 24-26

  2. Introduction: • Approximately, households in most of EU countries spend one quarter of their budget in housing expenses and Sweden has the highest figure of housing expenditure (28%) in Europe. • General subsidy, interest rate subsidies, family allowances, Rent control (rent-setting) • Two issues that are often debated in the housing subsidy situation are: • Efficiency • Resource allocation of the subsidy system

  3. Two research questions: • From efficiency perspective: Did the housing subsidy increase the production of housing stock? If so how were regions affected? • From tenure neutrality perspective: Did the housing subsidy cause distortion between different tenures of properties?

  4. Theoretical models

  5. The data • Two main groups: • 3 big regions • 4 medium and small regions • Unbalanced quarterly panel data • Cross- sectional data of 7 region • Time- series data: 1975-2006

  6. IV regression models for big & small/medium regions

  7. SUR regression models for multifamily & single houses

  8. Conclusions!!! • Though it is not easy to single out what type of subsidy has impact on the total housing production, our regression result indicate that interest subsidy has a positive impact on the total production of housing units. • Our study seem to support the assertion that construction subsidies may have increased the stock of depressed regions where the demand was low. . • The result also suggest that the interest subsidy stimulated more for the production of multifamily houses since the subsidy could drive down the total production cost of multifamily houses.

  9. F I N E !!!

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