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11.05.2021, 11:53

Renters Face Significantly Higher Housing Costs

Housing costs are felt more by households that rent, according to new research by Vienna University of Economics and Business.


The study which was led by Professor Emanuel List and Associate Professor Wilfried Altzinger from the university's Institute for Money and Finance investigated the financial burden housing costs place on particular households and found that housing costs are felt much more strongly by households who rent than those who own.


The researchers reported average monthly housing costs of 448 Euros for tenants and 646 Euros (a premium of 40 per cent) for homeowners, and also found people who rent their homes have a significantly lower incomes than property owners – about 60 per cent of people in the bottom third of the income range rent their homes, a number that drops to 20 per cent for the top third of the income distribution.


Based on the analysis in the study that used a sample of households in Austria, young people, single households, and single parents face a particularly high financial burden caused by housing costs.


For this reason, the researchers suggest economic policies aiming to reduce the burden of housing costs should focus primarily on people who rent their homes.


Emanuel List explains: "Only 3.1 per cent of homeowners face a heavy financial burden due to their housing costs, compared to 19.4 per cent of people who rent their homes. Even if we add loan on mortgage rates to the housing expenses, the relative financial burden caused by housing expenses is still lower for homeowners who have to pay back loans than it is for tenants."


Wilfried Altzinger adds: "Suitable approaches could include strengthening social and public housing or eliminating VAT on private rents. Subsidising property purchases, in contrast, always presupposes a certain amount of available wealth and a medium or high income. This means that subsidies for would-be homeowners would entirely miss their purpose and fail to target households actually struggling high housing expenses."


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