Ownership Incentives and Housing Affordability Evidence from France

40 Pages Posted: 5 Aug 2022 Last revised: 20 Oct 2023

See all articles by Sylvain Chareyron

Sylvain Chareyron

Université Paris-Est Créteil

Tidiane Ly

Syracuse University

Yohann Trouvé-Sargison

University of Saint Etienne - Analysis Group and Economic Theory Lyon St-Etienne (GATE-LSE)

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Abstract

Are ownership incentive policies inevitably accompanied by detrimental inflationary effects? To address this issue, we develop a theoretical model in which owners of new housing benefit from a homeownership subsidy or a rental investment incentive. We show that while both incentives increase the price of the new housing, they reduce old housing prices and have an ambiguous impact on the average housing price. These effects result from residential spillovers from the old housing market to the new housing market. We test these findings empirically by exploiting a 2014 French reform in the metropolitan area of Lyon which intensified both incentives. Difference-in-difference estimates confirm our theoretical predictions: two years after the reform, the price of new housing increased by 30% and the price of old housing decreased by 7%. Taking both markets together, the overall effect is non-significant. The results also show an increase in the share of new housing sold after the reform.

Keywords: House prices, mobility, Interest-free loan policy, Rent Control, Difference-in-difference

Suggested Citation

Chareyron, Sylvain and Ly, Tidiane and Trouvé-Sargison, Yohann, Ownership Incentives and Housing Affordability Evidence from France. Available at SSRN: https://ssrn.com/abstract=4182924

Sylvain Chareyron

Université Paris-Est Créteil ( email )

France

Tidiane Ly (Contact Author)

Syracuse University ( email )

Syracuse, NY 13244
United States

Yohann Trouvé-Sargison

University of Saint Etienne - Analysis Group and Economic Theory Lyon St-Etienne (GATE-LSE) ( email )

Lyon
France

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