Housing allowances and Czechoslovakia"s social safety net

While both of the nation"s Republics recognize that rents will have to be markedly increased due to budgetary constraints, they also realize that large increases could be very painful for low-income groups. Housing allowance programs, the dominant form of housing assistance in Western Europe and North America, are designed to address this issue. In such programs, assistance is focused tightly on the poor, so that subsidies decline as incomes increase and higher-income families are not entitled to any subsidy. This study examines the implications of implementing a housing allowance approach in Czechoslovakia. The report finds that a surprising number of renters (94%) can actually afford the proposed 100% rent increased scheduled for July 1992. Subsidies to support the other renters would amount to only Kcs 52 million annually. Even if rents are brought up to market rates, only 18% of renters would not be able to afford them. It is thus possible to reduce government subsidies by at least 87% while avoiding the creation of true budgetary hardships for any family. Short- and long-term recommendations are presented in conclusion.