## arhmiperea - Annex 1 Selected Sources of Data on Rental Costs ## Source details **Canonical URL:** [arhmiperea - Annex 1 Selected Sources of Data on Rental Costs](https://www.imf.org/-/media/files/publications/dp/2021/english/arhmiperea.pdf) ## Other formats - [Markdown version](/-/media/files/publications/dp/2021/english/arhmiperea.pdf.md) - [Structured JSON version](/-/media/files/publications/dp/2021/english/arhmiperea.pdf.json) --- ### Introduction and main findings - Many advanced European economies faced pressure from rental housing affordability that widened social and economic divergence. - Large and rising share of low-income renters, the young, and those living in cities is overburdened in many locations; in several locations middle-income groups increasingly face rental affordability issues. - Rental affordability has widened between renters and homeowners over the past decade amid low interest rates and housing policies that tend to be regressive and favor home ownership. - Rental housing support for the segment of tenants most in need has often not kept pace with affordability pressures. - COVID-19 is likely to intensify these trends because renters work more frequently in contact-intensive industries and have less access to telework; incomes are projected to take several years to recover. - Investment in rental housing can help spur activity, create jobs, and enhance energy efficiency if properly targeted. ### Key statistics and trends - In nearly three-quarters of the countries analyzed about half or more of the lowest income quintile renters were overburdened in 2018 (defined as paying at least 40 percent of disposable income on rent). - The cumulative median real rent rose by nearly 7 percent over five years from 2013. - A few cities recorded cumulative real increases of more than 30 percent. - The median renter (at market prices) spends more than one and a half times what the median homeowner spends on housing when measured as the share of disposable income. - Between 2011–13 and 2016–18 the discrepancy widened by 4 and 2¾ percentage points for low-income and median renters, respectively, compared to median homeowners. - Nearly half or more than half of renters in the lowest income quintile were overburdened in 12 out of 17 advanced European economies analyzed. - The overburden rates among renters have increased since the global financial crisis in half of the countries analyzed. - The median rent increased annually by about 1.3 percent in real terms since 2013 on average in the countries analyzed, which is 0.5 percentage point more than median real incomes. - For the lowest decile of income earners in advanced Europe, rental cost outpaced disposable income growth by 0.7 percentage point annually. - Among 14 (of 24) countries that experienced an annual average real rent increase of at least 1 percent since 2013, 11 saw bigger increases in their capital city than for the country as a whole. - In three-quarters of the countries with detailed data, more than 60 percent of low-income renters living in cities were overburdened in 2018. ### Drivers of rental affordability (econometric and empirical findings) - Regression analysis covers 204 regions in advanced European economies over 2005–18 using an unbalanced panel of almost 1.5 million households (almost 100,000 individual-level observations and 1,585 region-level observations after data adjustments). - Growth-inequality channel: - A 1 percent increase in regional GDP per capita led to a more than 7 percentage point increase in spending on rent as a share of income for the lowest-income households. - The same 1 percent increase led to a 4.3 percentage point increase for all households (benchmark group) in some specifications and 4¼ percentage points in others. - Urbanization and structural transformation: - Increasing population density by 1 percent leads to a 0.6 percentage point increase in average household rent burden for the benchmark group; the effect is 1.6 percentage points larger for low-income households. - A 1 percentage point increase in the population share with tertiary education leads to a 0.2 percentage point increase in the rent-to-income ratio for higher-income households and a 0.7 percentage point increase for low-income households. - A 1 percentage point increase in the share of high-growth firms raises the average rent-to-income ratio of low-income households by 0.8 percentage point. - Tourism: - A 1 percent increase in the number of tourists is associated with a 0.4 percentage point increase in the rent-to-income ratio for higher-income households; the effect on low-income households is larger by 2 percentage points. - Credit conditions: - Proxy measures for credit conditions (average interest paid per euro of principal and long-term interest rate) are found to play an insignificant role in explaining variations in rental affordability within the specifications used. - Full model result: - When pooling all channels together, only GDP remains statistically and economically significant, pointing to a dominant growth-inequality effect. ### City-level rental price dynamics and COVID-19 impacts - City-level EARS data for 24 cities show median real growth over 2013–18 of 1.4 percent per year and a cumulative median real growth of 18 percent for a representative two-bedroom apartment. - Cities with especially high real rental growth during 2013–18 included Lisbon, Dublin, and Reykjavik; limited declines registered in London, Riga, Rome, and Bern. - Early COVID-19 evidence (selected city-level reported changes): - Barcelona: new rental prices reported to have dropped by about 12–13 percent in November 2020 compared to pre-COVID. - Madrid: new rental prices reported to have dropped by about 8 percent in November 2020 compared to pre-COVID. - Dublin: average rents fell by 1 percent in Q3 2020 (year over year); Ireland as a whole average rents were 1.4 percent higher compared to 2019 (Residential Tenancies Board). - Rome city center: rents dropped by 10.3 percent in 2020 compared to 2019 (Idealista), while rents rose in other parts of the city. - Zürich: rental price index increased by 0.1 percent in 2020 compared to a 0.9 percent increase on average in Switzerland. - London: average rental price increase remained broadly unchanged at 0.7 percent in 2020 compared to 1.1 percent in 2019. - Potential longer-run COVID-19 moderating forces on rents include sustained declines in tourism, higher demand outside congested cities ("donut effect"), and conversion of commercial real estate into residential units; persistence is uncertain. ### Policy observations and recommendations - Overarching strategy: - Map housing policies into a national-level strategy to provide coherence on costs, benefits, and internal consistency. - National strategies should ensure sufficient supply of rental housing across locations and steer investment toward energy efficiency. - Short- to medium-term measures: - Targeted higher housing allowances and portable housing vouchers to protect low-income renters and support labor mobility. - More social rental housing and regulatory/financial incentives to raise rental housing supply across locations. - Maintain emergency income and liquidity measures during the recovery; gradually replace rent moratoria and eviction stops with additional transfers and guaranteed loans for the most vulnerable. - Upgrade well-designed, targeted, and portable rental housing assistance. - Caution on rent controls: - Introduction or tightening of rent controls is not guaranteed to lower rents for all vulnerable groups and is associated with lower rental housing supply and distributional trade-offs (protects incumbents, can harm new entrants and supply). - Where deregulation occurred (examples noted), supply responses followed; gradual liberalization paired with targeted assistance is recommended. - Supply-side and fiscal measures: - Room to raise low stock of social rental housing in many countries. - Use European Recovery and Resilience Facility and similar instruments to invest in low-income housing and energy efficiency. - Taxes on vacant properties can help raise supply long term but may not directly benefit low-income renters. - Limitations on short-term rentals and foreign buyer taxation mostly affect high-priced properties in tourist hotspots. - Ease and simplify land use regulation, accelerate rezoning and administrative processes for affordable housing development. - Reform tax benefits skewed toward home ownership by redeploying resources to affordable rental housing. ### Short-term renter support and medium-term supply measures (COVID-19 context) - Emergency pandemic measures widely used: - Moratoria on evictions and on rent and mortgage payments; temporary rent freezes and contract extensions; utility bill moratoria/relief. - Country examples: Spain tied rent and mortgage debt moratoria to unemployment and income criteria; Iceland large rental companies rescheduled payments; Switzerland extended payment periods by 60 to 90 days; Slovenia cut electricity price by 20 percent for affected households; Austria instituted utility payment moratoriums and exempted low-income households from green electricity tax; Ireland froze rent increases for duration of the pandemic. - Medium-term measures to boost rental availability within existing stock: - Inventory and mobilize vacant properties and public buildings (Brussels estimates between 15,000 and 30,000 units in 2018; Rome census found 161 vacant buildings in 2016, half publicly owned; Milan reported 260 abandoned buildings). - Use taxes on residential property vacancies (evidence: France estimated tax lowered vacancy rates by 13 percent between 1997 and 2001). - Regulate short-term rentals and convert underused facilities into social housing; incentives and "gentle requisitioning" cited. - Medium-term measures to boost new supply: - Target financing and tax incentives to construction of rental housing (grants, loan guarantees, low-interest loans, land sales below market). - Examples: US Low-Income Housing Tax Credit; Vancouver’s Rental 100 program; Swiss provisions for municipal land acquisition and bonuses for non-profit apartments. - Be cautious with broad-based mortgage interest deductibility and other owner-biased tax benefits (noted as regressive). - Social rental housing considerations: - Social housing stock varies (Germany about 1.1 million units after halving since 2006; Netherlands nearly 38 percent of total housing stock). - Social housing can crowd out private market if very large; size, targeting, and eligibility matter to avoid poverty traps and promote mobility. ### Measurement, definitions, and data gaps - Affordability metric used: narrow definition focusing on share of disposable income spent exclusively on rents; tenants overburdened if paying 40 percent or more (alternative 30 percent threshold noted). - Narrow versus broad definitions discussed; this paper uses narrow definition and includes mortgage principal repayments for homeowners. - Data coverage and dates: - Latest year generally 2018; 2017 data used for Ireland and the United Kingdom; 2016 data used for Iceland; 2015 data used for Sweden in some series. - Data sources: EU-SILC; EARS for city-level rental surveys; OECD house price database; IMF staff calculations. - Data gaps: - Regulatory restrictiveness, recipients of housing allowances, and social housing statistics often unavailable or decentralized, complicating evaluation. - Improved compilation and publication of regulation, recipient, and transaction-based rental price statistics recommended. *arhmiperea - Annex 1 Selected Sources of Data on Rental Costs* ### Annex 1 Selected Sources of Data on Rental Costs 63 ### arhmiperea - Annex 1 Selected Sources of Data on Rental Costs ### Introduction and main findings - Many advanced European economies faced pressure from rental housing affordability that widened social and economic divergence. - Large and rising share of low-income renters, the young, and those living in cities is overburdened in many locations; in several locations middle-income groups increasingly face rental affordability issues. - Rental affordability has widened between renters and homeowners over the past decade amid low interest rates and housing policies that tend to be regressive and favor home ownership. - Rental housing support for the segment of tenants most in need has often not kept pace with affordability pressures. - COVID-19 is likely to intensify these trends because renters work more frequently in contact-intensive industries and have less access to telework; incomes are projected to take several years to recover. - Investment in rental housing can help spur activity, create jobs, and enhance energy efficiency if properly targeted. ### Key statistics and trends - In nearly three-quarters of the countries analyzed about half or more of the lowest income quintile renters were overburdened in 2018 (defined as paying at least 40 percent of disposable income on rent). - The cumulative median real rent rose by nearly 7 percent over five years from 2013. - A few cities recorded cumulative real increases of more than 30 percent. - The median renter (at market prices) spends more than one and a half times what the median homeowner spends on housing when measured as the share of disposable income. - Between 2011–13 and 2016–18 the discrepancy widened by 4 and 2¾ percentage points for low-income and median renters, respectively, compared to median homeowners. - Nearly half or more than half of renters in the lowest income quintile were overburdened in 12 out of 17 advanced European economies analyzed. - The overburden rates among renters have increased since the global financial crisis in half of the countries analyzed. - The median rent increased annually by about 1.3 percent in real terms since 2013 on average in the countries analyzed, which is 0.5 percentage point more than median real incomes. - For the lowest decile of income earners in advanced Europe, rental cost outpaced disposable income growth by 0.7 percentage point annually. - Among 14 (of 24) countries that experienced an annual average real rent increase of at least 1 percent since 2013, 11 saw bigger increases in their capital city than for the country as a whole. - In three-quarters of the countries with detailed data, more than 60 percent of low-income renters living in cities were overburdened in 2018. ### Drivers of rental affordability (econometric and empirical findings) - Regression analysis covers 204 regions in advanced European economies over 2005–18. - Rising economic output did not translate into disposable income gains that sufficiently compensated for rising rental costs: - A 1 percent increase in regional GDP per capita led to a more than 7 percentage point increase in spending on rent as a share of income for the lowest-income households. - The same 1 percent increase led to a 4¼ percentage point increase for all households. - Greater urbanization, structural transformation toward high-skilled services, and higher incidence of tourism put pressure on rental affordability, particularly for lower-income households. - Credit conditions were not found to be a significant driver of rental affordability in the analysis, suggesting other frictions such as household liquidity constraints may impede arbitrage between housing and rental markets. ### Policy observations and recommendations - Housing policies are complex, often addressing multiple goals; affordability, well-balanced landlord–tenant regulations, and equal access to opportunities are only some aspects. - Measures tend to be fragmented and layered across levels of government. - Most countries provide more public resources toward home ownership than renting; public spending on social rental housing has been on the decline. - Mapping housing policies into an overarching national-level strategy could help provide a more coherent picture of costs, benefits, and internal consistency. - The paper argues a post-pandemic strategy to reverse heightened disparities should include more efforts to expand affordable rental housing through: - Targeted higher housing allowances. - More social rental housing. - Regulatory and financial incentives that raise rental housing supply across locations. - Investment in rental housing should be energy efficient to lower the sector’s carbon intensity, while acknowledging that a just transition strategy for compensating low-income households affected by higher energy prices is beyond the paper’s scope. *arhmiperea - Annex 1 Selected Sources of Data on Rental Costs* ### Introduction and Main Findings ### Introduction and Main Findings ### Policy conclusions and recommendations - Effective policies to improve rental housing affordability should: - Enhance long-term income opportunities for low-income households and the young (including investments in education, re-skilling, childcare, etc.). - Provide targeted rental housing assistance and increase the affordable (social) rental housing stock across locations to facilitate movement to locations where new jobs are being created. - Support investment in rental housing to accelerate economic activity and job creation in the recovery. - Short- to medium-term measures: - Until the recovery from the COVID-19 shock is fully underway, maintaining emergency income and liquidity measures to protect the most vulnerable renters and stem evictions remains important. - Over time, gradually replace rent moratoria and eviction stops with additional transfers and guaranteed loans to the most vulnerable to help curtail disincentives for new rental investment. - Upgrade well-designed, targeted, and portable rental housing assistance to address affordability pressures faced by the lowest-income groups while supporting labor mobility. - Caution on rent controls: - Introduction or tightening of rent controls is not guaranteed to lower rents for all vulnerable groups and over the long term; evidence suggests rent controls protect current renters and are associated with lower rental housing supply. - Supply-side and fiscal measures: - There is room in many countries to raise the low stock of social rental housing to support those with difficulties accessing the private market. - The European Recovery and Resilience Facility provides an opportunity to invest in low-income housing, either directly via the public sector or via financial incentives to private developers; such policies would stimulate demand, create employment, and address economic disparities, while also reducing the carbon intensity of housing if steered toward greater energy efficiency. - Taxes on vacant properties can help raise rental supply in the long term, but the impact is not necessarily felt by low-income renters. - Limitations on short-term vacation rentals and taxation of residential property purchase by foreign buyers tend to affect mostly high-priced properties in tourist hotspots and may not help low-income renters. - Other longer-term efforts include easing and simplifying land use regulations and accelerating rezoning and administrative processes, especially for affordable housing development. - Reform tax benefits skewed toward promoting home ownership (which benefit mostly high-income earners) by redeploying resources toward enhancing access to affordable (rental) housing. ### Size and cross-country patterns of rental markets - Rental market size varies across Europe due to culture, demographics, policies, housing finance systems, and historical homeownership promotion. - General patterns: - Rental markets tend to be smaller in eastern and southern Europe and larger in Nordic and German-speaking countries. - Since 2010, the share of renters increased in the Nordic countries, Austria, Italy, and Spain, while it dropped in the Benelux countries and Ireland. - Income profile of renters: - On average across the analyzed countries, about 30 percent of households in the bottom quintile of the disposable-income distribution are tenants paying market prices. - The propensity to rent decreases among richer families; within the top quintile of the income distribution, less than 10 percent of households are tenants paying market prices. - The share of renters who benefit from reduced rents varies widely, reflecting dispersion in social and employer-provided subsidized rental housing supply. - In Austria, Denmark, Netherlands a broad share of the population has access to some form of traditionally large social housing markets (data capture issues noted). - Demographic and spatial patterns: - Renting activity is more intensive among young households, people living in cities, and foreigners. - On average: - About half of the people between 16 and 29 years old are renters. - Close to one-third of those in the 30- to 44-year-old cohort are renters. - The share of renters in cohorts older than 45 years is below one-fifth. - Average share of renters in urban areas is more than twice as high as in rural areas. - More than half of foreigners (from both EU and non-EU countries) are renters, compared to about one-fifth for nationals. ### Rental affordability: measures and levels - Affordability metric: - The paper focuses on the share of income spent exclusively on rents. - Tenants are considered overburdened if they devote 40 percent or more of their household disposable income to rental payments; other studies use a 30 percent threshold. - Typical spending: - In many advanced European economies, the median share of disposable income spent exclusively on rental payments is about 25 percent. - In some countries, including Nordic ones, that share is close to or above 30 percent and has increased after the global financial crisis. - When including other rental costs (structural insurance, maintenance, repairs, utilities), the spending share rises by about 10–15 percentage points. ### Who is overburdened - Low-income households: - Households in the bottom quintile of the income distribution who rent at market prices spend more than 40 percent of their disposable income on rents on average across countries. - In 2018, more than half of the lowest-income renters were overburdened or very close to the 40 percent threshold in 14 out of 17 advanced European economies analyzed. - For higher-income households, those in the top income quintile spent slightly more than 10 percent of their disposable income on rental payments. - Age and location: - Rental affordability pressures are particularly widespread among young renters and in cities. - By age cohorts, the share of the young who are overburdened frequently exceeds that of the elderly in many countries. - In some countries, the share of overburdened low-income renters living in cities has reached very high levels at 60–70 percent (notably in the Nordics, Greece, and Spain). - Subsidized renters: - Subsidized rents lower the overburden rate for low-income earners but do not eliminate it. - The share of income that low-income renters at subsidized rates pay on rent is about 22 percent, nearly half compared to those in the same income bracket paying market rent. - Nevertheless, nearly one-fifth of all low-income renters with subsidized rents are overburdened. - The share is particularly high in Finland and the United Kingdom, and also high in Iceland, Luxembourg, and Switzerland (data limitations noted for some countries). ### Evolution over time and renter/homeowner gap - Post-global financial crisis trends: - The incidence of overburdened tenants increased after the global financial crisis in half of the countries, particularly among low-income earners. - Two groups: - Countries that already had severe affordability issues before the global financial crisis and remained under pressure for low-income renters (examples: Norway, Spain, the United Kingdom). - Countries where the share of overburdened renters was close to or below the European average but increased significantly since the global financial crisis (examples: Luxembourg, Slovenia, Switzerland). - During 2013–18, poorer households faced more frequent and more significant increases in the median share of income devoted to rents; the share also rose for middle-income earners in half of the countries. - Young renters and cities: - Available data suggest that in half of the countries the share of overburdened young renters (16–29 years) and those living in cities increased between 2013 and 2018. - In five out of six countries analyzed more young renters in the lowest-income group were overburdened in 2018 than in 2013. - In cities, the lowest-income group experienced an increase in the overburden rate in about half of the countries since 2013. - Renter vs homeowner affordability gap: - Monetary policy has been ultra-accommodative in advanced Europe since the global financial crisis; the annual income share spent by homeowners has fallen. - The annual income share spent by homeowners dropped between 2½ and 1.6 percentage points between 2016–18 and 2011–13 for the median and low-income homeowners, respectively. - For renters in the bottom income quintile (at market rates and at reduced market rates) the gap to the median homeowner widened by about 4 percentage points. *Source: Introduction and Main Findings (arhmiperea - Introduction and Main Findings).* ### Annex 3, Annex Figure 3.3). This finding suggests distributional implications ### Annex 3, Annex Figure 3.3). This finding suggests distributional implications ### Distributional implications of very low interest rates and tenure status - The text highlights distributional implications from the very low interest rate period in Europe linked to tenure status. - The comparison ideally would be between renters and recent homebuyers with a mortgage, but data constraints prevent this. Instead, housing costs for the prime age cohort (30–49) are used as a proxy. - Empirical evidence on unconventional monetary policies and inequality is described as "still inconclusive." Some studies suggest quantitative easing benefited lower-income households via the employment channel while the wealth channel has been small. ### Rental Housing Affordability: key facts and data coverage - Latest year is generally 2018. Due to data gaps, 2017 data are used for Ireland and the United Kingdom; 2016 data are used for Iceland. - Due to data gaps, 2015 data are used for Sweden in some series. - Some countries or categories are omitted in certain figures due to data gaps. - Data sources: EU-SILC; EARS for city-level rental surveys; OECD house price database; IMF staff calculations. ### Role of rental costs and disposable incomes in changes in rental affordability - Pressure on affordability has arisen from a combination of rental cost increases and greater income dispersion, with significant regional differences. - For many renter groups in advanced Europe (paying market or reduced rents), rental cost increased significantly more than disposable income, with low-income earners particularly impacted. - Homeowners, by contrast, have generally experienced lower and declining housing costs while incomes rose. - In urban centers and for low-income renters, rental cost increases have been the primary driver of affordability deterioration; in many other locations weak income growth was the main factor. - In some countries young people’s affordability was squeezed simultaneously by higher rental payments and lower incomes. ### Magnitudes and trends in rental cost changes (2013–18 and longer) - During 2013–18, median rental payments of those paying market rents increased on average by about 1.3 percent per year in CPI-deflated (real) terms. - This 1.3 percent per year average is about 0.3 percentage point higher compared to the previous five-year period (2008–12). - In 10 of the 18 economies in the EU-SILC sample, the median renter faced 9 to 67 percent higher real rental payments in 2018 than in 2007. - In six countries (Greece, Iceland, Ireland, Italy, Spain, United Kingdom) the real median rental cost at the latest data point was still below 2007, though Iceland, Ireland, and the United Kingdom experienced strong increases since 2013 from depressed levels after housing bubbles burst. - Results based on nominal rental payments point to similar qualitative conclusions. ### City-level concentration of rental price surges - City-level survey data (EARS) for 24 selected European cities show substantial dispersion across cities. - The median real growth over 2013–18 for city-level rental prices was 1.4 percent per year, on average. - The cumulative median real growth over 2013–18 amounted to 18 percent for a representative two-bedroom apartment; a few cities recorded cumulative real increases of more than 30 percent. - Cities with especially high average real rental price growth during 2013–18 included Lisbon, Dublin, and Reykjavik. - Limited declines were registered in London, Riga, Rome, and Bern. - In half of cases, rental price increases during 2013–18 in major cities surpassed country-level price growth, often by multiple times (examples cited: Lisbon, Dublin, Reykjavik, Stockholm, City of Luxembourg, Prague, Vilnius, Madrid). - City–country differences reflect local market drivers: income dynamics, migration, urbanization, investment activity, and policy-related and globalized pressures. ### COVID-19 pandemic impacts on rental affordability - The pandemic disproportionately affected occupations with larger shares of renters (service workers and elementary occupations); these occupations had lower median incomes pre-pandemic and experienced greater employment destruction during the crisis. - Rental affordability pressures are expected to rise for these groups through the income channel unless rents fall rapidly. - An incomplete passing on of falling interest rates to renters is expected to widen the affordability gap relative to homeowners. - Early evidence indicates rental prices in several cities have started to decline or moderated growth, concentrated in tourist hotspots so far. - Reported city-level COVID-19 rental changes (selected examples from the text): - Barcelona: new rental prices reported to have dropped by about 12–13 percent in November 2020 compared to pre-COVID. - Madrid: new rental prices reported to have dropped by about 8 percent in November 2020 compared to pre-COVID. - Dublin: average rents fell by 1 percent in the third quarter of 2020 (year over year); Ireland as a whole average rents were 1.4 percent higher compared to 2019 (Residential Tenancies Board). - Rome city center: rents dropped by 10.3 percent in 2020 compared to 2019 (according to Idealista), while rents rose in other parts of the city. - Zürich: rental price index increased marginally by 0.1 percent in 2020 compared to a 0.9 percent increase on average in Switzerland (Schweizer Bundesamt für Statistik, Stadt Zürich). - London: average rental price increase remained broadly unchanged at 0.7 percent in 2020 compared to 1.1 percent in 2019 (Office for National Statistics, United Kingdom). - Potential longer-run COVID-19 effects that could moderate rents include a sustained decline in tourism and business travel, higher demand for properties outside congested cities (a possible "donut effect"), and conversion of commercial real estate (including hotels) into residential units. The persistence of these effects is uncertain. ### Mobility, labor markets, and rental supply considerations - An ad hoc EU-SILC survey (2012) suggests countries with a larger share of rental housing had higher residential mobility and lower unemployment rates over the past five years (covering the global financial crisis), consistent with the Oswald hypothesis (homeownership linked to lower employment and higher unemployment). - Higher residential mobility can entail individual and social costs (for example, weakening of “social capital”). - Some investors have purchased struggling hotels with plans to convert them into rental properties, potentially expanding supply in affected cities. ### Definitions and methodological notes - Narrow versus broad definitions of housing costs: - Broad definition includes principal + interest payments + mandatory services and charges, regular maintenance and repair, taxes, and utilities for homeowners; rental payments + mandatory services and charges, regular maintenance and repair, taxes, and utilities for renters. - Narrow definition (used in this paper and by OECD, US Census): principal + interest payments for homeowners; rental payments for renters. - Eurostat narrow definition treats interest payments for homeowners (principal excluded). - This paper uses a narrow definition of housing cost for renters and homeowners with mortgage principal repayments included for the latter. The narrow concept allows comparison between EU-SILC country data and EARS city-level rental price data and is used in the econometric analysis in Chapter 4. - Rationale for including mortgage principal repayments for homeowners: principal repayments are fixed monthly outlays and affect cashflow management; inclusion makes affordability comparable between homeowners and renters. *Source: IMF staff calculations and analysis as presented in the provided Annex content.* ### Box 1. Defining Housing Costs—Some Considerations ### Box 1. Defining Housing Costs—Some Considerations ### Overview - Rental housing affordability is driven by relative movements of household income and rental costs and can affect different income groups unequally. - Rising rental costs do not necessarily reduce affordability if disposable incomes rise in tandem; income dynamics have differed significantly across income groups. - The analysis adopts an empirical structural approach focused on observed changes in rental affordability in Europe, especially for low-income groups. ### Data and empirical strategy - Data: an unbalanced panel of almost 1.5 million households across 204 regions between 2005 and 2018, providing a total of almost 100,000 individual-level observations and 1,585 region-level observations, after accounting for missing and dropped observations. - Granularity: EU-SILC household survey data matched with NUTS-2 region level data from Eurostat for structural indicators; focus on lower-income groups. - Empirical specifications: - Specification (1) relates household rent-to-income ratio to lagged regional structural determinants Z_{r,t−1}, including an interaction with a dummy for the lowest-income quartile to capture differential effects (β3). - Specification (2) includes a dynamic term (lagged rent-to-income) to account for inertia in rental cost burden and multicollinearity across channels. - Controls: year and country fixed effects; explanatory variables enter with a one-period lag; standard errors clustered at the regional level. ### Hypothesized drivers evaluated - Rapid economic growth and inequality (growth-inequality nexus). - Population size, density, and urbanization dynamics (including migration). - Demographics (aging, household composition). - Tourism and short-term rental schemes (for example, Airbnb). - Credit conditions and mortgage financing costs. - Structural transformation and business demographics (tertiary-educated population share, share of high-growth firms). - Supply-side factors: housing units per capita, building approvals and completions, construction and land costs, zoning and regulatory constraints. - Infrastructure and neighborhood amenities. ### Key empirical findings (regression-based) - Economic activity - A 1 percent increase in regional GDP per capita leads to a 4.3 percentage point increase in rental cost as a share of income for the benchmark group (households in the three upper-income quartiles). - The lowest-income quartile experiences an increase of more than 7 percentage points in response to a 1 percent increase in regional GDP per capita (3.1 percentage points higher than the benchmark group). - Urbanization and structural transformation - Increasing population density by 1 percent leads to a 0.6 percentage point increase in the average household rent burden for the benchmark group; the effect is 1.6 percentage points larger for low-income households. - Lowering the share of agriculture in gross value added by 1 percentage point leads to a 0.8 percentage point increase in the average household rent burden for the benchmark group; the effect on low-income households is 0.2 percentage points larger than for other groups. - A 1 percentage point increase in the population share with tertiary education leads to a 0.2 percentage point increase in the rent-to-income ratio for higher-income households and a 0.7 percentage point increase for low-income households. - A 1 percentage point increase in the share of high-growth firms raises the average rent-to-income ratio of low-income households by 0.8 percentage point (no significant effect for higher-income households in the same specification). - Tourism - A 1 percent increase in the number of tourists is associated with a 0.4 percentage point increase in the rent-to-income ratio for higher-income households. - The effect on low-income households is larger by 2 percentage points relative to higher-income households. - Demographics - The share of older people (55 years and older) does not produce sizeable or statistically significant effects on rental affordability on average or for the low-income group in the reported regressions. - Credit conditions and mortgage financing - Proxy measures for credit conditions (average interest paid per euro of principal and long-term interest rate) are found to play an insignificant role in explaining variations in rental affordability within the specifications used. - Interpretation: liquidity constraints and financial frictions may limit arbitrage between buying and renting, allowing homeowners to benefit more from looser credit conditions than renters. - Full model (all channels included) - When pooling all independent variables together (Table 2), only GDP remains statistically and economically significant in explaining household rental cost affordability. - This points to a dominant role for the growth-inequality channel: stronger economic growth can raise rents faster than incomes of low-income households, producing a lack of inclusiveness. ### Interpretation and implications - The growth-inequality nexus: rising regional economic activity can increase rental cost burdens disproportionately for low-income households when their incomes do not rise commensurately. - Urbanization, tourism, and structural transformation (education and high-growth firms) exert upward pressure on rents with larger effects on low-income households. - Supply constraints, zoning and construction costs, and inelastic short-term supply amplify price pressures; improvements in infrastructure and amenities raise rents but may differ across income groups. - Credit-market measures in these regressions do not appear to explain affordability dynamics, suggesting barriers to ownership for low-income households despite lower financing costs. - Policy implication emphasized: in addition to housing policies, stronger fiscal, structural, and labor market policies are needed to ensure low-income households can benefit from economic gains associated with structural transformation, urbanization, and tourism. *Source: IMF staff estimates.* ### Box 2. The Relationship Between Rental and House Costs—The User Cost of Capital ### Box 2. The Relationship Between Rental and House Costs—The User Cost of Capital ### Main factors behind declining rental affordability - Every country in Europe uses policies to maintain and develop affordable housing; these policies are often complex, layered, and fragmented because they were designed and administered at subnational level and have evolved over a century or more. - As of recently, more than 200 tax and expenditure programs aim at making housing affordable both for renters and homeowners. - Mapping housing policies into a national-level strategy can: - Elevate housing as a key driver for an inclusive recovery from COVID-19. - Provide a coherent picture of costs, benefits, and internal consistency of measures. - Target market failures and grant support for the neediest, including by providing rental housing and regulating it. - National strategies should ensure sufficient supply of rental housing across locations to reduce coordination failures and fully reap macroeconomic benefits from rental markets. - Investment in affordable rental housing can: - Counteract socioeconomic divergences. - Facilitate access to employment across locations. - Boost employment in the short term (per $1 million invested in energy-efficient new buildings, such as schools and hospitals, 2–13 jobs are created). - Lower carbon emissions if investment targets greater energy efficiency. ### Short-term affordability measures — Income support programs - Characteristics and roles: - Housing allowances and housing vouchers are common delivery mechanisms; housing allowances in Europe are means- and/or income-tested transfers, while vouchers (common in the United States) are portable subsidies often given directly to landlords. - Over the last decade, the share of overburdened households renting at market prices who received housing allowances has tended to come down. - Advantages: - Federal or state-level programs can be used in many locations, promoting access to neighborhood amenities and school districts across incomes. - Portability facilitates labor mobility and avoids lock-in effects associated with non-portable subsidies or social housing. - When well designed, housing income support can be targeted to household income, size, status (single parents, students), and rent paid. - Evidence: rent subsidies in the United States and the United Kingdom are effective in improving affordability for recipients; Figari and others (2019) show housing allowances reduced poverty materially in five of seven European countries analyzed. - Risks and distortions: - Housing allowances can raise rental prices, with landlords capturing a sizeable share by increasing rents (capitalization/capture). - Evidence of rent-bunching around expected rent values and landlord capture in Finland, France, and the United Kingdom. - Limits include lack of supply of “adequate” housing, insufficient coverage and program size, and the potential for renters still defaulting on payments. - Policy design option: linking allowances to a median rent in a specific area to reduce capitalization into rents. ### Rent controls and landlord-tenant regulation - Historical and cross-country context: - Rent controls have been widespread historically; a historical database covering 1910–2018 shows almost all of 47 countries studied adopted some form of rent control during that period. - Regulation tends to be stricter in countries with relatively large rental sectors (examples: Germany, Netherlands, Sweden). - Types of rent control: - First-generation controls: rent ceilings or freezes by governments. - Second-generation controls: prices free at contract setting, but an upper bound set for subsequent adjustments (e.g., indexed to CPI, mortgage interest rates, or government bond indices). - Reference-price mechanics vary across countries and are often guided by national principles with regional/local specifics. - Empirical effects and trade-offs: - Rent controls are popular because they are simple and avoid subsidy capture by landlords, but evidence shows trade-offs. - There is no clear evidence that stricter rent controls lead to lower average rent levels (accounting for quality); instead, regulations tend to redistribute savings on rents away from new tenants to incumbents or longer-stay tenants. - Rent regulations can create a divide between established households (benefiting from rent-controlled tenancies) and new households accessing the unregulated market. - Example findings: - A study focused on Germany found the 2015 introduction of a rental brake did not affect rental price growth in the short term and may have been associated with accelerated price growth in subject municipalities and neighboring areas. - Figure evidence shows little correlation between strictness of rent controls (average 2008–17 index) and average annual growth of real rent (2008–18). - Deregulation experience and policy sequencing: - Deregulation of strict controls in the Czech Republic and Finland improved landlords’ profits, leading to a quick increase in supply and improved accessibility to private rental options. - Complete and rapid deregulation may push consumers to owner-occupancy and have unintended consequences; gradual liberalization is recommended. - Liberalization options include: - Indexing rental price growth to reference rents or CPI. - Permitting rent increases within limits to cover landlords’ operating costs including repairs. - Freeing prices only on new rental units or newly built housing while grandfathering existing rent-controlled units for the duration of the contract. - Pairing rental price increases with housing assistance for those in need is advised. - Balancing landlord-tenant regulation: - Rent controls should be assessed within the broader landlord-tenant regulatory framework to balance power, ensure sufficiently long tenure for certainty, and avoid overly harsh eviction procedures. - Overly tight regulation and frequent changes reduce supply responsiveness to price signals. - Efficient, fair, and swift conflict resolution is important for unlocking rental markets’ full potential. - Germany has been cited as an example of well-balanced regulation but has moved toward stricter controls in recent years. ### Short-term renter support during COVID-19 - Emergency measures adopted in Europe and elsewhere included: - Moratoria on evictions and on rent and mortgage payments (to a lesser extent). - Temporary rent freezes or automatic contract extensions or renewals. - Trade-offs: - While these measures provide immediate shelter and prevent homelessness, some can create longer-term distortions and delay investment decisions needed to create supply. - Targeted rental assistance has been more limited during the pandemic and could be expanded. - Examples of measures: - Many countries temporarily suspended evictions of residential tenants in both social and private housing during lockdowns (countries listed include Austria, Belgium, Czech Republic, France, Germany, Ireland, Luxembourg, Netherlands, Portugal, Spain, Switzerland, United Kingdom). - In the United States: - Landlords who receive forbearance under the CARES Act were barred from serving eviction notices during the period of forbearance, extended to January 2021. - The law prohibits all landlords with federally backed mortgages from evicting renters. - A moratorium on evictions was placed in all but six US states. - The use of rent moratoria was the second most frequently used measure; for example, Austria instituted it for residential renters until the end of [text truncated in source]. *Italic: IMF staff, Box 2. The Relationship Between Rental and House Costs—The User Cost of Capital* ### 2020. In Spain, rent and mortgage debt moratoria were tied to specific ### arhmiperea - 2020. In Spain, rent and mortgage debt moratoria were tied to specific ### Emergency measures during COVID-19 - Rent freeze or moratoriums, eviction bans, and utility moratoria/relief were widely used across European countries. - Specific examples and measures: - In Spain, rent and mortgage debt moratoria were tied to specific unemployment and income criteria. - In Iceland, large rental companies voluntarily rescheduled payments without reduction in rent and with no interest rate penalty. - In Switzerland, payment periods for rents and leases on residential premises were extended by 60 to 90 days. - In Slovenia, the price of electricity was cut by 20 percent to help households experiencing a decline in income. - The Flemish government in Belgium waived utility bill payments for one month for the unemployed between March and July. - In Austria a moratorium on utility payments was established until June, prohibiting cut-off of services to the unemployed during COVID-19 and exempting low-income households from the green electricity tax. - Spain guaranteed that basic utilities would be provided to all, and no households would be cut off while the state of emergency was in place. - In Ireland a freeze of rent increases was introduced for the duration of the pandemic. - Some US states introduced rental assistance (Massachusetts) and rent vouchers (New York) to cash-strapped tenants who lost income because of the pandemic; the United States also expanded renter support through the social benefits system. - Germany established an online platform for applications to facilitate access to rent support. - Lithuania recommended that municipalities offer the option to defer utility payments and raised the level of rental costs eligible for reimbursement to boost support for acquisition or rental of housing. ### Summary of key measures taken to support renters (table highlights) - The source table lists countries and whether they implemented Rent Freeze Or Moratorium, Utility Bills Moratorium/Relief, Eviction Ban, Changes To Rent Assistance. Countries with multiple measures include: - Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Latvia, Lithuania, Luxembourg, Netherlands, Norway, Portugal, Slovenia, Spain, Sweden, Switzerland, United Kingdom. - (Table entries use marks like x and / to indicate measures; detailed per-country entries are in the source table.) ### Medium-term measures to boost rental availability within existing housing stock - First step: take stock of vacant properties—including public buildings—their location and identify disincentives creating vacancies. - Cities registering vacant housing: Brussels, Dublin, Rome. - Estimates: Brussels range between 15,000 and 30,000 units in 2018. - Rome: a 2016 census revealed 161 vacant buildings, half publicly owned. - Milan: 260 abandoned buildings. - Dublin’s vacant sites register includes 26 properties required to pay a levy in 2019 with a further 260 sites being considered as eligible for the tax. - The Irish government has a national strategy for the use of vacant housing for 2018–21. - Reasons for high vacancy rates: speculation, domestic and foreign demand for secondary residencies, excessive taxation of landlords’ rental income, uncertainty over future tax policies. - Examples of policy tools and evidence: - Tax on residential property vacancies applied in France, Ireland, Israel and the United Kingdom; analysis for France estimates the tax lowered vacancy rates (by 13 percent between 1997 and 2001) without short-term effects on rental prices and with an increase in the supply of rental units in the long term. - Taxing residential property purchases by foreigners used in several Canadian cities since 2016; anecdotal evidence suggests foreign purchases declined while prices continued to rise. - Targeted regulations: prohibiting use of dwellings for nonresidential purposes (Germany); tighter rules on short-term rentals (Berlin, Barcelona, Dublin, Paris) with some studies documenting downward pressure on rents and home prices in affected areas. - Forced conversion of underused or abandoned facilities into social housing as a last resort; examples of “gentle requisitioning” and conversion supported by fiscal incentives in Belgium, Germany, Italy. - Incentives to transform commercial properties into dwellings and “solidarity lease” where a nonprofit rents and sublets to low-income tenants (used in France). ### Medium-term measures to boost the housing stock (construction, financing, tax) - Need to increase physical stock of housing to address structural demand pressures; measures should be targeted to income groups with affordability concerns. - Financing private construction and tax incentives: - Mortgage interest deductibility remains an important tool across much of Europe (Belgium, Denmark, the Netherlands, Sweden) but tends to be broad-based and regressive. - Netherlands study finds mortgage interest deductibility had a significant inequality-increasing impact. - Exemptions from capital gains tax, imputed rent untaxed, or special depreciation allowances (for example, Germany) produce similar effects. - Important that measures facilitating financing target construction of new homes to avoid fueling demand pressure on stock. - Targeted subsidies for developers: - Instruments include grants, loan guarantees, low-interest loans, sale of land at below-market prices. - US Low-Income Housing Tax Credit (enacted 1986) grants developers credit when they build housing with ceilings on tenants’ incomes and rents. - Vancouver’s Rental 100 program (since 2012) offered incentives for construction of 100 percent rental housing buildings. - Switzerland adopted provisions allowing municipalities to acquire land for construction, set quotas for non-profit apartments, and give owners who voluntarily build such apartments a bonus of up to 10 percent on the gross living area. - Creating tax disincentives for holding vacant land has been difficult in practice due to valuation and implementation challenges. ### Social rental housing - Definition: publicly financed residential accommodation rented at below-market prices and often combined with subsidies to dwellers and social housing legislation. - Role and trade-offs: - Social housing ensures stable access for groups shut out of market-based housing due to stigma or shortages (example: family size or location). - Social housing can be costly and less flexible than housing allowances; thus it is one element of a comprehensive strategy. - Size and targeting matter: if not properly designed, large-scale social rental housing can create poverty traps and cement social problems. - Country examples and targets: - Germany: social rental housing stock halved since 2006 to about 1.1 million units; Germany allocated funds to build 100,000 new social housing units during 2020–21 and is selling federally owned properties to local authorities at reduced prices to build affordable housing. - France: stock broadly stable; city of Paris aimed to create 7,000 new public housing units per year between 2016 and 2020, of which 5,000 are in especially prosperous areas. - Spain: authorities plan to increase the very low stock of social rental housing by mobilizing public land and collaborating with private investors. - Netherlands: largest social housing sector, representing nearly 38 percent of the total housing stock (OECD Affordable Housing Database 2018). - Effects on private rental market: - Mixed evidence: social housing can crowd out private rental market when social sector is very large (for example, Netherlands), but governments can also raise total number of units without crowding out private provision (Sinai and Waldfogel 2005). - Eligibility and mobility: - Where eligibility is broad, excess demand and access difficulties (for the young) can arise; fixed-term tenancies with eligibility reviews can address distortions. ### Spatial regulation, access to transportation, and supply responsiveness - Zoning and spatial policies affect housing supply elasticity and construction. - Constraints on residential development can protect public health and public services but increase land prices and marginal construction costs, raising house prices and house price volatility relative to new construction volatility. - Regulatory proliferation has occurred in many contexts (height restrictions, minimum lot sizes, caps on housing units, urban growth boundaries, green zones, open-space designations, density restrictions). - Restrictive spatial regulation can worsen rental affordability by increasing prices and displacing lower-income households to locations with higher commuting times and costs. - Evidence and data challenges: - Empirical studies on direct link between spatial regulation and affordability are sparse; better collection of regulatory information could help evidence-based policymaking. - Questions about whether greater supply (including homeownership) translates into greater rental availability: in the United States an estimated roughly 2 percent of existing single-family detached housing stock transitions into the rental sector each decade; rent elasticity to housing supply is low per Anenberg and Kung (2018). - Investment in public infrastructure (transport) can shift demand to less-inhabited regions with vacant housing, decompressing prices over time but not addressing immediate affordability pressures. ### Effects and trade-offs of rent control and price regulation - Incentives and supply: - Rent controls lower net return on investment, inhibiting development and maintenance of rent-controlled units; can induce conversion of dwellings into nonresidential premises and decrease rental supply through sales. - Redistribution: - Rent controls can be superior to transfers financed through distortionary taxation in some respects but are often poorly targeted; exit strategies are frequently not envisaged, negatively affecting young cohorts. - Rent controls act as subsidy to tenants paid by landlords and may redistribute across tenant categories; they can lower tax revenue by keeping owners’ income low. - Resource allocation and mobility: - Rent controls increase tenancy duration and can cause misallocation by size and quality due to lock-in effects, inhibiting labor mobility across cities and regions. - Diamond, McQuade, and Qian (2019) document a 20 percent decline in labor mobility in San Francisco due to rent control. - Market fragmentation: - If rent control applies only to existing stock while new construction is exempt, a dual rental market emerges with low rents in controlled segment and high rents in uncontrolled units (example: Netherlands, Paris). - Dual markets can prevent first-best allocation and contribute to scarcity in the flexible rent sector. *Sources: Organisation for Economic Co-operation and Development (2021); and IMF staff based on information from national authorities.* ### Box 3. Side Effects of Rent Controls ### Box 3. Side Effects of Rent Controls ### Role of affordable rental housing and current pressures - Affordable rental housing contributes to economic inclusion and stability by preserving a sufficient income share for other spending and by promoting access to education, health care, and transportation. - Rental housing supports labor mobility by fostering transitions from education to employment and from job to job, which can facilitate economic transformations accelerated by the COVID-19 pandemic and help prevent greater income inequality. - Pressure on rental housing affordability has become a challenge across many European economies: a large and rising share of low-income renters, the young, and those living in cities is overburdened; in several locations affordability for middle-income groups is also low and declining. - Disparities between renters and homeowners have widened over the past decade in an environment of low interest rates and housing policies that tend to be regressive and favor home ownership. - Rental housing support for the segment of tenants most in need has often not kept up with affordability pressures. - Potential structural shifts that could reduce rental costs—such as less city tourism, moves to the suburbs, and transformation of commercial into residential real estate—are uncertain in strength and duration and are unlikely to primarily benefit the most vulnerable groups. ### Empirical findings on affordability drivers - Using a panel of household and region-level European data, low-income households have not seen incomes increase in line with rental costs; growth-inequality channels appear dominant. - Greater urbanization, structural transformation toward high-skilled services, and higher incidence of tourism have pushed up affordability pressures for renters, particularly for lower-income households. - Credit conditions are not found to have significantly impacted rental affordability, suggesting barriers between housing and rental markets. - The consequence of these forces has been a lack of inclusiveness as the benefits of income growth were not spread evenly. - Short-run COVID-induced contraction of service sectors—where many renters are employed—will likely worsen these trends. ### Policy recommendations and assessment of rent controls - Short-term, raising level and coverage of portable housing allowances appears to be the most powerful immediate policy tool for quick deployment and effective targeting. - Providing sufficient coverage and benefits to renters via housing allowances is critical to protect low-income renters throughout the expected lengthy economic recovery in Europe. - Where the crisis has exposed gaps, these should be filled permanently. - Housing allowances would help avoid cliff effects once COVID-19 emergency responses (broad income support, short-time work schemes, and rent moratoriums) are lifted. - Allowances should usefully be accompanied by other targeted measures, such as loan guarantees. - Until recovery is firmly entrenched, protection of the most vulnerable renters requires special attention to stem evictions. - Measures altering price signals— including rent controls—should be avoided or should be temporary and targeted, as they tend to get circumvented over time or discourage investment and rental supply in the long run. - Efforts to increase supply of affordable housing should be undertaken to alleviate demand pressures more permanently: - Governments could invest in more social housing. - Adjust financial incentives, for example by taxing vacant properties and shifting some housing subsidies that favor high-income homeowners toward private investment in rental housing development. - Boost physical housing supply by relaxing spatial regulation in densely populated areas, recognizing these measures face political obstacles. - In the EU, national recovery and resilience plans supported by the Next Generation EU program provide an opportunity to invest in social housing and public infrastructure to support inclusive growth, create employment, provide more affordable housing, and improve access to jobs across locations; steering housing investment toward greater energy efficiency would also reduce the sector’s carbon intensity. - An overarching national housing strategy is needed to set objectives, devise budgets, select policy tools cognizant of trade-offs, and establish mechanisms to evaluate policies’ effectiveness and fairness. ### Data gaps and measurement issues - Regulatory restrictiveness (zoning regulation and tenant-landlord relations) is difficult to measure but affects rental prices and shapes consumption and investment incentives; most databases are focused on a narrow set of markets. - In some countries, data on recipients of housing allowances or social housing are not available (or published) in a centralized form, complicating analysis of targeting effectiveness. - Compiling and publishing statistics on regulation, recipients of housing support, and transaction-based rental prices would allow more thorough evaluation of policies and inform decision-making. *Source: Box 3. Side Effects of Rent Controls.* ### Annex Figure 2.2. Total Factor Productivity Growth and ### Annex Figure 2.2. Total Factor Productivity Growth and Rental Market Size ### Figure summary - The figure plots TFP growth (percent, average 1998–2018) on a vertical axis ranging from –1.5 to 1.0. - The horizontal axis shows rental dwellings as share of total dwellings (percent, average for 2010–18) with reference ticks at 20, 30, 40, 50, 60. - Related panels in the annex link rental market size to growth volatility and other outcomes (references to panels and figures in the surrounding text). ### Key associations and findings - A well-functioning affordable rental market can be an important catalyst for the economic recovery from the COVID-19 pandemic, which will likely require some relocation of resources as economies shift to more digital and greener activities. - Higher labor mobility and lower unemployment, associated with sizeable supply of rentals across locations, would generally help improve overall social inclusion. - The availability of housing accommodation in particular allows people to move to more prosperous locations (Bayoumi and Barkema 2019), possibly helping reduce income inequality. - Advanced European economies with larger rental housing markets tend to have lower market-income inequality, once controlling for key factors determining income inequality—that is, per capita GDP, unemployment rate, old-age dependency ratio, the share of tertiary education, trade openness, and marginal tax rate (Annex Figure 2.4, panel 1). - The literature (for example, Causa, Woloszko, and Leite 2019) also finds that countries with larger rental housing markets tend to have higher wealth inequality because homeownership is an efficient way to build wealth and governments also tend to provide incentives for homeownership. This is illustrated for advanced Europe in the scatter plot in Annex Figure 2.4, panel 2. ### Supporting statistics and notes - TFP growth is measured as "TFP growth (percent, average 1998–2018)". - Rental market size is measured as "Rental dwellings as share of total dwellings (percent, average for 2010–18)" with axis ticks at 20, 30, 40, 50, 60. - Growth volatility referenced elsewhere is "Growth volatility (percent, 1999–2018)". - Note: "Growth volatility is calculated as the standard deviation divided by the historical mean." ### Policy implications highlighted in the text - Promote well-functioning affordable rental markets to support relocation of labor and resources during the post-COVID-19 recovery associated with structural shifts to digital and greener activities. - Consider the dual distributional effects: expanding rental supply can support labor mobility and reduce market-income inequality, but may be associated with higher wealth inequality relative to homeownership—policy design should weigh these trade-offs. *Sources: EARS; Eurostat; EU-SILC; Haver Analytics; and IMF staff calculations.* ### References ### arhmiperea - References ### Major topical clusters in the references - Rental market regulation and rent control (e.g., “Rental Market Regulation over the last 100 Years in an International Comparison”; “Welfare Effects of Rent Control—A Comparison of Redistributive Policies”; “A Review of Empirical Evidence on the Costs and Benefits of Rent Control”). - Housing affordability and house prices (e.g., “Recent House Price Increases and Housing Affordability”; “No Price Like Home: Global House Prices, 1870–2012”). - Rental housing markets and policies (e.g., “Recent Developments in the Rental Housing Market in Spain”; “Public Intervention in the Rental Housing Market. A Review of International Experience”). - Social and public housing (e.g., “Privileged but Challenged: The State of Social Housing in Austria”; OECD “Social Housing: A Key Part of Past and Future Housing Policy”). - Effects of macro and financial factors on housing (e.g., “The Consequences of Mortgage Credit Expansion”; “Do Lower Mortgage Rates Mean Higher Housing Prices?”). - COVID-19 and housing/real estate impacts and policy responses (e.g., OECD “Housing Amid COVID-19: Policy Responses and Challenges”; “COVID-19 Government Measures in Real Estate Europe”). - Spatial, demographic, and transport influences on housing (e.g., “The Dynamic Effect of Population Ageing on House Prices”; “Effects of Transportation Accessibility on Residential Property Values”). - Tax, subsidy, and fiscal policy interactions with housing (e.g., “Tax Subsidies to Owner-Occupied Housing: An Asset-Market Approach”; “The Employment Impact of Green Fiscal Push”). - Empirical methods and econometric issues relevant to housing research (e.g., “Biases in Dynamic Models with Fixed Effects”). ### Representative citations (verbatim titles and authors as in source) - Kholodilin, Konstantin A., Jan Philip Weber, and Steffen Sebastian. 2018. “Rental Market Regulation over the last 100 Years in an International Comparison.” DIW Weekly Report 8 (45): 453–64. - Knoll, Katharina, Moritz Schularick, and Thomas Steger. 2017. “No Price Like Home: Global House Prices, 1870–2012.” American Economic Review 107 (2): 331–53. - Konstantin, Konstantin A., Andreas Mense, and Claus Michelsen. 2016. “Market Break or Simply Fake? 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