Is there a trade‐off between housing and pension system generosity? Empirical evidence from the Luxembourg Wealth Study

This study contributes to the discussion about the housing-pensions nexus. However, it aims to explore housing in the context of welfare provision from a different perspective. Unlike the vast majority of the previous studies, we do not focus on homeownership per se or housing deprivation as a dimension of poverty, but on the significance of housing wealth. Additionally, the presented analysis is based on the more comprehensive concept of pension generosity assessment which includes empirical replacement rates. The study employs micro-data from the Luxembourg Wealth Study (LWS) dataset. Using statistical analysis and multinomial logistic regression modelling we examine housing wealth patterns among elderly households with a special focus on the possible linkage between housing and pension system’s generosity. The results of cross-country comparisons imply that there are large country differences in terms of housing wealth accumulation. Analyses of the relationship between (average) pension system generosity and the (average) share of housing assets in total assets at the country level using aggregated values do not provide any evidence for the pensions-housing trade-off. However, when the level of aggregation is reduced, a different picture emerges. Especially when the households having very small or no housing assets relative to total assets are excluded, it becomes clearer that individuals receiving higher pension tend to differentiate their asset portfolio.