Housing Market Interventions and Mobility: An International Comparison

Abstract

Government interventions in housing markets usually have a strong side effect of lowering residential mobility. Interventions tend to raise the price of owner-occupied dwellings and to lower rents compared with household incomes. An index of these two tendencies is calculated for major conurbations of 16 countries. Among these, Switzerland, South Korea, Sri Lanka and the former German Democratic Republic are of particular interest. The rank order correlation of the index with residential mobility appears to be strong, 0.962, and with an elasticity of -0.815 three-quarters of the variance is explained. No correlation was found with the home-ownership rate. In so far as lower mobility impairs housing welfare, market interventions should be avoided, but it is recognised that such interventions primarily reflect concern for equity and externalities.