How do housing allowances affect rents?: An empirical analysis of the French case

Between 1992 and 1994, the benefit of rental housing allowances was extended to all low-income households in France. Aggregate data oil the short-term impact of the reform indicates a rise in the rents of dwellings occupied by subsidized renters, compared to those of non-subsidized renters. This is mainly due to compositional changes in the populations of assisted and unassisted tenants. However, looking directly at rent changes at the dwelling level, rent changes are higher when new renters receive housing allowances. This finding is consistent with the hypothesis that in the short run individual private landlords capture part of the subsidy. (C) 2004 Elsevier Inc. All rights reserved.