inder ruprah

High delinquency rate of publicly provided mortgages in social housing programmes are often interpreted to be due to moral hazard. In this article we show that the typically used parametric approaches give misleading results because of overlooked confounding and selection biases. We show that using the more appropriate impact or treatment nonparametric approach the problem of high delinquency rate in publicly provided mortgages is due to the incapacity to pay and not due to moral hazard. The results caution against public policies to encourage private mortgage providers to move down market, and suggest eliminating mortgages and correspondingly increasing the grant component of the programmes.