Chile: subsidies, credit and housing deficit

Abstract

This article has two objectives: to analyse the effects of the housing subsidy on access to credit and on real-estate investment; and to study the influence of those relations in the Chilean experience. Following a review of the financing and subsidy systems in Chile, a theoretical model is put forward to analyse the effect of subsidies on housing credit and on the equilibrium of the real-estate market. The model offers new perspectives on the role played by subsidies policy and the structure on which the empirical research is based. The econometric analysis corroborates the two main theoretical proposals, namely: access to the subsidy increases a family's chances of obtaining credit and reduces the number of families living in a housing-deficit situation. The econometric results also help to interpret the trend of the housing deficit in Chile.