The Impact of Housing Subsidy Cuts on the Labour Market Outcomes of Claimants: Evidence from England

Housing subsidies are aimed at helping low-income individuals afford appropriate housing, but are costly to offer and, in the view of some experts and policy makers, reduce incentives for claimants to participate in the labour market. This paper investigates the labour market impacts of recent housing subsidy cuts in England that were aimed at encouraging labour market participation and increased work effort among claimants. My identification strategy relies on the fact that, within the time period investigated, the subsidy cuts were only implemented for claimants renting from private landlords while claimants renting from other segments of the rental market were unaffected. I utilise this variation in exposure to the subsidy cuts within a difference-in-differences framework and find no evidence of a change in labour market outcomes for those affected by subsidy cuts. My findings indicate that, at least on aggregate, the subsidy cuts did not succeed in encouraging employment among claimants. These null findings suggest that as a policy instrument, cuts to housing subsidies may not be effective in generating efficiency gains through increased labour market participation or work effort.