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On the effects of owner‐occupied subsidies on housing construction in Germany

On the effects of owner‐occupied subsidies on housing construction in Germany Purpose – Between 1997 and 2005, the German government provided owner‐occupied subsidies to fund new private housing construction and stock purchases to increase owner‐occupied housing. The purpose of this paper is to analyse the impact of these subsidies on total housing construction for the 1997‐2007 period using regionalised data. This paper tests for differences between counties and cities and examines whether local participation in housing programs is related to regional migration and fertility. Based on the dynamic results, short‐ and long‐run elasticities with respect to the subsidy program are calculated. Design/methodology/approach – A balanced panel data set is used that covers approximately 95 percent of all German NUTS‐3 regions (counties and independent cities) for the 1997‐2007 period. To control for serial correlation, possible endogenous relationships and omitted variable bias problems, the System Generalised Methods of Moments estimation technique is applied. Findings – A significantly positive impact of subsidised construction is detected in counties with an elasticity of approximately 0.2 in the short run and 0.48‐0.58 in the long run. The elasticities in independent cities are significantly lower, at 0.11 and 0.32‐0.37, respectively. No significant effect of migration on construction was found, in contrast to a significantly positive effect of fertility, especially at the county level. The estimates suggest a significantly negative effect of subsidised stock purchases on total construction. Research limitations/implications – Tests for other countries using regional data on interest rates, construction costs and housing prices could lead to further insights. Practical implications – The findings suggest that further owner‐occupied subsidy programs should be geared toward families or larger households. It also seems important to provide sufficient building land to enable households to make use of housing construction subsidies. Originality/value – This is the first regional paper to examine housing construction elasticities with respect to a subsidisation program for housing construction and stock purchases that was designed for virtually all households in a country. It is also the first paper to test for differences in participation in a large‐scale, national housing program related to migration and fertility. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of European Real Estate Research Emerald Publishing

On the effects of owner‐occupied subsidies on housing construction in Germany

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Publisher
Emerald Publishing
Copyright
Copyright © 2012 Emerald Group Publishing Limited. All rights reserved.
ISSN
1753-9269
DOI
10.1108/17539261211215996
Publisher site
See Article on Publisher Site

Abstract

Purpose – Between 1997 and 2005, the German government provided owner‐occupied subsidies to fund new private housing construction and stock purchases to increase owner‐occupied housing. The purpose of this paper is to analyse the impact of these subsidies on total housing construction for the 1997‐2007 period using regionalised data. This paper tests for differences between counties and cities and examines whether local participation in housing programs is related to regional migration and fertility. Based on the dynamic results, short‐ and long‐run elasticities with respect to the subsidy program are calculated. Design/methodology/approach – A balanced panel data set is used that covers approximately 95 percent of all German NUTS‐3 regions (counties and independent cities) for the 1997‐2007 period. To control for serial correlation, possible endogenous relationships and omitted variable bias problems, the System Generalised Methods of Moments estimation technique is applied. Findings – A significantly positive impact of subsidised construction is detected in counties with an elasticity of approximately 0.2 in the short run and 0.48‐0.58 in the long run. The elasticities in independent cities are significantly lower, at 0.11 and 0.32‐0.37, respectively. No significant effect of migration on construction was found, in contrast to a significantly positive effect of fertility, especially at the county level. The estimates suggest a significantly negative effect of subsidised stock purchases on total construction. Research limitations/implications – Tests for other countries using regional data on interest rates, construction costs and housing prices could lead to further insights. Practical implications – The findings suggest that further owner‐occupied subsidy programs should be geared toward families or larger households. It also seems important to provide sufficient building land to enable households to make use of housing construction subsidies. Originality/value – This is the first regional paper to examine housing construction elasticities with respect to a subsidisation program for housing construction and stock purchases that was designed for virtually all households in a country. It is also the first paper to test for differences in participation in a large‐scale, national housing program related to migration and fertility.

Journal

Journal of European Real Estate ResearchEmerald Publishing

Published: May 4, 2012

Keywords: Germany; Housing; Subsidies; Government policy; Housing construction; Owner‐occupied subsidies; Regional housing; Markets; Dynamic panel

References