Economic Hardship, Housing Cost Burden and Tenure Status: Evidence from EU-SILC

Although it is often asserted that the housing cost burden is one of the key determinants of household economic hardship, in practice the linkage between the two has been rarely explored. The focus has been instead on the role played by income or other socio-economic determinants of household hardship. However, housing costs represent one of the most significant outlays in a household balance. The burden represented by housing costs may indeed cause households to reduce non-housing expenditure such as health care, education, food and clothing, thus creating serious household economic hardship. The primary goal of this study is to contribute on the literature on poverty by looking at households economic hardship in relation to the housing cost burden. In particular, our focus is to relate economic hardship with home-ownership status, by jointly estimating the burden of housing costs for renters versus home-owners paying mortgage. Using microdata from the European Union Statistics on Income and Living Conditions dataset (EU-SILC) regarding five European countries (Italy, Germany, UK, Spain and France) we are able to exploit two indicators of housing cost burden and several indicators of household economic and financial hardship to examine the predictive power of housing costs in explaining family economic hardship. Furthermore, we jointly estimate the effect of the housing cost burden for renters versus home-owners paying mortgage. Results show that housing costs represent a non negligible burden in all the five European countries. Moreover, home ownership is found to significantly reduce household hardship status.