Housing policy: a case of subsidising the rich?

Abstract

Subsidised housing has been an important welfare programme in our Five-Year Plans. The state government housing boards have over time assumed a significant role in evolving and implementing the government's housing policies and programmes. This paper attempts an investigation of some aspects of the cost-benefit analysis of selected housing boards. The study relates primarily to the Gujarat State Housing Board, one of the most active and effec - tive housing boards in the country. The results of the study seem to suggest that subsidies and windfall gains are larger for the more well-to-do among the income groups for whose benefit our housing schemes have been designed. The evidence that justifies this conclusion is as follows : (i) Within the low income group rental housing schemes, rates of subsidy are higher for the larger and more costly tenements. (ii) The government's effective rate of return on low-income (hire purchase) housing is somewhat larger than that on middle income housing. (iii) The gap between the government's return and the private return on hire purchase schemes is very larger and bestows substantial windfall gains on the middle income group. Such gains are much less substantial for the lower income group. It is thus imperative that the pricing policies in housing are examined in detail to see how and for whose benefit they have been formulated.