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Housing subsidisation in the Netherlands; measuring its distortionary and distributional effects

This paper measures the distortionary and distributional effects of housing subsidies. The results are discussed in the light of the main justifications for subsidising housing, i.e. the merit-good argument, external effects and the distribution motive. Our measurements reveal some patterns of subsidisation that seem difficult to justify on these grounds. This applies especially to the differences between subsidisation of rental and owner-occupied housing, the differences between mortgage- and equity-financed ownership and the increase of relative subsidisation above a certain income level.