Comprehensive model of household tenure choice

Steven Bourassa, Donald Haurin, Patric Hendershott and Martin Hoesli

No 11-49, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We present a comprehensive model of household tenure choice that allows for the taxation of imputed rental income and capital gains, deductions of mortgage interest and property taxes, subsidies to owners and renters, and borrowing constraints. This model is used to guide our review of the literature that analyzes the impact of country tax and subsidy policies toward housing and to focus our critiques of various methodologies. We discuss the impact of factors such as house price capitalization effects and individuals’ choices of household structure, loan-to-value ratio, and wealth accumulation on the likelihood of homeownership. We argue that the best empirical studies are ones that use panel household-level data and have access to a large set of measures of housing taxes and subsidies, macroeconomic variables, and household characteristics. We conclude with a review of three studies that illustrate the benefits and challenges of modeling the homeownership decision across countries.

Keywords: Homeownership; Demographics; Tenure Choice; Housing Policy; Costs of Owning and Renting; Borrowing Constraints (search for similar items in EconPapers)
JEL-codes: R31 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2011-10
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