Rent subsidies in the Czech Republic: a comparison of selected models

Petr Sunega

Abstract:

The focus of this text is a comparison of two selected models of rent subsidies in the Czech Republic. The conclusions that emerge out of this comparison could form the foundation for the development of the future form of this type of subsidy in this country.

In the first part of the study, the reader will find a theoretic description of systems found in selected countries of the EU, as well as the situation in the Czech Republic. This is followed by a section devoted to the methodology of testing and comparing the given models.

The second part of the text is empirically oriented. A micro-simulation model was created with enough flexibility to make it possible to easily change the entire algorithm of the subsidy calculation. With the help of this model, and the use of data from The File of Family Accounts of the Czech Statistical Office, testing and analysis was carried out on a simplified German example, and on the proposal for the concept of the new rent subsidy devised by the Ministry of Labour and Social Affairs in 1999. Another two reference variants emerged through the modification of the presented models. Testing was conducted by setting three different levels of rent. These levels simulated market rents, orientational local rents, calculated in accordance with the methods of the Ministry for Regional Development, and rents at their level in 1997. The study shows that factors such as regional differentiation of maximum rent, respect for the principle of marginal costs, and support for households with a lower number of members are factors of significance in the case of the Czech Republic, and therefore, they ought to be considered when developing the future form of subsidy.

Keywords: housing allowance, rent subsidy, housing, micro-simulation model, model optimalisation.