Rental Markets and Wealth Inequality in the Euro Area

Johannes Huber, Fabian Kindermann and Sebastian Kohls

No 20111, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Wealth inequality and aggregate homeownership are negatively correlated across the Euro area. We explain this within a quantitative overlapping generations model, where households consume food and shelter and make portfolio decisions. Households purchase real estate for consumption purposes or rent it out to other households on the private rental market. A reduced form wedge - correlated with empirical measures of rent control - governs rental market efficiency. Rental market efficiency is crucial in explaining cross-country variation in aggregate homeownership. Wealth inequality, however, is mainly driven by mortgage market characteristics, most importantly an interest rate spread between deposits and mortgages.

JEL-codes: C68 D15 E21 R21 (search for similar items in EconPapers)
Date: 2025-04
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