The trade-off between home-ownership and pensions: individual and institutional determinants of old-age poverty

This article reports an analysis of European Community Household Panel (ECHP) data to test the hypothesis suggested by Kemeny (1981) and Castles (1998) of a trade-off between the extent of home-ownership and the generosity of old-age pensions. To this end, we evaluate the impact of a range of both pensions arrangements and housing policies on the risk of poverty in old age. The most important analytical innovation is the inclusion of social housing provision as an important policy alternative to the encouragement of home-ownership. Although we found substantial empirical support for the trade-off hypothesis, the findings raise several issues for discussion and further research. Firstly, we found that neither generous pensions nor high ownership rates had the strongest poverty-reducing potential, for this was most strongly associated with the provision of social housing for older people. Furthermore, the analysis identified a group of older people who are faced with a double disadvantage, in the sense that in high home-ownership countries, those who did not possess their own homes also tended to receive low pension benefits. Although this effect arises at least partly as a result of selection - the larger the ownership sector, the more selective the group of people who do not own their homes - the high poverty risk among 'non-owners' was apparently not countered by the pension system.