Prudential measures in housing access: Should one include transport costs in the front-end ratio?

COULOMBEL

Type de document
ARTICLE A COMITE DE LECTURE REPERTORIE DANS BDI (ACL)
Langue
anglais
Auteur
COULOMBEL
Résumé / Abstract
This paper aims to shed light on this issue by comparing the two prudential measures-limiting either the housing or the housing plus transport expense ratio-using the monocentric model. By constraining residential choices and reducing housing consumption, both policies improve household solvency and reduce urban sprawl. While this seems to contradict previous claims, the joint constraint proves more efficient in both regards. Provided the constraint is not too stringent, both policies have limited impact on household welfare and often even improve welfare. But this time, capping only the housing expense ratio always dominates the joint housing plus transport constraint. A numerical application to the Paris region illustrates our findings for a real case study. Results suggest that replacing the current limitation of the housing expense ratio with a joint housing plus transport constraint would significantly improve household solvency and curb urban sprawl, with a negligible welfare loss.
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