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A General Equilibrium Model of Housing, Taxes, and Portfolio Choice

James Berkovec¹; Don Fullerton^2,3,4

¹ Freddie Mac (United States) · ² National Bureau of Economic Research · ³ Ifo Institute for Economic Research · ⁴ University of Illinois Urbana-Champaign

The authors describe a model in which rental and owner housing are risky assets, tenure choice is endogenous, and each household is constrained to consume the same amount of owner housing that it has in its investment portfolio. Equilibrium net rates of return are major determinants of the amount of owner housing, but a logit model indicates that demographic factors are the main determinants of ownership rates. In their simulation, taxes on owner housing would raise welfare not only by reallocating capital but also by the government's taking part of the risk from individual properties and diversifying it away. Copyright 1992 by University of Chicago Press.

DOI

10.1086/261822

Volume

100 (2)

Pages

390-429

Language

en

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BibTeX

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