Personal housing benefits / housing allowances are the main instrument of housing policy in France. Nearly 6 million households benefit from them each year, at a total cost of nearly 18 billion euros. Their effectiveness has been called into question by a series of empirical studies showing that this support is largely captured by landlords in the form of higher rents. This phenomenon has been observed in France and in many other countries: because they are ‘earmarked’ for the consumption of a specific good, housing benefits drive up demand which, in a context where supply is slow to respond, fuels rent inflation. In France, this capture of subsidies by landlords is exacerbated by the fact that certain beneficiaries – students, in particular – are easily identifiable, and by the fact that a majority of landlords receive the amount of the subsidy allocated to their tenants directly.
The current system has another major flaw: it helps to penalise low-income households returning to work, due to the poor coordination of housing benefits with other schemes to
support low-income households, notably the Active Solidarity Income (RSA) and the Employment Bonus (PPE). Indeed, for households on modest incomes, returning to part-time work usually results in only a limited increase in disposable income, as the reduction in housing benefit compounds the loss of part of the RSA.
The reform proposed here is intended to address these criticisms: it proposes merging housing benefits, the RSA and the PPE into a single benefit. A useful simplification of the French social protection system, the integration of housing benefits into a benefit that is neither specifically ‘earmarked’ nor allocated to this area of expenditure would, moreover, reduce the risk of landlords capturing the benefits, whilst increasing incentives to return to work. Such a reform would therefore ensure that the funds allocated to housing benefit actually benefit the households they are intended to support.
