Working Paper: CEPR ID: DP14184
Authors: Thiemo Fetzer; Srinjoy Sen; Pedro CL Souza
Abstract: Homelessness and precarious living conditions are on the rise across much of the Western world. This paper exploits quasi-exogenous variation in the affordability of rents due to a cut to rent subsidies for low income benefit in the United Kingdom in April 2011. Using individual-level panel data as motivating evidence, we document that individuals exposed to the cut were significantly more likely to build up rent arrears and face evictions; further, they were more likely to endogenously attrit from the panel. Using comprehensive district-level administrative data, we show that the affordability shock caused a significant increase in: evictions; individual bankruptcies; property crimes; insecure temporary housing arrangements; statutory homelessness and actual rough sleeping with most notable rise in statutory homelessness among families with children. We also note political effects: the cut reduces electoral registration rates, and is associated with lower turnout and higher support for Leave in the 2016 EU referendum, likely capturing a change in composition of those that engage with democratic processes. Lastly, we estimate that the fiscal savings were much lower than anticipated: for every pound saved by the central government, council spending to meet statutory obligations for homelessness prevention increased by 53 pence, rendering the cost savings much smaller than expected
Keywords: housing insecurity; homelessness; populism
JEL Codes: H2; H3; H5; P16; D72
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Housing benefit cuts (H53) | Rent arrears (R21) |
| Housing benefit cuts (H53) | Evictions (J63) |
| Housing benefit cuts (H53) | Temporary accommodation (Z30) |
| Housing benefit cuts (H53) | Statutory homelessness (R28) |
| Housing benefit cuts (H53) | Rough sleeping (R28) |
| Housing benefit cuts (H53) | Electoral registration rates (K16) |
| Housing benefit cuts (H53) | Voter turnout (K16) |
| Housing benefit cuts (H53) | Support for Leave vote (K16) |
| Housing benefit cuts (H53) | Local council spending on homelessness prevention (H53) |