On the User Cost and Home Ownership

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dc.contributor.author Díaz, Antonia
dc.contributor.author Luengo Prado, María José
dc.date.accessioned 2014-05-23T12:01:14Z
dc.date.available 2014-05-23T12:01:14Z
dc.date.issued 2008-07
dc.identifier.bibliographicCitation Review of Economic Dynamics. (2008), 11 (3), p. 584-613
dc.identifier.issn 1094-2025
dc.identifier.uri http://hdl.handle.net/10016/4937
dc.description.abstract This paper studies the differences in the cost of housing services for renters and homeowners and calculates the bias that results when we value owner-occupied housing services using a rental equivalence approach. Our framework is a life-cycle model with endogenous tenure choice with households facing idiosyncratic uninsurable earnings risk and housing price risk. We model houses as illiquid assets that provide collateral for loans. To analyze the impact of preferential housing taxation on the tenure choice and the bias, we consider a tax system that mimics that of the US economy. Namely, owner-occupied housing services are not taxed and mortgage interest payments are deductible. Through simulations, we show that a rental equivalence approach (relative to a user cost approach) overestimates the cost of housing services. The magnitude of the bias is very sensitive to both the income tax rate and the size of adjustment costs in the housing market.
dc.format.mimetype application/pdf
dc.language.iso eng
dc.publisher Elsevier
dc.rights © 2007 Elsevier Inc.
dc.subject.other Consumption
dc.subject.other Durables
dc.subject.other Down payments
dc.subject.other Housing
dc.subject.other User cost
dc.title On the User Cost and Home Ownership
dc.type article
dc.type.review PeerReviewed
dc.description.status Publicado
dc.relation.publisherversion http://dx.doi.org/10.1016/j.red.2007.12.002
dc.subject.eciencia Economía
dc.identifier.doi 10.1016/j.red.2007.12.002
dc.rights.accessRights openAccess
dc.type.version acceptedVersion
dc.identifier.publicationfirstpage 584
dc.identifier.publicationissue 3
dc.identifier.publicationlastpage 613
dc.identifier.publicationtitle Review of Economic Dynamics
dc.identifier.publicationvolume 11
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