Does provision of public rental housing crowd out private housing investment? A panel VAR approach

Using province-level panel data on housing investment, this paper examines the effects of public housing provision on private responses. Using panel data and a proper specification allows us to look at dynamic interactions between public and private investment while controlling for province-specific fixed effects and year-specific effects. We first examine whether private rental housing investment has changed in response to the public counterpart. We performed a panel VAR estimation of the crowding-out effect to examine the efficacy of housing support programs for low-income families. Our empirical results reveal that (i) public and private housing investment Granger-cause each other with an asymmetric pattern; and (ii) the crowding-out effect rises with the housing availability ratio; it grows rapidly as the housing availability ratio gets closer to 100%, which offers useful policy implications for public housing policies in fast-growing regions or countries.