The Distribution of Housing Tax-expenditures and Subsidies in an Urban Area

Summary. This paper examines the distribution of housing tax-expenditures and subsidies among households in the owner-occupied and public-rented sectors in the Birmingham area, UK. Subsidies to tenants are defined as the difference between market rents and the rents actually set. Tax-expenditures to owner-occupiers are defined as the absence of tax on imputed rental income and capital gains. The results presented indicate that tax-expenditures tend to be more regres-sively distributed than subsidies to tenants arising from non-market pricing. The benefits from the latter are more dependent on a household's location and property type than on income. The paper concludes that efficiency and equity objectives are not met by the current housing finance system. 1