Abstract:
Since WWII many western governments have left a deep imprint on the functioning of
the housing market. Initially, most West-European governments concentrated on
producing high volumes of housing to make up for the shortages that arose during the
war. Later, in the 1960s and 1970s, more attention was paid to the quality of housing;
then, in the 1980s and 1990s, the workings of the housing market became increasingly
influenced by market forces, partly because of government budget deficits. In this period
the principle that each household should be housed according to its needs was
superseded by the principle that the housing supply should be based on the effective
demand. In this phase of the public housing policy a shift occurred from productionoriented object-based subsidies to individual subject-based subsidies (Boelhouwer & van
der Heijden, 1992; Kemeny, 1995; Kleinman, 1996; Doling 1997). Hence, from the mid1970s complex rent subsidy systems started emerging in many countries (for an
overview see Kemp, 1997, 2000). At the end of the 1990s these frequently complicated
policy instruments again became the subject of debate, notably in Western Europe
(Stephens et al. 2002; Boelhouwer & Haffner 2002). This debate had an impact on
developing countries as Egypt, that copied western old subsidy system the type of
distortion in Egypt housing market put pressure on the rents and poses the essentiality
for its subsidy. The more critical approach towards rent subsidies can be explained by
the fact that social and economic policy was stressing more participation in the labour
market. What matters in the case of rent subsidies is the ability to pay for good-quality
housing. Moreover, by allowing households greater freedom of choice, the rent subsidy
also pushes up the demand for better quality homes. If this extra demand then triggers an
increase in the housing costs, it could usher to (unwelcome) over-consumption of rent
services.
The central theme of this paper is the tension between income-dependent rent subsidies
(anti-poverty) on the one hand and their effects stimulation of demand on the other.
The paper will conclude that, arguments justifys government intervention in the housing
market for efficiency reasons. These arguments stem from some specific characteristics
of the housing market in developing countries, notably, inadequate provision of
information, underdeveloped competition, an inflexible supply due to deficient market
forces and market failure in general. The paper will state that reforms are needed to
ensure diversity in subsidy and its financial sustainability.
