On the user cost and homeownership
Antonia Díaz and
María José Luengo Prado
Authors registered in the RePEc Author Service: Maria Jose Luengo-Prado
UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía
This paper studies the determinants of housing tenure choice and the differences in the cost of housing services across households in an overlapping generations model with household-specific uninsurable earnings risk and housing prices that vary over time. We model houses as illiquid assets that provide collateral for loans. To analyze the impact of preferential housing taxation on the tenure choice, we consider a tax system that mimics that of the U.S. economy in a stylized way. We find that a mixture of idiosyncratic earnings uncertainty, house price risk, down payments and transaction costs are needed for the model to deliver life cycle patterns of homeownership and portfolio composition similar to those found in the data. Through simulations, we also show that a rental equivalence approach (relative to a user cost approach) overestimates the mean unit cost of housing by approximately 3 percent.
New Economics Papers: this item is included in nep-dge, nep-fmk and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24) Track citations by RSS feed
Downloads: (external link)
Journal Article: On the User Cost and Homeownership (2008)
Working Paper: On The User Cost and Homeownership (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:cte:werepe:we065421
Access Statistics for this paper
More papers in UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía
Bibliographic data for series maintained by Ana Poveda ().