Welfare Effects of Fiscal Subsidies on Home Ownership in the Netherlands.

The article examines the welfare effects of the current tax-favored treatment of home ownership in the Netherlands. The authors compare the current system with a neutral arrangement of owner-occupied housing and estimate the average subsidy at 20% of the imputed rental value of the house. Furthermore, the welfare costs of the subsidy associated with distortions in housing consumption and employment are estimated between 1.7 and 6.7 billion euro. In conclusion, the authors states that the elasticity in the country is probably small due to strict spatial constraints, which the effects are probably closer to 6.7 billion euro.