Horizontal Project
HOUSING
Building an OECD Housing Strategy

Building an OECD Housing Strategy
Why is housing important?
Housing market bubbles are at the root of many
financial crises. Indeed, during 2007-08, house prices
collapsed in several countries, marking the onset of the
global financial crisis (Figure 1). In the past few years,
house prices have been increasing rapidly in many
countries, and they are now above their pre-crisis
level. In addition, the growing importance of housing
in household balance sheets raises the sensitivity of
aggregate consumption and investment to changes
in house prices. Housing policies also influence
economic developments through their impact on
the mobility of workers, access to quality jobs and
education. Furthermore, housing developments
affect environmental outcomes, including through
interactions with urban land-use patterns, residential
energy consumption and transport systems.
Rising house prices undermine housing affordability,
particularly for low-income households and in fast-
growing urban areas (Figure 2). Access to affordable
housing is crucial for achieving a number of key policy
objectives, including poverty and homelessness
reduction, equality of opportunities and sustainable
growth. Access to affordable housing is also
important in a context where population ageing is
likely to lead to structural shifts in housing demand.
Source: OECD Economic Outlook database and OECD Analytical House
Price database.
Figure 2. The cost of buying a flat in large cities has
increased considerably for middle-income families
Number of years of annual income needed to buy a 60 square
meter flat in the country’s capital city or financial centre, for a
median income couple with two children.
Source: Under Pressure: The Squeezed Middle Class, OECD 2019.
Housing market developments influence the
distributionofincomeandwealthashousingisoneof
thelargestspendingitemsinhouseholdbudgetsand
often the largest asset in household balance sheets
(Figure 3). Housing is, therefore, a fundamental
driver of the accumulation and the distribution of
wealth and debt within and across generations.
Figure 3. Housing is the chief asset of the middle
class
Source: Housing, wealth accumulation and wealth distribution: evidence
and stylized facts, OECD (2019) forthcoming.
Figure 1. House price and business cycles are tightly
linked
Annual real percentage change, OECD average
BUIILDING AN OECD HOUSING STRATEGY 3
-6
-4
-2
0
2
4
6
8
10
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
House price GDP
6.8 7.4
10.3 10.2
0
2
4
6
8
10
12
1985 1995 2005 2015
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
DEU
AUT
USA
CAN
FRA
NLD
GBR
FIN
AUS
OECD
IRL
BEL
LUX
PRT
NOR
ITA
EST
GRC
LVA
ESP
SVN
POL
HUN
SVK
Housing (main residence) Other real estate
Other real assets Other financial assets
Deposits

How can policies affect housing?
Tackling the challenge policy-makers face in
delivering affordable quality housing while
addressing financial stability risks and economic
efficiency goals requires the development
of multi-pronged housing policy strategy. It
requires addressing issues that cut across many
policy areas, including social housing, urban land
use regulation, financial regulation, taxation,
local public finance, welfare support, transport
policies, housing standards, rental regulation
and the enforcement of competition in related
activities (e.g. construction, real estate). Some
issues are specific to regions or groups of countries.
For example, in many central and eastern
European countries, formerly government
owned housing was sold to individuals or
households who are not able to maintain the
buildings or up-grade their energy efficiency.
A successfulhousingstrategywillalsohavetobridge
the different interests of multiple stakeholders.
Moreover, the growing importance of
digital platforms in the housing market
has implications for efficiency and welfare.
While platforms have reduced entry costs of
providers of short-term accommodation, they
may reduce supply of affordable housing and
drive up house prices and rents. This has raised
new regulatory issues in a number of cities.
The Horizontal Project “Building an OECD Housing
Strategy” responds to the 2018 MCM Statement of
the Chair encouraging the OECD to strengthen its
work in the housing area with a view to developing
a comprehensive approach in analysing housing
marketsandprovidingpolicyadvice.Italsoresponds
to the 2017 Ministerial Council Statement calling
on the OECD to help governments improve their
policies in a number of areas, including housing.
Horizontal Housing Project: Objectives and
expected outcomes
The objective of the Horizontal Project is to develop
a framework, indicators and a policy toolkit to help
governments design and implement coherent
policy strategies to ensure that housing sector
developments are consistent with policy goals such
as a better functioning housing market in terms
of housing supply, quality, affordability, poverty
reduction, access to public services, labour market
efficiency, economic resilience and a clean urban
environment.The framework will highlight potential
trade-offs and synergies between policy goals when
designing housing policies. New indicators to be
assembled as part of the Horizontal Project include
more granular, internationally comparable data
on house prices, including across regions within
countries, rents and land-use regulations, building
on earlier OECD work. Household wealth surveys
will also be used to measure the contribution
of housing to gross and net wealth inequality
between different socioeconomic groups.
4 BUIILDING AN OECD HOUSING STRATEGY

Key outcomes through better policy settings are
greater resilience at the macro and micro levels
(i.e. preventing excessive mortgage leverage at
the household level), the removal of policy-related
obstacles to labour mobility, reductions in housing-
related inequalities and improved environmental
quality. The indicators identified as most pertinent
willenrichthehousingdimensionoftheOECD’swork
on measuring well-being.The framework, indicators
and toolkits underpinning the Housing Strategy will
be developed with a view to mainstream them into
core OECD economic advice, in particular through
the Economic Surveys under the aegis of the
Economic and Development Review Committee.
Main activities
The project will take a cross-cutting approach to how policies can enhance housing outcomes at
the country, regional and household level. Avenues for policy action will be explored along the
following lines.
Housing, economic
resilience and performance
The housing sector has been experiencing boom-
and-bust episodes creating large distortions
and adverse externalities in many countries. The
combination of inelastic housing supply with the
very elastic lending capacity of financial institutions
and other frictions makes the housing sector
particularly prone to price bubbles and painful
corrections. These characteristics of the housing
market are often exacerbated by policy distortions.
In a majority of countries, the tax treatment
of housing, which is biased in favour of both
homeownership and debt financing, is conducive
to excessive mortgage borrowing and leverage. At
the same time, regulations, including of land use,
and other distortions (e.g. lack of competition in
construction) that restrict the supply of housing
further contribute to fuelling house prices beyond
levels that would be consistent with underlying
factors. This limits access to affordable housing.
The work will scrutinise the evidence to identify
multidimensional policy actions to achieve greater
economic resilience and more affordable housing.
Housing, labour mobility
and the modern job market
The ease of moving residence geographically
has implications for the functioning of the labour
market as it affects the job-matching process and
use of human resources. Policies magnifying the
cost of moving, which range from high transaction
taxes to non-transferable, or simply uneven access
to preferentially priced housing, including social
housing, can trap workers in unemployment or
low-productivity jobs. This poses an obstacle to the
mobility of workers towards dynamic markets and,
as a result, affects economic efficiency. The already
high economic and human cost of such obstacles
to mobility may rise in the coming decades, as
the transformation of labour markets increases
the premium on mobility and adaptability.
BUIILDING AN OECD HOUSING STRATEGY 5
A key expected output of the project is to bring
together the insights that the OECD bodies and
directorates have developed in the area of housing
to enhance policy coherence across the many
dimensions of housing challenges. The OECD has
been building expert knowledge in key areas of
housing, including the project on Housing and
the Economy, the Affordable Housing Database,
the project on Spatial Planning Instruments and
the Environment (SPINE) and the work on the
Governance of Land Use. The Horizontal Project
will pull together, expand and cross-fertilise
these contributions to deliver holistic, whole-of-
government,actionablepolicyadvicethatwilllayout
policycomplementaritiesaswellaspolicytrade-offs.

Going local. Housing is local
by nature
While some housing-relevant policies are set across
the economy (such as mortgage regulation, a large
part of housing-related taxation, some of housing
regulation), many policy decisions that drive
housing outcomes are set at the local level. A key
example is land-use policy, which is overwhelmingly
under the purview of local governments, whereas
rental-market regulation and housing-related
taxation are also often under the control of local
authorities, but to a varying extent. Land-use
regulations indeed play an important role in driving
house prices, especially in the most expensive cities.
Theworkwillincreaseknowledgeonthelocaldrivers
ofhousingoutcomessothatOECDadviceinthearea
of housing can mobilise local policy levers as part
of integrated strategies across government levels.
To support the analyses, additional sub-national
housing-related indicators, in particular house price
indices, will need to be gathered for the countries
where statistical offices do not yet provide them.
6 BUIILDING AN OECD HOUSING STRATEGY
Housing is at the core of
Sustainable Development
Goals No. 11 and 13
Efficient, climate-compatible, green housing
policies are at the core of meaningful progress
towards Sustainable Development Goals No. 11
of sustainable cities and communities and 13
of climate action. Policies such as quantitative
restrictions, including on building height, urban
growth boundaries and other types of zoning can
render housing less affordable and influence urban
sprawl, with consequences for energy use and
pollutant emissions. The OECD’s integrated land
use and transport model (Multi-Objective Local
Environmental Simulator, MOLES) can be extended
andtailoredtoshedlightontheseeffects,contributing
to the design of integrated housing strategies that
fully incorporate the environmental dimension.
Housing and inequality
Housing outcomes and policies have distributional
effects and can in particular influence equality
of opportunities through access to quality jobs,
schools and public services. Equality of opportunity
is therefore an important determinant of social
mobility within and across generations. Policy
drivers of housing outcomes are multiple. They
include housing-related taxation, public cash and
in-kind transfers through housing allowances and
the availability of social housing, monetary policy
and institutional features of credit markets, and
the regulation of rental markets and of land use. All
have implications for access to adequate housing
and the distribution of wealth across households.
The work will deliver an in-depth assessment of the
extent to which housing shapes the distribution
of wealth. The Horizontal Project will also shed
new light on the influence of housing on the
joint distribution of income and wealth. It will
investigate the role of homeownership, housing
wealth, housing inheritance and housing debt
in shaping the accumulation of wealth and its
distribution. Policy lessons would be drawn, in
particular on finding an appropriate balance
between the objectives of promoting affordable
housing and access to homeownership and that
of preventing the build-up of excess leverage,
not least among low-income households.

Collaborative ventures
across OECD policy
communities
TheHorizontalProjectwillpulltogether,expandand
cross-fertilise contributions from different bodies
within the OECD Secretariat to deliver holistic,
whole-of-government, actionable policy advice.
The work will also bring together the expertise
and collective experience of Member and Partner
countries through various OECD committees,
including the Economic Policy Committee (EPC),
which leads the project, the Committee on Statistics
and Statistical Policy (CSSP), the Employment,
Labour and Social Affairs Committee (ELSAC), the
Environment Policy Committee (EPOC), and the
Regional Development Policy Committee (RDPC).
The project will also involve coordination with the
Committee on Fiscal Affairs (CFA), the Committee
on Financial Markets (CMF) and the Network on
Fiscal Relations across Levels of Government.
Housing questionnaire
To underpin the policy analysis of the housing
market, the OECD Questionnaire on Affordable
and Social Housing (QuASH) is being updated
and extended. The QuASH questionnaire collects
qualitative and quantitative information on
outcomes and policies to promote affordable
and social housing in OECD countries (such
as spending, eligibility for social housing and
benefit amounts). As part of the Horizontal
Project, the next wave of the questionnaire will
cover a broader set of housing-related policies,
including rental regulation and transaction costs.
A blueprint for achieving an
inclusive housing strategy
A key deliverable of the Horizontal Project is to
develop a framework for addressing the various
housing policy challenges. This framework will
evaluate policy measures and objectives across
multiple policy dimensions in a coherent way rather
than evaluating measures within separate silos.
Main deliverables
The key outputs of the Horizontal Project include indicators and evidence on the effects of
policy on housing-related outcomes, advice on housing policies tailored to country-specific
circumstances,thematicreportsonthespecificaspectsofhousing,aswellaspolicybriefsandnotes.
BUIILDING AN OECD HOUSING STRATEGY 7

Contacts
Economics Department
Asa Johansson: Asa.Johansson@oecd.org,
Head of Structural Surveillance Division
Peter Hoeller: Peter Hoeller@oecd.org,
Head of Public Economics Division