Energy Crises as Obstacles to Housing Affordability: The Case of Germany

• In Event: Everyday Concerns: Housing and Transit Policy Causes and Consequences

Abstract

The housing affordability crisis has gained much attention in recent years, as an increasing number of households are unable to find adequate, affordable housing in cities, and have become severely cost-burdened. In political science, an emerging body of literature is concerned with the consequences of this growing inequality in the housing market, examining how housing burden translates into preference formation and political attitudes. So far, much of this debate centers on the ratio between household income and rental prices as the sole determinant of housing burden. Spending on rent is, however, only one element of total housing costs. What has gained relatively little attention in the literature to date is the role of rising energy costs as an element of total housing cost. Increases in the cost of energy increase the total housing burden placed on households, and can have a negative effect on housing affordability even if rental prices stay stagnant. We add to this literature by illustrating the role of fuel-cost-induced poverty in shaping perceptions of the housing market in Germany. Employing an instrumental variable design, this paper analyzes the effect of changes in energy spending on households’ perceived housing burden. We exploit granular data on local energy prices as the instrument and draw on zip code-level microdata on household expenditures and characteristics from the German socioeconomic panel. We find a) that low-income households respond more intensely to energy shocks, and b)a positive relationship between rising local energy prices and perceived housing burden.

Authors

• Sophia Wang, Yale University

• Laura Kettel, Aarhus University