Rent increases cause higher inequality between households


Over the past decade, the proportion of property owners in Germany has increased remarkably from approx. 42% in 2006 to 47.5 % in 2013. Thus a decreasing part of the households are affected by the strong rent increases in many large German cities and university towns. However, not all households are affected equally, because property is distributed differently among different types of households. Scenarios using socioeconomic modelling show that the impact of rent increases are strongest for predominantly tenant households such as 1-person pensioner households or households of the unemployed. These tenant households are forced to reallocate parts of their consumption budget to the increased rent expenses, thereby consumption falls primarily in the areas of communications, recreation and culture, education and health. Rent increases thus reinforce the inequality of households with and without ownership: while households of tenants equalize the suffered limited consumption by a lower savings rate, households who own and let are able to increase their consumption already in the year after the price increase. This is due to higher revenues that can be achieved by the rent increases.

More informatione is available in the soeb-Working-Paper 2016-6 (in German language only).

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