Housing policy and family formation

Abstract: Essay 1: This paper addresses the impact on housing consumption of a decrease in housing allowance among single recipient parents living in rental apartments. We take advantage of an imposed limit on the recipients’ dwelling size in the Swedish housing allowance reform in 1996-1997 that can be argued to be close to a natural experiment. The focus is on overcrowding. The data for this study has been extracted from the Swedish National Insurance Board’s databank on housing allowance recipients, which is data that has not previously been available for research. The result suggests that the benefit cut has increased the propensity for a housing adjustment into overcrowding. Furthermore, it gives some support to the view that housing allowance has some real effects on recipients’ housing consumption, an effect that has been regarded as close to negligible in previous literature. Essay 2: This paper investigates whether there is a cohort effect to be found in the tenure decision of young adults and whether parental wealth seems to have any influence on first-time homeownership. Recent studies have indicated that young adults’ chances on the housing market have deteriorated; it has become more difficult to become established on the housing market and such situations may increase the importance of parental wealth. In this study, parental wealth is not only estimated as family background information on parents’ homeownership, which earlier studies on first-time homeownership have emphasizes the importance of, but also as the father’s socioeconomic status and single parenting. Very unique cohort data with information on three birth cohorts who entered the housing market during different periods in the Swedish housing policy suggests there to be a significant and large cohort effect in the tenure decision of young adults. Furthermore, the results imply that parental wealth, as well as young adults’ earnings capacity, are more important predictors of the transition to first-time tenant-ownership comparing young adults facing increasing problems on the housing market with those who did not. Essay 3: This study contributes to earlier research on homeownership and childbearing by taking into account the potential simultaneity between these two life events. A very unique and recent data set comprising three different Swedish birth cohorts that entered the housing market during different time periods in the Swedish housing policy suggests that these are events that are indeed simultaneous. Different tests indicate that taking this simultaneity into account gives an overall statistically significant improvement of the model fit. However, this result is most obvious for those young adults who faced increasing problems on the housing market. The childbearing decision of these cohorts also seems to be more sensitive to changes in the user cost, i.e., the potential cost of being a homeowner. This may indicate that the housing market could have repercussions on the childbearing pattern; however, to draw more clear conclusions from this result, the relationship between housing and childbearing needs to be further explored since changes in the Swedish housing market also coincided with economic recession, increased unemployment rates and changes in the educational system.