Housing Policies in the United Kingdom, Switzerland, and the United States: Lessons Learned

Publication | April 2016

Success of housing policies depends on supply conditions and tax incentives.

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We provide an analysis of the housing market and current housing policies in three developed countries: the United Kingdom (UK), Switzerland, and the United States (US). We focus on these three countries mainly due to the marked differences in their institutional settings. The UK is characterized by fiscal centralization and an extraordinarily rigid planning system. The consequences of this setting, which make housing supply extremely unresponsive to changes in house prices, are a high degree of urban containment, a severe housing affordability crisis, and a housing shortage, particularly for the young. The key UK policy, Help-to-Buy, which focuses on stimulating housing demand, fails to address the affordability crisis, because increasing demand only pushes up house prices further without expanding housing supply. Fiscal decentralization and a lax zoning system, both encouraging residential development and an extraordinarily low homeownership rate explain why Switzerland’s main political concerns are sprawl and rent stabilization. The country’s key policies aim to tackle these two concerns but they themselves have some important unintended consequences. The US is characterized by fiscal federalism and an enormous variation in the tightness of land use restrictiveness across metropolitan areas. The key policy concern across the country is homeownership attainment and the key policy to tackle this issue is the Mortgage Interest Deduction (MID). This policy backfires in prosperous and tightly land use regulated metropolitan areas—“superstar cities”—because in these places the policy-induced demand increase mainly pushes up house prices. The MID only increases homeownership attainment of higher-income households in metropolitan areas with lax land use regulation. The net effect of the policy on homeownership attainment across the country is essentially zero. We conclude that the assessment of housing policies crucially depends on the fiscal and regulatory environment in local housing markets. Policies that stimulate housing demand such as the MID or Help-to-Buy are doomed to fail in markets with tight regulation or otherwise tight supply.


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  • Governance and public sector management