In the context of housing subsidies, the generic question relates to the portion of subsidies being captured by housing producers, rather than by consumers. Studies on this topic include Susin (2002) for section 8 housing vouchers in the United States, and Devereux and Lanot (2003) for mortgage interest tax relief in the United Kingdom. The latter paper is part of the literature on tax incidence, which by nature is closely related to the literature on evaluation of subsidy programs.

## <u>b) Partial equilibrium on the housing market with only consumers</u>

Very often, only the consumer side is examined. In this case, one is concerned with recovering household preferences and computing the distribution of equivalent and compensating variations. This framework may be appropriate when issues of efficiency as well as redistribution for a particular subsidy are examined, and has been applied in many studies: for example, Olsen and Barton (1983) on rent control in New York City; Kraft and Olsen (1977), or Le Blanc and Laferrère (2001) on public sector housing, respectively, in the United States and in France; Koning and Ridder (1997) on rent assistance in the Netherlands.

The partial equilibrium framework is also the main concern of policymakers, who often disregard overall losses for the economy, focusing instead on the effects of subsidies on housing production or consumption. Hence, as far as policy evaluation is concerned, major outcomes will be housing production or consumption changes occurring as a result of the policy. Moreover, specific studies focus on various economic margins. An appropriate estimate of program “efficiency” (though not in the coined economic sense) then becomes the _leverage effect_ of a program, i.e., how much supplemental investment in housing will be generated by one dollar of subsidy?<sup>23</sup> The focus on the leverage effect has been particularly important in the evaluation of slum upgrading and siteand-services programs (see for example Quigley, 1987).<sup>24</sup> Often, particular data from administrative files or surveys are not available, and the estimation of models like those used in the papers mentioned above is not possible. When adequate data are missing, other indicators of efficiency can be devised and they can vary on a case by case basis.

# _Visibility:_

Visibility refers to the degree of visibility of all costs of the subsidy for taxpayers and citizens. In order to measure visibility, one must first determine the actual subsidy cost and then determine how explicitly defined these costs are in the government’s budget. As a rule, costs are better known for subsidies on the State budget.<sup>25</sup> The cost of fiscal subsidies is often estimated because fiscal revenues are an important component of a country’s macroeconomic stability. In contrast, the cost of in-kind subsidies such as public housing or land are rarely estimated because the implied transfers are often implicit and do not appear on the main budget of the State or local authority. Thus, generally speaking, we can assess a decreasing degree of visibility to subsidies depending on their type and accounting method, as follows:

- subsidy on budget

> 23 There are many ways to estimate this type of impact, i.e., marginal or average impact, short-term vs. long-term impact, etc.

> 24 This may be attributed to the importance of the “merit good” aspect of housing for international institutions financing such programs.

> 25 However, this is often only true for direct costs, e.g., the amount of subsidy budgeted or distributed to beneficiaries during a given year. Indirect costs which are not the main preoccupation of governments, are rarely known without _ad hoc_ studies, even for budget programs.

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