Policies to promote access to good-quality affordable housing in OECD countries
Introduction
Affordable housing in OECD countries remains a pressing policy challenge, as new OECD research reveals that nearly 15% of tenants and 10% of mortgage-payers spend over 40% of their disposable income on housing costs across member nations.
This comprehensive working paper, Policies to promote access to good-quality affordable housing in OECD countries, provides critical evidence on housing affordability, quality gaps, and the complex policy mix governments deploy to address these issues.For researchers, students, and housing professionals, understanding these dynamics is essential for developing effective, equitable housing strategies.
Understanding the Challenge of Affordable housing in OECD countries
Access to good-quality housing is foundational to well-being, yet significant portions of OECD populations face housing stress. The incidence of housing cost overburden rises sharply among low-income households: 39% of both mortgage-payers and private sector tenants in the bottom income quintile spend more than 40% of their disposable income on housing. Middle-class households are not immune—nearly 9% of mortgaged middle-income homeowners experience similar overburden.
Beyond affordability, housing quality and access present persistent concerns. Most OECD countries report that 1 to 8 people per thousand lack regular access to housing, while 15% of low-income households live in overcrowded dwellings and 14% lack access to an indoor flushing toilet. Neighborhood-level factors like crime and pollution further compound housing deprivation for vulnerable groups.
Tenure patterns shape these outcomes. On average, 65% of dwellings in OECD countries are owner-occupied, 22% are privately rented, and 8% constitute social rental housing.
However, low-income households are disproportionately represented among renters: only 54% of households in the bottom income quintile are owner-occupants, compared to higher rates among wealthier groups.
This tenure-income linkage underscores why affordable housing in OECD countries requires targeted, tenure-sensitive policy approaches.
Key Policy Instruments for Affordable housing in OECD countries
OECD countries employ a wide and complex set of policy instruments to promote housing access. Analysis of the OECD Questionnaire on Affordable and Social Housing (QuASH) identifies thirteen primary programme categories, which can be grouped into three strategic pillars.
Support for Homeownership
All 26 reporting OECD countries provide public support for access to homeownership, with spending reaching up to 2.3% of GDP in some cases. Instruments include one-off grants, subsidized mortgages, down-payment assistance, mortgage guarantees, and tax relief—particularly mortgage interest deductions.
While grants and financial assistance are often reserved for low-income first-time buyers, tax relief measures are typically non-means-tested and tend to favor higher-income households.
Research indicates these non-targeted subsidies can distort investment incentives, exert upward pressure on housing prices, and undermine tenure neutrality goals central to equitable affordable housing in OECD countries.
Social Rental Housing Provision
Most OECD countries support social rental housing through direct public provision or subsidies to non-governmental providers, including non-profits, cooperatives, and, in some cases, for-profit landlords under temporary contracts.
Central government support ranges from 0.1% to 0.6% of GDP, though public funding has declined in many nations. While social rental housing is not universally reserved for low-income households, these groups constitute the majority of tenants in most countries—especially where supply shortages exist.
Providers increasingly rely on diversified financing, including rental income, debt finance, and equity contributions, creating new management challenges as tenant profiles evolve.
Housing Allowances and Demand-Side Support
Housing allowances—income-related cash transfers to support housing costs—are used by nearly all reporting OECD countries, with central government spending between 0.6% and 1.8% of GDP.
Eligibility is typically means-tested, though criteria and benefit levels vary significantly. Compared to social rental housing, allowances offer advantages: they can be designed as entitlements for more equitable access and impose fewer disincentives to residential or labor mobility.
However, evidence from multiple countries suggests landlords may capture a portion of allowance value through rent increases, potentially undermining affordability gains. Additionally, allowances alone may not ensure housing quality or security of tenure for vulnerable households.
Critical Findings on Affordable housing in OECD countries
The OECD analysis reveals important insights about policy coherence and effectiveness. First, while all reporting countries cite improving housing access among their top five policy objectives—and 18 explicitly reference affordability—the distribution of public spending does not always align with these goals.
Available data, though limited in cross-country comparability, suggest owner-occupied housing receives substantial support relative to social rental or private rental tenures. This pattern conflicts with tenure-neutrality principles and may disadvantage low-income households, who are under-represented among owner-occupants.
Second, targeting effectiveness varies across instruments. Grants and financial assistance for homebuyers often incorporate means-testing, whereas tax relief for mortgage payments or residential property frequently does not.
Social rental housing, even where formally open to broad income groups, de facto serves predominantly low-income tenants due to supply constraints.
Housing allowances generally target lower-income households but face challenges in high-rent markets where benefit levels may not bridge the affordability gap.
Third, policy trade-offs require careful management. Homeownership support can promote wealth accumulation but may reduce residential mobility. Social rental housing provides security and quality standards but can create spatial concentration if not integrated with broader urban planning.
Housing allowances enhance choice but may inflate rents if supply is inelastic. Understanding these dynamics is essential for designing coherent strategies for affordable housing in OECD countries.
Future Directions for Affordable housing in OECD countries
The working paper identifies several priority areas for further OECD work to strengthen evidence and policy learning. Establishing standardized indicators on tenure structure, affordability metrics, housing quality, and policy spending would enable more robust cross-country monitoring. Deeper analysis is needed on how housing policies interact with broader social objectives like poverty reduction, labor mobility, and social inclusion.
Emerging challenges warrant particular attention. As social rental housing providers adapt to changing financing models and tenant demographics, understanding efficient management practices becomes critical.
The growing role of the private rental sector in delivering affordable housing requires better data on regulatory frameworks, rent-setting mechanisms, and tenant protections.
Additionally, addressing transitional homelessness through housing policy—complementing integrated social service approaches—represents an important frontier for inclusive housing systems.
Finally, improving data coverage and validation remains foundational. Current spending figures exclude certain instruments like tax expenditures and implicit subsidies, limiting a comprehensive assessment of policy effort.
Expanding the OECD QuASH to capture more countries, years, and instrument details would significantly enhance analytical capacity for affordable housing in OECD countries.
Conclusion
This OECD working paper provides an indispensable evidence base for understanding how member countries pursue access to good-quality affordable housing. By documenting the scale of housing cost overburden, quality gaps, and the diverse policy instruments deployed, the analysis equips policymakers, researchers, and advocates with critical insights for reform.
As housing markets evolve amid demographic change, economic volatility, and climate imperatives, the lessons contained here offer enduring value. Continued investment in data, evaluation, and cross-country learning will be essential to advance equitable, sustainable outcomes for affordable housing in OECD countries.