The Impact of the Youth Housing Loan Subsidy Policy on Housing Prices: Evidence from New Taipei City

Abstract

In August 2023, the Taiwanese government launched the New Youth Housing Loan Subsidy Policy (hereafter the New Youth Policy), which lowers the threshold for young people to buy homes through interest subsidies, higher loan ceilings, longer maturities, and extended grace periods. However, when housing supply is difficult to increase in the short run, such a demand-side subsidy may push up housing prices through a price capitalization mechanism. Taking New Taipei City as the study area, this paper uses more than one hundred thousand transaction records from the Ministry of the Interior’s actual price registration system between January 2021 and September 2024, and applies a hedonic price model to construct a multiple regression. After controlling for building characteristics, location, and annual trends, the study examines the effect of the policy on the unit price of housing. The pooled specification shows that the unit price of housing was about 4.4% higher in the post-implementation period, a differential equivalent to roughly one-fifth of the conditional appreciation of the market over the same window. To test whether this differential can be attributed to the policy rather than to a market-wide trend, we exploit the NT$10 million loan ceiling to construct a difference-in-differences design in which small dwellings, whose transaction prices fall within the ceiling, are treated as the high-exposure group and large dwellings, whose prices lie far above it, serve as the low-exposure comparison group. Once the control variables are allowed to differ across the two segments, the difference-in-differences estimate is economically and statistically indistinguishable from zero, and this null result is stable across four alternative size thresholds. An event-study specification reveals a significant pre-policy divergence between the two groups, and a placebo cut-off placed in the first half of 2023 yields a significant coefficient, so the parallel-trends assumption is not supported. A split-sample estimation by unit size likewise finds no significant difference in the policy coefficient between small and large dwellings. Building age and floor area have negative effects while floor level has a positive effect, reflecting the phenomenon of higher unit prices for smaller units. We therefore conclude that housing prices in New Taipei City rose markedly over the observation window, but that the data do not provide robust evidence that this increase is attributable to price capitalization of the New Youth Policy; the 4.4% pooled differential should be read as a conditional association and most probably overstates the policy contribution. The study suggests that when the government promotes housing finance subsidies, it should simultaneously introduce supply-side measures such as increasing social housing and urban renewal, so as to fulfill the goal of housing justice.