Housing Expenditure and Income Inequality

Abstract

The trend of rising income inequality in Germany since the mid-1990s is strongly amplified when considering income after housing expenditure. The income share of housing expenditure rose disproportionally for the bottom income quintile and fell for the top quintile. Factors contributing to these trends include declining relative costs of homeownership versus renting, changes in household structure, declining real incomes for low-income households, and residential mobility towards larger cities. Younger cohorts spend more on housing and save less than older cohorts did at the same age, which will affect future wealth accumulation, particularly at the bottom of the income distribution.